Micro Cap Altcoin Guide by WeStudyMarkets

Arriyan_ba
januari 23, 2024

Are You Always on the Hunt for the Next Big Crypto Gem?

The quest for the next cryptocurrency project that could skyrocket 20, 50, or even 100 times its value is an exhilarating pursuit. If you’re like me, you’ve probably wondered where to even start. During the last bull run, I was somewhat lost in the world of microcap cryptocurrencies, but this year, I’ve discovered a strategy that seems to be paying off.

It’s not a process of learning everything there is to know about blockchain and understanding the tech behind bitcoin mining, staking, sharding or encryption and privacy. Although I would most definitely encourage everyone of you to study these topics, this isn’t perse necessary information to navigate this landscape. In fact basic knowledge of marketing, trends, business and economics would be the essential information I think is needed to be able to successfully discover so called crypto gems. I will explain what I mean by that briefly.

As we all know there is one king of the crypto’s, being Bitcoin. Then we have the stable coins, like USDT, USDC and BUSD. Lastly we have all the other coins, being alt(ernative) coins. The gems I’m talking about are typically microcap alt coins, since stable coins are (or at least should be) pegged to a currency like the US dollar or the Euro, so there shouldn’t be much movement there and Bitcoin is great, but doesn’t really have the small size it used to have to be able to bring us 20x gains in the near future. Don’t understand why? Two words, Market Capitalisation.

Market Capitalisation

Market Cap or Market capitalisation is basically the product of the circulating supply by the price of the asset. This is an important metric that shows the total value of an asset. Apple, the world’s most valuable business by market cap has 15,599,434,000 outstanding shares valued at $194,98. If you multiply these numbers by one another the result will be ~ $3.04 T. For Crypto tokens it’s the same concept we look at the circulating supply times the value per token and voila that’s our market cap. Luckily there is no need for us to constantly calculate this number, since all this data is available to us live on a variety of websites, for both stocks and crypto’s!
My favourite website, is CoinMarketCap. This website has most data related to coins available and also adds links to whitepapers, roadmaps and project websites.

So why do I look at market cap and why is it so important for my investment decisions?
The market cap of a project projects the potential future growth. By looking up the history of the space and checking out past projects like Solana, Binance Coin, Avalanche protocol and Doge we can compare the Market Caps that these amazing project had, to set realistic maximum limits to what is possible. Of course there will be projects that will stand out and shatter those ceilings, maybe even overtaking ETH in the process, but it’s for sure not a likely event.
Here are some examples to clarify what I’m trying to say, in case it isn’t clear to you yet;
Let’s take $SEI for example. This is one of my favourite coins this year. It looks like the project is solid, so it’s not a meme coin without any utility. They have an engaging community, The volume is high and the price action is keeping investors satisfied. We like to see it. Now when wanting to make a price prediction we look at the market cap to do this. The current SEI market cap is about $1.5 billion. Comparing this to SOL at its peak ($80 billion) that’s a potential 53x. Obviously you can not state out predictions solely based on that argument. Solana partly grew huge because of the insane hype around NFT’s, market was younger and more naive, people took more risks, there were so many people with extra cash because of lock downs (nowhere to spend it). These are all factors that you need to calculate into your projections, that’s where economics 101 comes in. But for a global potential meter, this is how you do it. If the market cap is already $40b, don’t bet on it becoming a 100x, because usually it simply doesn’t work like that. Coins don’t just overtake bitcoin. Understanding scales in market cap will help you think a lot clearer when investing.

What are we looking for?

When looking for gems I usually start my journey on either X or CoinMarketCap. I’ll break both down for you;
On X I will usually look up posts from influencers asking their following “shill me your next crypto gem” or “next 200x gem”. In the comments you can try to look up for tokens that are mentioned by multiple people, insinuating that this project has a loving community that likes to “sneeze” (Seth Godin reverence from the purple cow). When I see a token get mentioned multiple times I look it up on CoinMarketCap to check the Market Cap and then continue to check on the project its website, whitepaper, roadmap etc. I will get back to those steps later, first I’ll finish explaining my business with X. After I checked to see what the project does I type in the project its Ticker symbol in the search bar on X to see what the engagement around the project looks like. A huge catalyst for me is when I see many mentions about the project in the past few days, weeks and months. That’s usually my final test, but a very important one. I tend to pass on projects that have no engagement or very few mentions (could be wrong or have me missing out, but until now I’m doing pretty good I think).

