In this guide, I’ll show you what the best low cap cryptocurrency picks are. Also, a deep dive into the definition of market cap and reliable crypto exchanges.
Welcome to 2020! At the start of a new decade, the ever-expanding digital world is facing a new concept which is called cryptocurrency. Moreover, by now, if you haven’t heard of the impressive rise of Bitcoin in the past few years you must have been living under a stone or might been in a place where no WIFI exists. So, what is a cryptocurrency, and what makes it so popular?
Basically, cryptocurrencies are digital money that in contrary to fiat money(USD, EURO), has no central owner and only exists in cyberspace. Instead of banks and credit card companies taking care of your transactions and charging expensive fees, cryptocurrencies use a decentralized computer network that is fast and can be used on a global scale.
One of the reasons that cryptocurrencies have grown in popularity is the fact that most of them have a limited supply. Also, most of the blockchain networks are transparent where every transaction can be tracked and traced.
So far the concept of cryptocurrencies. At the time of writing, more than 5000 cryptocurrencies exist and the numbers are growing. Moreover, it’s not only about digital money or being a store of value anymore. Additionally, thanks to blockchain technology many new uses cases appeared like smart contracts, dApps, or decentralized finance.
In this article, I’ll deep dive into the concept of a small-cap cryptocurrency or altcoin. Additionally, how market cap is being calculated, what the risks are, and finally some interesting picks for finding the ‘next Bitcoin’. Remember to do your own research first and do not invest blindly in these very volatile investment vehicles.
What does market cap mean in Cryptocurrency?
Every blockchain project in this industry whether it’s a large-cap or low cap cryptocurrency has its own value or market cap. Market cap or market capitalization is a metric that measures the relative size or value of a cryptocurrency. In particular, it is calculated by taking all coins in circulation and multiplying it with the current market price of a single coin or token.
For example, if each unit of a cryptocurrency is being traded at $10.00, and all coins in circulation are equal to 50,000,000 coins, the market cap for this cryptocurrency would be $500,000,000. Also, if coin X is valued at $1 and coin Y is valued at $10, coin Y could still have a lower total market cap. Therefore, it is important to take the circulation supply of a coin into consideration to measure the total market cap of a cryptocurrency.
Does the market cap matter in cryptocurrency?
The short answer is it depends. Meaning, as explained above market cap is just another metric that easily can be calculated. However, it doesn’t say anything about the value of a certain cryptocurrency project. In other words, it could be possible to introduce a new coin with zero use case that still is backed by a group of well-funded investors. Theoretically, this new project could easily enter the top 10 of cryptocurrencies.
As you can see this project with no uses case and no or few developers doesn’t deliver more value than any low cap cryptocurrency. A very good example of this is Bitconnect, a cryptocurrency project in 2017 that managed to enter the top 10 with zero use case, and only promises. Additionally, they claimed to give you very high yields in return for your BTC put in their custodian wallet. At the top of this scam, their coin BCC was worth $500. As their use case was unsustainable founders of the project claimed most of the Bitcoin being deposited at their platform resulting in a massive loss for investors.
To summarize, in my opinion, the market cap can be a good metric for your investment decision. However remember that market cap is about price, not value.
Small cap vs Large cap Cryptocurrency
What is the definition of a low cap cryptocurrency compared to a large-cap? I think, there is no strict border that classifies whether a cryptocurrency is a low cap, mid-cap, or large-cap. Also, it’s something the veteran investor has to decide based upon experience.
That being said, I think a cryptocurrency can be considered large-cap if the total market value is above $1 billion. However, in the cryptocurrency markets everything is temporary and a year from now things might have changed massively. Therefore, don’t use this $1 billion metric as a strict border forever. Another way of defining a large-cap cryptocurrency is also to look at ranking instead of price value. For instance, one could say that a large-cap cryptocurrency should be in the top 50 of all cryptocurrencies in the world.
How to define a low cap cryptocurrency
First of all, a low cap cryptocurrency is very young and most of the time it hasn’t a finished product or use case. Also, developments are still ongoing and these projects are selling a promise that they can’t deliver right now. You as an investor should believe in their idea and it’s also very smart to keep up to date with the latest developments.
Small cap cryptos, because of their low market cap, are susceptible to the whims of the market. To put it simply, you may see your investment in them go down to a negligible amount in an instant.
So, the question arises, why should you invest in them in the first place?
Well, because they have the potential to truly explode in value and give you huge returns on your investment, much more than what large-cap or mid-cap cryptos can give you. Like Bitcoin in the early days remember?
