If you’ve started investing in crypto, you may be tempted to stick to Bitcoin (BTC). It was the first cryptocurrency, and it’s the biggest by far. Since it leads the market, it’s generally considered the safest option. It’s also the easiest crypto to invest in, since there are so many places to buy Bitcoin.
While Bitcoin has its advantages, a Bitcoin-only approach isn’t the best strategy for crypto investing. It’s better to add other cryptos (often referred to as altcoins, because they’re alternatives to Bitcoin) to the mix. Here’s why.
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1. Other cryptos have more uses than Bitcoin
Bitcoin is famous for being the first cryptocurrency. Although that has made it extremely successful, being first also has its drawbacks. Since Bitcoin’s 2009 launch, developers have created all kinds of more advanced and more useful cryptos.
While Bitcoin was originally intended as a digital currency, newer cryptos can offer much faster payments at a fraction of the cost. Solana (SOL) is one example, and there are many more cryptos that are faster than Bitcoin.
Bitcoin introduced blockchain technology, but more recent coins have taken it several steps farther. Ethereum (ETH) launched its own programmable blockchain that developers can use to create decentralized apps. There are also cryptocurrencies, such as Polkadot (DOT), that can use and bridge multiple blockchains.
At this point, Bitcoin’s primary purpose is being a digital store of value. Other crypto projects have much more ambitious goals.
2. They have more growth potential
Since Bitcoin is the largest, most popular cryptocurrency, it often doesn’t grow as much as smaller cryptos that catch on. Here’s a look at how much Bitcoin has grown this year compared to a few altcoins:
Bitcoin has done well, but its results don’t come near those of smaller cryptos that only recently started getting more mainstream attention.
To be fair, smaller cryptos carry more risk. Bitcoin is volatile, but it’s less likely to fail because it’s so firmly established as the top cryptocurrency. But if you’re interested in crypto as a high-risk, high-reward investment, it makes sense to pick out altcoins to watch that potentially offer much greater profits.
3. Many cryptos let you earn rewards by staking
Staking is a simple way to earn more crypto. When you stake crypto, you’re pledging it to the blockchain, where it’s used to verify transactions. There’s no risk involved, and in return for staking crypto, you earn rewards. It’s like earning interest on your crypto.
Not every cryptocurrency offers staking, and Bitcoin doesn’t. For a cryptocurrency to offer staking, it must use a system called proof of stake to verify transactions.
Quite a few new cryptos use proof of stake and offer impressive rewards rates. For example, one of my favorite cryptocurrencies, Cardano, uses the proof-of-stake system. Anyone who owns Cardano can stake it and earn rewards of about 5% per year at the time of this writing.
Bitcoin uses an older system, proof of work, to verify transactions. You can’t stake Bitcoin, which also means that you can’t earn rewards on it.
4. Bitcoin isn’t environmentally friendly
Bitcoin’s proof-of-work system operates through a process called mining. Bitcoin miners use special machines to solve complex equations, and the first miner to solve an equation gets to verify transactions and earn rewards.
The problem is that this leads to massive energy usage and waste. Recent estimates suggest that Bitcoin’s annual energy consumption is similar to that of the entire country of Poland. It also generates about as much annual electronic waste as the Netherlands.
Not all cryptocurrencies are like Bitcoin. Proof-of-stake cryptocurrencies in particular are much better for the environment, because they don’t use mining. Considering the negative attention Bitcoin has gotten for its environmental impact, greener cryptos could be a better long-term bet.
5. It’s easy to branch out
Not only does it make sense to add other cryptos to your portfolio, it’s also easy to do so. Most major crypto platforms offer 10 or more cryptocurrencies. Some of the top cryptocurrency exchanges have over 50, giving you plenty of options.
If you’re buying or planning to buy Bitcoin, you can probably buy lots of other cryptocurrencies at the same place. Consider using some of your crypto money for altcoins instead of putting it all in the Bitcoin basket.