Alternative coins, or altcoins, include any cryptocurrencies other than Bitcoin and include tokens like Ethereum, Litecoin, Dogecoin and thousands of other cryptocurrencies.
You need an account with a cryptocurrency exchange to get started. Some exchanges let you trade altcoin-bitcoin pairs, meaning you can buy and sell altcoins using bitcoin. Trading altcoins against bitcoin is a great choice if you want to increase the amount of bitcoin in your portfolio.
Most crypto exchanges support at least some altcoins. Depending on the exchange you choose, the types of altcoins you can buy will differ. Some crypto exchanges offer financial derivatives, interest-bearing accounts and even preapproved lending.
Take a look at our list of 6 best exchanges for altcoins.
Best for Active Investors: eToro
eToro is a great choice if you want to actively involve yourself in cryptocurrencies. eToro has a unique social media platform on its exchange and allows users to communicate trading ideas to each other.
eToro is a great place for beginners to learn about crypto since it has this built-in platform. Many beginners find eToro’s simple interface easy to learn. Also, eToro has a unique feature called CopyTrader, where users can allocate a portion of their funds to mimic popular traders’ portfolios.
Best for Mobile Users: Gemini
Gemini, a cryptocurrency exchange, offers a great choice for mobile users. It offers a sleek mobile app for iOS and Android so you can manage your crypto on the go. Gemini currently offers bitcoin and 25 different altcoins on its exchange.
You can also get an insured wallet on Gemini which protects you from online security breaches. You can point to several crypto hacks throughout the years, so it’s good to have an extra layer of security like insurance. Purchase a hardware wallet if you don’t have insurance.
Best for Beginners: Coinbase
If you’re a beginner who wants to invest in cryptocurrencies, take a look at Coinbase. Coinbase offers about 40 different altcoins to choose from and it offers a unique feature where you can convert any altcoin into another altcoin automatically on its exchange. Coinbase can do this because it’s a crypto brokerage, not an exchange. The 2 altcoins aren’t actually traded for each other, Coinbase just credits your account with the correct tokens.
Coinbase offers a website and mobile app for iOS and Android. To fund your account, you can connect to your bank via wire or credit card. Alternatively, you can send cryptocurrency to your Coinbase wallet to fund your account.
Best for Derivatives: Kraken
Kraken is a good choice for any level of cryptocurrency investor. The exchange has crypto guides that you can reference to learn how the exchange works and how different cryptocurrencies operate.
Kraken also supports trading crypto derivatives on its platform. You can buy cryptocurrency futures and trade on margin up with up to 5x leverage. Note that trading on margin is high risk and you run the chance of being liquidated.
Best for Ethereum: Argent
Argent is technically an Ethereum wallet, not an exchange. You can exchange altcoins directly on the mobile app, so that’s why it’s included in this list. Argent is an Ethereum wallet, so you can hold any Ethereum-based token. Some examples of tokens on Ethereum’s blockchain include ChainLink, Uniswap, Binance Coin and WBTC.
Argent also allows you to interact with several decentralized financed (DeFi) applications built on Ethereum. This is probably Argent’s best feature because it allows you to earn interest on your cryptocurrency investments. Interest rates on these platforms can reach as high as 50% annual returns, depending on the cryptocurrency you hold in your account.
Best for Altcoin Variety: Binance
Binance, a leading cryptocurrency exchange with several built-in features, offers you the choice to trade against bitcoin, U.S. dollars, or USDT trading pairs. (USDT is a stablecoin that’s pegged to the U.S. dollar and has a 1:1 ratio with the U.S. dollar.) Binance also has its own token, Binance coin (BNB), that you can use to pay transaction fees.
Depending on your location, Binance may also offer financial derivatives. Binance offers margin trading in some regions and allows you to leverage your crypto positions.
Crypto Exchange vs. Broker
Crypto brokerages and crypto exchanges serve the same function but operate differently. Crypto brokerages such as Coinbase set the price of altcoins consistent with the market. Alternatively, crypto exchanges use order books consisting of buy and sell orders to set the price of their altcoins. Binance is an example of a cryptocurrency exchange.
Which Exchange Has the Most Altcoins?
