Altcoins. Love them or hate them. They are penny stocks on steroids; hundreds of Bitcoin clones exist, each with their own unique marketing spin. A brief look at CoinMarketCap lists over five hundred at the time of this writing. All of the fun of incredible volatility and none of the safety net of regulation.
Bitcoin trading and Bitcoin gambling are brothers-in-arms, and you can’t play a riskier or more rewarding game than betting big on market swings and human greed. This, however, should not be construed as investment advice, but there are rules if you want to win in ‘gambling’ altcoins.
- You have to have patience. Like an intense game of Bitcoin poker. You are playing the long game, the averages—that means you have to know when to fold at a loss, and keep yourself playing for the long term. You can’t predict every winner, but altcoins tend to fall into relatively predictable patterns.
- Most altcoins have no value. This is the most important differentiator between the altcoin and the penny stock. A penny stock represents a share in something that may derive a profit, may create a novel invention, or tap a new market. An altcoin’s value is entirely derived from consumer perception. They are all going to zero; it’s just a matter of when.
- Most coins are invented to pump and dump. That is to say they are minted solely for the purpose of bilking investors. Penny stocks are famous for manipulation, but many altcoins are created solely to be manipulated—to con people into putting money into them with the promise of future return or consumer adoption. You can use this fact to your advantage: the consumer psychology of the pump-and-dump is well established, but can you profit from one in progress?
- Timing is everything. Since you know the intrinsic value is zero, you want to get in early in the inevitable pump. Watch for the slow build, that is the gradual but consistent acquisition of an existing or new altcoin. Traders often try to hide their intention by splitting their orders over a long time period.
- Watch the blockchain. The most important tool for analyzing pump and dumps is the blockchain itself. You can observe the usage metrics to gauge real interest, as well as monitor addresses that may be involved in the slow accumulation of coins. This is a major structural difference from the penny stock, as you have real-time information on account holdings, mining throughput, and transactional volume (i.e. potential real world usage).
- The buy-and-hold mentality is not a good strategy; this is like playing hot potato. Your time scale should be short. Remember: if you buy too late, you are the one who is going to be holding the bag.
- Finally, have fun. You won’t find a more exciting market in terms of risk or volatility anywhere in the world. The traditional stock markets have nothing on altcoin trading right now. It is just about the most fun game out there.
Aside from the fulfillment in trading altcoins, it is also equally enjoyable to use them on a number of Bitcoin gambling sites that accept other cryptos besides Bitcoin, especially when ShapeShift promotes altcoin gambling. Dogedice.me is an excellent venue for online dice and Dogecoin fans while other casinos like FortuneJack, Satoshibet, and Betcoin Casino caters to different sets of altcoins.