Every day, millions of people go out to make money. Thousands of them look for what to invest in. Hundreds choose cryptocurrencies to try to multiply their little capital. And of these hundreds, only a few succeed. In the ratio of 100, 50 will be scammed in one way or another, due to greed, ignorance, or both. 20 will come out confused and upset believing that the crypto market is only ruthless to those with little capital. The other 20 will continue trying to make some return and will achieve it in the long term, but it will be sporadic because they treat it as a betting game. The remaining 10% will try to recover and if they understand from now that it was a matter of doing it right from the beginning, and doing it right does not mean asking the audience what to invest in but figuring it out for yourself, it will already be a better start.
And after all this, I have come to the following conclusion: very few truly value the effort that went into making that money they now have in their account, because it shows that they give very little importance to the fact of coming to gamble it. Even though they may have a deep fear of losing money - Isn't it paradoxical?
This is partially how the market works. The vast majority of people act in the same way under the same context (negative news: hasty sales at losses. Positive news: hasty purchases to not miss a potential return. And this knowledge is being exploited by big investors. Playing with the minds of those with little knowledge, so little that they are unable to educate themselves a bit before losing money.
Now, what do you need to know to start the game on the right foot, and stop being part of the 90% and join the 10%? No other career requires the following: Knowing yourself. No other career has the potential to give you the money that investments do, especially in this kind of assets. And the energy involved in dealing with money directly and indirectly with people whose identities you don't know will bring out the worst in you if you're not prepared.
So I have selected some elements that are better to know before putting that $10 in the latest meme, starting from the well-known fact that with $10 and low market cap assets (if you're lucky) if it goes up you will at least double it, but how long are you willing to wait for this to happen? Will you have the patience not to sell below your purchase price? If you put all your money in an altcoin that crashed, will you be able to endure it? As older investors say: how can you protect yourself if you don't know where the hit is coming from?
1. Know Your Investor Profile
Don't ask others what to invest in to get a lucky break. Ask yourself:
- How much risk am I willing to take? (Knowing that you can lose it all)
- Can I tolerate the volatility of the cryptocurrency market? (Will you have the mindset required to endure or to stop the loss not out of fear but because the market conditions changed and you adapted?)
Knowing your risk tolerance will help you make smarter decisions about your money. And if cryptos are for you or if it's better to learn about stocks, indices of the traditional market.
2. Invest in Yourself First
Before putting your money into any asset, consider investing in your education. Look for online courses or mentors who can teach you about the world of cryptocurrencies. There are free and paid resources; you'll see what works for you. There are courses on Coursera that can help you or look for mentors who can provide valuable lessons because they are in the same field.
Learning about technical analysis, reading charts, and the fundamentals of the market will give you confidence and prepare you for battle.
3. Define Your Time Horizon
Your time horizon is crucial when it comes to investing in cryptocurrencies. Ask yourself:
- Am I looking for short-term profits or am I willing to hold my investments long-term?
Warren Buffett has always considered that the best ally of an investor is time; with it you eliminate market noise in the short term. If you don't handle futures yet, you don't need to expose yourself; you can still make spot purchases and sales at your own pace. Or buy assets for the long term.
4. Volatility is Part of the Game
It is essential to understand that most cryptocurrencies are highly volatile. Don't expect to see significant returns in just a few days. Investing in cryptocurrencies requires patience and a long-term mindset. Being prepared for price ups and downs is fundamental to your success as an investor.
5. Low or High Market Cap Assets?
Before entering the topic, consider if cryptos are for you. Most enter attracted by marketing like flies to honey. And it is so because they need capital flowing from those who don't know to those who do.
If you see that there is a lot of risk and good learning is difficult, start with dividend-paying stocks, indices, crypto ETFs whose exposure is not direct. Although you also need to educate yourself; these are assets that have a lot of study material, professional videos, and books. The crypto market is still very young and there isn't much material, so everyone who has started with crypto has adapted their knowledge. However, this market has particularities that you need to know, for example regarding its cycles, how the price of Bitcoin affects other cryptocurrencies, and a wealth of information that expands every day.
Returning to our topic, when it comes to investing with little capital, the decision between low market cap (small-cap) and high market cap (large-cap) assets is crucial:
- High Market Cap Assets: These are more established cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). They tend to be less volatile, and although the growth potential may be lower, they offer greater stability. They are a good option for beginners looking to reduce risk.
- Low Market Cap Assets: These cryptocurrencies tend to have a higher growth potential, but they also come with greater risk. If you decide to invest in small-cap, make sure to research thoroughly. They are often more volatile and may be more susceptible to sharp market changes, especially in terms of liquidity.
Possible Cryptocurrencies to Consider:
High Market Cap Assets: For example:
- Bitcoin (BTC): The first and most well-known cryptocurrency.
- Ethereum (ETH): Leading platform for smart contracts and decentralized applications.
Low Market Cap Assets: For example:
- Chainlink (LINK): Protocol that connects smart contracts with real-world data.
- Polygon (MATIC): Scalability solution for Ethereum, constantly growing.
- VeChain (VET): Focused on supply chain management.
Conclusion
Investing in cryptocurrencies with little capital is completely possible, as long as you prepare adequately. It is necessary to understand the importance of knowing technical and fundamental analysis to know where to buy, where to exit, and in what assets to invest and why. Regardless of whether you are going to do futures. Even to buy a crypto you need to know all this because it is not the same to enter just when BTC was marking its recent maximum, as it is to wait and understand what you want with these investments.
Don't worry about the market as a whole. Give time to your research and look for what you understand. Profit follows preparation. Peter Lynch.
Today's recommended book: How the Rich Think by Morgan Housel.
It's reading time.
