Should we buy small-cap altcoins in Q3 2025?

Investors are well aware of the risks when investing in small-cap altcoins. However, this segment often offers impressive returns, potentially multiplying the initial investment several times.

So, should investors start buying low market cap altcoins this July – especially when many experts believe that the altcoin season has begun?

Opportunities and risks for small-cap altcoins in Q3 2025

Although the total market capitalization of crypto reached a record high in July, the capital flow mainly went into Bitcoin and large altcoins.

Data from TradingView also confirms this. Although the total market capitalization is about to reach 4 trillion dollars, the market capitalization of altcoins outside the top 100 is only 15.4 billion dollars.

Compare total market capitalization with market capitalization excluding the top 100 | Source: TradingViewData from CoinMarketCap shows that the top 100 altcoins all have a market capitalization of over 700 million dollars. Altcoins outside this group – that is, with a capitalization below 700 million dollars are classified as medium or low capitalization.

This discrepancy in capital flow indicates that investors remain cautious. They prioritize altcoins that have high liquidity or are of interest to financial institutions and listed companies.

However, another perspective brings hope. Some analysts believe that the current capital flow is still in the early stages.

Many experts share the same opinion as investor Mister Crypto. According to them, the market is currently in phase two, when most of the money is still flowing into ETH. After that, capital will gradually shift to large-cap, mid-cap, and small-cap altcoins.

This delay creates a "golden opportunity" for investors to buy early at a reasonable price and to get ahead of the wave of larger capital flows in the future.

However, there are still analysts like João Wedson who are cautious about altcoins with micro market capitalization – especially coins outside the top 300. These coins often have a market cap of under 200 million dollars. He warns that the open interest (OI) to market cap ratio is a notable risk signal for this asset group.

Cryptocurrency Trends: Ranking and OI/Market Cap Ratio | Source: AlphractalData shows that the OI of coins outside the top 300 is at an unusually high level compared to the market cap.

When OI exceeds market capitalization, it signals that traders are focusing on short-term fluctuations in the derivatives market, rather than actual buying and selling in the spot market. The consequence is that these altcoins have low liquidity and are prone to significant volatility.

"From outside the top 300, OI becomes too high compared to market capitalization - this is a very large risk signal. What does that mean? These altcoins will ultimately cause 90% of traders to be liquidated, whether they are placing Long or Short orders. They are also very difficult to analyze consistently," João Wedson explained.

On platform X, the excitement about the altcoin season is spreading strongly in July. However, whether to invest in low-cap altcoins in Q3 2025 still depends heavily on individual investors' risk appetite and investment strategies.

Dinh Dinh