What does Low-Cap mean?
First of all, what do people mean when they mention “low-cap cryptocurrency”? They are talking about crypto coins with a low market capitalization. This refers to the total value of the circulating supply of a coin. Therefore you can state that the lower the market cap, the lower the number of coins that are currently being traded. On average a coin is considered ‘low cap’ when the market capitalization is under 200 million USD.
How to calculate the Market Cap?
To calculate the market cap of a coin, you have to multiply the price with the circulating supply: Market cap = Price (x) Circulating Supply.
For example, the current market cap for bitcoin is:
This makes bitcoin the most dominant / popular cryptocurrency at the moment and a relatively safe investment.
To track any crypto coin and its market caps, you can use a source like coinmarketcap or coingecko.
Looking, for example, at the current market cap of DDoS (Disbalancer), ($1,500,000~) the difference between low and high-cap becomes clearly visible. The potential effect a small development can have on the price of a low-cap coin like DDoS suddenly becomes much more feasible compared to a coin with a market capitalization more like bitcoin.
Why buy Low-Cap coins?
Why do some people prefer to buy coins with low market capitalization? It is actually quite simple and understandable. low-cap coins are significantly more volatile, or in other words; low-cap coin prices grow and shrink faster than high-cap coins. When there are fewer coins being offered, a small demand can already have a huge effect on the price.
Buying a low-cap coin that is backed by a great team with an innovative and realizable idea, is therefore a recipe for astronomical gains that could potentially be life-changing. It is recommendable to first investigate the company behind the low-cap coin before you invest your money.
A lot of people tend to gamble their money on low-cap coins and ICO’s to eventually hit a ‘good one’ and have high profits. Unfortunately it is not that simple. Most of the low-cap coin projects come and go like the wind. Without research, you risk a significant chance of losing your investment.
How to research a Low-Cap crypto project:
● Start by visiting the company’s website and check the quality of the content.
○ Read the company’s whitepaper and see whether you understand the content, a lot of companies tend to use a lot of difficult jargon to look legitimate. A good whitepaper can inform readers without leaving them too confused.
● Check and see what’s said, for example, in Telegram groups and Reddit posts.
● See who’s the team behind the project. Check what experiences they have and whether they successfully launched other projects.
● Check whether the company is transparent regarding, for example, their ICO token sale figures. Companies sometimes also ‘lock’ their sold tokens to guarantee potential investors that they are not a pump-and-dump scheme.
○ In addition, pay attention to how the company communicates its ideas to the public. Do they frequently update their investors on social media? Do they reply to questions? How do they handle feedback?
● What is the community like? Although it is not recommendable to blindly follow what people tell you, it is wise to see whether the community believes in the company and its project(s). A strong community of stakeholders can bring any crypto project to the next level.
● Of course, you can also simply check the price chart. What happened in the past, were there any large dumps or pumps, and why did these occur?
Where to buy Low-Cap coins?
Another characteristic of low-cap coins is that they are often found only on just a couple of exchanges. Low-cap coins are seldom initially found on huge exchanges like Binance. Although this can be seen as a limitation it also brings huge potential with it. Whenever a coin enters a new exchange it reaches a new target group which almost always leads to a rise in price. Investing in new, low-cap coins that eventually end up on large exchanges like Binance often generates impressive growth.
As this article implies, low-cap coins can be great, high gaining additions to your crypto portfolio. Provided that you conduct a sufficient amount of research beforehand. It is always recommended to have a nice division between low and high-cap coins. That way you can enjoy both volatile and stable growths.
Please note that, although the market cap can give a general image of the popularity and potential of a coin, it does not give an indication nor prediction of any short-term fluctuations.