How to Invest in Top 20 Altcoins Using the Same Tool
Cryptocurrency market is just a few years old, and still there are hunderds of altcoins of different fates and perspectives. There is excess of one hundred coins nowadays, which is comparable to securities market of a small country.
Not all of them are developing projects; it’s only about 40% of altcoins that have market cap over $1 million. The cryptocurrency market is still in the sidelines of Bitcoin, however, alctoins market is exanding currently reaching 20% of Bitcoin’s market cap.
A thriving market with great potential of growth and low entry threshold is certainly appealing to potential investors.
How can one assess profitability of investment in top cryptocurrencies? Is it better to invest in Bitcoin, or in high market cap altcoins? Is there any index to assess altcoins market, just like there is Dow Jones for securities market? How can an investor diversify the risks and have a balanced portfolio of crypto-assets with decreased volatility?
Answering all those questions takes much time. One would have to spend most of the time to study the alternate cryptocurrencies. Certainly, there is an evident difference between expensive purchase of Ethereum coins and a cheap purchase of NN coin no one has ever heard about before. In the prior case, though the rate may decrease in mid-term, there is a great chance of long-term growth. For that reason, understanding blockchain system or altcoin subject to possible investment is very important.
One of projects that may answer those questions is Coinoindex, ther first cryptocurrency counterpart of Dow Jones index, which also allows for investment in top 20 altcoins.
The index is similar to Dow Jones. It reflexes changes in cost of portfolio of 20 cryptocurrencies with greatest market cap. The portfolio’s contents get updated on a weekly basis. The portfolio’s cost is calculated in real time and displayed at Coinoindex website. One may easily note that the index’s volatility is much less than that of its components. As of summer 2015, the curve corresponds to market dynamics; it shows that altcoins are inferior to Bitcoin in terms of profitability, however, there is a turning point down the road, and the trend goes upwards.
Graph by Poloniex exchange
Thus, Coinoindex shows both ‘average temperature for a hospital’ at cryptocurrency market and highlights emerging trends. The latter option may be useful for those who wish to enter the market at the right time. Dow Jones’ counterparts are prominent in stock market theory. Dow’s theory, for instance, predicts certain regularities in the market’s general state, as well as the index that describes it.
Investment in indices (index funds) has a lion’s share of all stock market operations. In this sense, altcoins market is no different from shares market. By investing in Coinoindex, a user diversifies risks and invests in current trend of the whole market, rather than in a standalone altcoin.
Currently, Index is tradeable at Poloniex, where one may buy or sell it for Bitcoins. This makes Coinoindex not just the first cryptocurrency index, but also cryptocurrency’s first index fund.