Altcoin Price: Complete Guide to Altcoin Valuation and Investment Strategies

Open any crypto platform and you'll immediately see thousands of altcoins, each with its own price. Though seemingly straightforward, the same altcoin price can lead to very different conclusions without the right knowledge and context.

1What Does "Altcoin Price" Mean?

Ethereum, Solana, XRP and thousands of smaller tokens are all called altcoin. This is because rather than being a single asset, “altcoin” is a category that includes every cryptocurrency other than Bitcoin. 

"Altcoin price", hence, can refer to different things depending on the context. It may describe the current price of an individual cryptocurrency, the price performance of a group of altcoins, or the altcoin market as a whole.

“Altcoin price” can refer to one specific token, a group of altcoins, or the broader altcoin market.

In practice, investment decisions are usually made one cryptocurrency at a time. Therefore, throughout this guide, altcoin price will mostly refer to the market price of an individual altcoin. 

Unlike when you buy products in the supermarket, altcoin prices cannot be controlled or dictated by any centralized entity. This, in turn, leads to a question that our next section will answer.

2How Is an Altcoin Price Determined?

Altcoin prices are mainly influenced by the fact that buyers and sellers are constantly interacting via exchanges using different liquidity sources. Comprehending those key factors will probably let you understand why there is a difference between the display price that you see on an exchange and the execution price that your order will result in.

How Price Discovery Works

Since buyers and sellers rarely agree on what a cryptocurrency is worth, they have to continuously negotiate until both sides reach a price they are willing to accept. This process is called price discovery.

Altcoin prices are formed through price discovery.

When buyers become willing to pay more than sellers are asking, transactions occur at higher prices. Conversely, the market price would fall when sellers accept lower prices.

The latest price produced by this process is the one displayed on exchanges and price-tracking platforms such as CoinMarketCap, CoinGecko, and TradingView. Investors, however, may notice that even at the same moment, the price displayed to them may not always be identical.

Why You May See Different Prices for the Same Altcoin

The same altcoin can show different prices because it trades against different reference assets and across exchanges.

Different Trading Pairs 

An altcoin's price is always quoted relative to another asset. Hence, when the reference asset changes, the same altcoin can appear to perform differently across trading pairs. 

For example, SOL/USDT measures Solana's price in USDT, while SOL/BTC measures it in Bitcoin. In case SOL gains 10% against USDT but Bitcoin gains 20%, SOL/BTC would still fall, since Solana has underperformed Bitcoin. 

Different Exchanges

Each exchange has its own order book, traders, and liquidity. This means supply and demand, and ultimately, the price will likely differ across exchanges, even when you’re comparing the same trading pair.

Unfortunately, even after you know a token's market price, that is not always the exact price you will trade at.

Why Your Execution Price May Be Different

The first contributing factors are trading fees and, on decentralized exchanges - network gas fees. Whether this fee is a little or a lot heavily depends on the network traffic at the time.

Secondly, it’s crucial to understand that the displayed price is usually just the price of the latest completed trade. Your execution price is not determined by that, but rather by the available liquidity when your order reaches the market. 

In a thin market, for instance, a large order may have to be filled at several different prices before it is completed. This “dries up” the liquidity of that asset and pushes the price up when it’s finally your turn.

Your execution price can differ from the displayed market price because of various factors.

3What Makes Altcoin Price Rise or Fall?

Now that you understand how an altcoin's price comes to be, the next step would be learning about what causes altcoin prices to move up or down. 

Altcoin Demand Drivers

Altcoin demand is shaped by crypto and macro risk appetite, real project adoption, and short-term narratives.

Bitcoin and Macro Conditions

When confidence in the crypto market improves, new capital typically enters Bitcoin first, as it is generally viewed as the least risky cryptocurrency. Whether capital will flow from Bitcoin into altcoins is an entirely different story. 

Investors’ willingness to take on additional risks plays an extremely important role here. This willingness is shaped by broader macroeconomic conditions such as interest rate expectations, equity market performance, and the strength of the U.S. dollar.

If these factors turn out favorable, investors’ risk appetite will likely grow, prompting them to invest in riskier assets (i.e. altcoins) in search of higher returns. 

Project Adoption

When more users, developers, and applications interact with a blockchain, demand for its native token often increases. The token, in this case, is typically needed to pay fees, secure the network, access services, or simply participate in the ecosystem.

Although higher prices are not guaranteed, this durable source of demand will still make sustained price appreciation more likely over time. 

Market Sentiment and Narratives

That said, investor expectations alone can oftentimes be enough to shift demand in the short term.

Those expectations are influenced by both news and market narratives. Exchange listings, partnerships, protocol upgrades, ETF developments, and other major headlines can quickly attract buyers toward specific sectors or the market in general.

Supply Drivers

Besides demand, an altcoin's price also depends on how its circulating supply changes over time and how well the market absorbs this supply.

New emissions and vesting unlocks are the mechanisms used to increase the number of tokens available for trading. If demand does not grow quickly enough to absorb that additional supply, prices can come under pressure.

Conversely, token burns permanently remove tokens from circulation, while staking temporarily locks tokens up. With fewer tokens available to trade, buyers compete for a smaller supply, which means prices will likely appreciate.

Altcoin prices are also affected by supply changes.

External Drivers

An altcoin's price can also be influenced by events beyond the project's control, as they shape how investors perceive the asset's risks and future prospects.

Regulatory developments are a common example. Favorable regulations or clearer legal frameworks can improve investor confidence and expand market participation. By contrast, restrictive regulations may limit who can trade a token, or even lead to exchange delistings.

