Should I buy crypto with low or high market cap? (2024)

Should I buy crypto with low or high market cap?

It represents the total value of all coins currently in circulation, calculated by multiplying the current price of a single coin by the total supply. A high market cap can indicate a strong project with widespread adoption and stability, while a low market cap may signal a newer, potentially riskier investment.

Mid-cap cryptocurrencies have market caps between $1 billion and $10 billion – they generally are considered to have more untapped potential upside but also higher risk. Small-cap cryptocurrencies have a market cap of less than $1 billion and are most susceptible to dramatic swings based on market sentiment.

Cryptocurrencies like Bitcoin can experience daily (or even hourly) price volatility. As with any kind of investment, volatility may cause uncertainty, fear of missing out, or fear of participating at all. When prices are fluctuating, how do you know when to buy? In an ideal world, it's simple: buy low, sell high.

In general, the higher the market cap of a cryptocurrency, the more dominant it is considered to be in the market. For this reason, market cap is often regarded as the single most important indicator for ranking cryptocurrencies.

A high market cap signifies that the company has a larger presence in the market. Larger companies may have less growth potential than start-up firms, but established companies may be able to secure financing cheaper, have a more consistent stream of revenue, and capitalize on brand recognition.

Investing in cryptocurrencies with a low market capitalization can be a strategy for investors seeking potentially high returns. These lesser-known coins may present unique opportunities within the vast expanse of the digital currency landscape.

In the crypto space, you'll often hear terms like "Large Cap," "Mid Cap," and "Small Cap." These distinctions are based on their market capitalization: Large-Cap: Cryptocurrencies with a market cap above $10 billion. For example, Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and USDC. They are considered more stable.

Before investing, research the project's fundamentals. Look into the team behind the cryptocurrency, their vision, the problem they aim to solve, and how their coin or token fits into the solution. A strong, transparent team and a clear, achievable vision are signs of a potentially successful project.

Some experts recommend investing no more than 1% to 5% of your net worth. When looking at how much of your portfolio to invest in crypto, limiting your overall exposure to crypto is crucial. It's important to never invest more than you can afford to lose.

What happens when crypto reaches market cap?

Cryptocurrency market cap, derived from price and supply, reflects total value. Its volatility mirrors crypto's instability. Market cap trends indicate market sentiment: rising caps signal bullish markets, falling caps signify bearish sentiment. Each cryptocurrency's market cap showcases project size and stability.

A company's market cap might help give you a sense of how risky its stock is. Larger companies are often more established and have less volatile stocks. Smaller companies may have more volatile stocks, but in some cases may be able to grow faster than very large companies.

Market Value: An Overview. Market capitalization is the number of a company's shares outstanding multiplied by the current price per single share. Market value is more complicated. It's assessed using numerous metrics and multiples including price-to-earnings, price-to-sales, and return-on-equity.

Typically, investments in large-cap stocks are considered more conservative than investments in small-cap or midcap stocks, potentially posing less risk in exchange for less aggressive growth potential. In turn, midcap stocks generally fall between large caps and small caps on the risk/return spectrum.

High risk: While small-cap companies have a lot of growth potential, they have equal potential to fail. Small-cap stocks are a riskier investment than large-cap stocks. The companies usually have less access to investment capital and are more sensitive to market changes.

What is a good market cap? This is relative: A "good" market cap will align with your goals for your portfolio. Large-cap companies tend to be more stable and carry less risk than small-cap companies. And while small-cap companies may carry more risk, they can offer big rewards if they experience significant growth.

Use Safe Storage

Store sizable crypto holdings in a hardware wallet or with a trusted crypto custodian rather than leaving them on an exchange long-term. Leading hardware wallets include Trezor and Ledger, and some software-based wallets like Electrum are considered secure.

Less Than 5% Several experts argue that due to their inherent volatility, investors should allocate no more than 5% to crypto. “The allocation of crypto in a retirement portfolio can vary depending on an individual's risk tolerance and financial goals,” said Michael Collins, CFA and founder/CEO of WinCap Financial.

The world's first cryptocurrency, Bitcoin, has the largest market capitalization. Its established network, limited supply, and growing institutional adoption make it a relatively safe haven in the volatile crypto market.

Pull the market metrics

Specifically, check a cryptocurrency's market capitalization, trading volume, and supply. Judging a cryptocurrency by market cap alone isn't recommended, but cryptocurrencies with a high market cap ($1 billion+) may be considered less risky due to their value potential.

How does market cap affect price?

How Does Market Cap Affect Stock Price? Market cap does not influence share prices. It works the other way around. Market cap is arrived at by multiplying the share price by the number of shares outstanding.

The global cryptocurrency market cap today is $2.52 Trillion, a +2.78% change in the last 24 hours.

The social media buzz around a coin can be a good indicator of its potential. If there is a lot of positive talk about a coin on social media, it is more likely to pump. However, it is important to be careful with this, as some coins are pumped by social media influencers who are paid to do so.