How to find small cap altcoins moonshots
If you don't own small cap cryptocurrencies, your missing out on a unique opportunity to profit from a high-potential asset class. Smaller coins tend to present the best long-term investment opportunities of any cryptocurrency sector
Although there are risks associated with investing in smaller cryptocurrencies, there are also many opportunities. For example, Bitcoin and Ethereum have each grown over 1,000% this year so far.
In addition to the upside potential of small cap cryptocurrencies that may not be met by larger market capitalizations (such as top five coins), one of the most important functions of any cryptocurrency portfolio is diversification.
The Problem: Finding parabolic gains in today's crypto market
There’s one thing that’s become evident in crypto over the last market cycle: the biggest gains are no longer available for those who only own Ethereum and Bitcoin. While Bitcoin and Ethereum both seem like relatively secure bets in terms in at least holding their value over the long term, they pay for that (relative) security in terms of lower potential upside.
Even if Bitcoin goes to liberal price targets of $500,000 to $1,000,000 dollars, that still only represents a return of 10x to 20x. Those multiples are similar when we look at Ethereum price targets of $50,000: about 15x from where we sit today. Nothing to scoff at, but nowhere near those 100x returns that ‘blue-chip’ currencies once promised.
The problem is, cryptocurrency success isn’t limited to Bitcoin and Ethereum
There is no shortage of new alt coins that you can invest in (remember it’s not a security). While the biggest crypto giants might never offer 100x or 1000x returns again, there’s still plenty of room for altcoins with a much lower market cap to "moon" (this is what the crypto community calls coins that 100x or more).
The challenge is finding those low cap alt coins Where you, as a trader and investor, can find all the opportunities for ‘low-cap’ cryptocurrency success that you desire.
You really need to get out there and dig a little beyond the big 80(+)-odd currencies if you want to increase your odds of finding undervalued altcoins with significant headroom.
The Solution: How to find small cap altcoins that have 100x potential
In order to develop the groundwork for understanding what makes an altcoin high up on our list, especially those with high price targets and low market caps, we need to understand how other altcoins have acheived parabolic returns
When you examine successful coins closely, it becomes evident that the vast majority of them have fundamentally earned such returns with a few basic factors:
So where are these returns available? Small-cap altcoins — those rising cryptocurrencies that come to the marketplace with a problem to solve and the hope that providing a solution can generate billions of dollars in value for founders and investors alike.
Currencies like Solana, Terra Luna, and MATIC (all returning over 50x YTD) are examples of investments that could have once fit under this ‘small-cap altcoin’ label.
So how do you find the altcoins with the most potential to moon?
- Understanding Use Cases
- Do small cap altcoin fundamental analysis
- Know where the Smart Money is
- Know where to start your search
Understanding Crypto Coin Use Cases
In order to find altcoins poised for a 100x+ moon, you will want to understand trends. Cryptocurrency coin market trends are all about the long term, and taking a look at what is happening in the cryptocurrency market that will help you find altcoins primed for a 100x+ growth. You'll want to focus on and understand the dominant crypto coin use cases.
Cryptocurrencies are designed to fix a variety of problems that are commonly encountered in almost all industries. Years of progress have culminated in a huge expansion in possible use cases.
Currently Popular use cases include:
- Data Storage
- The "Oracle"
- Supply chain and logistics monitoring
- Intellectual Property
- Asset Trading
- Real-time IoT
- Cross-border payments
- Decentralized Finance (DeFi)
- Digital Identity
It's even better if you can latch on to a use case in it's infancy, and choose the market leader for that use case. But you don't want to be too early, or your money could be tied up for a long time!
It's important to note that most coins are part of a blockchain application and the application is the actual manifestation of the use case. The coin itself is usually the "token" for transactions on that blockchain.
For now, the aforementioned content is sufficient to understand that altcoins are are and what they are used for. In a later series, we will cover each use case in-depth.
Understanding the Crypto Company Fundamentals
Crypto fundamental analysis means looking deep into the financial asset's available information to assess discover whether it is undervalued or overvalued. We have to understand where they get value from in order to conduct the correct fundamental analysis for cryptocurrencies.. This is different from traditional assets like stocks, as the blockchain and crypto tokens are a new class of assets that have some different measurements of operations. These following is a detailed review of fundamental analysis of cryptocurrency altcoins.
On-chain metrics are those that can be verified by checking the data that the blockchain provides. We could do this by checking the data on a node for the desired network or pulling the information from websites or APIs that are focused on providing reputable information.
