Day Trading Bitcoin versus Altcoins
Altcoins are also known as alternative currencies. These are bitcoin clones, bitcoin rivals (boo, hiss!). There are well over 4,000 different altcoins in existence. If you do not like to trade or speculate on the bitcoin against fiat currency markets, you could trade against altcoins instead.
Altcoins seek to improve on the ideas bitcoin represents. Some people feel the need for more anonymity, whereas other developers want to explore the boundaries of the underlying blockchain technology. Rather than submitting their ideas to the bitcoin developers, they use the bitcoin code, change the name, make some minor tweaks, and launch it as a brand new digital currency.
Over the years, only a dozen or so altcoins have managed to stay relevant over time, mostly thanks to a strong community and the integration of some unique features that have not made it to bitcoin core (yet). Nevertheless, none of these altcoin communities is as large or as supportive as the bitcoin community. But that doesn’t mean there is no speculation going in the altcoin scene either. And this is why so many day traders prefer to speculate on the altcoin markets, as there is a lot of room for quick profits and quick losses.
Most altcoins are created by pump-and-dump groups. What this means is that developers create a lot of hype for their coin and promise unique and interesting features. As people find out about these promises, they are more eager to buy coins at a low price, which in turn pushes the price upward. A few altcoins that have people who are actively working hard outside of pump-and-dump groups include Litecoin, CasinoCoin, and Guldencoin.
Rather than pushing up the price by buying coins, some altcoin developers encourage community members to put down a lot of money for a valueless altcoin. And once the price is high enough, these developers cash out, take their money, and work on a new coin for next week.
There are many altcoins to go around, and most of them will never serve an actual purpose. However, if you can catch a few cheap coins before the price increases, there is a nice amount of profit to be made. Never become too greedy though, as prices can plummet even faster than they rise.