Benefits of Investing in Small-cap Coins
With more than 1500 cryptocurrencies out there in the world, it can get exhausting for a new investor to choose a cryptocurrency to invest in. Bitcoin, Ethereum, and Litecoin are the obvious choices. But the prices have skyrocketed in the past few years. So it is hard for an investor to make a sizeable return on their investment. So, to make a good return, investing in small-cap coins. The coins have a low market capitalization and low price. These coins can show massive growth over a short time. Which is not yet possible with other cryptocurrencies that have reached a large market capitalization.
Reasons to Invest in Small-cap Coins
Investing in small-cap coins has its advantages. For example, small-cap coins are the most likely to fetch 10x or 20x return for the investor if they work. The traditional big market cap coins might not show. The price also responds fairly well to even the most minute changes. If an investor invests even a few thousand dollars in them, they can see a rapid increase in their value.
Disadvantages of Small-cap Coins
A little downside to investing in small-cap cryptocurrencies is the trade volume. Sometimes the trade volume for small-cap cryptocurrencies is really low. It might create problems when the investor tries to capitalize on their gains. Another problem can be excessive volatility. A dump of a few coins can lead to the price dropping substantially resulting in a loss. The risk level is high for the small-cap cryptos.
Tips on Small-cap Investment
Choosing small-cap coins is based on the risk profile. If you are looking to invest with a high risk and high reward strategy, small-cap coins can work for you. However, if you are a little risk-averse in your investment strategy it is best to stick with the Large Cap coins. Another thing to look for while investing in small-cap cryptos is the trading volume. If the trading volume for the cryptocurrency is too low, don’t bother investing in it. It would create problems for you when cashing out.