HOW TO IDENTIFY LOW CAP CRYPTO GEMS
In the past few years, interest in cryptocurrencies have surged across the globe. Stories abound across different media platforms of people that have become millionaires from cryptocurrency investment, beginning from the famous Bitcoin boom down to the more recent coins like Dogecoin and $Cake. Traders could also try to detect the trajectory of more known coins via avenues like spot trading, futures trading, options trading, perpetual swaps etc. This would be done using fundamental and technical analyses strategies, and the assets would be traded based on signals derived from the analyses done. However, this might not necessarily be as explosive as the one time investment in the relatively unknown coins that offer massive returns on investment in such short timeframes. So how exactly can you get your share of the “overnight riches” of the crypto market?
The first thing you should know is that the coins that usually offer such returns are referred to as crypto gems. Gem is the tag accorded relatively unknown low-cap coins that have immense potential or are grossly undervalued. These gems are not exactly very conspicuous. That is why they are called gems after all. They are scarce and not very easy to recognize, since there are thousands of projects out there. What they do have in common is that they have a value that is untapped until when they are discovered, and the mass realization of that value makes them soar in value. However, there are a few things a gem hunter could factor to aid in the identification of potential crypto gems. These factors include the coin’s trading volume, its fundamental research, its market supply chain, and its market cap.
· TRADING VOLUME: This is an asset’s trading “traffic”. It takes into account the completed trades of the asset in question. Generally, gems tend to garner lesser traffic before its discovery. This usually keeps its value at a low range, allowing investors alert to its potential to gather a sizeable amount before it is discovered by the public. It is when the asset becomes popular that its trading volume skyrockets. The new investors rush to accumulate their shares of the asset to profit off of it as well, increasing the number of trades and causing a corresponding increase in price.
· FUNDAMENTAL RESEARCH: This is perhaps the most important part of identifying a potential gem. In fundamental research or analysis, the trader tries to gauge the value of a cryptocurrency with the view of knowing if it is undervalued or overvalued. Gems are generally grossly undervalued, as was mentioned above. This means that their current market value is much lesser than what it should be when its fundamentals are put into perspective. The fundamentals the analysis would focus on include the company or team behind the development of the asset. The stronger the team or the company is, the better the chances are that the asset would have a high value in future. Another thing is the asset’s utility. When the asset has a strong utility, it has a big chance of becoming very valuable because it will always be in demand to meet its utility purpose. An example is Ethereum always being in demand because Ether is needed to carry out transactions on the Ethereum blockchain. The fundamental research of the asset would tell a lot about whether or not it has a chance of going far.
· MARKET SUPPLY CHAIN: This is also an important part of identifying a potential crypto gem. This involves looking at the structure of the asset’s supply into the market. Assets that have very efficient distribution mechanisms tend to have a bigger shot at the big time. This could come in form of a deflationary distribution model where the asset is projected to have a definite supply quantity, just like Bitcoin. This ensures scarcity and value consequently. This does not mean all gems are deflationary, however. They also be inflationary where the asset is designed to increase progressively. Gems of this model often tend to introduce periodic burning though, to keep the supply under control.
· MARKET CAP: This is integral to a gem by definition. A gem must be undervalued, leading it to maintain a relatively low market capitalization. It is at this point the gem is in its accumulation stage, where investors look to quickly buy in. It is noteworthy that not all assets with a low market cap are gems. That is why it is important to look at all the other factors to give the market capitalization some context.
Dear vibrant investor, it is a very smart decision for you to start looking at investing in the next big thing. However, trade with caution (pun intended). It is quite tricky trying to locate a gem, and it requires qualitative research to be sure. All the factors are to be put in consideration for better results. Even at that, not all assets that fit the bill will eventually get into the spotlight. Even when they do, not every gem would maintain its value. Some would go back to the trenches in months without proper management. But there is no harm in trying now, is there?
