A Beginner's Guide: Investing $100 In Crypto

Investing in cryptocurrency has become increasingly popular, with many people looking to get in on the action. Before investing $100 in cryptocurrency, it is important to understand the risks involved and ensure that you have a solid financial foundation that can withstand potential losses. It is also crucial to choose a suitable crypto platform and diversify your investments beyond crypto.

When investing a small amount like $100, it is recommended to use a centralized exchange such as Coinbase, Gemini, or Kraken, which offer more insurance and regulatory clarity compared to peer-to-peer services. These platforms allow you to buy, sell, and hold cryptocurrency, and you can transfer your assets to a crypto wallet for more direct ownership.

While investing $100 in cryptocurrency may not lead to huge gains overnight, it can still yield decent returns if the market performs well. It is a good starting point for those who want to gain experience in crypto investing without taking on too much risk.

Choose a platform

Choosing a platform is an important step in investing in cryptocurrency. There are several options available, each with its own advantages and disadvantages. Here are some factors to consider when selecting a platform:

Reputation and Security:

It is crucial to choose a reputable and secure platform to ensure the safety of your investments. Look for platforms with strong security measures in place, such as two-factor authentication and encryption protocols. Research the platform's history, user reviews, and whether they have experienced any significant security breaches. Remember that even secure platforms can be compromised, so always follow safe storage practices for your cryptocurrency.

Cryptocurrency Selection:

Different platforms offer varying selections of cryptocurrencies. While some platforms may only offer a limited number of popular coins like Bitcoin and Ethereum, others provide a more extensive range of altcoins. Consider your investment goals and risk tolerance when deciding on the variety of coins you want to invest in. Diversifying your portfolio across multiple cryptocurrencies can help manage risk.

Fees and Charges:

Cryptocurrency exchanges typically charge fees for their services. These fees can vary significantly between platforms and may include deposit fees, transaction fees, and withdrawal fees. Be sure to review the fee structure of each platform before making a decision. Some platforms may also offer lower fees for high-volume traders or provide incentives for new users.

Payment Methods:

Consider what payment methods the platform accepts. Most exchanges allow direct connections to your bank account or the use of debit and credit cards. However, using a credit card may result in additional charges, such as cash advance fees and interest rates. Some platforms may also support alternative payment methods, such as PayPal or other digital wallets.

User Interface and Features:

The user interface and functionality of the platform can impact your trading experience. Look for a platform with a user-friendly interface that is easy to navigate and provides all the tools and information you need to make informed investment decisions. Some platforms may offer advanced features such as limit orders, stop-loss orders, and recurring investments.

Regulation and Compliance:

It is important to choose a platform that complies with regulatory requirements and follows industry best practices. Reputable platforms will have measures in place to protect users' funds and personal information. They will also adhere to Know Your Client (KYC) and Anti-Money Laundering (AML) guidelines, requiring users to provide identification and verification.

• Coinbase: Coinbase is a well-known and user-friendly platform that offers a wide variety of cryptocurrencies. It is a regulated exchange that follows KYC guidelines and offers features like recurring purchases.
• Binance: Binance is another popular platform that provides one of the largest selections of digital currencies. It is a centralized exchange that provides insurance and regulatory clarity.
• Kraken: Kraken offers a range of cryptocurrencies and supports various order types, including market, limit, stop-loss, and take-profit orders.
• Robinhood: Robinhood is a trading platform that offers commission-free cryptocurrency trades and purchases. It supports several cryptocurrencies and makes money through payment for order flow.
• PayPal: PayPal allows users to buy and sell Bitcoin, Ethereum, Litecoin, and Bitcoin Cash directly. It also enables users to utilise the "Checkout with Crypto" feature to purchase products and services.
• Cash App: Cash App is a peer-to-peer payment service that allows users to buy and sell Bitcoin.

Remember to conduct thorough research before selecting a platform, as this list is not exhaustive. Compare multiple platforms, considering their features, fees, security measures, and user reviews. By choosing a platform that aligns with your investment goals and risk tolerance, you can confidently begin your journey into the world of cryptocurrency investing.

Understand the risks

Before investing in cryptocurrency, it's important to understand the risks involved. Here are some key points to consider:

Volatility and Risk

Cryptocurrency is a highly volatile and risky investment. The value of cryptocurrencies like Bitcoin can fluctuate widely in a short period, leading to significant losses. It's important to approach crypto investments with caution and only invest what you can afford to lose.

Regulatory Framework

The crypto market is relatively new and lacks the regulatory framework of traditional financial markets. This means there are fewer protections for investors, and the risk of fraud or manipulation is higher.

Cybersecurity Threats

As a digital asset, cryptocurrency is susceptible to hacking, technical glitches, and other cybersecurity threats. A breach in a crypto exchange or a compromise of your crypto wallet could result in the loss of your investment.

No Guaranteed Returns

There are no guaranteed returns in any investment, including cryptocurrency. The value of crypto is highly dependent on market demand, and if demand falls, the value may plummet. It's important to diversify your investments and not put all your eggs in the crypto basket.

Understanding the Market

Before investing in crypto, ensure you understand the market and the underlying technology. Ask yourself if you know what Bitcoin and the crypto market are, and if you're comfortable with the level of risk involved. It's crucial to do your research and due diligence before investing.

Impact on Financial Goals

Investing in crypto should align with your financial goals and risk tolerance. Assess your current savings, emergency funds, debt repayment progress, and retirement savings. Ensure that investing in crypto doesn't compromise your financial stability or ability to meet other financial goals.

