Small/Mid Cap Trading Series Part 2 – Picking a Project and Timing

Our job at CoinBusters is to help do some of the research for you. The biggest mistakes you can make in crypto involve chasing pumps and buying in at the wrong time. The smaller the market cap, the more volatile you can expect the price action to be. The beauty of these small caps is that it doesn’t require massive initial investments to make great returns.  There are a few simple trading rules to follow that greatly increase your chances of success when picking small cap projects to invest. It’s better to consistently win smaller plays than to try and swing for the fences… although who doesn’t like a homerun every now and again? 

The Small Market Cap Bible for Trading

Sure, we could just “tell you” what we are buying, but where’s the fun in that? Everyone generally wants to find the easy way out – the get rich quick. Repeated wins are how you get rich, and knowing how to make good decisions is paramount whether you buy crypto, stocks, famous paintings, or cars. It may be easy to just “buy what we buy” – but what happens if you get a tip from a friend, see something on reddit or twitter, or do your own research?

Investing in general needs to be a cold, emotionless pastime. It does not matter how much you “like” a project or believe in it. For small projects that are exceedingly volatile, if you don’t use data to drive your decisions you’re likely to get rekt at some point. There are three rules you must follow with small caps.

The first and most important thing you must consider is where in the world of crypto the project is taking place. Right now, the most successful small cap projects are applications/programs that provide some use (DeFi, gaming, etc.). When you think you have found a project that seems promising, you need to consider the “mother” blockchain the application resides in. If the blockchain itself is in a huge growth period relative to its competitors, it’s an obvious indicator that more people are using it and therefore, more potential users of the project (which drives the price up!). If the blockchain is slow (even if the blockchain seems promising, we don’t want to be super super early) and not growing rapidly (ADA after the smart contracts launched, etc.) it needs to be considered. Not that it won’t end up being a good investment, but more often than not these slower ecosystems take a while to really get going. Find ecosystems that are booming, like AVAX is right now, and like ONE is starting to do.

Second – does the project, right now, have any sort of utility? Does it do anything? Has the team delivered? I am very against getting into projects that haven’t really done anything yet. To me, it’s like proposing to someone before meeting them. Could it work out? Sure. Likely to? Probably not. If the project/application does something, you can learn about the people developing it and running it pretty easy. A well organized and active development team on social media is common across every single successful project. Getting the word out about project activities is essential through marketing. I’ve seen a lot of promising projects fall flat because their marketing was terrible. In addition, you have to make an honest assessment as to whether or not what the project aims to do is even important. Every reddit supporter and token holder will tell you the project is going to the moon. But is it? You need to assess its importance to the ecosystem. I am a big fan of “future capabilities” and investing in them, but only if they’ve shown me something before.

Third – Why should people care about the project? Does it do something unique? Copies of other projects rarely have staying power. I want something that shows innovation or creativity in some sense. For those of us that invest in stocks, a “stock tip” usually is accompanied by how the company is doing something awesome that will lead to the stock price going up. Crypto is no different. Crypto has long since abandoned the “If you build it, they will come” mantra – if the project can’t keep someone’s interest, they are gone.

Trading Money Defi Crypto
Trading in Crypto

Time is Money in Trading

When should you be trading? If you find a project that answers all three of the above, how do you know when is the right time? Well – real projects with real utility cannot go to zero unless it wasn’t a real project in the first place. The market as of late has been brutally red. This is just what happens with crypto and if you invest on a whim without knowing what you’re buying, you’ll just end up selling and eating a big loss. Newsflash: Crypto – is – not – going – away.

The best time to trade, and this is really how you turn $1,000 in to $30,000, is when the market is beat up and bloody. In these instances the smaller cap projects tend to be disproportionately down compared to the market. This means that you’ll get more for your money. When MELT dipped to $.15, a $1,000 investment would have given you 6,666 MELT tokens. Less than a few weeks later MELT was nearing $5. $1,000 to $30,000 just like that. We covered it here. Don’t say we didn’t tell you!

