What is Low Cap Coin? 5 Steps to Invest Low Cap Coin
What is Low Cap Coin? What is the selection criteria for low cap coins to invest in? What investment strategy should be in place to maximize profits?
What is Low Cap Coin?
Low Cap Coins are coins with a market capitalization of less than $50 million. Typically, these Low Cap Coins will have a relatively cheap price, low 24-hour trading volume, and low intraday liquidity.
Features of Low Cap Coin
- Suitable for users who aim to trade according to the scalping (Scalping) strategy, making quick profits in a short period of time.
- With a low capitalization, when the market notices and the cash flow comes, there will be a "terrible and fast" profit.
- Has the potential to become Mid Cap Coins and bring huge profits to early users.
- Suitable for investors with small capital.
- High risk High return. Along with huge profits, Low Cap Coins always have equally high risks. The user's investment can evaporate "in an instant" if you choose to win a scam project.
- Usually, the price of Low Cap Coins is quite small, you can buy in large quantities. However, because the liquidity is quite small, you can suffer big slippage.
- The coin price may not be stable and you will have to keep a close eye on it.
Difference between Low Cap Coin, Mid Cap Coin & Top Coin
What is Mid Cap Coin ?
Mid Cap Coins are coins with a market capitalization of between $100 million and under $1 billion .
Mid Cap Coin is quite interested by users thanks to the uniform growth with Coin Top of the ecosystem.
Mid Cap Coins also have a moderate price and great growth potential, these factors make the user's profit quite high with low to medium risk.
What is Top Coin ?
Top Coins are cryptocurrencies with a market capitalization of 1 billion USD or more and extremely good liquidity.
Top Coins have very strong growth potential and are the coins that have a strong influence on the entire market. The volatility of Top Coins also causes changes in the market capitalization in general and the trading psychology of users in particular.
The Top Coins are considered to be relatively safe because of their applicability to the development of each ecosystem. However, price volatility usually doesn't provide a quick source of profit and turns out to be large sums for investors with little capital.
For example: Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), Solana (SOL),...
Step 1: Make a strategy to invest in Low Cap Coin
Example: Be Son has 5,000 USDT. Son selected and found 5 Low Cap projects to invest with equally divided capital. After 6 months:
- Project 1: 0 USDT
- Project 2: 0 USDT billion
- Project 3: 20,000 USDT (x20x)
- Project 4: 10,000 USDT (x10x)
- Project 5: 0
⇒ After 6 months, Son has 30,000 USDT (x5 times the initial capital).
Son continued to bring this money to invest with 5 other Low Cap projects and continued to allocate capital to earn profits. Continuing this process, you will see the growth of your capital over time. For the crypto market, it is quite common for a project to x5, x10, x20,... even x100 x200 times, so this method is completely feasible.
So, from the above example, you can see that choosing a Low Cap project and holding coins for the long term is one of the important factors for you to make a profit.
This is a fairly simple tactic, but finding potential projects and the mentality of staying away from the market is not for everyone. Brothers are often quite hasty, or are influenced by the crowd or even "bottom", constantly jumping through other projects according to the community and leading to losses, "flying out" of the account.
Step 2: Find gems before anyone
To find potential projects, twitter is a fairly popular platform for users to "dig".
To know how to find potential projects on Twitter, please refer to: How to use Twitter to find Hidden Gem
However, if the amount of information about the project has spread on Twitter, the number of followers of the project is quite large, then you are already late. And the saying, "buffalo is slow to drink cloudy water" will probably never be wrong in this harsh Crypto market, when just seconds before second you can x5, x10,.... an account.
So how to become an "early" investor of the project?
Method 1: Tracing tweets
With this method, specifically, he will find tweets related to the project from users who have researched before. Brothers and sisters analyze the following examples:
The time $QUARTZ started to attract investors' attention was on December 15, 2021.
Your task will now be to find users who have tweeted about $QUARTZ before and will continue to observe the movements of these users.
How to search for tweets related to $QUARTZ?
