Investing little and earning a lot sounds attractive, doesn’t it? That’s exactly why many users seek out cheap cryptocurrencies that could rise in value later and bring them a good profit. However, despite the appeal, this topic has plenty of hidden pitfalls.
Before investing in brand-new and inexpensive cryptocurrencies, it's essential to understand how the price of digital currencies is formed, how to evaluate the potential of a project and avoid becoming a victim of fraud. In this article, we will cover these and many other important points. To learn more about how new cryptocurrencies emerge, how to track their release, and how to maximize potential profits, check out the article New cryptocurrencies.
Principles of forming cryptocurrency price
Why are some digital currencies expensive, while others are worth a few cents? Yet, even the cheapest cryptocurrency can be a promising investment. So, how is the price of cryptocurrency determined, and what factors contribute to it?
Digital assets are not backed by any physical commodity, so their price is primarily influenced by the balance of supply and demand for each currency. When demand for a particular coin increases, its price also rises, and conversely, when demand decreases, the price falls.
The issuance and circulation of digital coins are not regulated by any central authority, so it may seem that supply and demand cannot be artificially influenced. However, there are mechanisms for this. For instance, occasional coin burns are used to reduce the supply of certain tokens.
When demand grows and supply decreases, it leads to a price increase for the crypto asset. There are also ways to artificially boost demand: for example, when a large player, known as a "pumper," buys up large sell orders to create the illusion of rapid growth.
At this point, inexperienced players rush to invest in the asset. Then, a crash occurs as the crypto assets are dumped, leading to a sharp drop in value to minimal levels. Though such a process can happen naturally, it is often a planned action.
Besides, if a significant portion of an asset is controlled by one or a few users, one of the key characteristics of cryptocurrency—decentralization—suffers. This is especially dangerous for currencies that allow staking, as it also provides the means to influence project governance.
What other factors affect market quotes
Unlike fiat currencies, the supply of any digital currency is limited and pre-programmed. Therefore, once all the coins are in circulation, it won’t be possible to mint additional coins for future needs. This means cryptocurrency is not subject to inflation due to an excessive supply of coins entering the market.
As previously mentioned, the key factor in determining the value of any digital currency is the balance of supply and demand. However, this is not the only factor influencing whether a cryptocurrency is cheap or expensive. Let’s explore other factors that determine coin prices.
It’s important to understand that the digital currency market is closely interconnected, so if the sector shows growth, all currencies tend to rise in value. Conversely, if the market declines, all currencies lose value. This depends on various factors, such as news on economics and finance.
Even though digital currencies are not regulated by any government or governmental body, they do not exist in isolation from the rest of the world. Therefore, news from governments, regulatory bodies, major companies, or even rumors on social media can influence the value of cryptocurrencies.
The overall sentiment of investors can also significantly impact the cryptocurrency market. To measure this, a special index was developed—the Fear & Greed Index—which helps gauge whether fear or greed is dominating the market. In the case of fear, investors hold off on buying, and prices go down. In the case of greed, investors are eager to buy, pushing prices up.
Another important factor is the legal status of cryptocurrencies, which varies from country to country. When major nations impose bans on crypto, it leads to a drop in value. Conversely, when legislation becomes more favorable, the value of digital currencies tends to rise.
Competition affects all assets, and cryptocurrencies are no exception. Each new project aims to offer users better conditions, new or improved technologies, faster transaction speeds, or lower fees. As a result, demand for the currency grows, along with its price.
Cheap means bad?
Investing a little and earning a lot – it sounds tempting, right? That’s exactly why many users are searching for cheap cryptocurrencies that could rise in value later and bring them a good profit. However, despite the appeal, there are many hidden pitfalls in this topic.
Expensive crypto assets aren’t accessible to everyone, as purchasing even one Bitcoin currently costs more than $60,000. This is a hefty sum, which is why many investors buy fractions of a Bitcoin at a time, but they do it regularly. However, there’s another strategy – investing in cheaper assets.
Some fear that the cheapest cryptocurrency might not be a profitable investment, as many still believe that only expensive assets can generate good returns. But that's not always true. Sometimes, seemingly valuable and expensive assets lose their value sharply, while cheaper ones, on the contrary, grow.
Therefore, when investing in affordable crypto assets, it's important to assess their growth potential realistically. To do this, various factors that may contribute to this growth should be considered: for example, the project's team, its purpose, the useful features of the cryptocurrency itself, the size of its community, and other aspects.
