How can you invest in cryptocurrencies with little money?

Many people hold back from investing in cryptocurrencies for one simple reason: They are low on money. The idea of ​​investing little money (which can be a lot for that person) and that the investment cannot be turned into anything by volatility is keeping many from doing so. But the crypto world can be a good place to invest in long-term cryptocurrencies and get good results even if we are talking about small amounts.

Definitely, If you are a small investor and want to clear up some doubts, this article will help you understand how to invest in cryptocurrencies. We will explain some simple strategies, their advantages and disadvantages, so that you can decide which path you want to take.

Remove the first doubt: invest in cryptocurrencies or not?

The first question that arises when looking to invest is Should I really invest in cryptocurrencies or should I look for another option? Well the answer to that question depends on how much risk you want to take and how many chances you want.

More or less risk

How can you invest in cryptocurrencies with little money?
How can you invest in cryptocurrencies with little money?

First, Investing (whether in cryptocurrencies or traditional markets) is risky, always keep this in mind. In a traditional market, a large company with continued growth in the stock market can go under and lose all of your money overnight. Cases like so many that are the newest Evergrande (China) or Wirecard AG (Germany), whose crash came unexpectedly and whose financial burden is immense. It is therefore clear that the traditional markets are not the “sea of ​​calm” and the summit of “sustainable growth”, because there are also constant strong slumps and losses of millions.

The same situation occurs with crypto, where we see exponents like Bitcoin or Ethereum rising or falling in value depending on market perception and reality. And when we talk about “market” we are not talking about a black hand, but about people who, like you, choose to buy or sell these cryptocurrencies depending on how they see the prospects for these cryptocurrencies or their own needs .

Value beyond FUD or hype

Second, the crypto world is talked about quite dissonantly in specialized media. Surely you will understand better what I am talking about if I mention some things you can see in major media:

  1. Cryptocurrencies are used for tax evasion.
  2. They serve money laundering and terrorist financing.
  3. They are the main currency in the black and drug markets.

I’ve only mentioned three common cases, and they all have one thing in common: they’re wrong. In each of the cases discussed earlier, the undisputed means of conducting operations are fiat currencies and traditional banks. This strategy is known as FUD (Fear, Uncertainty and Doubt or Fear, Uncertainty and Doubt) and is often seen in the crypto world. Basically, certain actors manipulate public opinion to create a bad image of cryptocurrencies (as in the previous example) and move them away from them.

We can basically call the FUD a lie and, as always, the lie falls under its own weight. A recent example is a huge tax evasion, money laundering, and drug case known as Pandora Papers. There are millions of leaked documents and privileged information in which they talk about banking transactions, cash and dark pools / ATS to carry out various criminal activities.

But where are the cryptocurrencies in all of this criminal network? Just nowhere. The reason is that nobody wants to record an illegal transaction in a globally visible public record and, by the way, nobody can magically delete it with a button. Things about blockchain technology and the particular power groups didn’t like it at all. Of course, this does not mean that cryptos are not misused, but that is not a question of the tools, but of the user and their ultimate purposes.

Of course, we shouldn’t just be concerned about the FUD, the hype (over-funding) should also alarm us. A miracle financial product that will make you a millionaire in a few days and is advertised like robots? Better take this with a grain of salt and stay away, because it can be anything from a traditional Ponzi scheme (which ends up turning off the tap and everyone running) or just a gross scam where you lose everything (like the fake airdrops cases on Twitter).

With that said If you want to invest in cryptocurrencies, you have to appreciate the project beyond its critics and enthusiasts. To do this, he does research, looks at the good and bad of the project, how it has grown, who is behind it and how it is developing.

Take into account all the factors that will affect the investment

Finally, the question arises as to the factors that may or may not affect the plant. In fact, this is where the biggest difference between traditional finance and cryptocurrencies lies. To make this more understandable for you, let’s do this example:

Juan has saved $ 100 with a traditional bank for 10 years. He expects that when he returns to the bank for his $ 100 it will be at least $ 200 (10% interest per year). However, when he returns for his $ 100, he receives nothing. The reason? Juan’s money was the victim of the accumulated inflation of the dollar and that the bank charges monthly commissions for keeping the savings account, but only pays annual interest on the same money.

