Investors worldwide wonder how to invest in low-cap crypto? Research and identify high-potential projects, plan a trading strategy that includes pre-determined stop orders, learn what the next trending sector or technology is, and avoid coins that have already experienced sharp price increases. Finally, you need to find a reliable exchange that offers liquidity. It is important to note that low-cap coins aren’t available everywhere, unlike more established cryptocurrencies, so you might want to consider researching and trading through a DEX first, given that many centralized exchanges do not list low-cap coins for trading.
Though crypto has gained a lot of recognition in recent years, most people still view low-cap coins as lottery tickets rather than financial instruments. But as millions of successful traders can attest, there’s much more to it than the luck of the draw. This guide dives into everything you need to enter the low-cap market equipped for success, including research techniques, market insights, and token recommendations to help you invest in winners like JOYS and CELR before they become popular.
Why Trade Low-Cap Crypto?
Technically, any project with less than $100 million in market capitalization is a low-cap cryptocurrency. But the term generally refers to new cryptocurrencies centered on emerging technologies.
This can be both a blessing and a curse.
On one hand, the risks associated with these lesser-known coins are very serious. The low-cap crypto ecosystem is riddled with scams and negative externalities. Compared to established currencies like BTC or ETH, it’s also more sensitive to changes in market sentiment.
That said, investing in the low-cap market comes with a few unique opportunities.
● High Potential Gains: The best low-cap cryptocurrencies can yield extraordinary returns, sometimes as high as x100. One notable example is Chainlink(LINK), which propelled from $0.20 to over $48 during the last cycle. When you invest at the ground level, seemingly small positive developments can lead to significant price increases.
● Early Adoption Benefits: Investing in low-cap projects early often means buying tokens at a lower price and gaining access to exclusive rewards such as staking benefits and governance rights.
● Market Potential: Projects with large, untapped markets and limited competition offer higher growth potential. The market potential of emerging blockchain tech cannot be overstated.
How to Invest in Low-Cap Crypto in 3 Steps
Step 1: Identify High-Potential Projects
Finding worthwhile low-cap crypto projects requires diligent research and a strategic approach. Here’s how to do it effectively:
Choose a Promising Sector
Start by looking into emerging cryptocurrency sectors. There’s no reason to limit yourself to the biggest trends like Artificial Intelligence, Non-Fungible Tokens (NFTs), and Liquid Staking Protocols. Afterall, the best time to invest in a token is before it becomes trendy.
Platforms like CoinGecko and CoinMarketCap can help you narrow down your choice. A CoinMarketCap subscription includes a unique custom filter feature, which is invaluable for initial research. Meanwhile, CoinGecko offers more relevant data and an easy-to-understand token data display. Both platforms can be indispensable for low-cap crypto research.
Selecting the Right Coins
Once you've found a potential sector, it's time to take a deep dive into the individual projects by evaluating them on several key parameters. Not all low-cap cryptocurrencies are created equal. With high-risk assets like these, separating the best from the rest can feel like looking for hay in a needle stack.
Make sure to check out each of these parameters to avoid the most common pitfalls of the low-cap crypto market.
● Practical Technology and Use Cases
The underlying technology and the problem the cryptocurrency aims to solve are critical. There are two key indicators of a worthwhile use case – relevance and necessity.
1. Relevance: Does the project address a real-world problem that exists today?
2. Necessity: Is blockchain technology the most effective solution for this problem?
Make sure to avoid projects that are not both relevant and necessary.
● Reliable Leadership
The credibility, experience, and track record of the project's team and advisors can significantly influence the project's potential success. The key is to find a transparent team with a track record of relevant expertise.
Thanks to LinkedIn, you can check out the work history of most crypto executives within minutes. You can look into their education, experience, and any projects they were previously involved with.
● Community
A vibrant and engaged community is the driving force behind a project's growth and adoption. Join the community channels and social media groups to get a sense of the engagement levels.
Pro Tip: a project's consistent development activity on platforms like GitHub is a clear indication of its commitment and active engagement.
