The difference between Bitcoin, altcoins, and stablecoins

Bitcoin doesn’t need to be introduced because it was the first digital coin ever created. Being the first cryptocurrency, it reserved the right to stand alone, while all the ones that came after it were classified as “altcoins.”

What are altcoins?

In plain English, altcoins are cryptocurrency alternatives to bitcoin, or more generally, any cryptocurrency that is not bitcoin.

Since the creation of the first alternative coin in 2011, thousands more have been produced. The primary objective of the first new alternative cryptocurrencies was to enhance the functionality of the original Bitcoin and, of course, to spur competition. Developers of altcoins wanted to cut down on energy use, slash transaction fees, and speed up transactions.

Today’s cryptocurrency market has developed, and numerous altcoins have uses other than Bitcoin’s role as a decentralized payment system. Others are built on completely independent blockchains, while some of them run on the same blockchain but as separate organizations. Ether, for instance, was developed as a method of payment on the Ethereum blockchain, which was built to enable the development of decentralized apps.

Are altcoins tradeable?

Most definitely. Many altcoins are particularly popular for day trading because to the high volatility they provide, as traders are drawn to the enormous price swings that bring them numerous trading opportunities. However, high volatility also entails considerable danger, and the internet is rife with accounts of people who lost their funds as a result of sharp price drops.

This danger is reduced on Deriv because you can trade cryptocurrency without having to purchase or acquire the actual coins. You can only forecast the future price direction of a crypto asset and make money if your forecast is accurate, whether you select CFD trading or multipliers. This does not, however, imply that all risk has been eradicated. To prevent losing more money than you expected, it is essential to have risk management tools like stop losses in place.

Understanding what influences cryptocurrency pricing and establishing a sound trading strategy are equally important to managing your risks. One effective method is technical analysis, which provides a variety of tools to assist you in analyzing the market and making informed trading decisions.

Deriv also gives supporters of cryptocurrency one more choice. With cryptocurrency, you can trade on any market. In this scenario, opening a cryptocurrency account and purchasing some cryptocurrency would be necessary. Because your prospective rewards may also be made in cryptocurrency, trading with it gives you the opportunity to acquire more cryptocurrency without having to buy it.

Since not all cryptocurrencies are subject to significant price fluctuations, the crypto world has much to offer you as well if you prefer trading on cryptocurrency prices but are uneasy with excessive volatility. For instance, stablecoins have an entirely different idea.

What are stablecoins?

Stablecoins are cryptocurrencies whose value is tied (or pegged) to another asset at a 1:1 ratio, such as fiat money, commodities, or another cryptocurrency, and that is less erratic or has a more stable value. It’s usually either US dollars or gold. That is the exact origin of the word “stable,” as stablecoins are thought to have a far more stable value and less erratic values than other cryptocurrencies.

In order to establish a safe means of exchange inside the cryptocurrency ecosystem that would retain its value without undergoing material losses or gains, the first stablecoin was released in 2014. Stablecoins are now used by traders to carry out a variety of crypto transactions, such as the purchase and sale of volatile crypto assets, without involving the conventional financial system.

However, the Terra crisis in May 2022 demonstrated that even stablecoins can lose value in a matter of hours, thus they continue to entail the standard risks associated with cryptocurrencies. Visit our blog on stablecoins, where we go into great length about the subject, if you want to learn more about how stablecoins operate.

Can you trade stablecoins?

You can, indeed. You don’t have to purchase the stablecoins itself in order to trade them, just like with other altcoins traded on Deriv. You can avoid losing the full value of a coin even if it crashes if you predict future price changes and set your risk management tools.

Due to its low volatility, stablecoins are often not used for day trading operations. However, even if the majority of stablecoins have a 1:1 value correlation to another asset, their prices can still change. Usually, the change is not significant—less than a cent. However, if you trade frequently or do not like major price fluctuations, this minor change can still be significant.

Stablecoins, on the other hand, are quite popular for trading, and Deriv offers a variety of stablecoin crypto accounts. Your rewards will likewise be made in cryptocurrency, just like with any other cryptocurrency account, and trading with stablecoins is identical to trading with fiat currency.

It’s always a good idea to practice trading using a demo account first, with no risk at all, if you are just starting out in cryptocurrency trading. It has all the same capabilities as an account with real money and comes pre-loaded with USD 10,000 in virtual funds.

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