Transaction count is a good measure of activity taking place on a network. By plotting the number for set periods (or by using moving averages), we can see how activity changes over time.
Note that this metric should be treated with caution. As with active addresses, we can't be sure that there isn't just one party transferring funds between their own wallets to inflate the on-chain activity.
Specific On-Chain Metrics to look for include:
Transaction value is the total value transacted during a specific time period. For example, if 5 HNT transactions, worth $50 each, are sent in one hour, we say that hours transaction value was $250.
Blockchain addresses that are active in a set period are known as active addresses. One way to do this is to count both the sender and the receivers of each transaction over a set period. Another way is to check the overall number of unique addresses.
Fees paid can tell us about the demand for block space. These can be thought of as bids at an auction. Users compete with each other to execute their transactions faster. When the fees paid amount is rising it is an indication that demand on the blockchain is ramping up. Keep in mind that this is a relative metric, because the technology behind specific blockchains is different. So $100 in "gas" fees on Ethereum is not the same as the same amount of gas fees on Solana.
Hash rate and the amount staked
Blockchains today use many different consensus algorithms, each with its own mechanisms.
Hash rate is sometimes used as a measure of network health in Proof of Work cryptocurrencies. An increase over time can indicate an uptick in mining. While a decrease in hash rate points can show miners are "capitulating" or going offline.
Staking measurements is a way to measure health in mining in Proof of Stake cryptocurrencies. Users stake their own holdings to participate in block validation. Therefore we can check the amount staked at a given time to measure the interest and growth of the coin.
Project metrics look at the quality of the project, with such factors such as the the whitepaper, team quality and performance, and the development roadmap.
Before investing, read the whitepaper of the low cap altcoin. The whitepaper gives a technical overview of the cryptocurrency project. Whitepapers should explain the network's objectives and, as a result, provide:
The technical quality
- The project's use cases (see above)
- The queue for upgrades and new features aka the roadmap
- The coin or token supply and distribution aka the tokenomic
- Do a reality check on the above. Are the promises and goals realistic? Is it consistent with the other information you have about the project?
Not all successful projects have a public team. If they don't that in itself is a yellow flag (though some very successful projects have anonymous teams). When the team is public, its members' track records can show if the team has the experience to make the project successful. Such questions as:
- Have they previously realized successful ventures in this industry or a closely aligned industry?
- Do they have the skill to execute on the roadmap and meet the timlines?
- Have they been engaged in any shady projects or scams?
- What does the developer community look like if the team is anonymous
- How much activity is there on the project's GitHub to see how much activity is taking place and how many contributors there are. A coin with an ongoing track record is probably more viable than one who has a quiet repository.
It's also important to identify other blockchain projects competing for the use case, as well as legacy company competition. Do fundamental analysis of the competitors too. In depth research may find a project that is stronger than the one you are researching.
Tokenomics and initial distribution
Tokenomics is the economics of a crypto coin. The word was created by combining the word token with economics.
The Allocation of Tokens:
Allocation of tokens means how is the distribution of the tokens allocated. Common actors in the allocation are the public, development team, investors, and liquidity farming pool.
A fair distribution should ensure that:
- There is enough released to the public to hold the project accountable
- The largest hodlers are not able to control the liquidity of the tokens
- A fair amount (but not too much) is held by "insiders" such as employees and investors
The Supply of the Token:
There are three types of crypto token supply.
- The circulating supply. The number of tokens that have been released so far and are currently in circulation is the circulating supply of a token
- The total supply. The total token supply is equal to the number of tokens available, excluding any that have been burned.
- The max supply. The maximum number of tokens that can ever be generated is the maximum supply of a token.
Burning tokens is good for the value, as it reduces the available supply
If there are too many tokens being released at once or too frequently, the value of the token might go down.
If the total supply is much larger than the circulating supply it may indicate that the value could go down, when that supply is releaed
If the majority of the supply is owned by just a few parties those holders could eventually manipulate the market
The project whitepaper usually thoroughly discusses tokenomics and should help you understand the funding, intention, operations, and trustworthiness of the altcoin.
The Token Model:
An inflationary token does not possess a maximum supply and can be created out of thin air. This reduces the value of the token. Often proof-of-stake tokens like Ethereum are inflationary in order to reward validators and delegators on the network.
A deflationary token is one where the max supply is capped, like Bitcoin at 21 million. This increases the scarcity (and therefore value) of the token.
Some alt coin tokens have a dual token model (like DAI & MKR). For example one token is used for funding within the ecosystem and the other is used as a utility token.
When you're trying to choose which small cap altcoins to invest in, it is important to thoroughly know it's tokenomics.
