There are more than 6,000 virtual currencies and tokens circulating around the world, and spotting a multi-bagger early on is next to impossible, they say.
Similar to the stock market, the world of cryptocurrencies also has high-, mid-, and small-cap coins and tokens.
A 'small cap crypto' or 'penny crypto', is a coin with a market capitalization (Mcap) generally in the range of $ 5 to $ 15 million, while the' mid-cap companies' range between $ 100 million and $ 500 million. Cryptos with a market capitalization of over $ 500 million they are widely distributed and marketed, earning the 'large cap' label.
Cryptocurrency watchers may call the 'buy low, sell high' strategy risky, but investors have made considerable sums of money adopting it. The phenomenal price increase observed in coins and tokens, such as Solarium, Polkadot, BNB, Tezos, Ripple, Cardano, Avalanche, Dogecoin, Matic and Shiba Inu Be a testament to this time-tested strategy.
โPeople take positions in undervalued cryptocurrencies when top-tier coins are expensive. The problem with this strategy is that there are several cryptos with Mcap as low as $ 1 million. There is a serious risk of losing money in many of these coins and tokens, โsays Sachin Jain, a founding partner at Amesten Capital, which runs a portfolio management service for crypto investors. Low-value cryptocurrencies are susceptible to deep price corrections in times of market collapse. There is also the risk that developers will take all of their holdings and go off the market. In such cases, investors would lose all their capital, โhe said.
Crypto fund managers recommend investors to buy cryptocurrencies that are built around a long-term project or products. Investors should only invest in top-rated cryptocurrencies that have a wide circulation.
There are many "projects" that generate cryptocurrencies or tokens as a reward for enablers (the "doers" of the project). Many times, developers may not have the means to market their project or its reward tokens. If the project is around for a long time and the developer's narrative is strong, investors can buy their tokens at lower prices. These are called "undervalued gems" in crypto fund management parlance. This is precisely why savvy investors continue to outperform their investments in Solana, Polkadot, and Cardano, as they believe these next-gen blockchains will disrupt the dominance of ethereum. Ripple and Tezos are considered to help the payments industry.
โThe reason people buy small-cap companies is that they multiply faster than top-of-the-line cryptocurrencies. Little do they realize, they also collide at a much faster rate, โsays Sidharth Sogani, founder and CEO of Crebaco, which offers rating services to cryptocurrency issuers, exchanges and DeFi enablers. โSome small-cap coin issuers are scammers too. ... Investors should do their research before investing in lesser-known coins and tokens. "
Investors are moving to lesser known cryptocurrencies because they cannot afford to buy top-of-the-line coins. "People feel they should be able to buy one bitcoin and not a fraction. They are not happy to invest in a part. This sentiment drives investors to penny cryptocurrencies, โsays Sathvik Vishwanath, CEO of Unocoin, a cryptocurrency exchange.
Cryptocurrency investors should always be careful, and even more so with penny cryptocurrencies. They should be aware of the cryptocurrency bill that will be tabled in Parliament soon. Any adverse government decision can trigger a sell-off, which bleeds small caps the most.
