Examining Why Altcoins with Smaller Market Caps Have Been Underperforming Lately
Recently, the cryptocurrency with a larger market cap has been outdoing those with a smaller market cap, with Bitcoin making the most significant dominance. Investing in small-cap altcoins is a risky endeavor, especially if you fail to conduct your due diligence, you stand the risk of losing your investment, though taking a calculated risk can result in a huge pay. Most enthusiasts are betting on large-cap cryptocurrencies such as bitcoin and Ethereum’s ether, instead of little-known tokens that could see their value rise far more than the better known assets.
Reasons for the Trend
The performance gap between the small and large-cap can be traced to a historical trend, seen during periods of economic stress and investor caution. When the small cap begins to underperform, it means that traders are huddling in big names that are easier to trade, as they neglect the smaller companies which are considered riskier. If this won’t change, it will bring more significant problems than those experienced in the previous months.
Despite small caps being much cheaper than large caps, the small caps are still giving downward earnings. A 27 percent fall has been recorded in the past few months, meaning that the group of stocks is in an earnings recession. DeSanctis said,
“I do think you have some margin compression in small caps where margins can’t handle additional costs, whether that’s going to be higher wages, obviously now it’s tariffs.”
Is the Situation that bad?
Some cryptocurrency exchanges like the OKEx have begun launching their projects through the Initial exchange offering, considerable evidence that the company can survive for long. Due to these tokens, companies have experienced a rise in their prices.
However, the future is not clearly defined. While small cap cryptos do present profitable opportunities, large cap cryptocurrencies have proven their dominance.