Previously Published to Gate.io
As Bitcoin continues to falter after rallying to new highs in the first half of 2021, many are turning to altcoins on the Ethereum blockchain as their crypto of choice.
Here are 5 coins on the Ethereum blockchain to keep your eyes on (and your diamond hands at the ready) during the current altcoin cycle.
What is the Ethereum Blockchain?
Ethereum is a community-based, open-source platform with its own programming language. This makes it possible for any developer to build, publish and monetize next-gen, distributed applications (otherwise known as ĐApps).
Ethereum is used for the decentralization of these applications, powers currencies and enforces smart contracts deploying code — not by any particular person or entity.
While Ethereum is a functional blockchain, it’s often considered the silver-standard next to Bitcoin — the “digital gold” of the crypto world — and is therefore the second most popular blockchain on the market.
At one point, Ethereum forked into multiple factions in order to maintain a secure and stable platform, thus separating the ether (ETH) coin from Ethereum classic (ETC), which still operates on the original Ethereum platform.
Ethereum is constantly evolving, as is evident with Ethereum 2.0, which launches in three phases — including the preliminary phase, which took place in December 2020, and the next two following in 2021 and 2022.
According to the EC Council, “Ethereum 2.0 is an upgrade to the already existing Ethereum blockchain. It aims to increase the speed, efficiency, and scalability of the Ethereum network, enabling it to address the bottlenecks and increase the number of transactions.”
What is an Altcoin Cycle?
In a way, altcoins (short for “alternative coins”) will always follow Bitcoin, as certain trends will trigger buy and sell points for alternative coin investments.
The four phases in an Altcoin Cycle dictate when one should buy or sell in order to profit from high-performing altcoins:
* The Start of a Bull Market
* The Outperformance of High-Quality Altcoins
* The Hype
* The Bear Market
At the start of a bull market, prices will “bottom” out from massive sell-offs that took place in the previous cycle. Investors start buying up the coins with the most likely gains during this phase. Demand increases for coins that produce the highest return. Investors begin moving assets.
It’s at this time when Bitcoin’s in most demand — meaning many altcoins will continue to remain low. While some coins ride the wave, others will drop like flies. Token selection in this phase is — and always will be — extremely crucial.
In fact, the price of altcoins may plummet further in the second phase of the Altcoin Cycle. When this happens, they tend to become extremely undervalued compared to Bitcoin and are then brought up by riskier investor types.
And then, we see the hype. Bitcoin reaches new heights. FOMO (the “fear of missing out”) starts kicking in.
We see an uptick in the buying and selling of undervalued altcoins. Demand drives prices. And, a bubble begins to form. Investors should gauge their assets and decide when they’re going to pull out — if they’re going to pull out at all.
If coins become overvalued, the bubble will burst. Some sell high and buy back in once the bubble pops. Multi-year bear markets could begin at this point, and exposure should be minimized until prices bottom out.
Phases are triggered by events. They can start, restart and loop at any time. It’s up to individual investors to do their due diligence before investing in any coin. Time the market, engage in research and seize the moment.
Top 5 Coins on the Ethereum Blockchain to Watch
Is Ethereum a good investment? Most crypto traders would agree yes, although ETH itself may be an expensive buy-in for some. Look to these altcoins to fill out your portfolio — you never know which one will be the next to go to the moon.
Coin 1: Uniswap
DeFi platforms empower developers, liquidity providers and traders to participate in an open financial marketplace.
Uniswap (UNI) is a decentralized finance protocol used to exchange cryptocurrencies by way of smart contracts and ERC-20 tokens on the Ethereum blockchain. Considered the largest decentralized crypto exchange, it’s the fourth-largest, overall, based on daily trading volume.
Uniswap focuses on eliminating unnecessary fees and intermediaries for faster, more efficient trading. The ultimate goal is decentralization, resistance to censorship and the prioritization of security. It’s also an open-source software, registered under a general public license (GPL), guaranteeing end-users the freedom to use, share and modify its contents to create a better platform.
Uniswap V3 launched onto the Ethereum mainnet on May 5 with claims that it is “the most powerful version of the protocol yet.”
Coin 2: Polygon
According to Mark Cuban, “Polygon is the first well-structured, easy-to-use platform for Ethereum scaling and infrastructure development.” Why should it matter? He’s a serial investor and a multi-billion dollar entrepreneur, who earned his fortune from FinTech and software-based technologies. His recent investment in Polygon falls nothing short of “sizable.”