External factors such as regulation can strongly affect altcoin prices.

4How to Read Altcoin Price Correctly

Correctly reading an altcoin price is more complicated than just the headline number. You have to consider price charts, timeframes, historical levels, volume and liquidity before you can determine if a move has been a change of trend or just random, short-term noise.

Start with the Price Chart 

A price chart is usually the starting point for evaluating any altcoin, since it shows how the market has valued the token over time.

If you only want a quick overview, a line chart is often enough. A candlestick chart, on the other hand, provides more detail by displaying the opening, highest, lowest, and closing price for each trading period.

Next, compare multiple timeframes - such as the past 24 hours, 7 days, 30 days, and one year. This serves to determine whether a recent price move is part of a broader trend or simply a short-term fluctuation.

Historical metrics such as the all-time high (ATH), all-time low (ATL), and current drawdown should also be researched. These will show you a broader context of where today's price sits relative to previous market extremes. 

It’s important to mention that a token trading far below its ATH is not necessarily undervalued. Earlier highs may have simply been driven by market conditions, liquidity, or narratives that no longer exist.

A price chart helps investors assess an altcoin’s trend across timeframes.

Confirm the Trend with Volume and Liquidity 

Even after pinpointing the current trend, healthy trading activity still has to be present for a price move to be meaningful. We need to look into 2 things.

Trading volume, for one, shows how much value changed hands over a given period. Strong volume generally suggests broader market participation, but this number can also spike during major news events. Hence, trading volume cannot tell you how easy the token is to trade when it is standing alone.

To answer that, you need to look at liquidity. A liquid market is supported by a deep pool of buyers and sellers, making price movements harder to manipulate and more representative of broader market demand. In illiquid markets, however, relatively small trades can produce large price swings, making trends less reliable. 

5How to Evaluate an Altcoin's Valuation 

Once you understand how the market is trading the token, the next thing you need to answer would be whether its valuation is reasonable. 

Compare Projects with Market Capitalization 

A common beginner mistake is assuming that a low-priced token automatically has more upside than a higher-priced one. The problem is that unit prices cannot be compared directly, since different cryptocurrencies have different numbers of tokens in circulation. 

This is where market capitalization comes into play. This metric allows projects of different sizes to be compared on the same basis by combining price with circulating supply. 

Say, Project A has 100 billion tokens in circulation priced at $0.01. This gives it a market capitalization of $1 billion. Project B, on the other hand, has 1 million tokens priced at $100, resulting in a market capitalization of only $100 million. Although Project A's token is much cheaper, the market actually values it much more highly. 

However, if a project plans to release more tokens in the future, market capitalization alone may understate how large the project could eventually become. This is where another metric steps in to complete the puzzle.

Market capitalization compares altcoins more meaningfully than unit price.

Check Future Dilution with FDV 

Fully Diluted Valuation (FDV) estimates what the project's valuation would be if every token in the maximum supply were already in circulation at today's price. A large gap between market cap and FDV, therefore, simply suggests that substantial token releases may still lie ahead. 

6How to Monitor Altcoin Demand Beyond the Price Chart

Unlike token supply which can be measured directly, market demand has to be inferred from several market-wide indicators.

Altcoin demand can be monitored through multiple indicators.

Bitcoin Dominance (BTC.D)

Investors typically look for signs that money is beginning to move beyond Bitcoin before considering investing in the altcoin market.

Bitcoin Dominance (BTC.D) helps track this rotation by measuring Bitcoin's share of the total cryptocurrency market capitalization. A falling BTC.D generally suggests that capital is moving away from Bitcoin toward altcoins.

It does not, however, reveal which altcoins are attracting those inflows.

ETH/BTC

Because Ethereum has historically been the first destination for capital rotating out of Bitcoin, investors often look to ETH/BTC to confirm whether their expectation holds true. A rising ratio generally suggests that investors are becoming more willing to take additional risk by allocating capital beyond Bitcoin into ETH.

Even if Ethereum is attracting new capital, unfortunately, that does not necessarily mean the broader altcoin market is benefiting. Investors, therefore, need to look at other metrics to determine whether capital is spreading beyond the 2 powerhouses. 

TOTAL2 and TOTAL3 

TOTAL2 measures the combined market capitalization of all cryptocurrencies excluding Bitcoin. Meanwhile, TOTAL3 excludes both Bitcoin and Ethereum, making it a closer representation of the broader altcoin market.

When these charts trend higher, they generally indicate that the overall value of the altcoin market is expanding. When they trend lower, capital is leaving the sector. 

The remaining question, then, would be whether capital invested in altcoin is strong and widespread enough to signal an altcoin season.

Altcoin Season Index

Altcoin season is a period when altcoins, as a group, outperform Bitcoin over a sustained period. It is measured and confirmed using the Altcoin Season Index.

A high score would be a strong indication that favorable market conditions are supporting the altcoin market as a whole. 

The index, however, should better be viewed as confirmation of the broader market environment rather than a standalone buy signal.

7A Final Word on Altcoin Price

Coinminutes' final goal when writing this article is not to tell you to buy or sell any cryptocurrencies. Rather, we hope to provide you with the information needed to make an informed decision on this asset class.

Now that you've somewhat grasped some of the main concepts that define altcoin price, perhaps a more in-depth look into them is in queue. Or maybe following social sentiment or price moves around altcoin is more so your cup of tea? 

If those are the kinds of crypto coverage you are looking for, check out our website at https://coinminutes.com/ for more updates.