Market Optics: Is It Time To Get Out Of Small Cap Altcoins?

Small cap altcoins have always been the biggest winners when it comes to a bull market. This is because they possess a higher level of volatility compared to their larger counterparts, making any change in the market much more pronounced in their value. However, this volatility that makes it such a favorable play during bull markets is what makes it a dangerous one when the market is dumping. So is it time to get out of small cap altcoins?

Investing In Smaller Altcoins

These smaller cap altcoins have been returning the best gains for investors throughout the 2021 bull market. But once the bull rally had begun to die out, it was very obvious that these small cap altcoins are better played in green markets. Given the recent downtrend, their volatility has now played against them where the majority have now lost more than 90% of their value, and it can get even worse if the market does not see a significant recovery.

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An example of this was during the 2017 bull market where various small cap altcoins had made very interesting plays in the space. Their gains would be lost just as easily, however, when the bear market in 2018 began. What this led to was not only more than 90% losses for investors, others had completely died out, leaving investors with dead bags.

An example of this was with coins such as ICON (ICX). The altcoin had dumped to near zero during the 2018 bear market despite being one of the best performers the previous year. What this means is that the biggest pull of these small cap altcoins is also their greatest weakness.

ICX declines from its $3 high | Source: ICXUSD on TradingView.com

Still Good To Invest?

Just like with any investment in the cryptocurrency market, it is always advisable to invest only what one can lose. However, there are times when investors can be stuck with coins with declining values due to not selling on time. Here is where it is important to access whether it is time to jump ship or hold on for dear life.

The first thing that an investor will want to do is make sure that the project is a sound one. The utility and roadmap of the project can often determine if it will survive a prolonged bear market. Sometimes, even this may not be enough without adequate support but is always a good pointer.

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One thing to note about these smaller cap altcoins is the fact that surviving through a bear can mean large returns for investors. Using the example already mentioned above, ICX had dumped to near zero during the last bear market. But by the time the next bull market rolled around in 2021, the cryptocurrency had recovered above $3, rivaling the value of larger players such as Cardano (ADA).

Given that the altcoin was trading at $0.1 in December of 2019, it could have been considered a lost cause but it is the same story for all small cap altcoins that make it through the bear market. Likewise, the altcoin has now declined back to the $0.3 level following the market crash, indicating that small cap altcoins investors are in for another long-haul wait.

Featured image from NewsBTC, chart from TradingView.com

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