Polygon (MATIC) was formerly known as Matic. And like others on this list, Polygon is a decentralized finance (DeFi) platform and an open-source technology with lots of tools that instantly allow developers to “implement a stand-alone network or a secure sidechain, using the security of the Ethereum network through smart contracts.”
Polygon was created to carry out “scalable and instant blockchain transactions” and to combat slow block confirmations and high gas fees, which have become commonplace across the market.
Coin 3: Chainlink
Expected to reach $100 by 2025, Chainlink’s decentralized oracle network “provides reliable, tamper-proof inputs and outputs for complex smart contracts on any blockchain.”
Chainlink (LINK), formerly known as smartContract.com, pushes the boundaries of the public blockchain to create a more reliable, more secure Oracle network. Oracle provides the blockchain with real-world data, allowing the free transfer and communication of data between hybrid nodes — key when feeding information into and out of decentralized finance applications.
Chainlink is working on a solution that verifies data sources and to disway dishonest, centralized data-feed providers from distributing data into the node-based system. They’re also partnering with companies outside the blockchain ecosystem to create a more universally-accepted smart contract.
In 2019, Chainlink partnered with Google to create a hybrid smart contract, using its BigQuery data analytics platform and allowing users to transfer between some of the most popular cloud service providers on the market.
Coin 4: Aave
Aave is a “decentralized non-custodial liquidity market protocol where users can participate as depositors or borrowers.” Similar to borrowing capital on margin, users may borrow against existing assets without actually having to sell. It also means that they don’t miss out on the next surge in crypto, as their initial investments are left in place.
Investors earn interest on their crypto, depositing money into Aave’s community-based lending pool, earning a passive income, while continuing to earn from gains.
Aave is a secure lending protocol, continually audited to eliminate any irregularities found within the blockchain. Aave’s platform is considered risk-free, and all non-collateralized funds can be withdrawn at any time.
Coin 5: Ox
An open protocol network, 0x enables the peer-to-peer (P2P) exchange of assets on the Ethereum blockchain. Often referred to as the “Craigslist for cryptocurrencies,” 0x (ZRX) powers the decentralized exchange of tokens by allowing individual developers to create their own cryptocurrency exchanges.
This platform also allows users to trade tokenized assets such as stocks, gold, real estate and video games, promoting interoperability between decentralized applications.
0x Labs wants to build a more efficient system for global finance and equities. Using a new and improved infrastructure, they are able to carry out transactions more transparently and by stripping away the powers of any other third-party system.
Investing in Altcoins
Many traders have transitioned to altcoins, frustrated with the recent volatility of Bitcoin and the stock market. Many have found favor with trading such assets and now feel that they’re not just investing in an asset, itself — they’re investing in a movement.
How to Invest in Altcoins
Depending on the asset, its popularity and the level of trust it has built with the public, you may or may not find your favorite asset on major crypto-trading platforms. Based on your location, some cryptos may be banned due to federal embargos and regulations.
Pros and Cons of Altcoins
Pros
* Many altcoins are new on the market, created to solve problems within existing blockchains — therefore in demand but awaiting adoption.
* Most altcoins are relatively affordable and highly undervalued.
* Tokens are often backed by actual services and/or assets.
Cons
* Altcoins tend to see less fluctuation — annoying when we want to make a quick buck.
* Triggered by an event, demand can come overnight — We can easily miss out.
* Although generally secure, altcoins are open-source and may not be completely hack-free. The good news is your investments are protected and platforms are secured more and more every day.
Should I Invest in Altcoins?
Your investing strategy is ultimately up to you, but having altcoins to balance out your portfolio is always a smart move. Ethereum, alone, shot up from $186 to more than $4100 between January 2020 and May 2021. Dogecoin went from being a joke meme coin to the fourth-largest cryptocurrency in less than a month.
Many cryptocurrencies are experiencing a dip. It’s the perfect time to buy before the inevitable rebound occurs and prices shoot back up. With any investment, however, you must do your homework first.
By Jessica N. Abraham, Benzinga Contributor
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
** Jessica N. Abraham is not a financial advisor, and this article serves only for educational and informational purposes. The reader should do his or her own due diligence when investing in any cryptocurrency or blockchain. Abraham, herself, owns one or more of the above cryptocurrencies listed above.