On the other hand, Maria arrived and took $ 100 and bought it in BTC (at a price of $ 771 per BTC on Jan 1, 2013) for a total of 0.12970168612 BTC. María doesn’t pay any commissions on her wallet, she’s in control of her money and now (October 2021) when she sees her balance she can see that her $ 100 is worth $ 7,911, which is over 790% revaluation corresponds to their original investment.

As you can see, they both made the same investment with diametrically opposite results, and this is because external factors influence the investment made. On the one hand, Juan forgot that the bank charges monthly commissions on his savings account and that the FED prints money indiscriminately (they themselves say their ability to print is infinite), which eventually left the United States in debt and weakened its currency.

At the same time, With her investment, Maria had the foresight to eliminate these external factors by using her own wallet and guarding the BTC herself. To do that, all Maria had to do was buy her BTC, create her wallet, and be patient to wait for the price of BTC to hit the current point.

With that we are in any case clear; When we make an investment, we examine all the factors that could intervene. Some you will know before you make the investment (commissions, taxes if applicable) and other factors that you will see over time (appreciation of a stock or cryptocurrency, a new law, tax increase).

How Much Should I Invest in Cryptocurrencies?

Depending on what you’re looking for, you can invest in cryptocurrencies from $ 1 up to what your pocket can afford. In any case, all you need to do is buy a computer or smartphone, an internet connection and an account in a central or decentralized exchange. But remember one thing: invest what doesn’t put your livelihood and those who depend on you at risk. Put simply, invest what you can afford to lose so that losing does not pose a risk to your economy.

Losing on cryptocurrencies, however, can be pretty relative. For example, those who bought BTC for $ 20,000 in the 2016-2017 crypto boom “lost” when the bear market hit and prices fell to $ 3,000 for a long time.

Then, You lose if you sell (you trade your BTC for fiat) but if you do until today (October 2021) have patiently waited, your patience has paid off in getting what you invested plus three times more. Yes, in addition you don’t sell but diversify (buy more BTC and other cryptos) and you understood at this critical moment that the bear market would be over then your patience will lead you to higher profits. You may think doing this is crazy, but the truth is it has happened hundreds of times and it will continue to happen.

This leaves us with a clear point:

If you want to invest in crypto, invest what you can safely lose to undermine your financial security. If you want to maximize the cumulative effect of your purchases, buy your purchases when the price is low and keep a steady hand with your past inventory.

This policy can cause your $ 100 BTC monthly purchases to end up accumulating $ 1200 per year, but the value of this global BTC can be much higher if the market maintains an upward trend. like in 2020 and 2021. Even in a bear market, holding your BTC can produce good results later in the future.

The best strategy to invest in cryptocurrencies?

Finally, we get to the point where we need to choose the best strategy for our investment, and here we explain some that you can choose:

HODL, the veteran option

The word HODL (from the English HOLD, but misspelled) is widely used in the world of cryptocurrencies and their investors. The idea is simple, you buy a bit of bitcoin and hold on to it for a long period of time until the value of BTC goes up and you make a profit on your purchase. And best of all, you just have to buy BTC, put it in a wallet under your control and wait for the right moment to sell, it’s all you need.

Ultimately, the simplicity of this strategy brings great benefits. In fact, many early adopters of BTC have taken this strategy to the extreme with impressive results. A good example of this happened on February 21, 2021 when a 2010 whale (miner) moved 100 BTC for the first time in its entire existence. What was a few dollars then was worth almost $ 5 million then. And all thanks to the fact that it did an 11 year old HODL from BTC.

Other experiences like this can be seen constantly in the crypto world, both short (approx. 6 months), medium (1-2 years) and long-term (+5 years). Big project of holding your purchase through thick and thin until the time is right to sell and withdraw profits is an easy way to invest in cryptocurrencies.

The downside, of course, is that it requires a strong hand and nerves of steel, which very few people can do. After all, if you invest $ 1,000 in BTC and then the price goes down to convert your $ 1,000 into $ 100, there is incredible psychological pressure. Enduring this pressure of waiting for the market to recover and make a profit is something HODL requires you to do, and if you are unable to do so, this option is not for you.