Simply put, you can define a low cap cryptocurrency when it’s very volatile in price, has no finished product yet, and is ranked outside the top 100 on the Coinmarketcap website.
Risk vs Reward of a low cap cryptocurrency
As explained above a small cap cryptocurrency could be very volatile and as their trading volume is low they can easiliy be manipulated when trading. Therefore, investing in a low cap cryptocurrency can be very risky. Most cryptocurrency investors however, like to take small risks as the rewards could be really lifechanging.
What are the common risks?
Below some of the major risks investors have to deal with.
- Some low cap crypto’s like the DeFi coins ask you for BTC or ETH as collateral on their platforms. In the end you might lose them all.
- Whales enterring these low-liquidity markets and quickly manipulating price(pump-n-dump)
- With most of these projects the token supply is very unbalanced. Meaning, founders or developers and early investors may own 85% of all tokens. This is very unhealthy and could lead to price crashes if they decide to sell it all.
On the contrary, the rewards can still be life-changing. For example, let’s take a look at the following scenario that actually happened in the market.
Airdrops are a way of rewarding investors with new coins for holding a certain amount of tokens at their wallets. In 2018, Syscoin holders were rewarded with CPS coins, a brand new cryptocurrency in the market.
This new project CPS rewarded 6% of its total supply to Syscoin holders. For instance, someone who was holding 200.000 SYS, would receive 125.000 additional CPS worth $0.10 at that time. In other words, $12500 worth of free cryptocurrency!
Best small cap cryptocurrency picks of 2020
Below I’ll list some very promising small-cap cryptocurrency projects that in my opinion could be the next Bitcoin. Also, I have invested in some(not all of them) what makes it a little bit biased, so take this advice with a little grain of salt 😉
Syscoin I mentioned it earlier already, is one of my favorite small-cap picks. This project(ranked 170th) has been there for a while(2014) now and is still going strong. What makes Syscoin special is that it isn’t just another ERC-20 token on Ethereum like most of the new ones these days.
One of the key incentives of Syscoin is it’s masternodes feature where anyone can install their software and run a node. Also, to run a masternode one has to lock up 100.000 SYS coins in a wallet. Moreover, masternode owners will earn 6.95% additional passive income with it. At the time of writing, more than 2000 masternodes exists which makes the network (really!) decentralized and secure.
Features of Syscoin
- High transaction throughput – Syscoin’s network is very scalable as it can handle more than 60K TPS per second
- Interoperability – With Syscoin it’s possible to transfer tokens on any ERC-20 blockchain, this thanks to its bridging feature
- High security – Syscoin is merged mined with Bitcoin, which makes it very powerful and secure
- Low fees
Another very interesting low cap cryptocurrency is Velas(VLX) currently ranked 142th on Coinmarketcap. Furthermore, Velas made its birth in July 2019, out of a token swap on the Coinpayments cryptocurrency platform.
In particular, Velas cryptocurrency is a self-learning and self-optimizing blockchain platform. In detail, it stands for secure, interoperable, extremely scalable transactions, and smart contracts.
Explicitly, the Velas blockchain uses neural networks optimized by artificial intelligence. All this, to enhance its consensus algorithm, which maintains decentralization, stability, and security. As a result, this blockchain network will be very easy to scale and it can handle up to 33000 TPS.
For more info on Velas, I wrote a very detailed article, which explains it all and also the best places to buy Velas cryptocurrency.
Nimiq(NIM), currently ranked 327th on Coinmarketcap, could be a hidden gem that really has some upside, because of it’s very simple uses case. Nimiq is blockchain technology inspired by Bitcoin but designed for the browser.
This advantage allows for a new level of accessibility and user experience without the need to compromise on decentralization or censorship-resistance.
Creating a Nimiq account on the website requires no download and no personal data. Keys are stored in the user’s browser and are never sent to a server. The same level of easy accessibility is projected for buying and selling NIM as well.
Another very promising low cap cryptocurrency project is NOIA.Network, particularly because of its ambitious use case. NOIA currently ranked 306th wants to ‘upgrade’ the current internet technology with its innovative software solution.
I like their solution because it’s technical and also a realistic one. Also, despite that many other new cryptocurrencies offering another ‘financial solution’ or DeFi. What are they trying to accomplish?
NOIA is a software solution that runs on top of the public internet. It provides built-in security and ensures connections are reliable and fast — all in a few clicks. Moreover, when a device or server instance is connected, every packet is encrypted and automatically routed via the best available path on the Internet. For a more detailed analysis, read my NOIA.Network review.
