It’s a common question asked by investors new to cryptocurrency usually followed by “how do I buy crypto?” How much of your money should be invested in crypto will depend on a few factors including your risk tolerance, timeline for taking profits, and of course, how much spare capital you have.
The answer is simple: invest only what you are prepared to lose, that’s a bit daunting but the reason most long-term investors will give you that answer is because it used to be that investing in the traditional market involved putting down a fairly significant lump sum to get started.
Now with recent financial products such as a spare change investment app which can fractionalise your ownership of an asset, the answer can change slightly to: however much you’re comfortable getting started with.
With cryptocurrency it doesn’t matter how much you have, so starting with $10 or $10,000 will be able to buy you some Bitcoin or Ethereum. As mentioned, you can even use an app that rounds up your purchases and invests them into crypto which can start off your investment journey for mere cents.
Treat your initial investment as a way to lean, to dip your toe in the water so to speak. Get a feel for the market and see for yourself what happens to your dollars with the ebbs and flows of the cryptocurrency world.
It’s good to keep in mind, the days of getting 12,000% returns are over, and if they’re to return there’s no telling how to pick “the next Bitcoin” out of the dozens of coins created every day. The best strategy here is to not think of it as a get rich quick scheme but a steady, long term investment.
Beware of the sunk cost fallacy which has taken the money of many a first time investor. The sunk cost fallacy will have you believing that you need to “double down” on a particular crypto when it’s at a loss. Know when it’s time to walk away.
A good thing to do with your $10 (if you’re starting with that much) is to put some into Bitcoin, some into Ethereum, and some into other cryptos to get a feel for the market and see what makes sense to you. Remember though, past performance isn’t an indicator of what will happen in the future, it’s just so you get a sense for investing.
Then, when you’re ready, invest another $10, then maybe the week after another $10, and another the week after that. This is a strategy called dollar cost averaging, and it’s one of the easiest ways to build up a portfolio in crypto as you put in small amounts over time.
After all, if you put in $10 a week to something and it goes down by 30% overnight, you’re not likely to lose sleep over it, you’d sleep even soundier if you were only rounding up a few cents with each purchase to invest.
Investing doesn’t have to be hard, or scary, just start small and build from there, and remember to take profits along the way as they come. Of course, there are risks involved, so make sure to do your own research and don’t invest what you can’t afford.