Trading cheap cryptocurrency can be like playing Russian Roulette with your money.
Many of the start-ups that sell digital coins for pennies seem to have a bright future ahead. But with a multitude of crypto projects out there, how do you know which ones will bring in good returns?
Cryptocurrencies aren’t created equal
There are currently more than 2,000 cryptocurrencies on the market. However, not even 1% of them has the potential to be the next Bitcoin.
When new cryptocurrencies are launched, it can be hard to figure out whether they’ll make a good investment. “Small-cap” coins could bring in the highest profits, but there’s almost no way of knowing which one to choose from the early stages of their development.
Cheap cryptocurrencies – or “low-cap coins” – have substantial potential for growth. However, they’re way riskier than the big gainers – the established, more expensive cryptocurrencies. That’s because cheap cryptocurrencies often aren’t based on assets or an established tech product, but rather on a vision.
Some undervalued tokens can bring you substantial rewards. They can increase 20 to 100 times in relatively short periods of time. However, they can also generate significant losses. Not all digital coins are gem projects, and some of them never get their 15 minutes of fame.
Let’s take the Atomic Wallet Coin, for instance. This cryptocurrency has an approximate ROI of 391.44%, according to CoinMarketCap. However, the coin often appears as one of the biggest losers, as it can’t seem to find its way up. Could it be a good investment? It’s hard to tell.
What to look for when buying cheap cryptocurrency
Nobody knows which coins will turn into the big winners and which ones will end up in obscurity. If you decide that you want to jump into the cheap cryptocurrency market, you may want to consider facts and numbers instead of promises.
The best strategy is to invest in a portfolio of digital currencies. Diversity can reduce the risks of a bad investment so that you don’t lose all your funds if one cryptocurrency proves to be a total failure.
The market cap alone can’t indicate the full potential of a digital coin. A checklist of essential things to look for before investing could also be helpful.
The use of the token
A successful cryptocurrency has a defined purpose. Despite what many people think, digital coins aren’t necessarily here to replace fiat currency. Most of them power blockchain-based applications and have a specific role in the project.
Before buying cheap cryptocurrency, try to identify what role the founders give or anticipate for that coin. If you can’t find at least one that’s different from “hold and exchange it”, the odds are that nothing good will come out of it.
The project behind the cryptocurrency
A currency’s website should give you all the details about the coin and why it exists. Specifications should be straightforward, professional, and transparent. Many new projects also show some real-life usage of their cryptocurrencies. This way, they can illustrate the cryptocurrency’s features and potential in the market.
Serious blockchain-based projects publish a roadmap that anticipates possible scenarios and shows a future strategy. If the website lacks clarity and doesn’t provide any information of this kind, you may want to look for other cryptocurrencies for your portfolio.
The team
The success of cheap cryptocurrency is often directly connected to the team behind the project. While a distinguished group of blockchain experts doesn’t guarantee a successful project, a team with a bad reputation is almost a clear sign of failure.
Look for developers with experience and diversity in their professional background. Identify the reasons that brought these people together and why they chose this project instead of any other. The lack of a shared mission is a red flag and should tell you to walk away.
The project’s advisers
Advisers are often renowned personalities in the blockchain community or professionals with an excellent profile who bring value to the project. Be careful though if the list of advisers looks too good to be true – it’s easy to place an image and a bio on a website. Do some social media research to see whether there’s any official communication on Twitter or Telegram about the endorsement.
Even with the best advisers on board, you still can’t know for sure whether the cheap cryptocurrency you choose will become a big gainer, but at least you should know you aren’t falling for a scam.
The takeaway
Cheap cryptocurrency could be worth purchasing as long as you do your homework and research the project before buying. A diversified portfolio makes a difference when taking this path.
With more than 2,000 coins and tokens out there, there are plenty of cryptocurrencies to choose from. Try to make educated decisions based on facts, not potential gains built on nothing but an idea.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.