You use Twitter's search bar and use the " Advanced Search " function.
Next, you fill in the information you need to find in the " These hashtags " fields and the desired time:
You will then have a fairly complete amount of information about all the users who have researched and tweeted about $QUARTZ before. Your task now will be " Add ... from Lists " to continue monitoring and learning about the project.
By this method, you can continuously update the fastest information, the most objective reviews from users to be able to track all the moves from the project.
Besides, you can also pay attention to users who are also looking for projects like you through the common points in the fields and project pieces that you are interested in, from there. Earn " alpha seekers" and follow in their footsteps.
Method 2: Check wallet on block explorer
To check the number of wallets holding coins/tokens, you can check the Block Explorer of that project using CoinmarketCap . Search for the coin/token to be checked, then click on Etherscan address/BSC/Solana/,...
You need to check to know:
- Number of project holders.
- Holding period of "whale" wallets.
- Has the token allocation in the large wallets been flushed?
- What period of time do users hold the most, then link to the information source on twitter and evaluate if the project has attracted the attention of users.
- Transaction volume of wallets.
- Is there any "price gouging" here?
So, why is it necessary to check the amount of tokens distributed to the market, or the main wallets that hold the token, the information related to the token at such a close level?
For low cap projects, the risks users can bear will also be relatively high. The information related to the token will be a basic source of information so that you can learn and evaluate the potential, having a basis for comparison with other similar projects.
Above are some suggestions for tracking information related to tokens so that you can know the credibility and understand the project.
Method 3: Don't miss any tweets on Twitter
As their grandparents said, “there is no smoke without fire”, the crypto market is a living proof of this saying. Every tweet that a user mentions the project will be a suggestion for the brothers to participate in the market.
If more and more tweets mention the project's features or products, you will partly know that: "This is the prey".
Whether you will have to check hundreds or thousands of projects, careful selection will have a positive impact on your own account. Taking the time to analyze and learn is the responsibility and obligation with the money you use.
Method 4: Share & Connect
It is no coincidence that the source of information you are read for free every day on social networking platforms continues to have an impact on your mind and behavior.
The fact that you share information on social networks will partly contribute to the treasure of tweets related to the project. From there, the users after learning will have a faster understanding, and as more and more users know and learn, the project will have a certain level of interaction, the speed of development will also be faster. and more expansive.
After a period of time you repeat this process continuously, you will connect a community of "alpha seeker", expand your circle and investment opportunities will also gradually become "fine" more pressure".
Besides, you should also interact with the founders of the projects, the real builders to be able to understand them and understand the product they are building. Although my time in the market is not long, but from the moment I started to learn and connect with the founders and builders of the project, they all have a welcoming attitude, so don't hesitate. to connect with them!
In any market, I think this is a pretty good tip so that you can at least "survive" in the market, and then gradually can think of "making a profit", " make a lot and a lot of profit".
Method 5: Follow the cash flow
This is probably a fairly common method, not only applicable to the Low Cap Coin line in particular but also to all coins/tokens in the market in general. You need to follow the moves of the big players in the market, every step of the way, each VC ( Venture Capital ) will have its own investment taste, once you have learned enough and deeply about VCs, Mr. I can judge for myself which pieces and how projects will have great development potential.
To understand the internals and nature of VCs, follow the FoxCryptoNews series "Investment Fund Analysis - Ventures Capital" here!
Besides, you should also pay attention to the ecosystems with Incentive Programs or DeFi development support funds, the capital raising deals of the whole system in the nearest time, ... to get an overview. most important about the cash flows of the systems.
From there, you will know which systems are being noticed by the "sharks", the VCs are pouring money, ... to start researching the missing pieces, monitoring and looking for opportunities. investment association.
Step 3: Research “dig deep” into the Low Cap project
To "dig deep" "into a low cap project, you need to learn the following 5 main factors:
Innovation/Unique Selling Point
Unique Selling Point (USP) is a fairly common phrase in the field of Marketing, this is an extremely important factor to distinguish a product or a service type of any business/project/individual. /,... with competitors. The USP will provide the project owner with a leading edge to occupy a certain position in the market.
