Key Takeaways
- An altcoin is any cryptocurrency other than Bitcoin.
- Altcoins range from established smart contract platforms like Ethereum and Solana to stablecoins, DeFi tokens and highly speculative memecoins.
- They can offer higher potential returns than Bitcoin but usually carry much higher risk.
- Research the use case, team, token supply, liquidity and security before buying.
Bitcoin was the first cryptocurrency, but there are now many thousands of others. Collectively they're called altcoins, short for "alternative coins." Some are major technology platforms; many are speculative experiments that will fail. This guide explains the different types and how to evaluate them.
What is an altcoin?
An altcoin is any cryptocurrency other than Bitcoin. Some people exclude Ethereum because of its size, but technically it's an altcoin too. Altcoins may run on their own blockchains or exist as tokens on another network.
Main types of altcoins
| Type | Purpose | Examples |
|---|---|---|
| Smart contract platforms | Host apps, DeFi and tokens | Ethereum, Solana, Cardano, Avalanche |
| Payment coins | Fast or cheap transfers | XRP, Litecoin |
| Stablecoins | Track a currency like the US dollar | USDT, USDC |
| DeFi tokens | Govern or power financial apps | Lending and exchange protocol tokens |
| Exchange tokens | Fee discounts and ecosystem perks | BNB |
| Infrastructure and oracles | Supply data or services to blockchains | Oracle and storage tokens |
| Memecoins | Community and internet culture | Dogecoin, Shiba Inu |
Learn more in our guides to Solana, XRP, stablecoins, DeFi and memecoins.
Why people invest in altcoins
- Higher potential returns: smaller projects can grow much faster than Bitcoin in bull markets.
- Exposure to specific technologies: such as smart contracts, payments or DeFi.
- Utility: some tokens are needed to use an app or pay network fees.
- Staking rewards: many proof-of-stake altcoins can be staked.
Risks of altcoins
- Extreme volatility: altcoins usually fall far more than Bitcoin in downturns, often 80% to 95% or more.
- Failure: most altcoins from past cycles have faded into irrelevance.
- Token unlocks and dilution: large supplies held by insiders can be sold as they unlock.
- Low liquidity: small coins can be hard to sell without moving the price.
- Scams: rug pulls and pump-and-dumps are common. Learn the red flags.
How to research an altcoin
- Use case: what problem does it solve, and does it actually need a token?
- Adoption: look for real users, transaction activity, revenue or developer activity. See on-chain data.
- Team and backers: are they known and credible?
- Tokenomics: check circulating vs total supply, inflation and unlock schedules. Read what is market cap.
- Liquidity: is it listed on reputable exchanges with healthy trading volume?
- Security: look for audits and a clean security history.
- Community: active but not cult-like or driven only by price hype.
Altcoin season
"Altcoin season" describes periods, usually late in bull markets, when many altcoins outperform Bitcoin. These periods are often followed by sharp declines. Read crypto market cycles.
Frequently asked questions
Is Ethereum an altcoin?
Technically yes, since it isn't Bitcoin, though many people treat it as its own category because of its size.
Are altcoins a good investment?
Some established altcoins have performed well, but altcoins as a group carry far more risk than Bitcoin. Many investors limit them to a small portion of their crypto holdings.
Where can I buy altcoins?
Major altcoins are available on most crypto exchanges. Smaller tokens may only trade on decentralized exchanges, which adds risk.
This guide is for educational purposes only and is not financial advice.
This content is for educational purposes only and is not financial advice. Cryptocurrency investments are volatile and risky. Some links may be affiliate links — see our disclosure.