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š§ Understanding Market Caps
What They Are and Why They Matter in Cryptocurrency Investing
Troy Pulli
April 28, 2023
šGM Valued Readers,
Have you ever looked at the market cap of a cryptocurrency and wondered what it actually means? Market cap is a term that gets thrown around a lot in the world of investing, but it's not always clear what it represents. In this newsletter, we'll explain what market cap is and why it's important to understand when investing in cryptocurrencies.
Market cap refers to the total value of a company or cryptocurrency, calculated by multiplying the price per share or token by the total number of outstanding shares or tokens. It represents the theoretical value of a company or cryptocurrency if all shares or tokens were to be sold at the current market price. Essentially, market cap is an indicator of the size and popularity of a company or cryptocurrency in the market.
Low market cap coins, also known as "micro-cap" coins, can offer higher investment opportunities compared to high market cap coins. This is because they are often undiscovered or overlooked by the majority of investors, which means there is potential for greater gains if the coin is successful. Investing in low market cap coins is not without risks, however. Because they are less popular and have a smaller liquidity pool, they can be more volatile and subject to price manipulation. Additionally, there may be less information available about the coin and its development team, making it more difficult to assess the potential for growth and success.
Butā¦there are several potential benefits to micro-cap cryptocurrencies, which are those with a low market capitalization. Here are a few:
Greater potential for growth: Micro cap cryptocurrencies often have a small following and are less well-known than their larger counterparts. However, this means that they have more room to grow if the project is successful. If you can identify a promising micro cap cryptocurrency before it gains widespread attention, you may be able to benefit from its potential growth.
Lower entry barrier: Micro cap cryptocurrencies often have a low price per token, which means that you can invest in them with a relatively small amount of capital. This can be especially attractive for investors who are just starting out or who have limited funds to invest.
Diversification: Investing in micro cap cryptocurrencies can be a way to diversify your portfolio and reduce your overall risk. By investing in a range of different projects, you can spread your capital across multiple investments and potentially reduce your exposure to any one particular asset.
An example of a micro-cap coin is āVesta Financeā Disclaimer: I currently hold Vesta
Despite these risks, some investors choose to invest in low market cap coins as part of a diversified portfolio. By doing thorough research and keeping a close eye on market trends, it's possible to identify promising micro-cap coins that have the potential to grow significantly.
To sum it up, understanding market cap is crucial when investing in cryptocurrencies. It's a measure of the size and popularity of a cryptocurrency in the market and can provide valuable insights into its potential for growth. But remember to consider other factors as well before making any investment decisions.
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