A Small Start: Investing In Crypto With Just $100

Cryptocurrency has been labelled as one of the greatest wealth transfers of our time. With a total market cap of $1.59 trillion and 30 million new Bitcoin addresses since January 2020, the cryptocurrency market has witnessed a significant surge in interest. However, investing in cryptocurrency can be challenging due to the abundance of conflicting and complicated information available. While $100 may not seem like a substantial investment, it can be a good starting point for those looking to enter the crypto market. This amount allows investors to explore various investment options, such as blue-chip crypto heavyweights like Bitcoin and Ethereum or lower-market-cap alt-coins with potential for significant gains. It's important to remember that investing carries risks, and it's recommended to do your own research or consult a licensed professional for investment advice.

Where to buy cryptocurrency

There are several ways to buy cryptocurrencies, each with its own advantages and disadvantages. Here are some of the most common methods:

Brokerage Services

Crypto brokers provide a simple and straightforward way to buy and sell cryptocurrencies. One popular example is the Crypto.com App, which is trusted by over 100 million users worldwide and is available on both the Apple Store and Google Play. Brokerage services are a good option for those who want a user-friendly platform to buy and sell crypto without the complexity of a cryptocurrency exchange.

Cryptocurrency Exchanges

Cryptocurrency exchanges are online platforms that offer more advanced features compared to brokerages. In addition to buying and selling, exchanges allow users to trade cryptocurrencies using fiat currency or other cryptocurrencies. They also provide more complex trading instruments, such as crypto derivatives. Crypto.com, for instance, offers its own exchange with low fees and deep liquidity. Exchanges are a good option for those who want access to more advanced trading features.

Peer-to-Peer (P2P) Marketplaces

P2P marketplaces, also known as DeFi (decentralized finance), are platforms that allow buyers and sellers to trade cryptocurrencies directly without the involvement of a third-party exchange. Crypto.com, for instance, offers access to multiple P2P crypto marketplaces through its DeFi Wallet. This option provides more control and potentially lower fees but may require more technical knowledge.

When choosing a platform to buy cryptocurrencies, it is essential to select a reputable and secure provider. Additionally, it is advisable to use a dedicated crypto wallet, such as the Crypto.com App or Crypto.com DeFi Wallet, to store your cryptocurrencies securely.

One popular platform for buying cryptocurrency is Coinbase. It is the largest cryptocurrency exchange in the United States and is known for its impeccable security record. Coinbase also offers educational resources, zero trading fees, and powerful analytical tools, making it a good choice for beginners.

How to lock in profits

Yes, you can invest in cryptocurrency with only $100. Here's a guide on how to lock in profits:

Locking in profits is a term used to describe the realisation of previously unrealised gains accrued in a security by closing all or a portion of the holdings. An example of this is when an investor who is long on a security can lock in profits by selling their stake for a gain. By doing this, they are no longer subject to changes in the underlying asset. This is also known as "taking money off the table".

Traders and investors may lock in profits for several reasons, but it often serves the purpose of reducing risk. Long-term investors may lock in profits to maintain their portfolio balance. For instance, if an investor's portfolio is divided equally among five funds, and one fund outperforms the others, its portfolio allocation might grow from 20% to 30%, exposing the investor to more risk. The investor may then lock in the profits for a portion of the outperforming fund and redistribute the proceeds among the other four funds to maintain their ideal portfolio allocation and balance risk and profit.

Short-term traders may also lock in profits to generate income and reduce risk. For example, a trader may open a long position after a bullish earnings announcement with a series of price targets. Once the stock reaches the first price target, the trader may lock in profits for one-third of the position and continue to hold the rest until a higher price target is reached. This way, the trader has taken some money off the table and reduced their risk if the stock price drops.

• Transfer the money to your traditional bank account. However, this could take several days, and you may miss out on other trading opportunities.
• Move your money to another cryptocurrency, like Bitcoin. However, this exposes you to a different type of risk, as other cryptocurrencies may be volatile.
• Trade your cryptocurrency for fiat currency, such as USD or your local currency, without withdrawing it to your bank account. Some exchanges, like Bitfinex, allow you to do this.
• Transfer your holdings into a stablecoin, such as Litecoin (LTC) or Tether USD (USDT), which is pegged to the US Dollar. This allows you to keep your cash in a stable asset while waiting for the next trading opportunity.
• If you trust it, you can convert your profits to USDT. While all trades are taxable events, there is some debate about whether converting to USDT is a taxable event.

Minimising risk

Cryptocurrency has been labelled as one of the greatest wealth transfers of our generation. However, it is a highly volatile and risky investment. Here are some ways to minimise the risks when investing in cryptocurrency, even with a small amount like $100.

Firstly, diversify your crypto portfolio. Don't put all your money into one type of cryptocurrency. By spreading your investment across different coins, you balance out the risks and increase your potential gains as they grow.

Secondly, understand the risk versus reward. With any investment, there is a trade-off between risk and reward. Be sure that you are only investing what you can afford to lose, and carefully consider whether you can bear the risks.

