An altcoin is any cryptocurrency other than bitcoin. The term is a contraction of ‘alternative coin’, the alternative that appeared on the market after bitcoin. For an investor the essence is simple: anything that is not bitcoin falls under the heading of altcoin, from established networks to obscure projects with no meaningful track record.
That broad meaning immediately explains why altcoins form such a diverse group. Where bitcoin serves one clear purpose, altcoins differ widely in technology, purpose and maturity. Anyone who asks ‘what is an altcoin’ is really asking about thousands of very different assets.
Everything beyond bitcoin
Bitcoin remains by far the largest cryptocurrency by market capitalisation and usually represents more than half of the entire crypto market. What is left is spread across thousands of altcoins. A small group of large names accounts for the lion’s share of that. The long tail consists of projects that are limited in size and thinly traded.
From layer-1s to tokens
Altcoins can be divided, broadly speaking, into two categories. The first are the layer-1 networks: independent blockchains with their own coin, on which transactions are recorded directly. Ethereum is the best-known example. The second category consists of tokens, which have no blockchain of their own but run on such an underlying network. Consider tokens for specific applications, stablecoins or rights within a project. This division offers a degree of structure, although the differences among them remain large.
More risk, less liquidity
Moving from bitcoin to altcoins raises the level of risk. The Dutch Authority for the Financial Markets (AFM) stresses that trading in crypto is highly risky and that the entire investment can be lost. With altcoins those risks often weigh more heavily: prices move more sharply, liquidity is lower and minor news can cause large swings. Smaller altcoins are moreover more susceptible to manipulation and are at times barely traded. It is precisely for that reason that diversification here is not a luxury but a necessity.
The Callisto Capital approach
At Callisto Capital, altcoins form at most a small and carefully bounded part of the portfolio, never an end in themselves. As a Dutch registered investment fund under the AIFMD-light regime, not subject to ongoing supervision by the AFM, we manage the portfolio systematically, with an emphasis on diversification, risk management and transparency. Participation is open from an investment of 100,000 euro.
This article is informational only and does not constitute investment advice.
