What Are Altcoins? Types, Top Picks & Investment Risks Explained

Altcoins are a collective term for all cryptocurrencies other than Bitcoin (BTC). Short for "Alternative Coin," the category includes Ethereum (ETH), Ripple (XRP), Solana (SOL), and over 1.8 million others listed on CoinMarketCap as of March 2026. This article provides a beginner-friendly explanation covering the basics of altcoins, the characteristics of major tokens, and investment risks.

What you'll learn in this article

• The definition of altcoins and how they differ from Bitcoin
• Types of major altcoins organized by category
• Notable coins to watch in 2026
• Risks of altcoin investing and how to avoid common mistakes

The biggest difference between altcoins and Bitcoin lies in their purpose and design philosophy. Bitcoin, often called "digital gold," primarily serves as a store of value. Altcoins, on the other hand, each have unique functionalities such as smart contracts and high-speed transfers.

However, only several hundred to a few thousand altcoins are actively traded; the vast majority have almost no trading volume.

Altcoins can be broadly classified into five categories based on their development purpose and functionality. Understanding each helps with investment decisions.

Blockchain Infrastructure (L1 & L2)

Layer 1 (L1) altcoins have their own blockchains. Ethereum (ETH), Solana (SOL), Cardano (ADA), and Avalanche (AVAX) are representative examples, each with different approaches to processing speed and security.

Layer 2 (L2) technologies supplement Layer 1 processing capacity. They emerged to address Ethereum's high gas fees (transaction costs). Optimism (OP) and Arbitrum (ARB) are notable examples, enabling low-cost, high-speed transactions.

DeFi & Stablecoins

DeFi (Decentralized Finance) tokens are cryptocurrencies used for financial services without intermediaries like banks. Chainlink (LINK), Aave (AAVE), and Uniswap (UNI) belong to this category, powering functions like lending and swapping.

Stablecoins are altcoins designed to maintain a price pegged to fiat currencies such as the US dollar. Tether (USDT) and USD Coin (USDC) are the most prominent, widely used in the crypto market when traders want to avoid price volatility.

Meme Coins

Meme coins are cryptocurrencies born from internet memes (joke images and humor). Dogecoin (DOGE) and Shiba Inu (SHIB) are the most well-known, and their prices can surge due to community excitement. However, they have limited practical utility and are highly speculative, so investing in them requires extra caution.

Below is a comparison of notable major altcoins as of 2026. All of these can be purchased on major domestic exchanges.

In the cryptocurrency world, "coin" and "token" are often confused, but the key difference is whether or not they have their own blockchain.

• Coins: Cryptocurrencies that operate on their own blockchain. Bitcoin (BTC), Ethereum (ETH), Solana (SOL), etc.
• Tokens: Digital assets issued on an existing blockchain. Uniswap (UNI) and Chainlink (LINK) are tokens issued on Ethereum

As a simple analogy, coins are like "houses" and tokens are like "apartments in a building." In everyday conversation, however, both are commonly referred to as "cryptocurrency" or "crypto."

Investing in altcoins carries risks that differ from Bitcoin. Understand the following three risks before making investment decisions.

Price Volatility Risk

Altcoins have smaller market caps compared to Bitcoin, meaning even small trades can significantly move prices. Price swings of tens of percent in a single day are not uncommon. Investing only with surplus funds is a fundamental rule.

Project Failure Risk

Among the 1.8 million+ altcoins, some have abandoned development, and others are outright scams. Before investing, always verify the development team's track record, whitepaper content, community activity (SNS and GitHub update frequency), and listing history on major exchanges.

Liquidity Risk

Altcoins with low trading volume may be difficult to sell when you want to, forcing you to accept a lower price than expected. Check daily trading volume on sites like CoinMarketCap and choose coins with higher volume as a first step toward safer investing.

Common Beginner Mistakes

Here are three common mistakes beginners make when investing in altcoins. Knowing these in advance helps you avoid the same pitfalls.

1. Buying at the top due to social media hype — Rushing to buy based on "buy now or miss out" posts, purchasing when the price is already at its peak. By the time a coin is trending, the price may have already peaked
2. Concentrating all funds in one coin — Losing big when a project fails because of no diversification. Spread your investment across multiple coins to reduce risk
3. No profit-taking rules — Failing to sell when in profit, thinking "it'll go higher," then losing gains when the price drops. Set rules in advance, such as "sell half when the price doubles"

Here are five criteria for selecting promising altcoins. Following these allows even beginners to make lower-risk investment decisions.

• Top market cap rankings: Coins with large market caps tend to have higher liquidity and are less susceptible to price manipulation. Start with coins in the top 50 for safety
• Clear use case: Projects with a well-defined purpose tend to grow long-term. Ethereum serves as the foundation for DeFi and NFTs; Ripple targets international remittances
• Active development: GitHub commit frequency and update cadence are indicators of project health. Exercise caution with projects that haven't been updated in the past 6 months
• Listed on domestic exchanges: Coins available on exchanges registered with the FSA have passed a certain level of screening. Coins available only on overseas exchanges carry higher regulatory risk
• Real-world demand: Whether the coin is actually being used in services or products is a key indicator of future potential

Q. Should I invest in altcoins or Bitcoin?

This depends on your experience and goals. Bitcoin has the longest history in the crypto market and relatively more stable prices, so beginners are generally advised to start with Bitcoin. Altcoins carry higher risk but also offer the potential for greater returns—thorough research is essential.

Q. How much do I need to start buying altcoins?

Major domestic exchanges allow altcoin purchases starting from around ¥500–¥1,000. Since you can start small, we recommend getting familiar with trading using a small amount first.

Q. What is altcoin season?

Altcoin season refers to a period when investment capital flows from Bitcoin into altcoins after Bitcoin's price movement stabilizes, causing altcoin prices to rise across the board. Historically, altcoin seasons have often followed Bitcoin halving events.

Q. What's the difference between "shitcoins" and altcoins?

Altcoins are a blanket term for all cryptocurrencies other than Bitcoin. Among these, coins with very small market caps and low visibility are sometimes called "shitcoins" or "grass coins" (草コイン in Japanese). While they offer the potential for large returns, they also carry high risks of price manipulation and fraud, so extreme caution is needed.

Altcoins are a collective term for all cryptocurrencies other than Bitcoin, with over 1.8 million types existing as of March 2026. They span categories including L1, L2, DeFi, stablecoins, and meme coins, each with unique use cases. When investing, verify the market cap, use case, and development activity, and practice diversified investing within your surplus funds.

If you want to start purchasing altcoins, we recommend the domestic exchange OKJ (OKCoinJapan). OKJ is a cryptocurrency exchange registered with the Financial Services Agency (FSA) and supports trading of major altcoins. Open an account on OKJ and complete identity verification (KYC) within one month to receive 1,000 JPY worth of Bitcoin for free.

Additionally, after opening an account and completing KYC through the link below, go to your Candy Drops My Page and tap "Open an OKJ account and complete KYC (points awarded after verification)" to receive 50,000 Candy Drops points. These points can be used to enter campaigns where you can win cryptocurrency and Amazon gift cards.

👉 Open a Free OKJ Account 👉 Get 1,000 JPY Worth of Bitcoin! A Beginner's Guide to Opening an OKJ Account

Reference sources:

• CoinMarketCap — Cryptocurrency Market Cap Rankings
• FSA — Information on Cryptocurrency
• NTA — Tax Treatment of Cryptocurrency