* Bitcoin’s competitors are gaining market share in retail purchase

* Its $ 2 trillion share of the crypto market is the lowest in 2 years

* Army of small investors focused on fun and profits, not risk

* Many, like Dogecoin, are rarely used in real transactions

* Volatility can put new investors at high risk

By Tom Wilson

LONDON, May 18th (Reuters). Bitcoin’s smaller competitors are weakening their $ 2 trillion share of the digital currency market. Of the dozen that are on his heels, most have little use beyond financial trading – but few of the investors fueling their rise seem to be concerned.

Among the big “Altcoins” – as all cryptocurrencies except Bitcoin are known – some like Ethereum are aiming for the backbone of a future financial system. Others, like Dogecoin, don’t have such ambitions and are rarely used for payments or business.

To the army of retailers who put money into them, their backstory – and the inherent volatility that exposes those who invest in them to potentially high losses – is often of little concern.

Instead, buyers see the opportunity for a quick win, or at least a fun ride.

“Oh, that’s fun”

Demi Staal, a 27-year-old electrical engineer from The Hague, holds a portfolio of altcoins valued at around $ 8,000.

His previous games included a $ 30 bet on Shiba Inu, a Dogecoin spin-off that briefly became one of the top 20 cryptocurrencies this month.

“I think it’s a joke, just like Dogecoin,” said Staal, who doubled his money on the transaction. “I saw it on my exchange a few days ago and thought, ‘Oh, this is fun, I’ll buy this’.”

In addition to the prospect of fun and profit, however, altcoins are plagued by volatility.

Such price fluctuations can be a big drag to investors, and unlike Bitcoin, and depending on the regulatory framework of the exchange they are bought on, many can only be exchanged for other digital coins on exchanges instead of being redeemed for hard currency.

The story goes on

According to US researcher Coin Metrics, Bitcoin’s share of the crypto market has fallen from 70% this year to around 45%, while the share of trading volume on the major Binance exchange has halved to 23%, according to data provider CryptoCompare.

The market capitalization is still around 800 billion US dollars. Although all cryptocurrencies continue to operate outside the regulatory framework of the global financial system, it is more widely accepted for payments than its competitors.

The second largest coin-operated Ethereum is catching up and has more than quadrupled to around $ 380 billion this year as more and more peer-to-peer crypto lending platforms with “decentralized financing” are using their blockchain.

The rise in Ethereum has sparked wider interest in the altcoin universe among retail investors with cash to burn. This is part of a trend that has also fueled the use of trading apps like Robinhood and a social media rally in stocks like GameStop Corp. triggered.

“The fact (the crypto market) is available 24/7 to people who work,” said Amar Rai, a 25-year-old risk advisor whose crypto investments have doubled since March last year.

Who will let the dog out?

Half a dozen other altcoin investors, all men in their twenties, told Reuters that they based their decisions on information sourced from sites like Reddit, Twitter, and TikTok.

As coins like Ethereum – whose supporters say it will change finances – increase, using social media trends as a reference point has seen others with few such prospects soar.

Take Dogecoin: The logo, started as a joke in 2013, features a Shiba Inu dog that is widely used in memes. But that didn’t affect his ascent.

It’s up over 10,000% this year and has grown to become the fifth largest token with a market cap of over $ 60 billion. That surge did not coincide with an increase in general usage of payments, however, and with an unlimited supply, lack of scarcity attracted inflation-proof investors to Bitcoin.

Instead, it gained momentum through tweets from a prominent supporter: Tesla CEO Elon Musk.

Dogecoin rose 25% last week after Musk said it was working with its developers to increase its efficiency. It had previously slumped a third after Musk called it “hectic”.

Staal, the Hague investor, said he recently lost after buying Dogecoin.

“I bought some a few weeks ago, just for fun,” he said. “I only put a few hundred euros into it. But it didn’t work for me – I bought it at the wrong time.”

Further down the food chain is Shiba Inu, which is up over 2,000% in the four days leading up to May 11th.

The individual coins of the Dogecoin spin-off are worth a fraction of a cent and have little practical use, while the website describes them as an “experiment to build up spontaneous communities on a decentralized basis”.

For the 24-year-old plumber Austin Alexander from Vancouver, that means a profit.

“I’m interested in money,” he said after starting buying Shiba Inu about four weeks ago. “The technology behind it is interesting, but the money makes me.”

The spin-off is still valued at around $ 6 billion, according to CryptoMarketCap, despite having declined 60% over the past week.

($ 1 = 0.8226 euros)

(Reporting by Tom Wilson Additional reporting by Elizabeth Howcroft; Editing by John Stonestreet)