Why look beyond the top 10 cryptocurrencies?

The case for smaller coins, and the case for caution.

Most of the money in crypto sits in a handful of large coins such as Bitcoin and Ethereum. Even so, thousands of other coins exist, and many people hold at least a few of them. Here are the main reasons, followed by the downsides, which are just as important.

Reasons people go beyond the top 10

• Different jobs. Coins are built for different purposes: some power apps on a particular blockchain, some connect blockchains to real-world data, some focus on fast and cheap payments, some on privacy. You may need a specific coin just to use a network, because it pays the fees.
• Room to grow from a small base. A coin worth a small fraction of Bitcoin's total value can in theory multiply in value more easily than one that is already huge. The catch is that it can also collapse just as easily.
• Spreading your bets. Some people hold a mix of coins so that no single project's failure wipes them out. Be aware that most coins tend to rise and fall together with the wider market, so diversification inside crypto offers less protection than it appears to.
• Earning from holding. Some coins allow you to "stake" them, locking them up to help run the network in return for rewards. This usually involves risks of its own.
• Belief in a project. Some people back a team or technology they have researched and believe in.
• Community and curiosity. From Dogecoin-style fan communities to experimental technology, some people just enjoy being part of something new.

The extra risks

• Most small coins fail. Large numbers of coins launched in past boom periods have since vanished or become worthless. Being small is not a bargain.
• Bigger swings. Smaller coins tend to fall further than Bitcoin in a downturn, and some can drop to nearly nothing.
• Low trading volume. It may be hard to sell without pushing the price down, or at all.
• Scams. "Rug pulls", where creators abandon a project after taking investors' money, fake tokens and hype campaigns are far more common among lesser-known coins.
• Few safeguards. Small coins may have little independent scrutiny, and fewer reputable exchanges list them.

Questions to ask before buying any smaller coin

• What does it actually do, and who would use it besides speculators?
• Who is behind it, and is the team public and credible?
• How many coins exist, who holds most of them, and are large amounts due to be released soon?
• Is it listed on well-established exchanges, and can you sell it easily?
• Is the hype coming from the project, or from people who stand to profit if you buy?
• Could you cope with losing every penny you put in? If not, put in less.

Keeping it in proportion

Many people who do hold smaller coins keep them to a small slice of what they've put into crypto, and only use money they can afford to lose. See how widely the market spreads on our top 250 rates, or compare coins against each other on the crypto pairs page. For how to hold coins safely, read about wallets and storage devices.