Of the exchanges listed above, Binance has the widest variety of altcoins. Binance supports 184 different cryptocurrencies and over 500 trading pairs. Other exchanges still support most major market cap altcoins and both Coinbase and Gemini support dozens of altcoins.
Argent technically supports more tokens than these exchanges, you’ll tap into less variety because Argent only supports Ethereum-based tokens. Most investors care more about the quality of altcoins supported on an exchange compared to the number of altcoins offered on an exchange.
You can choose from lots of altcoins on the market. Decentralized finance tokens (DeFi) have gained popularity among investors, which aim to replace centralized banking functions with code on the blockchain. DeFi tokens typically get built on Ethereum’s blockchain in the form of ERC-20 tokens.
Other altcoins that operate on their own blockchain can offer distinct advantages over using Ethereum. ERC-20 tokens are often limited by scalability problems on Ethereum’s network. These scalability problems should be solved later this year, as the Eth 2.0 upgrade is set to release in November 2021.
Consider adding these altcoins to your watchlist:
- Ethereum (ETH): Ethereum trades at $1,720 and has a market cap of $196 billion. It’s the largest altcoin by market capitalization. Ethereum offers a platform for developers to create decentralized applications with their own native tokens.
- Polkadot (DOT): Polkadot trades at $22.87 and has a market cap of $20.7 billion. It’s the 4th largest altcoin by market capitalization.
- Uniswap (UNI): Uniswap currently trades at $19.23 per token. Its market cap of $5.8 billion makes UNI token the 14th largest altcoin. The UNI token is an ERC-20 token native to the Uniswap platform. Uniswap’s platform lets users exchange Eth tokens and ERC-20 tokens through smart contracts. Uniswap also pays its users to provide liquidity on its platform, as liquidity needs to occur for decentralized exchanges like Uniswap to work.
- Yearn.Finance (YFI): Yearn.Finance trades at $33,460 per token with a market cap of $1.2 billion, making it the smallest market cap coin on this list. Yearn.Finance, a decentralized finance protocol built on Ethereum’s blockchain, earns users interest by optimizing lending on through smart contracts. These loans don’t have any risk of default, as repayment is guaranteed through collateral put into the smart contract.
- Stellar (XLM): Stellar currently trades at $0.39 and has a market cap of $8.7 billion. Stellar focuses on bank transfers of money across countries. It uses blockchain technology to transfer value across borders and then transfers from cryptocurrency into the region’s fiat currency. The SEC recently issued a lawsuit against Ripple, Stellar’s biggest competitor. Since then, Stellar’s price has increased dramatically.
Should You Invest in Altcoins?
Only invest in volatile altcoins if you’re risk tolerant. More established altcoin projects like Ethereum are generally less risky than small market cap coins but offer less return. Before investing in an altcoin, do your research:
- What problem does this altcoin solve? Can’t figure out what problem an altcoin solves? Chances are, the project doesn’t add much value to the market. Some coins that solve trivial problems may still appreciate in the short term, but you should question the project’s long-term sustainability.
- Why does decentralization help solve this problem? Using blockchains where decentralization is unnecessary often creates inefficiencies. Blockchains are slow, power intensive and hard to operate. Before investing in an altcoin, ask yourself if decentralization on a blockchain is necessary for the project to operate. If it isn’t, then the company likely issued its altcoin as an easy way to raise capital. This was extremely common in the 2017 bull market when the initial coin offering (ICO) craze took place.
- Who developed this project? Knowing the core developers and founders of the altcoin project you want to invest in will give you insight into how the project gets managed. If a project doesn’t display any team members on its website, it’s a red flag. Anonymously developed altcoins are fraudulent. It’s also a good idea to vet the founders/developers on external websites so you can see their past experience and verify their identity.
- How many coins will be minted/are in supply? An altcoin’s price has little to do with its growth potential. Just because a cryptocurrency is cheap doesn’t mean that it has more room to grow than a more expensive coin. You should also know the maximum supply of the coin and how many coins are currently in circulation, as this greatly affects the altcoin’s price.
Investing in the right altcoin projects can lead to huge returns. In the 2017 bull market, it wasn’t uncommon for investors to make 10 or even 100 times their return on altcoins they held through the market cycle.
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