Five Reasons why low-cap coins are a good buy
The million-dollar question that has been a headache to investors, especially the newbies is “how to select the best coin for investment”. There are many provable methods to identify and select a digital asset that has an incredible potential to rise to the moon. One of the popular ones is the selection of coins with low market cap, and this article will introduce readers to five reasons why low-cap coins are a good buy.
The Market Capitalization
Going straight to the point, Market Cap is the total value of a company measured in the U.S. Dollar. It is calculated by multiplying the total circulating supply of a digital asset by its price. Before we proceed, let’s briefly go through the demarcation of the market cap.
Market Cap is divided into three according to some investment reports.
- Large Market Cap - $10 billion and above
- Mid Market Cap – Between $1 billion and $10 billion
- Low Market Cap – Below $1 billion. Some experts also consider digital assets with a market cap of below $300 million as low-cap assets. Let’s quickly go through why low-cap coins are a good buy.
Low-cap Assets are very Rewarding
Going by price history, it is an undeniable fact that coins with large market caps are safe havens and have a low level of volatility compared to the Mid and Low-cap assets. In the world of cryptocurrency, coins that fall under the low market cap group are highly volatile, making them very risky to venture into and very rewarding when they experience growth. One interesting thing about low-cap coins is their prices. Most of them are very cheap, and can easily surge in price to multiply their value in a day.
High Potential for Insane Price Growth
Cryptocurrencies with low market cap have huge potential to rise to the moon. The price of a cryptocurrency is measured by dividing the market cap by the circulating supply. Price = Market Cap ÷ Circulating supply. This means low market cap assets are usually cheap and highly volatile. Remember that, the market Cap has to be equal to the circulating supply for an asset to trade at a dollar. When the value of the market cap doubles the circulating supply, the asset trades at $2 and it continues. However, the huge change in market cap takes a big reflection on its price when its circulating supply is very low. Verge, one of the low-cap coins at a point rose by 10,000% in one month. Ethereum at a point rose by 5000% in five months, and Digibyte rose by 30,000% in just three months.
Most Low-cap Coins are Undervalued
Low-cap cryptocurrencies have over the years suffered from insufficient or lack of media attention, affecting their prices greatly. In a year of market bull run, all attention is devoted to the big guns or the large-cap digital assets, denying them of their fair share of the hype. Most of the time, a company’s valuation is not enough to drive the price to what investors expect it to be. The cryptocurrency market primarily thrives on speculations other than valuations. So why should you invest in low-cap coins? The answer is simple: A small level of hype can cause a price surge of more than 1000%. In late 2017, John McAfee predicted that Verge would possibly trade at $15 in Mid 2018. This was after he tweeted that Verge was a sleeping giant. Shortly after, the digital asset took an insane bull run of more than 1000% to record an all-time high price of $0.23. Most of these low-cap coins have more incredible technological functions than the popular ones and are backed by hard-working teams.
Low-cap Assets are Perfect for Portfolio Diversification
Diversification of portfolios is a very popular risk management strategy in the market. Some digital assets tend to do better than others, so buying multiple coins increase the chance of having at least one asset that will yield positive returns when others are crashing. Low-cap coins are better for portfolio diversification because of their prices. Most of them are cheap and can be bought in high quantities for a few dollars.
Their Market Performance
As I pointed above, most of the low-cap coins suffer from inadequate media coverage in market analysis, so many investors think they are scam projects and are just there to make numbers. The truth is that most of the low-cap assets perform better than the so-called large-cap cryptocurrencies in the market bull run. Some of them even maintain their positive run when the popular ones experience a market pullback.