Last updated on March 4th, 2023 at 02:57 am
So you’re looking to invest in some good, cheap penny cryptocurrencies, hmm?
Let’s revise this: after the whole Doge/Elon Musk pump, you’re looking for the next good, cheap penny crypto that is worth only $1, or $0.10 or even $0.0001.
You find yourself scouring social media, following whatever celebrity is involved in the crypto market, and hoping they will open their mouth about the next best penny cryptocurrency to invest in. Right?
In the meantime, your imagination is going wild with the wealth that will manifest if your tokens hit $1. Right?
Put the brakes on the Hot Wheels Lambo, friend. Time for some cold, hard facts.
While it is true that some penny cryptocurrencies have a low price per token, the chances of any of them reaching Bitcoin or even Ethereum prices are fairly remote. Crypto investors who buy these coins thinking there will be big returns find themselves frustrated when they learn how ill-informed their decisions were based on hope and hype rather than reality.
“Well, Bitcoin was a penny crypto at one point,” You are probably thinking right now, and that was true. However, that was 11 years ago; Bitcoin and the whole crypto market were the proverbial canaries in the coalmine. Not every penny cryptocurrency has even the potential to be the next Bitcoin.
Hopefully, I can help you shed some light on this. Let’s dig in, shall we?
Penny crypto is defined as any cryptocurrency that is less than $1 per token. According to Investopedia.com, there are eighteen thousand cryptocurrencies out there with many of them belonging squarely in the penny range.
While penny cryptos may seem like a good investment opportunity due to their low price point, they come with a high degree of risk. Many penny cryptocurrencies are scams or have very poor liquidity, which makes them difficult to sell or trade.
In addition, the vast majority of penny cryptos are not listed on major crypto exchanges, making them difficult to purchase. For these reasons, investing in penny cryptos is considered to be a high-risk investment.
Many penny cryptocurrencies are cheap because of three major characteristics:
- Circulating Supply
- Market Cap
- Real-World Value
Circulating supply is the number of coins circulating and is available to the public.
More often than not, the reason a penny cryptocurrency is cheap is that it has a huge supply of coins, which dilutes the price of each coin. If the supply is massive and there is little real-world value, the price is not going to go very high.
Let’s look at Shiba Inu for an example. Take a look at the circulating supply of Shiba: as of the date of the screenshot below, the circulating supply is 549,063,280,000,000.
Five hundred and forty-nine trillion, sixty-three billion, two hundred and eighty million Shiba tokens in supply. Those tokens are only $0.00003 (at the time of this article being written) and most likely, they will not get too much higher.
Oh yeah? I hear the indignant Shiba Inu fans screaming as the comments section gets spammed with such impassioned wit along the lines of HUR HUR U SUK!!!1!!. However, I need to move on and tell you of equally important factors.
The ‘market cap’ is calculated as multiplying the token’s current price by its circulating supply. (CP X CS = MC)
Let’s go back to the Shiba screenshot for one sec, take note of how high the market cap already is. (about $16,144,657,694) If you want Shiba to go to $3 per token, the market cap will have to be $1.61 quadrillion dollars.
Let me put it this way, the world economy at nominal GDP sat at $94.9 trillion, the $1.67 quadrillion market cap is 17.597 times the $94.9 trillion.
There’s not enough money out there to fulfill that market cap, where will it all come from? There is a chance of all the money printers in the world going BRRRRRRRR all at once, which would also bring about inflation a la Venezuela 2019 on crack and steroids wrapped in methamphetamine.
The TL:DR version? When finding cheap crypto to possibly invest in, check the market cap. A high market cap means the token price is not going to get a lot higher. Low market cap tokens do have more potential for growth but also come with a higher risk of failure and even illiquidity.
Here are a few questions to ask yourself when thinking of investing in penny cryptocurrency:
- How will this coin hold up in the real world?
- Can you buy stuff with it?
- How does it hold up when you transfer your assets from crypto to crypto? Or crypto to fiat currency?
In order for your penny crypto to gain value, it needs to have a real-world function. If it was just created out of hype and thin air (riding the coattails of DOGE and SHIBA) it will most likely fail.
DOGE fans: HEY!
Oh, be quiet. Not you all, too.
As far as investing in penny cryptocurrencies, let alone the best, I refuse to give names. Does that mean I’m sitting on a pile of the best out there laughing at you? Uh…I plead the Fifth. I’m not a financial advisor and I don’t give out financial advice.
I’m going to give you the tools you need to make your own investment choices, especially for you beginners. In looking for the best penny cryptocurrencies to invest in, here are some guidelines to follow:
- Does the circulating supply have between 10 million and 1 billion coins?
- Has at least 25 percent of the whole supply been mined?
- Is the minimum market capitalization value at least $20 million?
- Is the daily trading volume more than $1 million?
- Can you find it on the bigger, more popular crypto exchanges?
- Does it have a strong social media presence talking about its development and can the developers be found on social media?
One last piece of advice: do NOT follow any celebrities that have had nothing to do with blockchain and crypto development, and so-called “gurus.” (*cough* Elon Musk) They are out to line their own pockets. Remember how the price of Doge plummeted after Musk’s appearance on Saturday Night Live? A lot of people were smarting after that.
PS — Not financial advice, never financial advice.
Just because penny cryptocurrencies are cheap does not mean they will eventually be worth a fortune. You will need to do your own research to determine the best penny cryptocurrency worth investing in. Follow the facts, not some celebrity.
Dani Lehmer is the Founder and Head Honcho of Dani Digs In.
She is a Quality Assurance Analyst and blogger whose natural curiosity allows her
to dig in (pun intended) to help people build their businesses and satiate curiosity
in regard to data science, analysis, and crypto.