Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $2,17 trillion. Bitcoin continues to trade at around $62,300. Ethereum experiences no changes and stagnates at around $2,400. XRP is down by 2%, Solana by 1%, and Dogecoin by 3%. Almost all altcoins are trading in the red, with very few exceptions. The DeFi sector decreased the total value of protocols (TVL) to around…
Best Strategies for Trading with Small-Cap Cryptos
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One of the critical decisions every crypto investor has to make is the coin to include in the portfolio and what to leave. Naturally, most traders focus on well-performing coins and coins with a high cap, like Bitcoin and a few altcoins, and they have good reasons for these choices.
Such investors view micro-cap cryptocurrency trading as a high-risk venture. However, they don’t understand that there is an immense potential to make exponentially high profits from such coins since there is room for much growth.
What are Small Cap Cryptos?
Small-cap cryptocurrencies are coins that have a small market capitalization. Generally, it is a market capitalization that falls below $50 million. Many of these altcoins are usually at their initial stages, some right after an ICO. Investors looking to hold their assets long-term are generally wary of them for fear of potential scams. Developers can abandon the investment, which could mean a total loss for investors. Also, most of these coins are usually start-ups that still face the risk of failing.
Risk-tolerant investors can still make huge chunks of money within a short time. They can take advantage of being early investors in these coins and leverage the benefit of little competition in analyzing and staking the crypto. However, they must employ appropriate strategies to reap these young but profitable crypto assets.
Micro-Cap Crypto Trading Strategies
In a broad sense, crypto trading strategies fall into long-term and short-term. Long-term plans are ideal for traders who are not ready to invest large chunks of money simultaneously. Instead, such traders make small continuous crypto investments over a long time while diversifying their portfolios.
On the other hand, short-term traders stake their crypto coins for a short period. It could be just a few minutes, hours, or a few days. It is the best trading strategy for micro-cap coins. Short-term strategies allow traders the opportunity to make quick profits within a short time and secure themselves from potential losses. However, individual events or some sensitive moves can result in significant price movements in the prices of small-cap coins, which could mean massive gains or losses.
However, investors can still leverage short-term and long-term strategies depending on the coin’s performance.
Accumulating During Lows
Coins with a small cap usually have low prices, so accumulating them at this stage is brilliant. Traders can then withdraw some of their profits once the prices start to rise, and this could cause the prices to go down and even dip the price below their ICO. Remember you still need to do your homework, so if it is a project you have faith in, you can hodl the coins as the price will eventually rise.
Balanced Portfolio Strategy
Crypto trading can jog your life up and down from the high volatility. However, if you want to maintain balance, this should be your strategy, especially when dealing with high-risk small-cap coins. The balanced portfolio strategy involves purchasing different cryptocurrencies for the same amount. For example, you could have a budget of $1,200 and then look for three other small-cap cryptos and commit $400 to each.
A balanced cryptocurrency portfolio helps investors spread their risks across the portfolio when unsure which coins will succeed. From their performance, you should know which has the most promising growth potential and possibly focus on it alone.
Of course, this is no guarantee for profits as you could still get stuck with none. For instance, one of the coins could make a 20% profit while the other two assets record a 10% loss. Of course, the exact opposite could also happen, but you have the risks spread across the coins you choose.
The Unbalanced Portfolio Strategy
The unbalanced portfolio strategy involves allocating different coins a distinct percentage from the others in your portfolio. For example, you can have three small-cap coins, each with a particular investment portion. The amount you allocate for each cryptocurrency depends on how well you think the coin will perform. It is thus essential to do your due diligence. Take your time to go through the whitepaper to understand the coins’ technologies, look at their ICO performance, and the team behind for you to understand the coins’ potential.
If you have three micro-cap cryptocurrencies, you can place 60% for one coin, 25% for your second coin, and 10% for the other asset. Investors who can make predictions correctly can realize their best earnings through this strategy.
Final Word
Btc
Bitcoin
$62.547
price
price
0.84959%
price change
While there are different strategies traders can use in crypto trading, it would be best to identify one and stick to it. You can try a couple of them before finally deciding your preferred option, although you need to be careful not to lose all your money in the attempts. The crypto market is highly volatile; their major drawback although they record different market performances on charts. Therefore, the strategies for one coin may be different for others. Risk-tolerant traders interested in small-cap cryptocurrencies can find their ideal strategy from the options above.
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Adam Robertson
@Adamjr
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