After the meteoric rise of Bitcoin during 2017, more people are open to investing in cryptocurrencies. The aim is to purchase a cryptocurrency, usually as Altcoin investments, when the price is low. Then, if the value increases, you can convert your investment back into cash, allowing you to experience a profit.
Bitcoin’s success is at least partially responsible for the creation of a number of Altcoins. But are they a wise investment? If you’re wondering whether Altcoin investments can make you rich, here’s what you need to know.
What are Altcoins and Altcoin Investments?
To understand what an Altcoin investment is, you first need to know what qualifies as an Altcoin. The simplest definition of an Altcoin is any cryptocurrency developed after Bitcoin. Some examples include Ethereum, Iota, Litecoin, Lisk, and Ripple.
Making an Altcoin investment involves buying one of these Bitcoin alternatives in the hope that it will increase in value. You spend real money, usually by making a purchase through an exchange, and trade the cash for your Altcoin of choice.
Alternatively, some Altcoins are mineable. This means, if you have the computing resources, you can acquire the cryptocurrencies without using actual money. However, if your computer isn’t up to the task, the cash you’ll need to spend to get up and running can be substantial. In these cases, simply buying the Altcoins may be a cheaper approach.
Once you have the Altcoins, the profit mechanism is similar to investing in stocks. However, instead of buying shares of a company, you are purchasing the Altcoin. In some cases, you can obtain fractions of an Altcoin, though not all of them allow you to buy in this manner.
Can You Get Rich Off of Altcoins?
This really is the central question surrounding the cryptocurrency craze we are experiencing today. Many people hope that any Altcoin investments they make will skyrocket like Bitcoin. But, is that just a pipedream?
Like any other investment, no Altcoin is certain to be a success. And, there is substantial risk, as there is usually nothing tangible backing Altcoins.
However, there is some potential for financial gain. Many of the processing mechanisms behind Altcoins have the ability to revolutionize industries. Plus, some large companies and financial institutions are openly supporting specific Altcoins. But, even with support, any Altcoin can fail.
Since the risk is so significant, most experts wouldn’t advise placing all of your financial eggs into an Altcoin basket. Just as some may rise, others may crash and burn, so your Altcoin investments could be wiped out in a matter of moments. If you are mining your cryptocurrency, then the risk to your financial well-being may be minimal. But, if you’re putting real money out there, understand that you could lose it all, just like investing in the stock market.
Could you get rich from Altcoin investments? Sure, it’s possible. But, ultimately, there’s no surefire way to tell which ones will be successful until it happens. You can research different offerings to determine if the one you have your eye on has potential. And, if you’re comfortable with the risk, consider investing in Altcoins. However, if the uncertain nature of these financial vehicles leaves you fearful, then you might want to pass.
Want to see more articles from All Things Finance? Here’s a few to get you started:
- 10 Investing Red Flags You Should be Able to Spot
- Common Forms of Trading Explained
- Easy Come, Easy Go: Dipping Your Toes into Forex Waters
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.