DCA, most of the calculator

DCA or Dollar Cost Averaging is an investment strategy in which we regularly (weeks, months, even years) invest the same amount of money to buy more and more cryptocurrencies. The trick to this strategy is to minimize the impact volatility could have on cryptocurrencies when buying, using a financial trick: split the amount you want to invest equally and make asset purchases at regular intervals make long-term future profits.

In short, make our purchases for the long term and acquire a certain amount of cryptocurrencies with a minimal average cost on each acquisition in terms of the dollar and the amount invested. If we keep our average costs to a minimum, it means that as cryptocurrencies appreciate, it will offer us better returns. The strategy is calculative as in a bear market you have to find the best time to buy, make your investment, and wait for the next bear cycle in the market. When that happens, repeat the cycle and continue doing the same thing until you pull back.

This strategy makes sense if, for example, you are investing in cryptocurrencies for the long term and want to maximize your profits. When you withdraw from the system, you are doing so for a much higher value than invested and you are free to use that money. The only problem with this strategy is that if you can’t read the market signs, it can be complex to implement. For example, you could be in a bear market, buy crypto and then wait for the rise, but instead of rising it keeps falling and you have lost that DCA. which compels you to do another to make up for any losses.

trade

Another slightly riskier investment option is trading in cryptocurrencies. Cryptocurrency trading can be the door to significantly increasing the investments you make, but it all depends on how you are raising your money. Which chess game is won in trading by someone who knows how to read his opponent and is ahead of his movement (or movements)? Only in this case your opponent is not a human being, it is the market and with it every human element that takes part in it.

Basically, trading can be summarized in two points:

  1. Know the signals in the market and analyze them to determine your strategy.
  2. Understand the psychology of the market and all the factors that can affect inside and outside the ecosystem.

The first is through learning and using tools such as technical, algorithmic, or quantitative analysis. It is a matter of practice, dedication, continuous learning, and intuition to read every tiny change and act accordingly.

Second, you do this with fundamental analysis, paying attention to the world and the factors that can affect the market in which you are trading. For example, bad news of global bans on cryptocurrencies, depending on their scope, can arrive and affect bear markets, and you should be vigilant in this case. The opposite can of course also happen, because good news can spark euphoria (among hundreds of thousands of cryptocurrency traders worldwide) and drive up the price of the asset (with its subsequent correction).

At this point you have surely seen that these two points are symbiotic. If market psychology is generally positive (including euphoria, hope, confidence), the immediate reaction on the market is a stabilization or price increase, as these moods lead to high demand for the asset. Otherwise (hopelessness, fear, uncertainty, doubt) the market reaction will be downward due to the selling or overselling of the market.

A good trader who can read this can take advantage of the ups and downs to gradually build capital. If highly vulnerable and volatile cryptocurrencies are also traded, these profits can multiply, but the risks are even greater. Finally, when you add things like leverage or futures, the chances of multiplying the investment grow, but the risk of losing it all increases exponentially. Which makes one thing clear: trading is for people who know what they’re doing, otherwise the odds of losing it all are against you.

One last tip

If you want to invest in cryptocurrencies, this last piece of advice is very useful:

Invest in the space that is most comfortable for you and get the most out of your drive.

If you don’t have the knowledge to act, don’t act, much less trust that the Telegram contact who says “Miss Alice” can make you rich in a week. If you don’t know what DCA or HODL is, then you’ll know the concepts, learn how to apply them and take a test, learn from your mistakes and improve. The cryptocurrencies came with a very clear idea that is still maintained, namely that “your money is yours and therefore you must be in full control of it”.

If you’re doing DCA or HODL, don’t use custodian platforms (that won’t give you the keys to your cryptocurrencies) because if they’re hacked or “bankrupt” you will lose everything anyway. Create an unguarded wallet, save your private keys and get to know your wallet as yourself because your money will be there and it will be the tool to make profits.

All of this is not easy, but neither is it impossible, being in the crypto world is constant learning and the more you learn, the more power you have to be free with your money.. Be sure to remember Benjamin’s words, Franklin:

“Empty your pocket in your head and your mind will fill your pocket.”

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