Investing in Altcoins

Altcoins also join in on the fun, though much more recently. Let’s look at the graph.

Bitcoin, Ethereum, Ethereum Classic, Litecoin, NEM, and Ripple Investment Returns from beginning of the year.

If I had 1 dollar on January 1st of this year, and I had wanted to invest in a cryptocurrency, where would I go? In fact, Bitcoin would have given me the least return, although its no chump change:

Bitcoin would have gotten me about 161 return.

Litcoin gives me a modest 500 return.

Ripple nets me about 2700 return

Ethereum gains 2600 return

Let’s look if I cashed that 1 dollar earlier in May though:

Percent Return if cashed in on the 17th of May

Bitcoin would have gotten me about 81 return.

Litcoin gives me 460 return.

NEM gains me 1100 return.

Ethereum only 993 return.

Meanwhile Ripple gains me 3000 return!

This shows one of the major problems in investing in cryptocurrency, they are very volatile. Ripple saw over a thousand percent drop in investment return just in 2 weeks. It also shows that one should be careful when investing when riding a wave, that wave could peak quickly and crash and you lose a lot of money. Just ask anyone who invested in a house in 2007, or in Dutch tulips during the tulip bubble.

Historical look at the top 6 cryptocurrencies

Now let’s look at a graph going back to 2013. Keep in mind that these altcoins were created after the start date, so their investment return is from their creation date. Altcoins are especially tricky for long term investment. They have much less foundation than Bitcoin, so are even more volatile. Hold onto one long term may prove to be a money loser. Yet, its very possible that they establish themselves as Bitcoin alternatives. Ethereum has seen a larger investment return since its creation than Bitcoin has since 2013, but its existence has been short so its hard to look at a long term look. Nevertheless, Ethereum and Litecoin seem like the best altcoin long term investments because they seem to have the most foundation. You can view my examination of altcoins here.

There is also the possibility of investing Bitcoin into altcoins to try to increase my Bitcoin wealth. The idea is that if I invest in Ripple with my Bitcoin, I want Ripple to grow at a faster rate than the Bitcoin. So let’s say I invested 1 Bitcoin in Ripple on April 1, and convert back to Bitcoin on April 28. Because Ripple had a higher return rate, 50% versus 20%, I’ve effectively increased my Bitcoins, as seen below.