Not only for the traditional market, USP is also a very important factor in the crypto market. Among countless ecosystems and thousands of projects launched every day, why do you choose this project A, B, C, ... to invest?
- What makes the difference?
- Is the improvement of the ingredients in the product continuously updated?
A few examples for you to have a more intuitive view:
- $QRDO : The only project to launch the decentralized MPC feature.
- $KDA : The only POW project that solves the thorny problems of blockchain: Nlockchain Trilemma.
- $QTZ : The only project with the highest "yield redirection" currently.
So, here are a few examples of USP misunderstandings:
- A new staking project has a higher APY than previous projects → The consequences of uncontrollably high APY will result in the liquidity flushing over each other, the first player has an advantage and position over the latter.
- A game with 100,000 players versus a game with 25,000 players → The number of players is not necessarily the deciding factor for the survival of the project.
- The app pays with a transaction fee of 0.3% instead of 0.6% like other apps in the same ecosystem → Depending on the features provided and the project's transaction fee allocation strategy.
However, finding the special feature of the project is a necessary factor, but whether the feature solves a practical problem or not is the real deciding factor. Don't focus too much on theory and forget about the "practice" of the project.
This is an extremely important element of the project, however, many brothers often do not understand tokenomics and easily ignore it. Tokenomics is the foundation for understanding the supply and demand of a project, similar to the shares of a company.
1. Token Allocation:
- The project will allocate tokens to different users in a certain period of time with predetermined allocation levels.
- Percentage allocation for each component will not be fixed, depending on the allocation of the project.
- The more investors and VCs participate in the seed/private sale rounds, the greater the selling pressure after each token payment.
- The amount of reward tokens is also an important factor because it will increase inflation or have negative effects on price when the reward token is minted.
Some of the components commonly included in a project's token allocation list (Token Allocation) include:
- Team - Token for members of the project.
- Seed/VC - Investor was purchased at a discounted price with a large number of tokens.
- Private sale - limit the number of investors with a smaller capital than VCs.
- Public sale - for everyone.
- Foundation/marketing - project administration costs.
- Liquidity pool - liquidity on DEXs.
- Staking-mining reward - reward for users participating in platform activities such as staking, farming,...
2. Token Vesting :
- Is the time when vesting tokens directly affects the price. The longer the vesting time, the smaller the amount paid each time will be, the lower the price impact will be.
- A fairly common form of vesting is linear vesting, which pays off over a fixed period of time with the same amount of tokens.
3. VC/Seed price: To understand more about VC/Seed price, please refer to the following example:
- Ventures Capital acquired 30% of the seed round of token A at a price of $0.10.
- After 2 years, when there is only 1 week left until the project pays the token, the price of token A is at $5.
- If Ventures Capital invests $20,000, they are holding about $1,000,000. At this point, the VC will be able to continue to hold token A and sell a part of the token to recover capital. This will only affect the token price to a certain extent.
- However, if after 2 years, the price of token A is at $0.25. So, VC right now is only enjoying a relatively low profit. If the invested capital compared to the return is not worth it, the VC will definitely sell the A token after it is paid.
⇒ You should note:
- Check how the price that investors are buying and the current price of the token is different: you can refer to the token allocation section in the Token explaination articles of FoxCryptoNews.
- Check the unlock time and token payment time: you can refer to the token release section in the Token explaination articles of FoxCryptoNews.
⇒ These are two quite important factors for you to see the factors that directly affect the price and selling pressure of the token.
4. Token Utility:
- This information shows how the token holders will use the token to maximize profits, how the user will receive the reward/incentive.
- If a project has an outstanding product with novelties in technology, but does not bring much profit to users, this is not necessarily a project that will attract users.
- Usually, you will see that most projects will give holders the right to vote, also known as project governance, through voting on proposals. However, if it is not a DAO project, administrative rights are not a profitable factor that users need to pay attention to.