You should always start by researching the project’s website, social media, and the development team. It's a good sign if these individuals have previously been involved in the launch of other successful projects in the field, as this indicates their competence. Additionally, explore reviews and information about the project on social media and specialized forums to see what other users think, whether anyone has made a profit, and so on.
Another important aspect to consider is the project’s community. If a cryptocurrency has a strong and loyal community that is interested in further development, this is another success factor. Members of such communities actively participate in the project’s activities and promotion.
Technological innovations offered by developers also play a significant role in a cryptocurrency’s success. These can include technologies that allow faster and more efficient transactions, launching games or apps on the platform and many other possibilities.
The usefulness of the cryptocurrency itself, meaning the functions it can perform, is also important. It could be a utility currency used within a platform, a payment method, a gaming token, or a governance token. The more useful the currency, the greater its chances of increasing in value.
How to multiply your profit by tenfold or even more
Now that we’ve learned how to select cheap coins for investment, let's figure out why it's worth doing so. The fact is that many digital currencies are priced cheaply at the beginning of their journey when they need to attract as many investors as possible.
Even those coins that are now expensive were once available for petty cash. Therefore, the cheapest cryptocurrency could later rise in value by tens, hundreds, or even thousands of per cent. There are many real examples of digital currencies that have already demonstrated such growth.
This is due to one of the key characteristics of all cryptocurrencies – their high volatility. This means that their price can change significantly even over short periods, let alone longer ones like a month or a year.
For this reason, crypto assets are incredibly attractive to traders and investors, as they offer the opportunity to earn high profits in a short time. However, it’s important to remember that with potentially high returns come higher risks compared to other, more reliable and stable assets.
Let’s look at a few examples of digital currencies that showed significant growth over the past year, with price increases ranging from tens to hundreds of per cent. Overall, 2023 can be considered a successful year, as 92 out of the top 100 cryptocurrencies increased in value.
One of the most significant appreciation was recorded by the Bonk token, which surged by over 7000%! Just think about that number – no stocks from the most successful companies, precious metals, or any other asset can boast such growth in such a short time.
Other currencies that gained more than 1000% include Injective, CorgiAI, and Kaspa. These are new projects that recently appeared on the market but have already developed a strong rally. However, well-known cryptocurrencies like Bitcoin and Ethereum also performed excellently, with the former growing by 162.5% and the latter by 98.6%.
Cheapest cryptocurrency
We’ve established that new and affordable cryptocurrencies deserve as much attention from investors as their expensive and well-known counterparts. So, let’s take a look at new projects with good potential, where the price of the currency is currently less than $1.
At first glance, it may seem like you can buy a large number of units of such a currency and simply wait for it to rise in value. However, it’s important to carefully select coins for investment and avoid putting all your funds into just one project. It’s wise to choose several currencies and distribute your capital among them.
A special category of digital currencies is meme coins. Their phenomenon is puzzling to many, as they don’t serve any practical purpose, yet they quickly gain popularity among users and are in high demand. The most striking example is Dogecoin, the first cryptocurrency created based on a meme.
Initially, this coin was designed to mock the cryptocurrency sector and those who invest in it. However, over time, a strong community formed around the project, and it also received support from Elon Musk. As a result, this currency is now actively used as a payment method.
Other meme coins also consistently rank among the top digital currencies and have good bullish potential. These include the Shiba Inu token, featuring the same breed of dog as Dogecoin, the previously mentioned Bonk token, Pepe (symbolized by a frog), and others.
However, among the cheaper currencies, some provide real utility. For example, Zilliqa is one of the most efficient platforms, having successfully implemented sharding technology to address blockchain scalability issues. Thanks to this technology, the chain can process a significantly larger number of transactions per second.
More cheap cryptocurrencies
Let's continue discussing affordable cryptocurrencies with good growth potential. We've already seen that the cheapest cryptocurrency can "shoot up" and zoom up in value several hundred times.
Another interesting project is ChiliZ, which focuses on developing sports communities. Holders of the project’s native currency can participate in decision-making on various issues related to the development of their favorite sports teams. This idea has already been supported by well-known football clubs such as Juventus and Milan.
One project offering useful functionality is Ren, which addresses the problem of compatibility between different blockchains. This platform allows the transfer of crypto assets across various blockchains. Given its strong prospects and low competition in this niche, the Ren token has excellent growth potential for investors.
One of the promising directions in cryptocurrencies is NFTs (non-fungible tokens). They are unique, as they are one of a kind. Such tokens can include music works, art pieces, game characters, and other items from games.
