Knowing that one Bitcoin was once worth less than a dollar while today’s value has surpassed 15 thousand dollars (price on the day of writing) may discourage people from investing in crypto with small amounts. This general misconception has driven many away from crypto even before they realized that owning 1 coin of anything isn’t the goal of investing. No matter how much you invest, your initial investment will grow in the same percentage range as the coin you invested in. So, for example, if you invest $100 in Bitcoin at $10,000 and it goes up by 10% your investment is now worth $10 more. This, of course, is a very simplified view of things.
Understanding Cryptocurrency
When people think about cryptocurrency they often think about Bitcoin. Even though it may look like just another form of money, cryptocurrency and blockchain are bringing unprecedented change to our world. We now have communities that count thousands and even millions. Those communities have their very own DAO funds that finance new ideas and new projects. Rather than looking at crypto the same way you look at money, try to understand that every cryptocurrency is as strong as the community behind it. US dollars are supposed to be backed by gold, while Bitcoin and other cryptocurrencies are backed by communities and the solutions they provide. The best way to understand crypto markets is to start with a Bitcoin trading game and gain experience before you put your capital into the real market.
How to Invest in Cryptocurrency
There are two main ways to generate income in crypto. Since we are taking $100 as a starting point, here are two examples of how you could grow that initial investment.
Long term investing
This form of investing requires you to conduct proper research regarding the project you want to invest in. If it is Bitcoin, you should know what functionalities it has, what kind of value it is bringing to the real world, and where the whole project is headed. If you agree with the path this particular project is taking, you can invest now and wait for your returns in the distant future. When it comes to long-term investing it is important to note that you should invest only what you are willing to lose. Most crypto projects seem stable now but there are many factors that could halt or even nullify the progress of those same projects in the future.
Crypto Trading
Unlike stocks, crypto can be traded 24/7/356. Every second there is someone willing to sell and someone willing to buy. This circumstance makes the price volatile, in turn creating big swings that can be a real treat for traders. For example, you could profit from Bitcoin going down as much as you profit when it goes up if you open a short position in the market. This means that you are betting the price will go down, so with every price dip you are making profits rather than losses. The same applies to upward movements and “long positions”. Due to high volatility and unpredictable market moves it is advised that new investors get some experience first before jumping headfirst into crypto. It is advised that you find a good trading app for beginners and put your trading skills to the test in real market conditions. Most trading apps offer virtual capital that you can use for trading. No financial gains will be made here but you will get a good feel of how you can handle upward and downward movements.
Conclusion
Starting out in crypto with just $100 is probably the best way to introduce yourself to this new asset class. Once you have “skin in the game” you will know if you can handle huge price swings that could turn $100 into $1000 or $10 in a matter of hours or days. Volatility in the crypto market can be tempting but without discipline and proper trading skills, it could also become your worst nightmare.
