Penny Stocks, in their quintessence, are best explained by Martin Scorsese’s The Wolf of Wall Street. In the movie, Jordan Belfort, played by Leonardo DiCaprio, takes advantage of penny stocks to make his fortune. He oversells these penny stocks to unsuspecting investors and makes a killer commission off of all of them.
Penny stocks, according to Investopedia, are stocks that trade outside of the bigger market exchanges. These are sold for a relatively low price and have a slow market capitalization. They are highly speculative due to the “lack of liquidity, large bid-ask spreads, small capitalization, and limited following and disclosure.
” Despite it being called “penny stocks”, this doesn’t mean they sell for literal pennies on the market. Penny stocks are usually traded below $5.
The cryptocurrency equivalent to these penny stocks is called penny cryptocurrencies (penny cryptos for short). It’s not much of a creative name but it encompasses the essence of what it is.
What are penny cryptos?
Penny cryptos, in their core, are the same as penny stocks. If bitcoin is a blue-chip stock (a stock of a large, well-established, and financially sound company that has operated for many years), then the lesser known and cheaper stocks are the penny cryptos.
Penny cryptos can be categorized into:
- Cryptos that have a large supply, making them a cheaper alternative (an example of this would be Ripple XRP)
- Cryptos that have just recently come into circulation (newly minted)
- Cryptos that were once considered high in value but have now fallen to extreme lows
- Cryptos that never got popular enough – perhaps they were never able to make it onto an exchange
These are all different types of penny cryptos and should not be treated the same way. Cryptocurrencies, in general, are kind of like penny stocks. They’re both subject to manipulation and have a high degree of volatility.
Best Penny cryptos to look out for in 2019
Penny cryptos are a good way to earn some extra cash with very little capital. You don’t have to put in a lot of money to invest (unless you’re willing to take big risks). So if you’ve firmly decided to invest in a penny cryptocurrency, the next step is to look for specific penny cryptos to invest in. Here are the top 3 penny cryptos set to explode in 2019:
Despite its existence for multiple years, the price of Ripple still remains under $0.5, thus making it penny crypto. Developed by Ripple Labs, XRP’s goal was to revolutionize the payment systems to be old and outdated. Ripple’s current system has the ability to make payments cheaper and nearly instant. Ripple’s other products use XRP for sending money.
TRX is currently the 8th largest coin by market cap. It is priced under $1 and it aims to revolutionize the entertainment industry and decentralize the web. It was created on Ethereum’s network but managed to launch its own blockchain in mid-2018. TRX has purchased BitTorrent and announced that they are working on their biggest project yet: Project Atlas. The project will revolve around BitTorrent and it aims to reward those who “seed” files, making it accessible to BitTorrent users.
Just one spot behind TRX, XLM is the 9th largest coin by market cap. It’s sold at around $0.08 and considered to be far below its potential. It’s one of the fastest coins in the cryptocurrency market, able to complete transactions within seconds. XLM aims to allow the unbanked and underbanked individuals easy access to funds, revolutionizing cross-border payments.
Penny cryptos: To buy–Not to buy
Now that you know all about penny cryptos, you may be wondering if investing in them will be worth it or not. They can be worth it but you still have to understand all the risks that come with it. Just like penny stocks, putting a lot of money into penny cryptos is a huge risk. Let’s say you buy 10 different penny cryptos. One of those 10 can make you rich but the others can completely drain you. You know how the saying goes: “Don’t put all your eggs in one basket!
That doesn’t necessarily mean that penny cryptos aren’t good investments. They can still earn you a lot of money. If the fundamentals of certain penny crypto are good then they can definitely be good bets. Just like penny stocks, all you have to look for is a small increase in your investment and that’s already considered a big win. There have been a lot of misses in the past but there is real money to be made with penny cryptocurrencies, you just have to be willing to take the risk. If you think about it, $100 worth of XRP is no different to $100 worth of BTC or even $100 worth of some random altcoin you just found. They’re all $100 worth so what instead of looking at the price, look at the coin itself and see where it could go. Look at the fundamentals of the coin and the market, read the white paper of the coin, and look for a coin that has a good team and a lot of community support.
Generally, if you’re looking to trade long-term, penny cryptos aren’t for you. Just like with stocks, the blue-chips are always a much smarter investment. In terms of cryptocurrencies, you might be better off investing in coins like BTC, ETH, and LTC.
If you’re looking to invest in penny cryptos, you have to be willing to lose some money in the process. The $100 you invest has to be $100 you’re willing to lose. On the other hand, why not take that chance? There’s nothing wrong with pouring a minimal portion of your funds into a penny cryptocurrency you believe in. Just be sure to not get overly optimistic and pour too much money in. Time and time again, people have fallen into the trap of doubling down after they convince themselves that a bad choice was a good one.
There’s nothing wrong with investing and then bailing. There’s also nothing wrong with taking a chance and holding. If you’re planning on investing, be sure to keep a clear head so you don’t make any mistakes you’ll regret in the future. As with all kinds of investments, it’s really up to you and how willing you are to take a leap of faith.
What do you think about penny cryptocurrencies? Does it sound like something you’d invest in? We’d love to hear your thoughts! Let us know in the comments section down below!