With the market in its current “down trend” it is the perfect time to buy. To save you just a little bit of research I’m going to share what I’m buying right now and why I am doing it

We’ve covered a lot about Polkadot in previous articles. One of the most anticipated parachains in the entire DOT ecosystem is Moonbeam. Moonbeam launched at the height of the big market slide in early 2022 along with FLARE, it’s largest DEX. Since then FLARE has been decimated price wise. Despite this, they have added some incredible farming pairs, staking options, liquidity pools, and more. As Moonbeam ramps up in the coming months, FLARE’s price should grow significantly. In fact, right now, there is over $14million in total value locked on in the platform and yet the market cap is a paltry $1million. At the time of this writing FLARE was $.08 per token.

FLARE passes all three checkpoints mentioned above. Moonbeam’s network will be taking off, it works and is constantly seeing new capabilities added, and FLARE’s platform (SolarFlare) provides an extremely needed utility (and is the largest DEX on Moonbeam). With the price so low, if it does recover to the $.50 price per token … that will be a nice payday!

Defi Kingdoms (JEWEL) is another play I’m making right now. I bet huge on FLARE and am doing so as well with DFK. Much like FLARE, DFK’s price has plummeted in recent months.

Since reaching a high of $23, DFK’s JEWEL token has dropped all the way to around $5.5. Like most of the market, January was a rough month across the board. However, DFK passes all the checks we need – it’s growing in popularity.

With the massive price drop, the “volume” of money flowing in the project is down. However, transactions are increasing and the number of users has been staying relatively flat. This means that the people playing DFK are playing more often than ever. DFK is the largest game on all of the Harmony chain and has almost $500million in value locked in its ecosystem. ONE is still a nascent chain… but DFK recently announced an expansion headed to the AVAX chain in the next month or two which is a really big deal. AVAX is booming and this will bring in an entire new market of users. DFK works, people are playing it everyday, and there is a lot to be excited about going forward. Likewise, as DFK skyrocketed in popularity in the fall, it made many many people a lot of money from playing a game. With so much money locked in the ecosystem and the new capabilities upcoming it is not going anywhere any time soon. I’m personally farming JEWEL in the JEWEL-ONE farm (262% APY), as is Apollo.

Defrost Finance (MELT) is back in our view… again. Prior to the recent price dumps (which hit MELT too), MELT hit $200million in locked value with a marketcap of below $5million. Wildly undervalued. MELT recently hit over $5 after rocketing up from $.15 after it was heavily farmed during launch. DeFrost’s development team is incredible. They have continued to deliver new capabilities, vaults, and ways to use the platform consistently – establishing partnerships with huge projects like OlympusDAO, Benqi, and Curve. It is THE best stablecoin platform from a rewards standpoint in the entire AVAX ecosystem and it isn’t even close. If you’re using AVAX, this is where you store your profits. MELT passes all of our checks, too. AVAX is (again) one of the hottest ecosystems in all of crypto. The platform is mature and definitely works. It has more features and tokenomics upgrades coming in the pipeline and a history of the developers delivering key features in a timely manner. It is unique and couples rewards strategies across multiple platforms which no other project has been able to do successfully. I use the platform to hold all of my stables and I’m earning insane rewards from these. I recently loaded up on more MELT and am going to get more as the market continues to stay rocky.

Trading: Don’t Forget

Nothing in crypto is guaranteed in the short term. In the long term, projects that pass the above metrics are highly like to thrive and succeed. But, just because they pass these checks now doesn’t mean they always will, so never stay married to any project for a pre-determined amount of time. Smaller cap projects are volatile because the small market cap and liquidity pools cause price swings any time someone buys or sells a reasonable amount. With these we aren’t looking for 20%. We’re looking for fast 2-3x wins with upside for far far more.

Justin Mckennon

About Justin Mckennon


Justin McKennon is a Co-Founder of CoinBusters. Justin has BS and MS degrees in electrical engineering and deep background in economic research and software development. Justin specializes in data-driven analytics and frequently works with projects in the DeFi and GameFi spaces across the market.

Learn More