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How to Make Money Investing in Small-Cap Cryptocurrency

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March 4, 2018 | 

1106 Views | 

Joanna Newman | 

Get Into Cryptocurrency Trading Today

In the words of Wences Casares, today, the biggest mistake a person could make would be to not invest in cryptocurrencies at all. Aside from being an innovative and highly-useful technology, digital currencies have also proven their worth as a financial asset and have turned many small-time investors into millionaires. Of course, when we think about the most prominent cryptocurrencies such as Bitcoin, Bitcoin Cash, and Ethereum, it’s easy to see why most people think they are the most profitable investment. And, while they are leading the markets in terms of their market caps, they are far from being the most valuable.

In fact, there are many other cryptocurrencies with much more modest market caps that can also be quite profitable and some, may even be more so than Bitcoin or Ethereum.

The Different Market Caps and Their Potential Return


The market cap of a cryptocurrency is an important factor that plays a crucial role in a currency’s acceptance into the markets. It can be calculated by multiplying a cryptocurrency’s total number of coins or tokens in circulation with its current market price and according to this value, they can then be classed into three different categories:



-Large Cap – In this category, we place assets with a market cap of more than $10 billion dollars such as Bitcoin, Ethereum, and Ripple. In terms of their notoriety, these currencies represent the lowest risk, but also the lowest gains. Therefore, it’s hard to imagine a scenario where any of these could see their market prices multiplied by 10 in less than a month. Even during 2017, which was a phenomenal year for most cryptocurrencies, Bitcoin only managed to climb from $1,000 to $20,000 over the course of 12 months. In the same way, it’s also hard to imagine seeing these more famous cryptocurrencies lose that much value. Although the markets are still extremely volatile, these large market cap currencies are the most stable.

-Mid Cap – Here we find cryptocurrencies with market caps of more than $200 million and represent an increased risk, as well as increased profitability. Sometimes, we can even see these cryptocurrency’s value multiplied by 100 in the mid to long-term, however, the associated risks are just as high. However, in most cases, there are no serious financial consequences.

-Small Cap -  This group represent all cryptocurrencies with market caps of less than $200 million and represent the highest level of risk. In this category, it’s not a rare sight to see a market completely collapse on itself and to date, market manipulation has been quite flagrant around these smaller cap currencies. However, these are the cryptocurrencies that offer the highest returns and we often see their values multiplied by 100, 500 or even 1,000 in relatively short periods of time. Still, it’s extremely important to be able to tell which small cap cryptocurrency have this type of potential.

How to Identify a Cryptocurrency’s Long-term Potential


Here, we are concerned only with the small cap cryptocurrencies and there are several factors that need to be considered when trying to determine the long-term potential of such currencies.

Most of the time, a cryptocurrency is the crown jewel of a project. Therefore, the analyses of a cryptocurrency’s potential cannot be based solely on its own value without considering the entire scope of the project. We must also consider the project’s vision, the problem the developers are trying to solve, the innovation behind the technology, the uniqueness of the project, as well as its roadmap. Another important factor to consider is the team behind to development of the project since a team that is made up of visionaries is much likelier to succeed than a team of young inexperienced developers.



Also, we must take into consideration the resources that are needed for the project. Does the development team have the necessary financial, technological and logistical backing to realize its goal? Once this question is answered, you will then be left asking whether there is a demand for the project since a cryptocurrency that no one needs or has a use for is not likely to go anywhere fast. A key factor in determining this is to look at the community. If there is a lot of talk and activity surrounding a project, this can be read as a good sign of the project’s potential.

When to Enter the Market


Once you have assured yourself of a project’s long-term potential, it is ideal to buy in during its launch (ICO) or during a moment of fear, doubt, and uncertainty (FUD).

In fact, during extreme market corrections, panic tends to grab hold of the investors who only know of a single way to make money on their investment and tend to sell and get out quickly before things get any worse. This panic tends to have a snowball effect on the market which further decreases their value.

This represents a reasonable strategy if we are only looking at the amount of money we are looking at our short-term gains and losses. However, for those who wish to see their investments multiplied by 100 in the long run, this sort of phenomenon is a competitive edge.

During these moments of FUD, market values tend to crash which represent a perfect way to optimize our investment. According to experts, the best time to buy into the market is during a correction of 60% or less or during a cryptocurrency’s ICO since at that time, they still have not gained much in terms of value.



Holding on Against All Odds

Once you have entered into your chosen cryptocurrency market, you will still have to hold on and resist the urge to sell during small jolts which are sure to be felt on your way to seeing your investment increased by x100 or x1000. Cryptocurrencies that offer unique solutions and that are aimed at a large target audience tend to be able to resist moments of FUD and severe market corrections.

For example, ETHOS is a project that is aimed at offering a universal wallet for all types of digital currency which is a very practical solution which saves investors from having to use several separate accounts to store their currency. This, alone, paves the way for the project’s widespread acceptance since it offers a very simple solution to a common problem.

Therefore, you must be able to remain calm, cool and collected and be able to resist the urge to sell when the rest of the world falls into a panic. You must stand behind your decision with conviction until seeing your investment grow by 50% or 100%. At all costs, you must not give in to the fear, doubt, and uncertainty that runs rampant in a world of crypto-skeptics.

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