Micro-Caps – A Journey Of Discovery & Life-Changing Returns

It’s All About The Risk/Reward Ratio

Had we not experienced the covid correction in 2020, Bitcoin would have only experienced very modest returns. Yes, in comparison to other asset classes and investment vehicles, it was still a solid performance. Altcoins on the other hand, and particularly micro-caps, experienced monstrous rallies that left Bitcoin looking a little worse for wear.

This all comes down to the risk/reward ratio. An element that is vital to consider when putting together a portfolio or investment strategy. At best, BTC managed a 20X (2000%) return, provided you bought the bottom and sold the peak. On the other hand, many altcoins experienced 300X returns and more! This is where the life-changing money is made.

Yes, 20X is still a stellar return. However, can you imagine if it was 300X? Micro-caps are able to attain these levels, provided they succeed and manage to garner the attention of the market. This is just one of the reasons why I always have exposure to some carefully selected micro-caps.

Time Is On Your Side

Given the fact that these altcoins generally tend to fly under the radar, there is often a very generous season of accumulation. Although many wish that their particular bags would just “moon”, they miss out on the dynamic of “powerful accumulation”. Because the prices are generally exceptionally low, a prolonged period of accumulation can render mind-numbing gains, provided it is utilized correctly.

Experience creates confidence, which is why so many altcoin investors are unable to comprehend the gains that so often take place within the micro-cap arena. Once you have held a coin that yields 100X, or even 300X, something changes. Your perspective, and what you see as possible suddenly shift gears. It’s as if the lights suddenly come on. This mental adjustment aids in the accumulation process.

Success in altcoin investing comes down to a well-defined accumulation process. Depending on your access to investment capital, this can sometimes be a fairly lengthy process. Consider, for a moment, how many bloggers on Hive spend years slowly accumulating tokens. This is however slightly different, as they are earned, and not purchased with investment capital.

The current market continues to provide good opportunities for accumulation. This is likely to continue for some time. Building a meaningful stack takes time, and often micro-caps have a very specific moment of recognition that comes at a much later stage. Provided, you choose the “right” projects, this dynamic often provides a rather long period of accumulation, prior to the market providing recognition.

Investment Becomes A Business

Catching an altcoin in its infancy provides more than significant gains, it opens up the realm of “business ownership”. Let’s begin to put some numbers to this idea. Consider an investment that goes on to realize a 100X return. An initial investment of $30K is now worth $3 million. This is another reason why I like to explore investment opportunities that incorporate some type of passive or residual income.

This will often be in the form of staking, or in the case of something like HIVE, a curation reward. Let’s say the annual return is 5%, which is fairly modest. On $30K, that would only bring in $1500 per year in passive income. However, apply that 5% to $3 million and the story changes. Your initial investment is now not only worth $3 million, but it also provides $150K per year of passive income.

That’s $12.5K per month! Not bad via an initial investment of $30K. Now, to many, this sounds unachievable. Not so, I have personally experienced returns in excess of 300X. Yes, often I did not have the foresight, and so my initial investment should have been a lot more significant. However, the fact remains, I was able to capture 300X returns and more. It’s really not that difficult. As I previously mentioned, even Cardano experienced north of 100X returns in the previous bull market from the bear market bottom.

What is actually unfolding in such a scenario, is the purchase of a business for next to nothing. The upside is tremendous, ultimately creating an enormous passive income source, which is in fact a business! I believe that the opportunities are unparalleled in this particular niche, and so I always look to allocate at least 10% of my portfolio to possible moonshots.

These are typically micro-caps that hold promise, and perhaps are displaying early signs of greatness. The risk/reward is just too powerful to ignore, in my opinion. What you are able to achieve in a successful scenario is life-changing, and so is something I am always willing to allocate capital towards.

Final Thoughts

It’s important to remain patient when dealing with micro-caps. This can sometimes be quite a long journey, often accompanied by periods of what may appear to be stagnation. This is however not always the case, so patient observation and continuous research are imperative. Actually, I have found this to be a lengthy process, more often than not. This has caused me to align my mindset with the possibility of such a journey.

As I mentioned earlier, if your conviction is strong and you are dedicated to the project, this merely provides you with a longer window of opportunity, in relation to accumulation. A micro-cap that goes on to reach the Top 50, or even the Top 100 can really change your life. However, this is not divorced from a process that will often become rather trying at times. Conviction and perseverance are key.

Once a project starts to move north of your average entry price, the risk begins to decrease. This can often take place in the early stages of price discovery, ultimately creating a buffer that will simultaneously allow additional allocation at a reduced level of risk. All the best, as you continue your hunt for the altcoin gems of tomorrow!

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