What is Micro Cap?
Let's find out Micro Cap meaning, definition in crypto, what is Micro Cap, and all other detailed facts.
A micro-cap is a small company with a market cap of $50 million to $300 million. Micro-cap companies have a higher market cap than nano-cap companies, but a lower one than small-, mid-, large-, and mega-cap companies. However, a lower market cap doesn't mean that stock prices will be necessarily lower than for the companies with higher market caps. A company's market cap is calculated by multiplying the stock price by the total number of outstanding shares.
Micro-cap companies are known for their excessive volatility and the fact that they are riskier than companies with larger market caps. That’s because they are unpredictable, have no history, revenue, assets, or operations, and have a lot of untested products. Besides, due to the fact that they lack liquidity and have a small shareholder base, they are vulnerable to huge price shocks (potential investors should really look into the liquidity aspect before investing).
The market cap of a crypto asset and its underlying blockchain is determined by the volume of circulating coins available to the public multiplied by the price per coin. Note that there is no specific market cap threshold that implies that an asset is a large-cap coin.
Though the market cap of micro-cap coins is similar to the market cap of penny stocks because it is small. Besides, they offer the potential for enormous payouts, but they also carry the danger of losing more money than you would with the average coin. Micro-caps could even be considered riskier than penny stocks because of their volatility. However, if you choose a proper chart, you can control the amount of risk you face.
Micro-cap coins are beneficial because they allow users to generate a significant quantity of money in a short period of time. You can earn huge returns on your initial investment if you invest in a micro-cap when it is still in the early stages of development. Being an early investor also means that you don't have to invest a lot of money to make huge profits.
However, keep in mind that you’re more likely to be scammed if you invest in micro-cap coins. Besides, if you don't do your homework on your preferred cryptocurrency, you risk losing all of your money. This would happen if the crypto firm decided to exit the market and take all of your investment funds with it (this is known as a rug pull).