● Tokenomics
The supply, distribution, and economic incentives of the cryptocurrency (i.e., how the tokens are allocated and used) play a vital role. Having a clear understanding of token supply, including total and circulating supply, allows you to gauge scarcity and potential price appreciation.
Distribution mechanisms, such as ICOs or airdrops, should be fair to prevent centralization and market manipulation. Meanwhile, the incentives for using the tokens should match the stated goals of the project to encourage people to join the network and keep it secure.
● Market Liquidity
Liquidity is crucial for ease of buying and selling a token without significantly impacting its price. When it comes to low-cap cryptocurrencies without much trade volume, higher liquidity is generally a sign of lower risk and more stability. Coins that are listed on more exchanges tend to have better liquidity.
● Roadmap and Milestones
A clear and achievable roadmap with specific milestones speaks to the project's vision and commitment to progress. The idea is simple—the more milestones you set, the more you can achieve. Successfully achievingmilestones is bound to build investor confidence.
● Security
The security measures in place to protect the network and its users are paramount. Look for a strong security framework and a history of no major breaches. Ideally, the project will either be built on an established blockchain like Ethereum or Solana.
● Social Media Presence
Simply lurking on relevant message boards or groups on Twitter, Reddit, and Telegram can provide insights into community sentiment and overall interest in a particular cryptocurrency. Positive sentiment is a good indication, but the most important factor to consider is overall activity and engagement.
Step 2: Plan an Effective Strategy (And Stick to It!)
Hindsight is 20/20. It may seem easy to zoom out on your charts and finger the best buy-in and sell points of the last cycle. But when you’re in the middle of a cycle and your low-cap tokens rise to ATH and fall 50% in a single day, you’d need nerves of steel to stay rational.
That’s why planning is absolutely crucial for success in the low-cap market. An effective investment plan provides structure and clarity, helping you make informed decisions and avoid common pitfalls. That said, some so-called “investing plans” you can find online are based on nothing more than intuition. So here are four solid, time-tested ways to improve your chances of turning a profit:
- Use stop-loss trades to reduce risks and avoid falling for the sunk cost fallacy. The sunk cost “trap” sets in as you keep investing in a token because you've already lost a lot on it, rather than because it's a good idea.
New traders have been known to buy more of a coin that is already down in order to reduce their average buy price. But this price decrease is an illusion. Having stop-losses in place from the beginning serves as an insurance policy against the sunk cost fallacy. - Instead of betting on tokens, bet on sectors and technologies. It’s tough to predict which crypto sectors will become rising trends. So, instead of going all in on a particular coin, you can research their three to five biggest competitors and split your initial investment between them. This way, no matter which project ends up leading the field, you can expect hefty returns once the sector experiences growth.
- Never buy at market price. For obvious reasons, the newest cryptocurrencies will have some of the lowest liquidity levels. That means if you set a large enough market order, you can lose most of your funds to slippage. The good news is that you can avoid slippage by placing numerous small buy/sell orders instead of a single large one.
- Look for the freshest coins. To maximize upside potential. Filter for recently listed projects, ideally priced under 500 Satoshis. Avoid tokens that have already experienced sharp price increases (pumps). And don’t shy away from cryptocurrencies that seem boring or mundane.
Step 3: Find a Trustworthy Exchange
At first glance, it can seem like there’s not much of a difference between the dozens of crypto exchanges available in your locale. But a closer look reveals that choosing a low-quality trading platform is a mistake that can cost you your tokens no matter how well they do on the market. On top of that, liquidity levels can play a huge role in your trades and they vary widely.
At a bare minimum, you should make sure your exchange boasts all of these qualities:
● Technical & Financial Security: Your funds need protection from hacking and fraud. Secure exchanges will offer a number of important security measures, like two-factor authentication (2FA), funds that are held in cold storage, and regular security audits. The best exchanges will also be protected by Secure Socket Layer (SSL) technology.
Pro Tip: While a number of exchanges adhere to the above standards, PlasBit is proud to be the only platform that will not only keep 100% of your deposits in cold storage, but also ensure the cold storage wallets against theft and physical harm.