⇒ The utility of the token, if it is really "stabilized", will create buying pressure and directly affect the token price.
Some common utilities:
- Staking/Boosted APY.
- Discount (eg transaction fee).
- Validation: you need to hold ...% tokens (as specified) to become a validator of the network and receive rewards.
5. Wallet distribution : you can refer to the token holding level of large wallets on block explorer. This is also considered a factor that creates buying pressure for users.
Who is the team behind the project?
Is team information public?
Are the people on this team from big businesses? What experience do they have in the field they are in charge of?
Information about the project team is an extremely important type of information in building trust for users, ensuring transparency to avoid possible consequences.
An information channel that builders often use will be Linked-in, which allows users to read and refer to the team's experiences and profiles. Besides, the way this team builds their own Twitter/Linked-in,... channel also affects the user's view quite a lot. Is the team really developing the project to bring something back to the community?
In addition, you should also contact them directly through Twitter / Discord / Telegram, ... social networking platforms to communicate and exchange about the project. Enthusiastic support or transparency in information will increase the trust of users.
The main pieces
4 prominent crypto market stories in 2021 are told as follows:
- DeFi Summer.
- NFT Season.
- Gaming & Metaverse.
- Solutions related to Layer 1.
When the whole market is looking for and pouring into these pieces, the cash flow will definitely be here. Your task now will be how to find the projects in the bullet points above.
Catalysts & Marketing
Some catalytic factors for you to consider are:
- Time of product launch / mainnet time.
- List tokens on CEX exchanges .
- Cooperation with other projects.
⇒ If for a long time, the project does not have any announcements about operation or product updates, then there will be no "reviving phoenix" here.
Besides, Marketing is often easily overlooked by users while it is clearly visible on some platforms such as:
Step 4: Know how to reduce money is reasonable
The market always has unpredictable "turns around" and so are coins. We need to understand that, if the coin goes up, it has to go down, if it reaches the top of ATH, it must also reach the ATL. So, whether "swinging to the top" or "finishing the bottom" depends on investor psychology and bravery. Do your due diligence to find the right time to put your money down.
Please see the following examples:
Assuming project 1:
In case the market is in a bad direction, some news has a negative effect around the project, investor sentiment will be "Sell".
And it is certain that the token price will drop another 10-20% and continue to move sideways for a long time. At this point, the token price cannot drop any more 80-90%.
⇒ Here, the strategy we use will be based on "asymmetric betting ability" , that is, you will invest when the market has entered a downtrend (down in control) and bet bet on the possibility of the market going into an uptrend (usually big).
Assuming project 2:
Apply the above strategy to project 2. If the project falls to the ATL level, you will lose about 80-90% of your account. Selling force is generated because users have made enough profit and want to redirect investment.
In this case, when to buy?
It can be understood as follows, when the market falls into a state of depression, the token price has been moving sideways for a long time, this seems to be a good time to start buying, you need to bet between the growth potential and the possibility of continuing sideways in the long term.
After you carefully study the project, apply the factors analyzed above to evaluate, and use tactics to appraise, I think you will be able to easily make a decision to spend your first money. private.
Step 5: Taking profits is never wrong
What is your biggest regret when participating in the market? → Top 1: Late closing
However, with the non-stop volatility of the market, you cannot know when is the ATH time to take profits. So, the profit taking strategy will be as follows:
- When x2 & x3 projects: Lock 20 - 40% to preserve capital.
- When x5 & x10 projects: Lock extra 20 - 40%.
- If the project has potential x50 - x100: Continue hodl.
The above strategy is an example so that you can preserve your capital and enjoy profits within a safe level. Not all projects will allocate and take profits at the above milestones. You need to carefully consider the potential of the project to be able to divide the milestones at the most reasonable level.
Wishing you success!
Hope this article is useful and can help you better understand investments in low cap coins in the market. If you have any questions or have any problems, don't hesitate to leave a comment below for immediate support from FoxCryptoNews!
Sep 29, 2022