On CoinMarketCap I go to the tab “categories” and look for coins in specific segments. This is where the trend analysis and prediction comes into play. Last bull run gaming coins dit really good, so this year we’re averaging over multiple segments to cover our asses and spread our risk. I’m betting on AI and cloud computing to be huge so I check those categories often. I then simply check the list of tokens that appear and just check them one by one (sometimes I only click on projects with a nice logo, must admit…) from there on we do the market cap analysis, followed by the actual “quality check”, which I will explain next.

Figuring out the quality of a coin

After you’ve found a token with a low market cap that you’re interested in, you check the actual quality of the project. This doesn’t necessarily have to do with the project. In my opinion, often times the quality of marketing is more important than the quality of the Tech behind it. Visit the website, read about what they do. Try to see if they have a page showing their team, which is a huge plus for me always. It just boosts my trust. People that are willing to put their faces on the website are less likely to scam all of their investors, at least that is what we hope. If they do show their team, I always check them out on linked in. What is their experience, what is their education, what other projects have they worked on and what are their capacities. If the project team consists of a bunch of nobodies with very little experience or evidence to be capable, I’m probably not investing. Next I would check their white paper, but since I can’t read 100 white papers a week I’ll just upload the pdf file in ChatGPT and ask for a brief 500 word summary. I check the roadmap too, to check whether they’re achieving their goals on time or not. “Are they even still developing stuff?” That is very important to me as well.
Then we check the chart, I don’t like to chase pumps so I’ll usually wait for a phase of consolidation (sideways movement).

I also try to evaluate if the coin has a big target audience or not. I know that there are many niche projects that grow huge, but targets that have selected a segment which is specific but large are more likely to grow, I think. I also bought some $BYTE this month a project I’m already 3x on within the timespan of just two weeks. I didn’t buy this coin because of the utility, but because of the community and the strong marketing that the team is doing. The concept of $BYTE being Grok’s dog is hilarious and since Elon Musk used to move the markets a lot last year, It is very likely people we be attracted by this affiliation with one of his companies. (there is no real affiliation with Elon Musk or Grok, this is all just a story). Meme coins have a huge audience which we saw last bull run too. Take $SHIB for example, with a $36B market cap back in October 2021.

Lastly something I havent’t mentioned yet is joining communities. I join Telegram chats and discords to talk with devs and investors to get more insight in what is going on and how they are doing. This is a pretty important step especially if you’re in it for the long run. You should stay up to date with what your projects are doing and how they are progressing. I always try to follow my coins on X as well, to stay tuned for larger updates and try to keep an eye out for mentions.

Where do we buy these coins tho?

The coins we’re talking about usually have a market cap around $10 million to $200 million, so these probably are not listed on populair exchanges. It seems really complicated to go make a Metamask wallet and transfer ETH for gas fees etc. but it really isn’t.
Once your wallet is set up you send some ETH and WETH to fulfil your transactions with. Websites like dexscreener.com show candlestick charts, volume and transactions and offer information on these coins. I would recommend using UniSwap to actually acquire the tokens. You can do this via your phone by opening the Metamask app, going to the browser section, look up Uniswap and then connect your wallet. Now you can type in what tokens you want to swap and voila the rest is just a few clicks away.

Last but not least

An exit strategy is an essential part of your general investment strategy. You don’t want to gain enormous amounts of money to see them all evaporate again, because you sold too late. I personally have a very diversified portfolio with small investments in a lot of microcaps and I don’t plan on letting them all just do their thing. My goal is to take my initial investment as soon as possible so that my gains are “free of risk”. I tend to take out my initial investment after a 3x if it’s a large sum and after a 10x if it’s a small amount. It does vary a lot tho so I can’t give you any exact numbers. It just is very important to take profits along the way, so that you secure a bag. Also I would like to add that micro caps are very high risk assets and they could easily go -95%. I have seen it myself, so please don’t go too aggressive. I personally just put in between 0,25 to 1% of my portfolio in a coin. The largest part of my portfolio will remain in cash, then bitcoin and the rest can be alts. The information in this article should not be used as financial advice this is merely for educational purposes.