Stay informed and do your research. Keep up to date with the latest news and updates on the crypto ecosystem. Government legislation can have a significant impact on crypto prices. For example, progressive legislation will increase crypto prices, while harsh regulations may prompt you to sell your holdings to minimise losses.

Follow cybersecurity best practices. Choose secure crypto wallets, avoid public Wi-Fi networks, and be cautious of suspicious or spammy emails. Developing good cybersecurity habits will help protect your investments.

Additionally, consider investing in De-Fi, blockchain technology-backed businesses, or the NFT market. These are credible alternatives to investing directly in cryptocurrencies while still allowing you to benefit from the growth of the crypto ecosystem.

Remember, investing in cryptocurrency is inherently risky, and there are no guarantees of profits. Always do your own research and make informed decisions before investing your money.

Choosing the right projects

Market Capitalization

Market capitalization, or market cap, refers to the total value of all the coins in circulation for a particular cryptocurrency. It is a crucial factor in evaluating the potential of a crypto project. Cryptocurrencies with larger market caps, such as Bitcoin and Ethereum, tend to be more established and may offer a more stable investment option.

Real-World Use Cases and Adoption

Consider the practical applications and real-world usage of a cryptocurrency project. Is it solving a specific problem or addressing a need in the market? The more widely adopted and used a cryptocurrency is, the more likely it is to have long-term viability and potential for growth.

Security and Transparency

Security is paramount in the world of cryptocurrency. Research the security measures and transparency of the crypto project. Look for projects that prioritize protecting user data, have a good track record of safeguarding transactions, and are open about their operations.

Smart Contract Programming and Innovations

Smart contract programming is a significant advantage for some crypto projects, like Ethereum. Smart contracts are self-executing contracts that automatically enforce the terms and conditions of an agreement, reducing the need for intermediaries. Additionally, consider the project's roadmap and any planned upgrades or innovations that could enhance its functionality, security, or scalability.

Regulatory and Market Volatility Considerations

The regulatory landscape surrounding cryptocurrencies can vary across jurisdictions and is subject to change. Be mindful of regulatory uncertainties and their potential impact on your chosen crypto projects. Additionally, the crypto market is notoriously volatile, so be prepared for potential price fluctuations and assess your risk tolerance accordingly.

Expert Recommendations and Due Diligence

Stay informed by seeking out recommendations from reputable experts in the field. However, remember that their opinions are not a substitute for your own research and due diligence. Always do your homework, evaluate multiple sources of information, and make investment decisions that align with your financial goals and risk appetite.

Remember, investing in cryptocurrencies carries inherent risks, and it's essential to thoroughly research and understand these projects before committing your funds.

Long-term investment strategies

Investing a small amount of money, such as $100, in cryptocurrency is possible, but it is a risky endeavour due to the volatility of the market. If you are considering investing in cryptocurrency, it is important to have a long-term investment strategy. Here are some strategies to consider:

Buy-and-hold investing:

This is a straightforward approach where you buy one or more cryptocurrencies and hold on to them for the long term. The idea is that, despite short-term volatility, the value of the cryptocurrency will appreciate over time. Bitcoin is often the first choice for this strategy due to its position as the largest cryptocurrency in the world and its strong performance over the past decade.

Dollar-cost averaging:

This strategy involves making small, recurring purchases of cryptocurrency on a regular schedule (e.g. weekly or monthly). By automating these purchases through an exchange, you can take the emotion out of investing and avoid trying to time the market. Dollar-cost averaging can help you build your position over time and reduce the impact of market volatility.

Investing in major cryptocurrencies:

Large, established cryptocurrencies like Bitcoin and Ethereum have several advantages, including first-mover benefits, large market capitalization, and a wide range of financial products built on top of them. These well-known coins have also demonstrated their resilience by weathering significant market downturns. While there are risks, bigger cryptocurrencies have generally shown more stability than newer or smaller-cap coins.

Diversification through exchange-traded funds (ETFs):

ETFs can be used to diversify your cryptocurrency portfolio. For example, you can invest in spot Bitcoin ETFs, which allow you to invest in Bitcoin in the same way you would invest in tech stocks. You can also consider more traditional ETFs that provide exposure to the crypto mining sector or blockchain technology companies. Diversification helps to reduce risk and increase your potential for long-term gains.

Secure storage:

It is essential to store your cryptocurrency in a secure wallet or with a trusted custodial service. Leading hardware wallets like Trezor and Ledger offer reinforced security protections, including offline storage, encryption, and PIN codes. Software-based wallets like Electrum are also considered secure options.

Understanding the technology:

Take the time to learn about the underlying technology powering different cryptocurrencies. Understanding blockchain networks, consensus mechanisms, hashing algorithms, and smart contracts will give you better insight into the potential and risks of your investments.

It is important to remember that investing in cryptocurrency is highly speculative and volatile. Always do your own research, consult experts, and only invest what you can afford to lose.

Frequently asked questions