In the crypto realm, altcoins, the cryptoassets beyond Bitcoin, have recently taken center stage. If you’ve noticed this – or even if you haven’t – and you’re interested in learning more about what altcoins are, and how they can be part of your investment strategy, keep reading. We’ll explore the altcoin surge, why it’s happening now, and how you can improve your knowledge to make better informed investment decisions.
What are you waiting for? Read on!
Understanding the Altcoin Surge
It’s crucial to recognize the significance of altcoins beyond being mere alternatives to Bitcoin. Altcoins such as Solana (SOL), Immutable X (IMX), and Polkadot (DOT), demonstrated big surges in the not-so-distant past, showcasing the growth potential within this market. The significant increase in the market cap of all three of these altcoins for the last 90 days of 2023 clearly indicates this: SOL at 306%, IMX at 251%, and DOT at 77%.
SOL, IMX, and DOT are all included in eToro’s Scalable-Crypto Portfolio, created for those seeking a diversified approach, which provides exposure to diverse scaling solutions. Additionally, the Mid Cap Crypto Portfolio offers a well-balanced selection for navigating the ever-evolving Altcoin landscape. Read more about eToro’s diversified and curated Altcoin SmartPortfolios further down in this piece.
Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
This surge in altcoin value is tied to the three categorizations of blockchain scaling solutions:
| Layer 0 solutions | Layer 1 solutions | Layer 2 solutions |
| Provides a foundational framework for seamless communication and coordination between different blockchains | Alters the blockchain structure to offer a more scalable network than Ethereum | Creates off-chain mechanisms that sit on top of the Ethereum blockchain |
SOL’s surge happened when it upgraded the foundational part of its network (Layer 1). IMX’s rise was thanks to Layer 2 scaling, and DOT’s climb was a result of Layer 0 solutions.
Understanding the DNA of Altcoins
Understanding altcoins means digging into where they come from. Each cryptoasset has its unique story that gives us key insights into what makes it tick. Whether it’s a native blockchain, a Web3 wonder, a utility token, or one of those trendy memecoins, their origins provide essential background on their purpose, development, and what sets them apart. Having a more comprehensive knowledge of this backstory helps us figure out each altcoin’s strengths, weaknesses, and potential trajectory of an altcoin, offering the ability to hazard an educated guess as to where they could be headed.
The Impact of the Halving and Four-Year Cycle on the Altcoin Market
The altcoin surge was not a mere coincidence; it was actually a phenomenon linked to Bitcoin’s halving and the four-year cycle. Historical data shows that after each Bitcoin halving event, altcoins experience substantial growth.
The numbers don’t lie. See here how the altcoin market cap rose at various points following previous Halvings:
Past performance is not an indication of future results
Check out the comparison of the altcoin market cap breakout patterns observed in 2016 and 2020 in the below table, both following Bitcoin halving events. The familiar pattern emerging in the 12-month performance from the halving in 2020 showcases remarkable gains across various further Altcoins, further emphasizing the cyclical nature of the crypto market.
Past performance is not an indication of future results.
It may come as no surprise that the predictions of what will happen following the upcoming Halving seem to be following the same pattern, sparking waves of anticipation in the Altcoin market. Watch this space.
Information is Power
It cannot be overstressed that thorough research is crucial prior to investing in any altcoin, to be able make informed decisions in this dynamic market.
Empower yourself by leveling up your knowledge, with the help of eToro, till you have what you need to be an effective altcoin investor.
| What you can do | Where to do it | Resources available to you |
| School yourself | eToro Academy | Courses, Guides, Tutorials |
| Listen and learn | Digest and Invest | Podcasts (check out BTC etc), webinars |
| Utilize eToro | eToro | Individual altcoin bios, news feed, historical charts, analysis features |
It’s important to be careful
While the Altcoin surge presents lucrative opportunities, it comes with risks. The aggressive nature of the market cycle should not be underestimated, and you should carefully consider your investments. Risk mitigation is absolutely essential, and central to the process for smart investing.
