This past year has been remarkable for the cryptocurrency industry. While the price of bitcoin has risen astronomically, the growth extends far beyond the original cryptocurrency, with coins and tokens across the board experiencing growth that surpasses what we saw at the height of the famous bull run of 2017. 

There have been a number of factors that have caused this renaissance in crypto, perhaps the biggest of all being the economic effects that the Covid-19 pandemic has had. Despite a sharp downturn early last March, the crypto industry quickly responded, turning losses into unprecedented highs in a matter of months. Taking bitcoin as a bellwether, BTC dropped into the $ mid-3000 range at the start of the pandemic and now is sitting near $60,000. 

People seem to have money to spend and have been eager to use their holdings to make more for themselves. The lack of things to spend money on due to pandemic restrictions seems to have led to more people trying their hands at stock speculation and venturing into crypto trading and investing. 

Here come the altcoins

Now, a year on from the start of the pandemic, industry analysts have started talking about the impending dawn of “altcoin season”, a term they are using to denote a prolonged bull market for smaller, less known cryptocurrencies. We got a taste of what that is like with the recent rise of Doge, propelled as it was by Elon Musk tweeting out his support for the coin multiple times. The enthusiasm driving the spike in Doge was followed by a bevy of other coins, most notably Hoge, which bills itself as “Doge but Defi.” While on the surface it may seem like a silly copycat coin, Hoge is deflationary in nature and rewards holders with token redistributions when coins are burned. People took notice of Hoge in much the same way as its meme predecessor, and the coin has risen by over 1000% in the past few weeks. 

These are just a couple of examples of a pattern that is currently active and something that many people are looking to get in on. If you are one of the people looking to try your hand with altcoins, there are a few things to know that will help you in your endeavors. 

Protecting yourself in crypto’s wild west 

The first thing that everyone should have in mind is that this sector of cryptocurrency is still very much the wild west. There is a lot of hype right now and a lot of people that may not have the best intentions at heart looking to cash in on that hype. So as an investor there are two things to keep in mind. The first is that the vast majority of altcoins fail in the long run. They may experience periods of growth for a time, but for many, those periods are short-lived and for those who invest in these coins, that can mean incurring big losses. 

So, if you’re planning on investing in lesser-known altcoins, you should first understand that there are absolutely no guarantees in terms of returns on your investments. Investing in altcoins should be considered a secondary form of investment and something you do only with money that you are comfortable losing. 

You should also do everything you can to make sure that you are not just throwing money blindly into whatever project catches your eye. It might sound trite at this point, but we have to do the research, especially when it comes to these volatile small projects. Only invest in projects that you believe have actual value. A good sign is if there is a communicative team that is behind the project. The community that surrounds the project is also of the utmost importance. Because many of these coins start out very small, the community of holders around the coin often plays a role of singular importance in terms of getting the coin to grow and creating more exposure.

It’s all about the exchange 

The second big thing to consider is the exchange issue. Getting involved with altcoins often means that you are going to have to deviate off of the more commonly traveled crypto exchange paths. Chances are, because people often look to get involved in the early stages of an altcoins development, the altcoin you may want to invest in will not be listed on Binance, Kraken or Coinbase

So what do you do then? You have to research the coins and figure out what exchanges it is listed on. Then you have to look into those exchanges and determine whether or not they are trustworthy. Luckily there are a few great resources on the web where you can get a pretty in-depth analysis of how healthy and reliable exchange is. One of those resources is CryptoGeek. 

Now let’s say you are trying to buy the aforementioned Hoge token. If you go to the token’s website it tells you that there are a few places that you can buy it from, the most popular being Uniswap. So from there you can head over to CryptoGeek and take a look at what they have to say about the exchange. With a user rating of 4.6/5, it seems like a pretty safe bet, but in any case, you should check around the web to get as much info as you can about the exchange. 

One of the biggest exchanges for altcoins out there is HitBTC. With many hundreds of assets and trading pairs, the exchange has made a name for itself based in no small part on the diversity of its offerings. If you check it out on CryptoGeek you’ll find a comprehensive analysis of what the exchange offers and a rating score of 4.2. These are the kinds of exchanges you are going to want to use so as not to put yourself in a vulnerable position when buying altcoins. 

While the prospect of altcoin season is exciting and there are definitely profits to be made, it cannot be stressed enough that investors should protect themselves as much as they can. FOMO is real but we should all be careful to not let it influence us into making rash decisions. Be sure to do all your research before investing and make sure you are not putting your money into the wrong hands. 

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

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