#3. Picking Out Microcaps 101 (Revised)

N.B: This is a revised edition of the post I published in July 2017, which featured a framework for filtering for microcaps. Since that post was published almost twelve months ago, much has changed in the space, not least of which being the price of Bitcoin. Consequently, many of the more minute details and figures in the original post are now invalid or ineffective, and a revision of said post feels necessary. I have refrained from changing the style or structure of the post, and have instead simply opted to update whatever information feels out-dated. I hope that you will find it useful.

Microcaps: Coins that have a market cap between 0-25BTC ($0-170,000, at the time of writing this).

Microcaps have long-proved to be the most profitable coins for me, and the process by which I pick them out is rather simple:

Step One:

Direct your browser to www.coinmarketcap.com: Click view all. Filter the list using the ‘Market Cap’ option for $0-100k. Open a new tab and repeat this for $100k-1mn. Click on the button that says ‘USD’ and change to BTC so that the market cap figures display in Bitcoin. Note down all of the coins below 25BTC that show a circulating supply below 1 billion coins. For all of these, also note down their 24H volume in BTC. Cross out the coins with a lower than 2% market cap to volume ratio: if X has a market cap of 25BTC, its 24H volume should be 0.5BTC or more. This is simply to filter for the microcaps that are getting a decent amount of attention. Now open up a separate tab for each remaining coin. From these remaining coins, cross out all the coins that have a total supply that is more than twice the size of their circulating supply (this is usually indicative of a large premine, and that is unnecessary added liability). Make sure that the figure you are looking at is the ‘total supply’, not the ‘maximum supply’. Total supply means the total amount of coins currently in existence. Maximum supply means the maximum possible amount of coins that can come into existence. The ones remaining (there’s usually quite a few) are the ones you will research further.

Step Two:

Head over to Bitcointalk and read through the announcement threads of every single coin that you have left on your list. Make a note of the level of activity in the thread, the number of pages it contains, the last time there actually was communication on there (some coins will be dead), and get a general feel for the community of each coin. Read through the announcement itself to find out where the coin has come from and where it is heading — look for roadmaps, Slack and Telegram channels, and active, communicative developers. Have a look at their websites and block explorers. Remove coins from the list of remaining ones that do not have at least a decent standard for all of the above (room for improvement can be profitable).

Step Three:

You should now have a small-ish number of coins on your list. These are the ones you’re looking to pick up, but whittle the number down even further by doing more meticulous research on how they are currently trading. Remove anything that trades only on Yobit – remove it immediately. Of the other exchanges, CoinExchange, CryptoBridge, TradeOgre and Cryptopia can be great for microcaps. Look at the charts for each of these coins, and spot accumulation patterns: constricted ranges; spikes of high buying volume etc.

Another research tool is the block explorer for these coins. Some may have rich-lists or largest address tabs. Monitor movements within these addresses. Are the largest addresses getting larger over time or are they in distribution? Screenshot the top 25 richest addresses and then screenshot the top 25 again a few days later. Compare your lists. Are these coins in accumulation?

Step Four:

Take the plunge and buy the ones you’re most confident in. It may even take you weeks to accumulate a decent amount of any single microcap project. Most likely, it’ll take months before you start seeing serious returns, but it’s worth it if you have the patience.

I hope this post helps with your research.


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Disclaimer: This post references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

18 thoughts on “#3. Picking Out Microcaps 101 (Revised)”

  1. Mng Nik,

    Love the book and website, a great help…
    Whith accumelating, do you mean for example:
    sell the coin after a 25 %rise an re-enter after drop?
    Or do you mean using the profit from swing trades to grow the micro coin bags?

    Thanks and keep up the great work.

    Arne
    The Netherlands

    1. Hey,

      By ‘accumulating’, I simply mean begin entering a position. This could be in the form of market buying, setting orders and waiting for them to be filled, or any combination of the two, up until the full position has been filled.

  2. Hi Nik,
    I enjoyed a lot your book. Thank you for sharing your knowledge. What you share is gold, man!
    Anyway, I found myself, like I read in other comments, rejecting all the coins because no one seemed to comply with all requests…
    In particular, it was difficult sometimes to find data about total supply (many call total supply what should be max supply), or clear reward structure.

    1. Hey,

      I’m glad you enjoyed it! Yeah, I think that sometimes you may need to widen the net and allow for more flexibility with some of the parameters if you aren’t finding any decent projects. And yep, sometimes it’s quite unclear whether a figure is total supply or max supply, but this should be made clear either on the BTCTalk Announcement or in the whitepaper of the coin. Same with reward structure; don’t go in blind – if it isn’t available anywhere, you can either ask the dev/community for further info on it, or just ignore the coin and move on.

  3. Great great reading man.
    You r smart and straight to the point.
    This post is minimal and effective, congrats.
    I am curious of this: do you have a some kind of “rule” or let s say in a better way “guidelines” on the amount (btc) to put in every micro cap generally? I mean, ok depending on how many projects you r interested in and your btc portfolio availability… But let s say you wanna spread your btcs in 10 micro cao projects, what s the amount of btc you wouldnt exceed per every coin?

    1. Glad to hear you enjoyed it.

      I don’t have a fixed rule or guideline for BTC amount per coin, but I do have a set of guidelines based on % of my altcoin portfolio. So, for example, I don’t put more than 1% of capital (at the time of entry) into a microcap, more than 3% into a lowcap, more than 5% into a midcap, and more than 15% into a highcap. Hope that helps!

  4. Very helpful, thanks.

    Just to clarify is the goal of accumulating them instead of buying larger quantities to prevent it from spiking too early?

    Do you have any idea on good max buy amounts per transaction?

    1. Hey,

      It depends upon the individual coin – sometimes, especially with microcaps, it is very difficult to accumulate without causing some sort of price spike. Generally though, setting up orders and market buying small amounts is the best approach.

      I don’t tend to set a maximum per order.

  5. Very helpful Nik…I tried this approach but surprisingly I couldn’t find at least one coin that is qualifying…may be because of BTC aggressive movements right now…will try after things settle down a bit…

    1. I found the same, though i was thinking perhaps because it is so deep in the bear market?

      On another note, does it matter if a coin is mineable or not? I was thinking its probably better if it were, but perhaps it is still possible to make decent coin off ones that aren’t mineable as well?

      1. It’s definitely primarily due to the bear market, but it may also help to cast the net a little wider. Don’t use the process I outlined with too much rigidity; keep things flexible and tinker with the points-of-interest.

  6. Great post! Question: do I pick one single coin? Or can I just pick, say, my 10 best coins? Or a combination of both ways?

    1. I tend to accumulate a moderate amount of many coins rather than attempt to accumulate a lot of one or two.

      Nik

  7. Love it. We here at Iridium (IRD) (https://ird.cash) try to keep all these social metrics high. One of the things we as a low-cap struggle with is low facebook and low reddit turn out. Sometimes people look at that low engagement on FB and Reddit and say that means the coin is bad. But it’s not a great metric since many alt coin traders will be way more active on Telegram and Discord. Happy you’re calling that out properly here.

    I’d probably also add that some of the privacy coins won’t have a "rich list" that someone could scan. We keep getting asked for this but with Cryptonote, there is simply no way to create a Rich List. I need to add this to our white paper .. but if you’re looking at a low cap privacy coin that doesn’t have a rich list you might just want to skip that metric alltogether and choose a different one in order to see accumulation.

    Thanks again Nick

    1. Agree with you on all points. Privacy coins are inherently more difficult to track for accumulation, but that is often the trade-off for the potentially greater upside due to the innovation of the sector.

      Nik

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