The last one I want to mention is already a little bit more established, because of it’s relatively high position(38th). Streaming services have been grown immensely in the last couple of years and will continue to do so in the future. Good examples are Netflix, Amazon Prime, or Stremio.
Guess what, THETA will conquer the current streaming services market by offering a decentralized solution. On their website, they claim that they are the new YouTube and are on their way to disrupt the online video industry.
To reach this goal the following solution will be offerred.
- Open source & network protocol – For everybody available to build on the Theta Network
- Decentralized Dapps – Video platforms and content providers can build for their audience
- Multiple content verticals – From esports, music, TV and movies to distance learning and peer to peer live streaming. Power the next generation entertainment.
Personally, I think they have a very strong use case and that’s the reason this project is on my watchlist. Also, if you are curious and want to know more, read my extensive guide about starting to invest in Theta cryptocurrency.
Best places to buy a small cap cryptocurrency
Above is explained what the most promising hidden gems of 2020 can be, so what’s next? Investors who want to buy these low cap crypto’s usually should go to a cryptocurrency exchange, sign-up, and start buying. However, it’s wise to take a little step back here, because being an investor in this industry is still very risky.
Although this industry is quickly evolving, it hasn’t matured at all yet. On a daily bases, the news is covered with topics related to exit scams, cryptocurrency hacks, or investors losing it all. Therefore, to reduce risk, I think you only should pick exchanges that have a decent track record, high daily trading volumes, and liquidity to be able to sell quickly. In my opinion, at this moment in time, two options that are the most reliable: Binance and Kucoin.
Buying a Small Cap Cryptocurrency on Binance
Binance is founded by Changpeng Zhao and is a well-known blockchain industry expert and expert in setting up trading systems. In the past, he also founded BijieTech and was head of development at Blockchain.info. Furthermore, Binance can be considered as the best altcoin trading platform out there. Especially, if you consider the trading volume and the number of coins listed on the exchange.
Binance which is originally a company from China, recently moved it’s headquarters to Malta because the China government banned cryptocurrency trading. Despite this ban, this crypto platform managed to grow to the biggest altcoin trading platform as it is today.
US residents on Binance
If you are a USA resident, then I have to warn you. Recently, the main trading platform at Binance didn’t allow US residents at their platform anymore. This due to regulations by the USA government. But don’t worry too much about that, within no time the trading company opened doors to Binance.us.
Trading at this domain is allowed for US customers because it meets US regulations and compliance standards based on its Digital Asset Risk Assessment Framework.
Buying a Low Cap Cryptocurrency on KuCoin
Compared with Binance, Kucoin is probably a more modern platform for trading any cryptocurrency. In addition, this platform was founded by a group of cryptocurrency enthusiasts from Asia aiming to offer comfort and security of your mighty assets. Kucoin which was launched in May 2017, has its headquarters in China despite the difficult climate towards cryptocurrencies performed by the local government.
This difficult climate towards cryptocurrency exchanges doesn’t affect the business model of KuCoin much because they’re aiming at foreign markets. Back in 2013, the founders started with setting up the foundation by making a technical implementation of the trading platform.
KuCoin a modern exchange for trading altcoins
Later on, in 2017, the founders finished this work and made the platform available for the public. As of writing the platform ranks at position 70 on the list of exchanges which is based on trading volume for the past 24 hours.
One of the remarkable policies this online trading platform has is its liberal sign up policy for new users. As a result, signing up at this platform can be done with just e-mail and mobile phones. Additionally, this speeds up the process of buying cryptos in a fast way.
In this article, I have shown you a summary of what in my opinion the most promising low cap cryptocurrencies in the market are. Also, it is important to know that cryptocurrency can make you rich, however, this won’t be an overnight session.
Remember, investing is a long term game and this isn’t different in these every young cryptocurrency markets. Therefore, to be profitable in the end, it is important to do your own research first. Happy investing and take care!
Disclosure: This post could contain affiliate links. This means I may make a small commission if you make a purchase. This doesn’t cost you any more but it does help me to continue publishing cool and actual content about Bitcoin & Crypto – Thank you for your support!
Latest posts by Jelmer Steenhuis
- Bitfinex: Excellent Platform in Buying Crypto at The Lowest Rates - October 23, 2020
- Should I Invest in Theta Cryptocurrency? - October 15, 2020
- Changelly vs Coinmama: Two Platforms for Buying Crypto Fast - October 13, 2020