● Sufficient Liquidity: We already mentioned that high-quality exchanges offer better liquidity, allowing you to buy and sell assets quickly without significantly affecting the price. But how can you tell liquidity is high? Here are three indicators:
1. Daily Trading Volume - the higher the daily volume, the higher the liquidity.
2. Order Book Depth - the difference between the highest bid (buy order) and the lowest ask (sell order) is the bid-ask spread. A narrow spread indicates high liquidity.
3.Execution Speed - if trades are executed quickly, it’s a sign of high liquidity. However, make sure to back-check the historical execution speed instead of going by the past few days.
● User Experience: A user-friendly interface and responsive customer support can significantly enhance your trading experience. Plus, a better interface can allow you to speed up your trades by a few seconds. And if that sounds frivolous to you, you must be brand new to the low-cap market.
● Compliance: This one is a no-brainer. With so many accredited exchanges out there, there’s no reason to settle for one that’s out of regulatory compliance.
CEX vs DEX
All crypto exchanges can be split into two main categories - centralized (CEXs) and decentralized (DEXs). CEXs, such as PlasBit, offer high liquidity and robust security measures. However, they often have stricter regulations, higher fees, and a smaller variety of new tokens.
When it comes to low-cap crypto, DEXs like Uniswap and PancakeSwap are the way to go. They provide greater privacy, lower fees, and the ability to trade without an intermediary. Most importantly, DEXs give you access to a broader range of low-cap coins. Many new tokens might not be listed on CEXs, making decentralized exchanges the perfect option for traders looking to explore the low-cap market.
The catch with DEXs…
Unfortunately, registering with a single DEX is not enough. For most traders, speed, variety and fees are paramount. And that’s the catch - even if you use a DEX, buying low-cap coins with BTC is subject to transaction fees and delays associated with the legacy banking system. Furthermore, many new tokens are not paired with USD/EUR on DEXs.
Thankfully, you have two solid options for circumventing the issue, and both involve trading with BTC instead of fiat.
- CEX plus DEX
Simply register with a trusted CEX and use it to make BTC purchases. You can then transfer Bitcoin to your DEX to trade. BTC transactions are quick and it’s not nearly as volatile as other cryptocurrencies. This option may get a bit cumbersome and redundant, but it is also time-tested. - Cross-Chain Tools
Depending on your needs, the best option might be to leverage multi-chain tools that offer DEX integration. Most come in the form of wallets that support various cryptocurrencies across multiple blockchains. This allows you to swap BTC for low-cap tokens directly within your wallet app, eliminating the need to move funds between platforms altogether.
Pro tip: If you’re a PlaxBit user, you already have a great multi-chain tool at your disposal. The platform integrates the underlying protocols of DEXs, giving users access to liquidity pools and a large selection of low-cap tokens.
Top 10 Most Promising Low-Cap Crypto
1. Joystream (JOYS)
Joystream markets itself as a decentralized video platform that empowers both content creators and viewers by removing intermediaries, ensuring that creators receive fair compensation. Joystream introduces a unique revenue-sharing model where users can earn tokens by contributing to the network in various roles such as content creators, curators, and moderators, fostering a collaborative and rewarding ecosystem. Listed on multiple exchanges, JOYS’ liquidity inspires quite a bit of confidence.
2. Swarm Markets (SMT)
Swarm Markets combines the benefits of traditional finance with the innovation of DeFi, offering both institutional and retail investors access to a wide range of financial products and services, like tokenized securities and yield farming. The platform features a unique liquidity protocol that allows users to provide liquidity in a compliant manner, earning rewards while ensuring transparency and regulatory adherence. Swarm Markets is one of the first fully regulated DeFi platforms in Germany, providing a compliant and secure environment for trading digital assets.
3. Tellor (TRB)
Tellor is a decentralized Oracle network offering reliable data feeds for smart contracts. The team has a combined 40 years of experience in blockchain and data solutions, contributing to an engaged community and consistent GitHub updates. TRB is listed on several exchanges, ensuring liquidity. The project touts itself as the provider of the world’s most comprehensive off-chain data solutions.
