A few years ago, choosing which cryptocurrency to invest in was easy. Bitcoin was the only viable option. Although Bitcoin is still the king of cryptocurrency in terms of both the BTC price and market cap, there are thousands of altcoins now and hundreds of them have a market capitalization in the tens of millions of dollars. So which should you invest in, Bitcoin or altcoins?
As you’ve probably guessed, the answer isn’t so simple. You need to understand what investing in cryptocurrency really means and what advantages each option will give to you. There are some great arguments for buying Bitcoin and altcoins. Let’s take a look at some of the pros and cons of investing in each.
Bitcoin: It’s the First and Most Popular
The key reason to invest in Bitcoin is that it’s the first and most popular cryptocurrency. After a decade, lots of cryptocurrencies have come and gone. Many even claimed to be ‘Bitcoin killers’. But here we are, with Bitcoin still the strongest cryptocurrency, and it doesn’t look like it’s going anywhere anytime soon.
For those who understand how technology products are used, this shouldn’t be too surprising. The network effect is the phenomenon where network products get more valuable if more people use them. This is why companies like Facebook and Google are so hard to shift from the top spots in their industry. Bitcoin is the same. It’s accepted in more places and you can trade it with more people.
Another important advantage of this popularity and massive market capitalization is price stability. Bitcoin is still a highly volatile asset, but compared to many smaller cryptocurrencies, it’s a comparatively safe bet.
Altcoins: New Applications
On the other hand, altcoins can offer something completely new. Bitcoin was highly innovative when it was invented, but it hasn’t developed much since then. Upgrading the Bitcoin protocol by forking the blockchain is difficult, risky, and time-consuming.
Altcoins, on the other hand, can take the best ideas from Bitcoin and improve on them with no baggage attached. There are many cryptocurrencies which are now so innovative that they are barely recognizable from the original Bitcoin protocol. Smart contract platforms like Ethereum and EOS massively extend the power of blockchain technology by adding complete programming languages for writing applications. Meanwhile, crypto networks like IOTA have developed their ideas so far that they don’t even technically use ‘blockchain’ technology at all.
The number of applications becoming available from different alternative crypto networks is staggering.
Bitcoin: It’s a Proven Network
One of the major advantages of investing in Bitcoin is that it’s a proven investment. Bitcoin has been around the longest, and its community of users has been getting stronger and stronger through the bad times and the good. Even the largest altcoin, Ethereum, has only been around since 2015.
At this point in time, Bitcoin is the proven, safe bet in the crypto world. The Bitcoin blockchain itself has never broken down, the user community and the mining community are very strong, it has survived many soft and hard forks, and most importantly, its value has stayed strong over the long run.
Altcoins: Better Technology
Altcoins are able to learn from the mistakes of Bitcoin. The Bitcoin network currently struggles with scalability and usability issues. The network can only process a maximum of 3 or 4 transactions per second.
In the altcoin world, there are now lots of alternative networks that offer solutions to these problems. Bitcoin Cash can handle many more transactions per second than the Bitcoin network. Then there are more ambitious projects like EOS with new consensus algorithms that can handle thousands of transactions per second.
Bitcoin also has problems with mining centralization. Now, many altcoins are using different consensus mechanisms that prevent mining power concentrating in just a few pools, as it happens with Bitcoin.
Bitcoin: Improvements Are Coming
Having said that, scalability improvements do seem to be on the horizon for Bitcoin. Second layer solutions such as the Bitcoin Lightning Network may well bring Bitcoin’s transaction capability up to where it needs to be. Incredibly, it might be able to do this with minimal changes to the Bitcoin protocol. The proven Bitcoin technology can stay in place and the network of users won’t have to shift over to a new network or a new technology.
If this happens, then it’s possible that Bitcoin will take some market share back from competitors that differentiate themselves as more scalable networks.
Altcoins: Still Room for Big Growth
One of the biggest advantages of altcoins is that there still exists the potential for larger growth. One Bitcoin is already worth many thousands of dollars, so further 10x, 100x or 1000x gains are much more difficult to achieve from the already high platform.
However, even if Bitcoin can improve its scalability with second layer solutions and can stay number 1, there’s still plenty of room in the market for competitors. Altcoins with different functionality and characteristics are certainly going to keep developing as the industry expands and matures. If you can pick the altcoins that will be the future winners before they get as popular as Bitcoin, it’s still possible to make those big 10x, 100x, or 1000x gains.
The Ideal Choice? Both
There are great arguments for investing both in Bitcoin and altcoins. Bitcoin has cemented its place at the top of the crypto industry, but there is plenty of growth opportunities for new applications and technologies. The smart investor will take advantage of both.
Diversifying your portfolio is always a good idea whatever you are investing in. The crypto market is just too unpredictable to have all your eggs in one basket. No matter how much or how little you are investing, you should spread it out across Bitcoin and other options. Just remember to do your research on any cryptocurrency you plan to invest in, and only invest what you can afford to lose.