Bitcoin vs Altcoins – Which Is Better

Bitcoin vs Altcoins – Which Is Better

Bitcoin has clearly established itself as the best store of value in 2020 and 2021. However, many cryptocurrency investors question whether the insane returns that minted many millionaires is still possible at Bitcoin’s current price. This has led to the popularity of altcoins in 2021. 

With that in mind, this article will cover which one is better for your investment portfolio. As usual, this mostly comes down to personal preference. 

The Positives of Bitcoin

Bitcoin has many positives to it. This section will list out some of the positives of the cryptocurrency as it relates to an investment option.

The Price Has Always Gone Up

First, and most importantly, is that the price of Bitcoin has always gone up on a long enough timeline. Past performance obviously does not guarantee future performance, but it’s a good indicator. 

Bitcoin operates in short bull cycles followed by two to three year bear cycles. This means that if you buy at the peak of the bull cycle, then you will probably have to wait two or three years before the price returns to those levels. 

The price has always exceeded the previous all-time high, though. 

A good example of this is the all-time high reached in December 2017. It was a little under $20,000 for a few days before crashing. 

Cryptocurrency entered a bear market after that. The price never dropped below the previous all-time high of around $1,000. 

More importantly, Bitcoin exploded past that all time high in late 2020. In 2021, it hit a new all-time high of around $61,000. (Source: InvestoTrend)

That is a 3x return from the previous all time high. And it only took about three years to reach that point.

Furthermore, based on historic trends it does not appear that Bitcoin will drop below the 2017 all-time high of about $20,000. 

To summarize, the price of Bitcoin has always gone up, which makes Bitcoin a safe investment. Yes, it’s erratic and unpredictable, but the price always increases on a long enough timeline. The price also does not drop below the all-time high from the previous bull cycle, so it has some semblance of a price floor. 

It Has Some Mainstream Acceptance

Another important point about Bitcoin is that it has some acceptance amongst mainstream culture across the world. In fact, a large amount of the younger population in many countries owns some amount of Bitcoin. 

This is important because increased mainstream adoption provides enough support to prevent the price from going to zero. 

The biggest test for mainstream acceptance, however, is that publicly traded companies are beginning to add Bitcoin to their balance sheet. Tesla and MicroStrategy being the two most famous examples of publicly traded companies purchasing Bitcoin. 

So, why are publicly traded companies adding Bitcoin to their balance sheet?

This goes back to our first point – Bitcoin has always exceeded its all-time high. In other words, these companies view Bitcoin as a more stable way to store cash than simply leaving cash in a bank account

This is especially true due to the massive amount of money that the Federal Reserve printed in response to the COVID-19 pandemic. These companies forecast a large amount of inflation and do not want to hold cash. Gold is too difficult for companies to hold, so they have gone to the digital version of gold – Bitcoin.

The Negatives of Bitcoin

Bitcoin is not without flaws. There are some flaws to the cryptocurrency from an investment perspective. This section will briefly highlight some of the flaws that investors see with Bitcoin. 

It Doesn’t Actually Do Anything

The biggest negative investors have with Bitcoin is that the cryptocurrency does not actually do anything. 

We know it is possible to use Bitcoin for digital transactions, but this is not really a common use for Bitcoin. Bitcoin has become a sort of digital gold. Unlike gold, however, Bitcoin does not have any valuable use outside of being valuable. 

To put it simply, Bitcoin is valuable because it’s valuable. This scares off many investors.

Environmental Concerns

There has been a lot of FUD surrounding the environmental concerns of Bitcoin. We view this problem as extremely exaggerated for the most part. But it is a big enough concern that Tesla cancelled Bitcoin payments due to the environmental impact of mining Bitcoin. 

This problem will likely disappear as the world makes a greater push to renewable energy. Miners also have plenty of incentive to use more affordable renewable energy because it increases their profit margins. 

The Positives of Altcoins

Altcoins have a few positives over Bitcoin. This section will cover some of the positives that these projects have over its biggest competitor.

Altcoins Offer Solutions To Problems

The biggest advantage altcoins have is that they offer more solutions to problems that Bitcoin. We’ll use Ethereum as an example:

It has the potential to completely revolutionize the banking industry, music industry, and real estate industry. In fact, Ethereum is already starting to revolutionize banking with decentralized finance.

Basically, altcoin projects usually attempt to offer a decentralized alternative to a centralized industry. 

This brings us to the next point.

Potential For Huge Returns

Yes, altcoins have the potential for massive returns that simply are not possible with Bitcoin. This obviously is not always the case, but you will not see 3000% returns in one year with Bitcoin. 

That is possible, albeit rare, with altcoins. The more likely return is something around 500% for altcoins that do well.

The Negative of Altcoins

Altcoins do have one main negative. This negative can be mitigated to some degree with research, but it will always exist because altcoins simply are not as popular as Bitcoin.

Many Projects Fail

That’s right. Many altcoins fail.

Now, they do not often drop to 0. But most of the more promising altcoins simply never get any traction and the price rarely changes a significant amount. 

This brings us to our final contention with the great altcoin vs Bitcoin debate.

The Best Cryptocurrency Investment Strategy

The best cryptocurrency investment strategy typically involves a high allocation (ie. >50%) of Bitcoin with a decent percentage of top tier altcoins like Ethereum or Chainlink. A small percentage of your portfolio can be in so-called microcap cryptocurrencies. Microcaps will likely do nothing, but the handful of ones that take off will pay for the losers. 

Still, you should focus mostly on Bitcoin and top-tier altcoins for the best cryptocurrency returns.