An example of an affordable cryptocurrency in this category is BLUR, which is the native currency of the platform of the same name. On this platform, users can trade NFTs faster and more efficiently than on other similar marketplaces, making it a leader in this market.
Another interesting category of digital currencies is gaming tokens, which are used in blockchain games. The main feature of these games is that you can play and earn at the same time. A notable representative of this direction is the gaming platform Decentraland and its native currency MANA, which is used to operate the project.
Another prominent representative of this category is the Beam token – the native currency of the Beam platform, which brings together the blockchain gaming and NFT industries. The platform provides resources and rewards players for participating in P2E (play-to-earn) games. As a result, a strong community is forming around this project.
Tips for beginner investors
We have already discussed how the value of digital currencies is formed and discovered that the cheapest cryptocurrency can be quite promising. Affordable coins are usually chosen by beginner investors who don't have a large initial capital. Here are a few expert tips worth considering:
- Choose between a startup or an established project. The most profitable investments often involve entering a project during its launch phase, but this strategy carries the highest risks. For those unwilling to take such risks, consider projects that have been around for a few years and have a solid reputation.
- Always conduct a preliminary analysis. Before investing in any coin, examine its website, social media, and development team. More trust is often placed in projects involving well-known people with a good reputation in the crypto community.
- Study the coin’s price dynamics. If the currency has been around for a while, analyze its price changes over time. How quickly does it grow? Have there been sharp fluctuations in either direction? How does its price move relative to Bitcoin?
- Evaluate the market capitalization. This is calculated by multiplying the coin's price by the total number of currency units. The higher this figure, the higher the currency's ranking. However, this indicator should not be used alone, as it is relative.
- "Don’t put all your eggs in one basket" – this is the main principle when investing in any assets, especially in cryptocurrency. No matter how promising a project seems, it’s unwise to invest all your money into just one currency. You should spread your capital across several assets.
- Don’t invest all your savings at once. You should gradually increase your investments, starting with small amounts. This will allow you to better understand the mechanisms of the cryptocurrency market and avoid ending up empty-handed in case of failure.
- Don’t ignore legal aspects. In many countries, cryptocurrency transactions are legal but subject to taxation. Keep this in mind to avoid future problems related to unpaid taxes.
How to avoid being scammed
The digital currency market is attractive not only to investors and traders but also to criminals who are eager to scam users out of their money. Therefore, in the pursuit of the cheapest cryptocurrencies, you need to be vigilant to avoid becoming a victim of fraud.
This is especially true for new projects just entering the market. Many users eager for quick profits rush to invest in startups. However, it’s important to understand that any of these projects could turn out to be a scam or a worthless coin.
Scammers can create websites and social media accounts for their "new project" and promise huge profits to trusting users. To avoid falling for such schemes, you need to be able to distinguish between real projects and fraudulent schemes.
| Parameter | Legit coin | Scam |
| Development team | Known, real people | Anonymous creator and team |
| Documentation | All information available, including white paper | Minimal documentation, errors in documents |
| Time frame | No time-limited offer | Time-limited offer |
| Promise of huge profits | No | Yes |
| Social media activity | Normal communication with followers | Suspiciously high activity |
The key things to watch out for are promises of quick profits in a short time and limited-time offers. Scammers know their scheme will eventually be exposed, so they try to attract as much money from investors as quickly as possible.
Besides investing in non-existent coins, there are other fraudulent schemes used to steal funds. For example, phishing sites that mimic legitimate cryptocurrency or wallet websites. When users click on these links and enter their information, scammers gain access to their coins.
The same goes for fake cryptocurrency giveaways, where scammers promise to multiply the assets received from users but simply disappear with the money. Another common trick is fake apps for handling crypto. When downloaded, these apps give scammers access to the user’s data and assets.
Conclusion
In this article, we have reviewed the mechanisms of cryptocurrency pricing and the factors that influence changes in their value. While the cheapest cryptocurrency can be a good investment, it’s important to know how to select the right ones for investing your savings.
Cheap doesn’t mean bad. Many investors don't have a large initial capital to purchase popular and expensive coins, so they seek out young projects that are just entering the scene but may grow significantly later on.
It's essential to pay attention to the development team behind the project, its technological aspects, the usefulness of the cryptocurrency itself, and other factors. By considering all these aspects, you can choose projects with the most interesting concepts for investors and allocate your capital wisely.
However, young projects also come with the risk of encountering scammers, so it’s crucial to be cautious and not invest in the first cryptocurrency that catches your eye. There are several red flags to watch for, including short-term offers, promises of huge profits, anonymous developers, and more.
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