Crypto Assets Capital, Risk Capital In Penny Cryptocurrency, Importance Of Watchlist | Homework

njaywan (74)in SteemitCryptoAcademy • 4 years ago (edited)

INTRODUCTION

Taking a deep dive into any crypto asset before investment is very crucial in order to make the right choices. Although every crypto investor has his own criteria for purchasing any asset, most prefer to opt for the coin with the most backing or confidence. For this, we must first look at its market cap.

Just like fiat currencies are usually ranked based on popularity, cryptocurrencies are graded based on market capitalization. Market Cap is calculated by circulating supply x current price. This is how we determine which coin is the largest among the lot and gives an ideal metric for determining which cryptocurrency has the most global backing.

Generally, the more global support a coin has, the lower the risk and vice versa. Needless to say, there is still some amount of risk in dealing with any cryptocurrency due to its stability and volatility issues. Categorically, all crypto currencies fall under three main sections; Large capital, Mid capital and Low capital.

Large Capital

These are the topmost ranked crypto currencies in the world and would definitely be seen amongst the top 10 rankings. They are currencies with over $10 billion in market cap. They therefore have great foundations with expert oversight with great potential for long term sustainable growth for any investor.

As such, it is quite safer to hold these currencies as they show much less volatility in the long run but still possess a slight level of risk.

Large cap cryptocurrencies at the moment

_{https://www.coingecko.com/en}

Mid Capital

Mid cap cryptocurrencies have a market capitalization between $2 billion - $10 billion. They are next in line on the ranking charts. Most of these currencies are still up and coming which means they present lots of growth potential. As such, delving into these currencies could be much more profitable than large caps.

However, they do present more risk due to higher volatility in this region.

Some Mid-Cap Crypto Currencies

_{https://www.coingecko.com/en}

Small Capital

These cryptocurrencies have a market cap < $2 billion and > $300 million. They are newly emerging tokens and therefore present an opportunity for early investors to grab a hold of the most returns. Similarly, they are the riskiest tokens as they present the highest volatility which is why they are ideal for short term hold/trade.

Returns on these currencies can skyrocket for investors within a short possible time, giving you 10x, 50x or even 100x of your original amount.

Some low cap cryptocurrencies

_{https://www.coingecko.com/en}

SUMMARY OF THE THREE CAPS

MARKET CAP	RANGE
LARGE CAP	> $10 billion
MID-CAP	$2 billion - $10 billion
SMALL CAP	< $2 billion but > $300 million

Which type of asset can be more profitable?

Out of the three, small caps are the most profitable. This is because they are the most volatile and their prices fluctuate the most within the hour. This is why most short term traders usually opt for this category of cryptocurrencies. This also means that they are the riskiest amongst the lot as price could also flunk at a moment's notice. Let's look at the example below.

In this RSR/USD chart, you would notice some sharp changes in prices between 07/02 - 15/02 (within the span of about 2 weeks). We first see the price bottom at $0.034 then it moves to $0.05681 in 3 days time, and then goes all the way up to $0.07830 in another 3 days (crossing more than twice the initial bottom). This means that investors earned more than 100% of their initial investment within 6 days.

From there, RSR/USD then takes a massive hit and falls to $0.04670 in the next two days (- 59.64% price impact). This means all investors within this time frame would have lost a lot within the shortest possible time frame.

The take from this is that, small caps are very profitable, but always presents a higher risk than other cryptocurrencies due to high volatility and lack of stability.

PROS AND CONS OF SMALL CAPS

PROS

Fast growth of cryptocurrency.
Whales can push the price up with a huge purchase.
Great profits can be made even with a small investment.
Ideal for short term trading.
Coins here can go 10x, 50x or even 100x within a short period.

CONS

Small caps with poor fundamentals tend to flunk soon.
Whales can push price down with huge liquidation.
You can lose a great deal of amount in no time due to its high volatility.

RISK CAPITAL

This is money which is spent on our daily routines and has not been set aside to any specific investment vehicle. In other words, it is the money that is used to run our home on a daily basis. We therefore do not expect any returns on these capitals.

We therefore do not factor this into our finances during calculations as they don't really impact our capital. As such, it is money we can afford to lose.

PENNY CRYPTOCURRENCY

These are widely undervalued cryptocurrencies with a good amount of community support but very cheap in terms of pricing. These coins do really well within a few months time and find a good support due to the confidence instilled in them. Some penny currencies go for as low as $0.003 but have a good market cap due to the strong backing it has globally.

Since we use risk capital to invest in this vehicle, we don't really need any expert analysis on these coins. A good example is Telcoin which was at $0.0001466 3 months ago and currently at $$0.00759 at the time of this post.

Swift growth of Telcoin

_{https://coinmarketcap.com/currencies/telcoin/}

WATCHLIST

Although it is good to have an overview of several crypto currencies in order to fish one out, can you imagine keeping a closer eye on over 6,000 cryptocurrencies? This is why it is extremely vital to have a watchlist.

Watchlist is therefore a carefully selected number of crypto currencies by individuals in order to keep a closer eye on. They make tracking of currencies very easier allowing the investor to make critical choices at any point in time.

Ideally, watchlists must entail a diverse selection of the various market caps. Meaning; 2-3 assets each of small, mid and large cap crypto currencies.

There are great tools for creating watchlists including coingecko coinmarketcap and trading view but for the purposes of this study, I will be using trading view which I find to be quite efficient.

The watchlist option of trading view can be found at the top right hand side of its interface as seen below.

Position of the watchlist tool on trading view

_{https://www.tradingview.com/}

Here is an example of a good watchlist I created on trading view to keep track of various assets ranging from low to large caps.

A typical watchlist created on trading view

_{https://www.tradingview.com/chart/jZCjGpc0/}

In the above watchlist, we have;

3 large cap assets; ETHUSD, LTCUSD & XRPUSD
3 mid-cap assets ; TRXUSD, VETUSD & FILUSDT
3 low-cap assets; ZILUSDT, SUSHIUSDT & ICXUSDT

This removes bias from asset oversight and makes it easier to keep track of preferred assets.

CONCLUSION

Before starting your crypto currency trading journey, you must first of all decide if you plan to opt for a long or short term trading. Then based on the afore mentioned ideas, you can decide which market cap coins to go for.

A watchlist is vital to keep track of the progress your preferred tokens are making in real time which is why you must have one. Some platforms like coingecko coinmarketcap even allows you to create an asset portfolio for monitoring you combined capital of the assets you are holding.

Effective supervision is therefore pertinent to the success of any crypto trader/investor.

Thank you for your attention.

I would appreciate your thoughtful contributions in the comment section as well. Thank you for your atttention.