With the value of Bitcoin having soared by nearly 2,000 percent over the course of 2017, cryptocurrencies are receiving more public attention than ever before. However, the story doesn’t end with Bitcoin. Despite the fact that most receive little or no attention compared to Bitcoin, there are over 1,000 different cryptocurrencies in the digital marketplace at the moment.
The question is whether or not these alternative cryptocurrencies, collectively known as "altcoins," have investment potential of their own. Though many altcoins are unlikely to serve as good investments, there are some with very real potential for cryptocurrency speculators. The following are some of the examples I believe demonstrate the investment potential of altcoins.
One of the most popular altcoins, Litecoin was developed as a faster alternative to cumbersome Bitcoin transactions. At the beginning of 2017, this cryptocurrency was trading just above $4. Following the explosion of cryptocurrency values, it’s per-coin cost skyrocketed to over $300. Thanks to this surge in value and its greater ease of use, Litecoin has attracted considerable attention from investors, with some even believing that it is a better long-term investment than Bitcoin itself.
One of the drawbacks of Bitcoin is that all transactions between wallets can be seen publicly. This flaw left a market opening for altcoins focused on privacy and anonymity, leading to the creation of Dash. In addition to privacy, Dash also focuses on encouraging sustainable growth by allocating a percentage of all Dash mined by users to development and promotional efforts. In 2017, the value of Dash increased by almost 8,000 percent to more than $1,200, topping the growth of Bitcoin substantially. With the mixture of privacy, long-term growth focus and strong recent price performance, Dash gives many indications of having considerable investment potential.
Often called Ethereum after the blockchain network on which it is based, Ether is an altcoin used in the execution of coded arrangements known as smart contracts. Ethereum smart contracts effectively authorize payment in Ether when a certain set of predetermined conditions is met. Ether turned in one of 2017’s strongest cryptocurrency performances, starting the year at just under $10 and achieving prices well in excess of $700 in the final week of December. Given this strong showing in 2017 and some projections estimating Ether prices over $2,000 in 2018, Ether makes the list of altcoins that look worthwhile.
Though many large cryptocurrencies have already soared in price, there are some that are still emerging. Ripple, an altcoin designed to easily act as an exchange medium between currencies and cryptocurrencies, falls into this category, having only passed the $1 price point in December of 2017. Despite low pricing, Ripple may be a good investment on the basis that traditional financial institutions are looking into adopting it as a method of processing cryptocurrency payments. Though Ripple as highly is speculative, its popularity with financial institutions may help to give it the real-world value that is often lacking in other cryptocurrencies.
Based on the success these cryptocurrencies have found, I think it’s safe to say that altcoins have a role as investment assets. It’s also worth remembering that the cryptocurrency market is unlikely to end up with a single dominant coin; as a result, there is room for multiple currencies to fill different needs. Private transactions, for instance, may require Dash, while Bitcoin may end up being best-suited to large transactions because of its extremely high value. With so many potential niches to fill, there is ample opportunity for investors to realize gains from Bitcoin and the various altcoins that make up the rest of the cryptocurrency market.