Bitcoin vs Altcoins vs Stablecoins: The Three Kinds of Crypto

Bitcoin is the first and largest cryptocurrency, with a fixed supply of 21 million coins, and it acts as the benchmark for the whole market. Altcoins are every other coin, from Ethereum to thousands of small tokens, and they are usually more volatile and riskier than Bitcoin. Stablecoins such as USDT and USDC are tokens designed to stay worth 1 US dollar, and traders use them as the "cash" of the crypto world.

Bitcoin: the benchmark

Bitcoin (BTC) has the biggest market value, the most trading volume and the longest history. Its rules are simple and very hard to change: a maximum of 21 million coins, more than 19.8 million of which have already been created, with the rest released ever more slowly through the halvings.

Why it matters for traders:

• Liquidity. Bitcoin has the deepest order books, so large orders move the price less than on small coins.
• Market leader. When Bitcoin rises or falls sharply, the rest of the market usually follows.
• Wider access. Since January 2024, spot Bitcoin exchange-traded funds (ETFs) have traded in the United States, which brought in investors who never touch an exchange.

Altcoins: everything else

"Altcoin" means alternative coin. The group is huge and mixed:

• Ethereum (ETH): the second-largest network. It runs smart contracts, which are programs that hold and move funds by code. Most decentralised finance (DeFi) and many tokens are built on it.
• Other base networks (layer 1s): blockchains such as Solana or BNB Chain that compete with Ethereum.
• Layer 2s: networks that settle on top of Ethereum to make transactions cheaper.
• Exchange tokens: coins issued by exchanges, often used for fee discounts.
• DeFi and governance tokens: tokens of lending and trading apps.
• Meme coins: coins driven almost entirely by community and hype.

Read the tokenomics first

Tokenomics means the economics of a token: how many exist, who holds them and when new ones are released.

• Market capitalisation = price x circulating supply (coins that can trade today).
• Fully diluted value (FDV) = price x maximum supply (including coins not yet released).
• Unlocks are scheduled releases of coins held by the team, investors or a treasury.

Many altcoins that sat in the top 100 in earlier cycles now trade at a small fraction of their peak or have been removed from exchanges. That is survivorship in action: the coins you see listed today are the ones that survived, which makes the whole group look safer than it was. You will meet this idea again in How to Backtest a Crypto Trading Strategy.

Altcoins are also priced against Bitcoin. The ETH/BTC ratio shows whether Ethereum is gaining or losing ground on Bitcoin, which traders use as a rough gauge of appetite for altcoins.

Stablecoins: the cash of crypto

Stablecoins let you park money inside the crypto system without riding Bitcoin's swings. They come in three main designs:

Type	How it holds 1 dollar	Main examples	Main risks
Fiat-backed	Issuer holds cash and short-term government debt	USDT (Tether), USDC (Circle)	Issuer failure, reserve quality, address freezes
Crypto-backed	Users lock more crypto than the stablecoins they create	DAI	Sharp crash in the collateral, smart contract bugs
Algorithmic	Code and incentives, little or no reserve	TerraUSD (collapsed)	Loss of confidence can spiral to zero

Two real events show the risks. In May 2022 the algorithmic stablecoin TerraUSD (UST) lost its peg and collapsed, taking its sister coin LUNA close to zero. In March 2023 USDC briefly traded well below 1 dollar after some of its reserves were caught at a failed US bank, Silicon Valley Bank, before recovering. Issuers of fiat-backed stablecoins can also freeze tokens at specific addresses, for example at the request of law enforcement.

Same coin, different networks

USDT and USDC exist on several blockchains, such as Tron (often labelled TRC20), Ethereum (ERC20) and BNB Smart Chain (BEP20). Each version is a separate token. Network fees differ a lot between them, and the sending and receiving networks must match.

How the three move together

	Bitcoin	Large altcoins	Small altcoins	Stablecoins
Typical volatility	High	Higher	Very high	Very low (if the peg holds)
Liquidity	Deepest	Deep	Often thin	Deep
Risk of going to zero	Low but not nil	Moderate	High	Low for large ones, not nil

Most altcoins are strongly correlated with Bitcoin, meaning they tend to move in the same direction, and they usually move further. If Bitcoin drops 10% and an altcoin tends to move about twice as much, that altcoin could drop around 20% on the same day. The share of total crypto value held in Bitcoin, called Bitcoin dominance, helps you see when money is favouring Bitcoin over altcoins; you can follow it live on the Bitcoin dominance chart.

Next, Crypto Exchanges Explained shows where all these coins are bought and sold, and how the order book and fees work.