Altcoin
Any cryptocurrency other than bitcoin.
Also called: alts · alt
Written by Javier Sánchez Ros
In plain language
Altcoins range from large, established networks to tokens with almost no liquidity. The category spans an enormous range of risk.
Most altcoins are highly correlated with bitcoin, and typically with higher beta: they fall further in declines and rise further in rallies.
Liquidity varies drastically and can vanish during stress, producing spreads and slippage that make stop orders unreliable.
Worked through
Five different altcoins, 2% of the account in each
- Positions
- 5
- Account committed
- 10%
- Risk as it feels
- spread across 5 bets
- Risk as it behaves
- one bet, higher beta
Five tickers, five charts, five stories about five different networks. It reads like a portfolio. Then bitcoin falls 10% on a Sunday and all five are down 15 to 20% by Monday morning, together, because the thing they mostly have in common is that they are not bitcoin.
Most altcoins trade as a leveraged expression of the same underlying move. They fall further in declines and rise further in rallies, which means the basket did not reduce the size of the bet — it increased it, while making it feel smaller.
The second problem arrives at the exit. Thin books are thin for everyone at once, so the stop that assumed a normal spread fills several percent worse than it showed, on all five, in the same hour. Diversification that fails exactly when it is needed was never diversification.
Why it matters
Holding several altcoins is usually one concentrated bet rather than a diversified portfolio, because they tend to move together.
Common mistakes
- Treating a basket of altcoins as diversification.
- Applying bitcoin-sized stops to assets that routinely move several times as far.
- Ignoring how thin the order book becomes outside peak hours.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
The hidden risk of holding several positions that tend to move together.
How easily an asset can be bought or sold without moving its price.
How much and how quickly an asset’s price moves over a given period.
A market where assets are bought and sold for immediate delivery and full ownership.
A scheduled reduction in the rate at which new coins are created.