The Greatest Risk/Reward Ratio – Micro-Caps On The Brink Of Death?

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3 Jun 2024

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An Inaccurate Metric
Price is not always the best metric to gauge a project’s relevance and prospects. It can actually be rather deceptive. Altcoins and micro-caps take an enormous pounding during a bear market. By the time the altcoin market has bottomed, many projects have shed 95% of their value, with some shedding as much as 99.5% and higher. This creates enormous opportunities within the market.
Sadly, there is no filtering process during a bear market. Everything gets lumped into the same box and goes down with the ship. The positive side of this unfortunate dynamic is that amongst the wreckage and carnage lie gems of great value. During the first quarter of 2022, I published an article addressing some of my altcoin picks from 2020 and 2021. Most of them were from 2020, perhaps one or two from 2021.
I invested in Solana when it was still a micro-cap and trading below $0.30 on Hotbit. Unibright was another gem I managed to pick up at $0.01. It went on to peak at approximately $4.22 in September of 2021. That’s the micro-cap market when it works in your favor. It can be equally as devastating. However, a little research goes a long way regarding this particular sector.
When you have a project in the tens or even hundreds of thousands, regarding market cap, any significant amount of capital inflows will push the price to astronomical levels. This dynamic is at the heart of micro-cap success stories. Finding projects with low market cap valuations while simultaneously retaining true value in the form of partnerships, adoption, and real-world use cases is imperative.
I spent a little time today revisiting older projects that have fallen out of favor with investors since the previous bull market or fallen below the radar. I am looking for those projects that still hold promise. Any new inflows of investment capital will likely propel these projects in the right direction. It’s also important to realize that much of micro-cap gains take place in a relatively short timeframe.
Since I mentioned Unibright, let’s look at the UBT chart. Unfortunately, this is UBT/ETH and not USDT. However, the general idea remains the same. As you can see, much of UBT’s move occurred within a week. You will often find that altcoins, especially micro-caps, will have a period of a few weeks where prices go parabolic. Essentially, a savvy altcoin investor will be on the lookout for such an event.

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I have been searching for a few projects with incredible risk/reward ratios. With an enormous ratio comes a decreased need for capital allocation. In other words, one can throw scraps at these investment opportunities. This creates a viable investment opportunity with practically zero risk. A project that goes on to secure a 500X return doesn’t need much capital to produce a viable return.

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Final Thoughts
Most investors are too one-dimensional, only investing in Bitcoin or blue chips. A diversified portfolio requires diversification regarding risk profiling and exposure. If you accomplish this, even a modest portfolio can become significant once a bull market hits euphoric levels. However, you have to be in it to win it! Happy hunting and I will catch you next time!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.