Any cryptocurrency other than Bitcoin - ranging from major layer-1 blockchains like Ethereum and Solana to speculative meme coins with no utility.
The term 'altcoin' (alternative coin) originally described any crypto asset that emerged after Bitcoin, but the category has evolved into a loosely stratified market. Large-cap altcoins (ETH, SOL, BNB, ADA, XRP) are established networks with significant developer activity, institutional trading volumes, and listed on major exchanges. Mid-cap altcoins are typically earlier-stage projects with specific utility claims but higher volatility and liquidity risk. Low-cap altcoins - including meme coins - can move 50–90% in either direction based on social media sentiment alone.
Altcoin price behaviour exhibits strong correlation with Bitcoin. During bull markets, altcoins typically outperform BTC (higher beta to the risk-on move). During bear markets, altcoins fall further than BTC as investors rotate back to the perceived safety of Bitcoin. The ratio of altcoin market cap to total crypto market cap - 'altcoin dominance' or 'altseason' indicators - is monitored by traders to gauge when capital is rotating from BTC into higher-risk assets.
Trading altcoins involves additional liquidity risk compared to BTC/ETH. Thin order books mean large orders move price significantly, and bid-ask spreads widen during volatility. On decentralised exchanges, impermanent loss and slippage are more severe for low-liquidity pairs. Position sizing for altcoins should reflect their higher volatility: a position sized for a 5% BTC move should be much smaller for an altcoin that routinely moves 20–40% in a day.
Worked Example
A trader allocates 5% of their crypto portfolio to a mid-cap altcoin at USD 0.80. BTC rises 18% over a two-week period during a risk-on move; the altcoin rises 52% (beta ≈ 2.9×). The higher beta produces nearly 3× the return of a pure BTC position. When BTC later corrects 12%, the altcoin falls 31%, erasing USD gains that had not been taken. Position sizing must account for this amplified downside - a common mistake for traders migrating from forex.