4. Celer Network (CELR)
Celer Network offers a layer-2 scaling solution that unites different blockchains and allows them to communicate. The breakthrough project is headed by Dr. Mo Dong, who holds a Ph.D. in learning-based networking protocol design and distributed systems. CELR ensures liquidity with availability on multiple exchanges, with tokenomics designed for fairness. It excels in addressing scalability issues in blockchain networks.
5. Taraxa (TARA)
Taraxa is designed to create decentralized audit logs for Internet of Things devices, ensuring tamper-proof and transparent tracking of device interactions. The team comprises professionals in blockchain and enterprise software, supported by an ever-growing community. TARA's fair distribution is ensured by its transparent tokenomics. On the tech side of things, Taraxa uses the Practical Byzantine Fault Tolerance (PBFT) consensus mechanism, which provides fast finality and is highly resilient against Byzantine faults, making it suitable for enterprise-level applications.
6. 99BTC (99BTC)
99BTC is a DeFi platform that offers yield farming and staking. Experienced team members and an active community with frequent GitHub updates back the project. The project ensures fair distribution through its transparent tokenomics, and security measures are updated on a rolling basis. On top of that, the project has an additional value proposition – 99BTC pays users to learn about how to invest in low-cap crypto.
7. Ethereum Name Service (ENS)
ENS simplifies crypto transactions with human-readable names. Seasoned blockchain developers lead the project,and it is supported by an active community and regular GitHub updates. Tokenomics are as solid as they get, with ENS listed on multiple exchanges. This is a great long-term token for those who believe in the future of crypto. Just think about it: when blockchains rule the financial world, having a one-word wallet address will be a useful tool and a valued asset.
8. Dimo (DIMO)
Do you ever get tired of marketing firms and data brokers treating your private data as their product? Well, DIMO’s developers clearly do. DIMO aims to create a decentralized ecosystem for mobility data, allowing users to collect, own, and monetize data from their vehicles in a secure and transparent manner. Unlike traditional automotive data platforms, DIMO ensures that users have full ownership and control over their vehicle data, empowering them to decide how and with whom to share their information.
9. GameSwift (GSWIFT)
GameSwift integrates blockchain technology into gaming for transparency and fair play. GameSwift focuses on creating a robust GameFi ecosystem where players can earn, trade, and utilize in-game assets and tokens across multiple games and platforms, promoting interoperability and a vibrant gaming economy. To facilitate growth, GameSwift provides extensive support to game developers, including SDKs, APIs, and marketing assistance. The tokenomics are quite solid as well.
10. Mintlayer (ML)
If you’ve ever wished you could make smart contracts on BTC’s blockchain, we have some good news for you. Mintlayer is a Bitcoin sidechain that enables the creation of tokens, smart contracts, and DeFi applications directly on the Bitcoin network, leveraging Bitcoin's security and decentralization. It utilizes a unique consensus mechanism called Dynamic Slot Allocation within its PoS system, which reduces energy consumption compared to traditional proof-of-work systems, making it an eco-friendly alternative for blockchain transactions.
Safety & Risk Reduction
The low-cap altcoin market is often likened to the Wild West, rife with potential but also fraught with risks. Rugpulls and scams are prevalent, and many projects, even those with honest intentions, can ultimately fail. It’s crucial for you to stay vigilant and keep these inherent risks in mind when exploring how to invest in low-cap crypto.
Here at PlasBit, we believe that even today, Bitcoin stands as the only sure investment in the crypto world. Unlike other coins, Bitcoin is truly decentralized, with no company behind it that might harbor hidden motives. Its purpose is to empower individuals to control their own funds, free from any central authority's manipulation.
In Conclusion
Diving into low-cap crypto can yield substantial profits, but it’s a high-stakes game that demands a sharp strategy and meticulous research. Arm yourself with knowledge and a well-thought-out plan to navigate this risky terrain and maximize your returns. Remember, in the world of crypto, fortune favors the well-prepared.
