The global adoption of cryptocurrencies has spiked significantly over the past several years. New cryptocurrencies have been launched, which has sparked greater interest among the public.
You must have already heard about Bitcoins, but then there are also terms like “altcoins” and “stablecoins”.
Here, let us explain what altcoins and stablecoins are and how they differ.
So, what are these altcoins?
The phrase “alternative coins” is where the term “altcoin” first appeared. Altcoins are exactly what their name implies—alternative coins to Bitcoin that are now traded on the cryptocurrency market. The vast majority of the crypto market is made up of altcoins. The design of altcoins makes them capable of challenging and even displacing the market leader. There are currently hundreds of profitable altcoins on the market, and their popularity is steadily rising among active traders. Compared to bitcoins, altcoins like litecoin (LTC) are less complicated and may be exchanged on any major cryptocurrency exchange. The most common way to buy Litecoin or any other altcoin is via an exchange. There are several payments or investing apps from which you can buy crypto.
And what are stablecoins?
Stablecoins were created with the intention of providing a consistent value despite the significant market volatility. Stablecoins’ market value can be linked to any asset, even fiat money. For the same reason, there isn’t a perfect stablecoin. The practice of pegging stablecoins to the US dollar has spread in recent years. Stablecoins also have the important benefit of being algorithmically connected to other cryptocurrencies.
Now that you have a clear picture of what altcoins and stablecoins are, let’s move on to the difference between them.
The Primary Distinctions between Altcoins and Stablecoins
Stablecoins and alternative coins mostly differ in their operation and intended use.
- As pointed out earlier, altcoins are cryptocurrencies other than Bitcoin. Stablecoins are a different kind of digital asset whose price can be pegged to another cryptocurrency or fiat currency. This feature of stablecoin comes in handy while trading commodities like valuable metals.
- Stablecoins are of two different types: asset-backed stablecoins and those that are not asset-backed. And on the flip side, altcoins are of numerous types and they come in different names.
- As stablecoins have the inbuilt tendency to maintain a stable asset value, the price is less likely to be affected by market price variations. On the other hand, altcoins are on the verge of a price spike that could happen at any time.
The potential advantages of altcoins
- Altcoins, when compared to other popular cryptocurrencies, have lower fees.
- They offer quicker transactions.
- Reduced and efficient energy usage.
- They offer anonymity.
- Altcoins offer high potential rewards.
- Altcoins offer their users a wide selection of altcoins. Each altcoin has its own unique and competitive functions.
Potential disadvantages of altcoins
- When it comes to market share for altcoins, it is quite hard to compete with Bitcoin as Bitcoin is ranked as the top cryptocurrency and holds maximum market capital.
- Altcoins have low liquidity and are the majority of investors’ second choice.
- They have less exposure and their value is subjected to volatility and, therefore, limited usage.
- Because of the price anonymity offered by the altcoins and their high volume, many users end up falling for scams.
The potential advantages of stablecoin
- Stablecoins provide price stability and are backed by assets, so you don’t have to be concerned about the regular changes in market value.
- They require fewer transaction fees, offer secure transactions, and are almost completely anonymous.
The potential disadvantages of stablecoins
- Stablecoins require third-party and external audits for their optimum functioning.
- The ROI (Return of Investment) is less.
Stablecoins and altcoins are equally good. Stablecoins have the potential to function as a store of value and are not subject to market fluctuations. While altcoins, on the other hand, are affected by market price fluctuations, they offer you the best profits over a short period.
About now, you might be a bit confused about which coins to buy. But before making a choice, always consider your requirements first and then opt for the crypto asset that suits your needs. The cryptocurrency market is a continuously evolving space, and more changes and advancements are expected to happen in the coming years.