Smaller-cap crypto projects can deliver some insane gains. Be careful though- it’s also these same coins that lose 60-80% of their value in crypto market corrections. Still, if you’re able to find the diamonds in the rocky crypto landscape, you’ll be rewarded. Typically projects that have strong fundamentals tend to do well in downturns too.
What are penny cryptos?
In this case, we’ll set boundaries for ‘penny cryptos’ based on the following conditions:
1) The coin has a relatively small market capitalization (i.e. the project’s ‘net worth’ is low and thus has lots of room to grow)
2) The coin trades for less than $1 USD per token
Cryptos are not stocks
Stocks are small slices of ownership of companies that make money, and then share that money with their stockholders. Cryptos come in all shapes and sizes. In the crypto world, the closest thing to a stock is an exchange token. Owning an exchange token is like owning a small amount of an exchange- like Binance Coin (BNB) or Uniswap Token (Uni). While cryptos don’t offer dividends, most tokens can be staked to earn extra cash passively.
Some words about small caps
If you’re new to crypto, get ready for a wild ride. If you’re new to small cap coins, get ready for a hurricane. The crypto market makes for some rough seas, and if Bitcoin is a barge, small caps and penny cryptos are tugboats. Even the smallest of waves can turn things turbulent. The wonderful thing about this, like with penny stocks, is that these projects have so much room to grow and can deliver outsize gains. If you can handle the sea sickness, there’s bound to be some rewards.
The 5 best penny cryptos for Q4 2021
Tron is a Singapore-based project that was made as a platform for making and sharing entertainment content. Tron is like Ethereum in that it’s a platform that can host decentralized applications (dApps) and execute smart contracts. The big plus here is that projects like this do well in bull markets and don’t dip quite as bad in downturns. This brings us back to Warren Buffett’s adage: don’t lose money. Other smart contract cryptos that also follow this trend are Cardano and Avalanche. Tron’s native token is called Tronix (TRX). The project currently ranks 28th out of all cryptos by market cap ($7.1B) and is valued at $0.10/token at time of writing.
VeChain is a unique project in that it aims to solve supply chain problems using the blockchain. The project has gained traction with agreements with huge entities like Walmart China. While VeChain boasts that it can host smart contracts and NFTs, this is not the project’s main focus. VeChain relies on the internet of things (IoT) to track supply chain information and add it to the immutable ledger. Think of thousands of remote sensors tracking goods in hundreds of locations. Global supply chains are incredibly complex, and only becoming more so. VeChain ranks 26th out of all crypto projects with a $7.5B market cap and its token (VET) is sitting around $0.11.
Stellar is one of my favorite cryptos, because I love its use-case. Here’s the use case: millions of immigrants live abroad in various nations. These people usually migrate from poorer countries to wealthier ones for economic reasons. Most send money back home to their families in the form of remittances. The current state of remittances is abysmal- it takes days and charges fees as high as 12%. Stellar’s goal is to make for instant and cheap transactions with its Lumens (XLM) token. I’ve personally used Stellar to move my coins around quickly and without fees and I love it. Established players like Western Union are going to get destroyed by projects like these. If you invest in Stellar, you’ll be on the right side of history! Stellar is currently the 23rd largest crypto project by market cap ($8.2B) with a current price of $0.34.
Hedera Hashgraph (HBAR)
Hedera is a proof of stake network where delegator and validator nodes are actually just a handful of businesses. While this speeds up blockchain consensus, it also makes a network more centralized, something all cryptos aim to cut. The project has a great roadmap and intelligent founders. Hedera is currently the 36th largest crypto project with a market cap of $5.3 billion and its token price (HBAR) sitting at $0.35.
Basic Attention Token (BAT)
This is a project that I’m intrigued by, given that the digital advertising business is booming and will only continue to grow.
You can earn BAT for free by adopting the Brave Browser. The catch is that the browser will show you a few push notification ads per day, which you can get rid of fast. I started with the Brave Browser six months ago, and I’ve earned almost 11 BAT, which is only around $10 USD at the time of this writing. Still, the browser has blocked ads and trackers, so if there’s a super-spammy website that normally has tons of ads, you can access it with Brave and not have to deal with any of that.
But back to BAT. The project aims to protect users from the carcinogen of algorithm-based advertising. The ad publishers pay in BAT and content publishers and users are both rewarded BAT for giving their content space and attention to the advertiser. This simple model solves a whole swath of negative externalities caused by online advertising. I’m super bullish on this project as a results. BAT is currently just outside of the top 100 crypto projects sitting at #101 and is priced at $0.79.
There are so, so many crypto projects out there- which is why you have to be careful. It is way easier to start a crypto project and get your coin listed on an exchange than it is to start a public company traded on the NYSE. For this reason, there are a lot of false promises out there in the world of crypto. Make sure you’re always doing your own research to make sure if a project is legit. Remember, the only thing that’s going to make a crypto gain value long-term is real-world adoption of its use case. Bitcoin has established itself as the digital gold, a store of value. Ethereum is the current platform of choice for NFTs and smart contracts.
In the end, ask yourself if the project you’re looking at has potential for real-world use case. Act like the judges on the show Shark Tank. Be discerning. My crypto portfolio is mostly made up of Ethereum and Bitcoin, because those two are tried and true and will still deliver great growth. I do make small percentage allocations for small caps like those above though, too.