Best Strategies for Trading with Small-Cap Cryptos

One of the critical decisions every crypto investor has to make is the coin to include in the portfolio and what to leave. 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. 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 being right after an ICO. Investors looking to hold their assets for the 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 need to employ appropriate strategies to reap from 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 strategies. Long-term plans are ideal for traders who are not ready to invest large chunks of money at the same time. Such traders make small continuous crypto investments over a long time while diversifying their portfolios.

Short-term traders, on the other hand, 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. 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 both 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 a brilliant idea. 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 its 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 some balance, this should be the strategy for you, especially when dealing with high-risk small-cap coins. The balanced portfolio strategy involves purchasing different cryptocurrencies for the same amount. You could have a budget of $1,200 and then look for three other small-cap cryptos and commit $400 in each.

A balanced cryptocurrency portfolio helps investors spread their risks across the portfolio when they are unsure which of the 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 10% losses. The exact opposite could also happen, but essentially, 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. You can have three small-cap coins, each with a particular portion of the investment. 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 its 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

Bitcoin live price
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, which is the major drawback about them, 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.

Stay up to date with our latest articles

More posts

What Is CBDC In Crypto?

The cryptocurrency trading revolution exploded more than ten years ago and led to an almost unprecedented economic and financial earthquake. As a result, people are learning to change their approach to payment and investment systems, pushing up the price of many cryptocurrencies. Such a rapid change has not gone unnoticed on the boards of the world's major central banks. In fact, in an increasing number of countries, central banks are working on launching centralized digital currencies, known as CBDC. This…

How Social Leaders on Shrimpy help Investors Maximize Profits from Crypto Trading

The emerging trend of social trading allows millions of investors to interact with their peers and learn from accomplished traders in the crypto market. Every market participant wants to become a profitable crypto trader and maximize earnings from the ongoing crypto boom. Unfortunately, navigating the highly volatile space while grasping the complex learning curve that involves fundamental/technical analysis can be rather daunting. Becoming successful in the crypto market requires time to develop a working strategy that empowers investors to execute…

Decentralized Exchanges 2022: Which is the Best Crypto DEX to Trade on?

Market experts believe that the survival and growth of crypto largely depend on decentralization. The good news is that decentralized exchanges or DEXs have become highly popular, and the crypto market sees this as an opportunity to save the essence of traditional blockchain. Each decentralized exchange platform has the potential to revive and thrive crypto market. Moreover, each new DEX platform comes with its own set of features. There are several methods to use DEXs and make money.  Decentralized exchange…

Top Crypto Exchanges for Beginners in 2022

Investing in crypto is not as complex as most people think. So if you’re curious and optimistic about the rise of crypto, there is no reason to hold back and dive into it. Remember, it is normal for beginner investors to get caught in the cobweb of endless crypto exchanges. As a beginner investor, your objective should focus on the best crypto exchanges to make the right investment decisions. Whether it’s Bitcoin or Ethereum, cryptocurrencies continue to be at the…

Top 10 Cryptocurrencies in January 2022

Cryptocurrencies had a great year in 2021. In this period, we have seen the market go from being classified as a billion-dollar economy into a trillion-dollar economy. Aside from that, cryptocurrencies are gaining visibility in the mainstream world with, for example, El Salvador's adoption of Bitcoin as the official digital currency. As a result, investors are looking for the "new Bitcoin" on the market, hoping to find a great alternative in so-called altcoins. Unfortunately, many traders value an altcoin exclusively…

The Story Of Bitcoin And Ethereum’s Reversed Blockchains

Decentralization is the primary selling point of the three worlds of Bitcoin, crypto, and the web. There are several reasons for this. Some are related to the increased transactional efficiency that decentralization can provide. Others are related to creating permissionless, censorship-resistant digital networks. The most important is that decentralization weakens any single-point-of-failure, hence bolstering network security. This not only keeps a network as close to unbiased and ‘neutral’ as possible but almost guarantees its immutability. Yet the crypto world hasn’t…

What Are the Best Crypto Prediction Sites?

There are now several websites that provide, besides crypto live prices, some forecasts on the future of the leading cryptocurrencies. However, considering the market’s high volatility and the few analysis tools available to the public for formulating these forecasts, it must monitor these portals carefully. This article will report some of the primary sources of price forecasts in the crypto industry. However, we remind you that the information contained in the text does not constitute financial advice, and we invite…

Why Do the Cryptocurrency Prices Go Down on the Weekends?

If you have been in the crypto world for a while, you will probably have noticed a typical behaviour of the market during weekends. With some exceptions, we are used to seeing the price of significant cryptocurrencies drop over the weekend. The phenomenon is known to those who operate in this market, but understanding precisely the causes seems to be rather complex. Therefore, this article will discuss a definitive answer by analyzing the various main factors involved in this market…

How to Track and Stay Updated with Cryptocurrency News

Cryptocurrency is a young market and, as such, very fast-moving. If we exclude the phenomenon of stablecoins, the prices of cryptocurrencies change continuously, with sometimes very high volatility. Since a volatile investment is, by definition, a risky operation, traders usually look for ways to reduce the possibility of incurring significant money losses. In this context, it is vital to stay up to date with market events, even if this can be complex. As seen in the past, a single tweet…

Keeping Consensus: Explaining Ethereum’s Difficulty Bomb

Ethereum’s difficulty bomb is a tool for maintaining network consensus between all classes of participants. This is a challenging task for Ethereum compared to Bitcoin, which performs frequent backwards-incompatible hard-forks. The most significant of these – Ethereum 2.0 – is yet to come. When it does, the difficulty bomb will be crucial in ensuring the community’s smooth transition to the new protocol. Review: Ethereum 2.0 and Proof Of Stake To understand the necessity of the bomb, we must review some…