Bitcoin versus Altcoin

The two main options to buy cryptocurrencies.

In past articles, we've highlighted the difference within the crypto market between Bitcoins (BTC) and other non-Bitcoin cryptos, also called "Alternative Coins" or “ALTCOINS”. These are the first two categories of crypto market. The question that may arise is: which one of the two categories to choose from when investing our Fiat money?

To answer the question above, it is normal to start with the leading currency in the crypto industry, which makes sense considering that the "dominance" of the main crypto is 60% of the entire crypto market, which means that 60% of what is invested in cryptocurrencies is capitalized in Bitcoins. Answering a part of this question, we can say that the logical thing to do is to first invest in bitcoins, but it is also logical to invest another part of our savings in other cryptocurrencies, altcoins that have a certain projection and growing potential.

Bitcoin is not only the main cryptocurrency because it was created in the first place, but because more than 11 years later still has a predominant price and its capitalization represents a very high percentage that is far from the others as a whole and from the second one in the ranking of the sector, That is 60% compared to 11.56% for the second cryptocurrency by capitalization, which means that out of the 338 billion (the total crypto market capitalization), bitcoin has about 200 billion and the second one just over 39 billion. This is a big difference that makes us choose to have bitcoins in the first place compared to altcoins.

The altcoins as a very important category of the crypto market.

When thinking about the altcoins, we have to look first at the most important one, that is, the leader of all of them, and not only because of its capitalization but also because of the qualitative value of its blockchain. And this is by far "The Ether". We have to make a clarification between Ether and Etherium, which are easily confused but are not exactly the same, as it can be seen below:

  • Etherium (see the article about Etherium, a different blockchain from the BTC) is the technology that uses the blockchain of the same name to store information and even smart contracts that works in a decentralized way, and;
  • the Ether is the native token that works in that blockchain that functions as a cryptoasset that is fungible (transmissible) and has a certain price and capitalization within the crypto market.

Despite this difference, it often refers to the Etherium coin instead of Ether coin even though the Etherium is not the cryptocurrency but the blockchain.

The importance of the Ether token and the Etherium blockchain is that its architecture is used by many other projects to create other utilities and other tokens called ERC20 (see the Etherium based token article ERC20) that are derived from the Etherium blockchain. These Etherium based projects have given to the Ether, and its blockchain, the Etherium, a significant relevance that makes Ether very attractive to choose as a good option for our crypto portfolio alongside with the leading crypto, the BTC.

We can say that a subcategory within the altcoins are the Etherium based tokens ERC20 that are very numerous as developments of the Etherium Blockchain to offer new utilities and applications

Another relevant subcategory within the Altcoins: the Stablecoins.

Within the altcoins there is a very important category called Stablecoins (see the article on stablecoins), which have the particularity of being stable as its name indicates is referred to a fiat currency. In this case we should highlight the stablecoin Tether (USDT or United States Dolar Tether) which has parity with the dollar and is backed by the most important fiat currency in the global currency market today.

Tether is a stablecoin, which does not depend on the Etherium blockchain (there are other stablecoins referred to the USD that are ERC20 tokens such as the TUSD - True USD, the USDC - USD Coin and DAI, among many others). Tether has its own blockchain. In terms of market dominance and capitalization, it is the third largest crypto in the CoinMarketCap ranking, with a capitalization of 15,234 million dollars and a dominance of 4.5% of the entire Crypto market. 

Therefore, when it comes to giving stability to our portfolio, it is a good option to own Tether so that it is not subject to great fluctuations.

Continuing with the altcoins in general, and apart from the main altcoin (the Ether) we have in the 4th place of the capitalization ranking the crypto Ripple (XRP) with more than 10 billion of capitalization representing a 3.20% of the market dominance. It is a crypto and an interbank blockchain that unlike the other altcoins is not decentralized and the banks control its price since they are the main holders and that is what makes it different, but despite these characteristics it is one more option that offers certain security for being supported by large institutions at a global level. Its blockchain is totally different from the others and is based on other protocols. 

Moving on to the 5th place, we have the Bitcoin Cash (BCH), a fork from the original Bitcoin (see the article on forks), its blockchain comes from bitcoin and it's a crypto that tries to follow the spirit of the Bitcoin philosophy to be digital money by definition, hence its name Bitcoin Cash. It has a capitalization of more than $4 billion and a dominance of 1.20% over the total crypto market. It's certainly a good candidate along with the previous altcoins, as an "alternative bitcoin" to be part of our portfolio.

Source: Coin360

As it can be seen in the Coin360 mosaic, we can see BTC comparing to the altcoins that follow it in terms of importance within the Crypto market, so that BTC is 60% dominant, in 2nd place ETH with 11.56%, in 3rd place Tether (USDT) with 4.5%, in 4th place Ripple (XRP) with 3.20% and finally Bitcoin Cash (BCH) with 1.20%. It is followed by Polkadot (DOT) and Link with about 1%. The rest are below 1%

Apart from these altcoins there are an increasing number of them, already more than 7170 so far, however the vast majority are projects that may not create the expected results. However, there are more and more altcoins with a lot of added value that can provide to the crypto ecosystem, and as we have showed in previous articles and they deserve a special attention, these are the following ones:

It is also recommended to review our article "The altcoins with the greatest projection for 2020-2021" and be able to appreciate the potential that the so-called classic altcoins have apart from the main one which is the ETH. This way we can have a good idea of the importance that many altcoins have as alternative to Bitcoin, but better to say they are complementary to it, in order to diversify our portfolio adequately taking into account their potential and the added value they can offer.