The four year cycle of the Halving traditionally shows a trend of bearish crypto tendencies, to counterbalance the bullish highs. While the highs tend to be evident in the two years after the halving, what goes up must always come down, and lows inevitably follow:
| Altcoins | No. of days to low, post-2020 Halving |
Drawdown percentage | Cycle High | Cycle Low |
| Ethereum | 768 | -81.4% | $4,846 | $902 |
| XRP | 962 | -96.8% | $258 | $8.27 |
| Dogecoin | 768 | -93.2% | $0.74 | $0.05 |
| Litecoin | 764 | -90.1% | $410 | $40 |
| Stellar | 951 | -89.0% | $0.71 | $0.08 |
| Dash | 1201 | -93.8% | $406 | $25 |
| Solana | 963 | -96.3% | $260 | $9.65 |
| Chainlink | 1125 | -90.5% | $52 | $4.98 |
| Polygon | 768 | -88.7% | $2.90 | $0.33 |
| Bitcoin Cash | 1129 | -93.7% | $1,606 | $100 |
| NEO | 959 | -95.7% | $140 | $5.96 |
| Decentraland | 1218 | -95.4% | $5.78 | $0.27 |
| Theta | 892 | -96.3% | $15.02 | $0.56 |
| Enjin | 890 | -96.8% | $4.75 | $0.15 |
| Loopring | 891 | -95.7% | $3.70 | $0.16 |
| Synthetix | 963 | -95.0% | $28.77 | $1.45 |
| Algorand | 1218 | -96.5% | $2.48 | $0.09 |
| Ankr | 963 | -92.9% | $0.21 | $0.01 |
Past performance is not an indication of future results.
We strongly encourage you to stay informed and make thoughtful decisions to navigate potential challenges effectively. Taking a proactive approach allows you to make informed choices, contributing to a more secure and successful financial journey without the need for excessive severity. Utilizing such tools as eToro’s Stop/Loss feature can help you anticipate and manage unexpected events.
Know when to cut your losses – and when to take your profits!
Knowing when to take profits and when to cut losses is crucial for long-term success. Utilizing the practical safeguard of eToro’s Stop/Loss feature is a wise move to ensure the safety of your funds and the effectiveness of your investment.
Stop/Loss is vital for risk management, and means that when you open a position, you establish precise points for potential gains and losses. The feature automatically sells a security when its price hits a set level to limit potential losses. Similarly, if the market moves in your favor, and the trade concludes with a profit, you secure your gains. This disciplined approach protects your capital, can improve your trading performance, and reduces any emotional biases. Think of this utilitarian tool as your personalized risk management system, allowing you to participate in the market while minimizing potential losses.
Diversifying the Altcoin Landscape
Safety in numbers is a key principle in navigating the Altcoin surge, which makes diversifying your investment across the Altcoins market cap a highly compelling option.
SmartPortfolios offer a way to invest in the market cap without needing to individually monitor each asset. Understanding the intricacies of your investment remains crucial, and with its diversified and curated Altcoin SmartPortfolios, eToro streamlines the process utilizing user-friendly features and comprehensive information on each portfolio.
For individuals who prefer a hands-off approach or harbor uncertainties about selecting specific Altcoins, investing in one of the eToro crypto SmartPortfolios, could well be a sensible choice. Specifically, look at the Scalable Crypto and Mid Cap Crypto portfolios, both of which comprise a number of different altcoins.
Furthermore, the blending of the stop-loss option with SmartPortfolios presents a strategic synergy, helping strengthen your risk management strategy as well as ensuring awareness of market shifts – while providing a protective cushion. In the realm of altcoin investments, the stop-loss feature emerges as a pragmatic ally, assisting you in maneuvering the twists and turns of crypto trading.
Conclusion
Navigating the Altcoin surge requires a strategic approach, deeply rooted in education and informed decision-making. From understanding the surge and the four-year cycle to exploring the diverse Altcoin landscape, this piece underscores the importance of caution and risk mitigation.
The vital significance of self-education and thorough research in the dynamic world of crypto cannot be overemphasized. We strongly encourage all our investors to do their own research, and use all the tools and information that eToro provides them in order to make safer and better informed investment decisions.