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How Much Do You Need to Start Crypto Investing?

start investing in cryptos

June 28, 2021 | 

JOHN K MWANIKI |  0 Comments| 

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Get Into Cryptocurrency Trading Today

Cryptocurrency has increased in popularity for the past couple of years. While its popularity has increased, most people are still not conversant with how trading works. It is safe to say that it has impeded their ability to start crypto investing

As you are making considerations for investing in cryptocurrencies, several questions might be racing in your mind. For instance, is it a sound investment? What is the best strategy to use? How much should you invest?

Already, about 21 million adults in the US own cryptocurrency. With limited information and knowledge about the market, it will be challenging to get started. 

How much should you have to start crypto investing?

One of the rules of investing in cryptocurrency is to maintain discipline. Avoid the temptation of over-buying. So how much exactly should you invest in cryptocurrency? It is recommended that traders invest something between 5% to 30% of their investment capital.

The 5% should be pretty an okay amount. 30%, on the other hand, is for the investor that prefers risk. While that may be the recommended amount, traders are allowed to invest whatever they feel comfortable with. Allocate an amount that you are comfortable losing. 

How do you get started?

If you want to start crypto investing, you will feel more comfortable testing the waters before diving in. you can therefore start by investing as little as 10% on several cryptocurrencies. This will go a long way in helping you set foot in the crypto market and also give you the chance to experience how trading works.

More so, you will be able to get a clue on the performance of the various cryptocurrencies. Distributing your budget across several months will also cut it. Instead of investing the budget you have in mind all at once, spread it across three months or even more. 

With this, you will be minimizing the investment risk. The strategies above go a long way in helping you avoid costly mistakes. They are a learning opportunity, and you can always reevaluate things along the way. 

For instance, you can change the cryptos you have invested in and the amount of money allocated for each. 

Things to keep in mind when deciding how much to invest  

As you start crypto investing, there are several factors to consider to settle on an amount. 

1. Diversification

Understanding why investors keep diversification in mind will help you understand why it is an essential factor to consider. The role of diversification is reducing risk in investments. People do this by spreading their investments across different industries, categories, and so on. 

Instead of concentrating your investment on one asset class, spread it out to manage risk. Note that the investments do not always operate perfectly. Diversification allows investors to direct their money towards assets that perform differently in similar markets. It ensures that the investment portfolio has assets exposed to different risks in the market. 

It is not recommended to have all your eggs in one basket. Allocate your money to different investment vehicles like stocks, real estate and even leave some in the bank to earn interest. 

What this means is, when determining how much to allocate to start crypto investing, keep diversification in mind. Distribute the resources you have across different investments. Allocating about 15% of your investment capital to cryptocurrency is considered safe. It is an excellent opportunity to make profits. You will also be protected from losing everything. 

2. Timing

If you want to start crypto investing and excel at it, you must look at the timing. Digital currency is characterized by unpredictability and volatility.  

The crypto market moves quickly, and media hype influences it. Any knowledgeable investors will tell you that timing is critical if you want to start crypto investing. Investing in new crypto before it becomes popular can trigger investors’ attention, creating price shifts.

Price fluctuations of the leading crypto may also have an impact on altcoin prices. News on price manipulation and shockwaves in the crypto market is also a reason for price movements. This is why timing is everything. Look around and see what is going on before you decide how much to invest. 

Market cycles will help you point out the crypto to invest in and how much to invest. Some of the questions you can ask yourself may include, is it an all-time-high or a market bull run?
It is recommended that investors allocate the least capital when an all-time high is approaching. Timing will greatly determine your entry approach into this market.

3. Risk tolerance

What is your risk tolerance? Keep in mind that the crypto market is very volatile. So investors should only allocate an amount they are willing to lose entirely.

If you are hard on yourself for losing, then do not invest the amount in mind. If the amount makes you lose sleep, then you shouldn’t invest it. Apart from judging yourself for losing an investment, there is more repercussion of losing more than you are comfortable with.

There is a risk of panic selling to prevent a loss. This means that you may have to sell at an amount way lower than you bought. The amount you choose should never affect your judgment. Cut down the allocation until you are comfortable.

What you need to know when you start crypto investing

While investing in cryptocurrency has potentially high profits, the risk is equally high. Allocating capital to this asset should not be done blindly. There are several factors to consider and research to do. Think about your risk tolerance. Start crypto investing with an amount you are willing to lose. 

Research to ensure your timing is right and keep diversification in mind. This way, you will avoid making huge losses or losing your investment capital entirely. You can start with a small amount to see how the digital currency performs and understand how the crypto market works.

Give yourself time to learn while minimizing the risk.

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Total Market Cap The Total Market Capitalization (Market Cap) is an indicator that measures the size of all the cryptocurrencies.It’s the total market value of all the cryptocurrencies' circulating supply: so it’s the total value of all the coins that have been mined.

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