Know Where the Smart Money Is
This section is ongoing and will be updated often.
To know what the smart money is investing in look no further than the biggest venture capital funds and what they are investing in. They have the capital, experience, and manpower to understand the best crypto investments. Here is our list of the top VC firms investing in crypto.
- Sequoia Capital
- Benchmark Capital
- Accel Partners
- Bessemer Venture Partners
- Kleiner Perkins Caufield & Byers
- New Enterprise Associates
- Founders Fund
- Cluster Capital
- Outlier Ventures
- Collider Ventures
- JRR Group
- Greylock Partners
- Andreessen Horowitz
- Union Square Ventures
- First Round Capital
- Ceras Ventures
- Peech Capital
- Titan Ventures
- Robot Ventures
- Genblock Capital
- Coinbase Ventures
- Skunk Capital
- Lightspeed Venture Partners
- Foundry Group
- Index Ventures
- Khosla Ventures
- Emergence Capital Partners
- True Ventures
- Floodgate Fund
- General Catalyst Partners
- Spark Capital
- Battery Ventures
- Redpoint Ventures
Know Where to Start Your Search
This section is ongoing and will be updated often.
New small cap altcoins listings on decentralized exchanges
The topic of decentralized exchanges (DEX) is a hotly contested one. Some argue that the DEX market is developing and growing, while others are skeptical about the quality of listings on DEX exchanges.
Crypto coin price tracking websites
Look for sites that will let you sort by Market Cap & also have robust detail on each coin, so you can research the coin once you find one to research.
Resources like Twitter, Discord, Youtube groups, and other social media platforms let the crypto community discuss all the coins that are currently available. These can be a resource for altcoins that are getting noticed. Make sure to do your fundamental analysis!
Blockchain explorers are like search engines for blockchains and cryptocurrencies. You can find things like transaction count, transaction value, and active wallets on blockchain explorers.
Red flags in Low Cap Altcoins
- Team Quality & Size. Ideally the team should have a larger team with multiple supporting disiciplines (marketing, engineering, etc..) and more than one influential advisor. The team should also be non anonymous
- Low Engagement & public activity. The team and it's marketing should be active. This includes marketing, blogging, engaging in business conversations, a frequently updated public repository, attending conferences, supporting the crypto community and more.
- Investment. most coins need robust investment to create a quality product. Anonymous investors is also a red flag.
- A Poor White Paper. This includes poorly written, non-existent, plagiarized, poorly described use case, no technical details, no timeline or roadmap, and more.
- Lack of Reality. Projects with exaggerated claims, or features that don't work, or a minimal real world usefulness are a huge red flag.
- Too Good to be True. There is no such thing as free money. If the project makes outlandish promises of appreciation or interest it is a big red flag.
- Token Allocation. If a coin has over 25% of it's total supply allocated to the project team it indicates mainly a desire to cash in. Likewise if there is no hard cap on the amount of coins it is could indicate they plan on cashing in my printing more tokens which devalues the coin. There are exceptions to allocation and hard cap numbers, but make sure to the story makes sense.
Further research: https://hackernoon.com/24-cryptocurrency-red-flags-21362adba27a
Q: How do I make money trading altcoins?
Q: What is a good strategy for finding low cap altcoins and how can I profit from it?
Q: What are some good tactics to finding undervalued altcoins?
- Search Google trends for altcoins that have a rising search volume.
- Look for tokens in active development with good marketing like an aggressive listing strategy, established partnerships with exchanges, social media presence & following. If they have all these things then getting in at the ICO, IEO, or IDO has a decent chance of making money
- Checkout this interesting strategy: https://www.reddit.com/r/CryptoCurrency/comments/n9cby0/not_every_new_coin_is_a_shitcoin_how_to_spot_the/
More resources: https://www.reddit.com/r/CryptoCurrency/comments/npi9bx/what_is_your_strategy_for_identifying_small_cap/
Q: What are the best prices to look for in small cap altcoins?
The best way to find low cap altcoins is to look for a coin with less than 10 million market capitalization. These are the coins with the biggest opportunity for 100x returns. Don't even consider coin price. It is not relevant.
Q: What are some tips on how to select a coin that has great potential for growth and is undervalued at the moment?
Many cryptocurrency investors look for coins that have great potential for growth and are undervalued at the moment. The best way to find these coins is through researching on how the coin has performed in the past, understanding what they plan to do with their product, and understanding the market value of their use cases and their teams ability to execute on building the product.
Q: Which coins should I be looking out for in terms of upcoming developments, new partnerships, etc.?