When it comes to trading cryptocurrencies, many traders can be confused about which asset to trade. There are thousands of cryptocurrency projects on the market, of varying market capitalisation and utility. It is the latter quality that I want to focus on in this article as the size of the cryptocurrency can significantly affect the volatility and trading conditions of the asset.
In crypto, market capitalization is the value you get when you multiply the unit price of a token or coin by the total number of such tokens in circulation. It is a measure of how big a digital asset is. Although the terms ‘large’ and ‘small’ are quantitatively ambiguous, a general rule is that a large-cap cryptocurrency has a market cap of more than $10 billion, while a low cap has less than this value. Going by this rule, at the time of writing, examples of large-cap cryptocurrencies are Bitcoin (BTC), Ethereum (ETH), Tether (USDT), Binance coin (BNB), Ripple (XRP), Dogecoin (DOGE), and Cardano (ADA). Examples of low-cap assets are far more plentiful than large-cap assets. In fact, most outside of the largest 50 projects are valued at under $1 billion.
Large-cap cryptocurrencies are typically considered less volatile than small-cap cryptocurrencies, because of the larger trading volume and larger number of market participants that they attract. However, be aware, this can lure traders into a false sense of security, because extreme volatility can appear in the charts of any cryptocurrency regardless of their market capitalisation. This is due to the immaturity and interconnectedness of the sector.
Even so, small-cap cryptocurrencies have a higher volatility potential due to the lower trade volume that occurs with these assets, and thus, they generally have wider spreads. Traders of small-cap cryptocurrencies look to overcome the wider spreads by taking advantage of the larger price moves that can be inherent in these volatile assets. All the while, because small-cap assets attract less retail and media attention, market moving news reports can be few and far between, meaning that the driving factors of price action in small-cap assets can be mysterious at times.
Before choosing whether to trade large-cap or small-cap cryptocurrencies you should understand how your trading strategy applies to the characteristics of each asset and what you want to achieve.
Not the Dogecoin, that thing should be banned in my opinion! I hope the new regulations will flush out all coins such as Dodge. As a software developer, this is my firm opinion. The only thing it could be used for is to reflect on the mental state of the average Joe buyer on the crypto market other than that it is a... hehe coin
CryptoTestingVA
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@confidentFinan84213 if it weren't for all the hehe coins nobody would give a flip about any crypto.
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financialfreedomgoals101
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Great Insight Bro!
kreteniko9
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I totally agree always is my goals is not your goals ..you can trade small cap currencies and get profitable without involving stress and emotions and large but always start when you are skilled and improved on trading..thank you for the amazing job ....
bilalislam8600
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great
brooklynqueens
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yawns
MBoxtrade
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Good gooder goodest
PAPIPIPSS
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I recently bought two bitcoin cash! So imma hold for the long term!