May 2, 2022

How to Buy Altcoins

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Interested in buying altcoins, but not quite sure how to do it? Look no further than this detailed guide on how to buy altcoins.

Altcoins—that is, coins that aren't Bitcoin—have immense potential as an investment and as a utility.

Ethereum, the largest altcoin, has a market cap of over $300 billion.

Wondering how to start buying altcoins? Don't worry - it's easier than you think.

In this guide, learn the process of buying altcoins, how to evaluate a coin you're interested in, and what to do once you have them.

What is an Altcoin?

Altcoins are any cryptocurrencies that aren't Bitcoin. As you might notice, it's a very Bitcoin-centric term. And it's kind of like saying "every currency that isn't the U.S. dollar", or "every Pokémon that isn't Pikachu."

There's no telling whether Bitcoin will always be at the top of the crypto market. In fact, there are plenty of people betting that it won't.

Ethereum is a popular contender for the next coin to reach the top of the crypto heap. But it might be another coin entirely that takes the title.

Or, we may end up with a cyclical crypto economy, where different coins have the highest market cap at different times. In that scenario, Bitcoin might be considered an altcoin, or the term might disappear entirely. What happens in 5-10 years is anyone's guess.

Coinmarketcap currently lists over 17,000 altcoins, and they come in a wide variety of types.

Different Types of Altcoins

Some coins are meant to be used purely for exchange (as currencies). But many coins have a range of utilities, and a few have none. Here are just some examples of the many types of altcoins that are currently available.

  1. Stablecoins are cryptocurrencies whose value is pegged to that of a fiat currency. USD Coin (USDC) is always meant to be worth exactly $1.00. So is Tether.

  2. Exchange Tokens, like Binance Coin (BNB), are tokens minted by cryptocurrency exchanges. These tokens have a value of their own and often provide benefits to users who hold them.

    For example, if you pay for your exchange fees with BNB on Binance, you'll get discounted rates. Many other exchanges will offer higher interest rates or other discounts for holding their proprietary tokens.

  3. DAO Tokens are used by members of a DAO (decentralized autonomous organization) to grant voting rights. For example, in 2021, Constitution DAO attempted to buy a copy of the U.S. Constitution.

    Unfortunately, they were outbid, but if they'd won the auction, holders of the Constitution DAO token would have been able to decide collectively what was done with it.

    These coins take advantage of Smart Contracts, which is one of the primary use cases of crypto and the blockchain. Plenty of popular blockchains incorporate smart contract functionality, including Ethereum.

  4. Meme Coins include coins like Doge and Shiba Inu Coin. These coins are often designed as elaborate jokes, and aren't intended for any real purpose.

    Sometimes, like with Doge, they suddenly experience a dramatic increase in price.

    Note: Be particularly wary of these coins, as their value is largely tied to hype. And many of them may have been created as part of a pump-and-dump scheme to benefit their creators.

  5. Commodity Coins are coins that have been tied to real-world commodities, such as Tether Gold (XAUT), DigixGlobal (DGX), and Gold Coin (GLC), which are all tied to the price of real world gold.

You might have some altcoins you're interested in. But are they actually a smart buy? Keep reading to find out.

Should You Invest in Altcoins?

No one can promise that an investment will be a good one, and it's important to remember that investing in crypto is inherently high-risk.

But if you think crypto is a worthwhile investment overall, there could be some valuable opportunities with altcoins.
And given Bitcoin's current high price, it seems less likely to have the same kind of growth it had over the past 5 years, which was roughly 3,000%.

If you're looking for high growth, you're probably better off picking a coin worth much less than Bitcoin.

The trouble is, there's no way of knowing which altcoins will grow, and which will stay where they are. Here's just a few things to consider when assessing the value of an altcoin:

  • Consider their utility - does the coin have any promising practical applications?

  • Observe how many people are talking about them - check out Reddit or crypto-specific forums.

  • Determine whether they have the potential to solve any problems.

Now, let's look at how to actually buy some altcoins.

How to Buy Altcoins

While the method of buying altcoins will vary slightly from one platform to another, it's pretty simple overall.

Note: you don't need a crypto wallet just yet (we'll cover that later). Most popular exchanges will hold your crypto until you're ready to withdraw it. You can skip the wallet for now and sign up for one once you've got a little investing under your belt.

First, create an account with a crypto exchange.
You can either download their app or visit their desktop site to create your account. Some popular exchanges that carry a good variety of altcoins include:

There are plenty more exchanges to choose from. Check out our picks for the best crypto exchanges, the safest crypto exchanges, and the most beginner-friendly exchanges.

To create your account, they'll need your contact and personal information. This is to comply with KYC (know your customer) and anti-money laundering regulations.

Then, verify your account.
Most platforms require some identity verification, which can take anywhere from a few minutes to a few days, depending on the platform you choose. This typically involves sharing a government-issued ID.

Next, set up a payment method.
There are several ways to pay for crypto on most platforms.

The cheapest way is usually via ACH bank transfer if it's available to you. This method frequently has the lowest fees. Other potential payment methods include:

  • Wire transfer
  • Debit card
  • Credit card

Finally, make your purchase.
Once you've decided which altcoin to buy, open your app, enter the amount in coins or in dollars, and preview your purchase.

This is where you'll see the true cost, with all the fees applied. If everything looks satisfactory, just click "Buy", and you'll have successfully bought your first coins.

Remember: Different exchanges have different fees, so make sure you're taking them into consideration when planning which exchange to use.

What to Do After Buying Altcoins

Now that you've bought your altcoins, you should consider setting up a wallet if you haven't already got one.

At this point, you're free to buy and sell as often as you like. Just keep the tax implications involved with cryptocurrency trading in mind.[1]

More sales and trades may mean a higher tax bill in the following year. Consider holding your coins for periods of at least a year to reduce the impact of your investing on your taxes.

Bottom Line

Now you should know everything you need to start buying altcoins. The most important thing to keep in mind is that all investments carry risk, and you should never invest more than you can afford to lose. That said, altcoins have a lot of potential, and there's always a chance that the one you choose will be the next big hit.

References

  1. ^ IRS. Virtual Currencies, Retrieved 4/18/2022

Jeremy Harshman is a creative assistant at CreditDonkey, a crypto comparison and reviews website. Write to Jeremy Harshman at jeremy.harshman@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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Best Place to Buy Crypto

April 12, 2022 - By Jeremy Harshman - Tips for Invest in Cryptocurrency
If you're new to cryptocurrency trading, one of the first questions you're likely to have is where to buy crypto. Discover the best platforms in this guide.
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