Choosing a Reputable Platform

When selecting a crypto platform, choose a reputable and secure exchange such as Coinbase, Gemini, or Kraken. These platforms offer insurance in case of cybersecurity breaches and regulatory clarity as licensed businesses. Avoid anonymous exchanges, especially if you value regulatory oversight and consumer protection.

In summary, investing in cryptocurrency carries significant risks, including price volatility, regulatory uncertainty, cybersecurity threats, and the potential for losses. It's essential to carefully consider your financial situation, conduct thorough research, and only invest what you can afford to lose.

Payment methods

To invest in cryptocurrency, you will need to connect your bank account or a payment method to your chosen exchange platform. Most major exchanges accept different payment methods, including bank transfers, credit card payments, or even other cryptocurrencies.

If you are buying Bitcoin, valid methods of payment include bank accounts, debit cards, and credit cards. You can also get bitcoin at specialized ATMs and via peer-to-peer (P2P) exchanges.

Some popular exchange platforms include Coinbase, Kraken, Gemini, and Binance. These platforms offer bitcoin and a growing number of altcoins. When creating an account on these platforms, use two-factor authentication and a long, unique password that includes a variety of letters, special characters, and numbers.

At most exchanges, you can connect your bank account directly or link it to a debit or credit card. Although you can use a credit card to purchase cryptocurrency, the price volatility combined with the interest charges on a credit card could inflate the overall cost of purchasing a token.

Fees vary for deposits via bank account, debit, or credit card, and exchanges also charge fees per transaction. For example, American Express users will pay the current cash advance fee for such transactions, and the fee charged will vary by exchange.

Another option is to use a payment processor like PayPal to buy bitcoin. You can connect your PayPal account to a debit card or bank account, or you can use the balance in your PayPal account to purchase cryptocurrencies from a third-party provider. PayPal also allows you to use your cryptocurrencies to purchase products and services through the "Checkout With Crypto" feature. However, when you buy bitcoin directly from PayPal, it earns money from the crypto spread, and it also charges a transaction fee that depends on the dollar amount purchased.

Keep in mind that banks may question or even stop deposits to crypto-related sites or exchanges.

Place an order

Once you have chosen a crypto-trading service or venue, connected your bank account, and decided on a payment method, you can place an order for your chosen cryptocurrency.

Almost all crypto exchanges offer market and limit orders, and some also provide stop-loss orders. A market order is an instruction to buy or sell a cryptocurrency immediately at the best available price. A limit order is an instruction to buy or sell a cryptocurrency when it reaches a specified price. A stop-loss order is an instruction to sell a cryptocurrency if its price falls to a certain level, and helps to minimise losses.

Kraken offers the most order types, including market, limit, stop-loss, stop-limit, take-profit, and take-profit limit orders. Exchanges also offer ways to set up recurring investments, allowing clients to dollar-cost average into their investments of choice. For example, Coinbase lets users set recurring purchases for every day, week, or month.

It is important to approach Bitcoin as a speculative investment due to its volatile nature. Invest cautiously, and only use funds you can afford to risk.

Safe storage

When it comes to storing your cryptocurrency, there are several options available, each with its own advantages and drawbacks. Here are some detailed instructions on how to safely store your crypto investments:

Hot vs. Cold Wallets

Firstly, it's important to understand the difference between hot and cold wallets. Hot wallets are connected to the internet, making them convenient for frequent transactions. However, they are more vulnerable to online threats and hacking attempts. Examples of hot wallets include software wallets, such as browser extensions or mobile apps, and web-based wallets hosted by a third-party service.

On the other hand, cold wallets are offline storage solutions, providing an extra layer of security. Cold wallets are ideal for long-term investments but may not be as convenient for frequent trading. Examples include hardware wallets, which are physical devices similar to USB drives, and paper wallets, where you write down your keys and store them in a safe place.

Types of Crypto Wallets

Hardware Wallets

Hardware wallets are considered one of the safest options for storing your cryptocurrency. They are physical devices, often similar to USB drives, that store your private keys. Popular options include the Ledger Nano X and Trezor Model T. These wallets can connect to your device via USB, Bluetooth, or other wireless options. While these wallets provide strong security, it's important to disable any wireless connections when not in use to minimise potential vulnerabilities.

Software Wallets

Software wallets are programs that reside on your computer or mobile device. They may come in the form of browser extensions or dedicated apps. While software wallets are convenient and easy to use, they are generally not as secure as hardware wallets since they are connected to the internet.

Custodial Wallets

Custodial wallets are managed by a third party, such as a cryptocurrency exchange like Coinbase. With these wallets, the third party stores your private keys, guaranteeing their safety. Custodial wallets are convenient, especially for beginners, as they are easy to set up and provide peace of mind in case you forget your login information. However, one of the main arguments against custodial wallets is that you relinquish control of your private keys to the third party, which may introduce additional security risks.

Best Practices for Storing Cryptocurrency

To ensure the safety of your cryptocurrency, consider implementing the following practices:

• Use multiple wallets: Store the majority of your crypto in a cold wallet for added security, and use a hot wallet for smaller amounts that you plan to use for trading.
• Physically record recovery phrases: Write down the recovery phrases for your crypto wallets and keep them in a secure location that only you can access.
• Never share your recovery phrase or private keys: This is crucial to ensuring the security of your crypto holdings.
• Keep software up to date: Regularly update your wallet software, operating systems, and other relevant programs to patch security vulnerabilities and enhance the protection of your crypto assets.
• Use multi-signature transactions: This adds an extra layer of security by requiring approval from multiple people for transactions to take place.

Frequently asked questions