$100 Crypto Investing Strategy: How to Decide, What to Look Out For, and What to Avoid
It’s tough to get started in crypto investing with little money, but you’ll have a better idea of how to do it after reading this guide.
Can you imagine having an extra $100 lying around? Neither can I. However, it can happen from time to time. And since that extra C-note is so hard to come by, you might want to consider doing something with it, so you see more C-notes in the future. That’s was my plan, and I’m going to share what I did with you.
If you’re like me, you know a thing or two about some of the vast crypto coin offerings on the market. And your brain will only allow you to hold so much information. Therefore, you’ve probably given thought to at least two or three crypto coins you’d like to invest in. But, which ones? How can you know if a currency is a solid investment, going up or down, or something you should avoid like the plague?
Well, you and I will walk through some key factors when deciding what coins to start with so you get the most bang for the buck.
Let’s get it.
Oh, before we get it, a reminder that I’m not a financial advisor. Therefore, in the end, your decisions are yours.
Now, with that done, let’s really get it.
Why not invest in all the coins you’re interested in?
We’ll start with why spreading your starting capital too thin may not be the greatest idea. For example, let’s say you’ve looked over the coins you like and decided on ten of them. Then, you take your $100, divide it evenly among your top ten, and call it a day. Boom, all done. Well, hold on. Let’s do some math:
- 10 x 10 = 100
- 10 x 5 = 50
- 10 + 10 + 10 + 10 + 10 = 50
- 10–5 = 5
- 10–10 = 0
- Total: $205
Well done. Here’s what happened. The first coin blew up at ten times, the second at five times, five coins didn’t move at all, and you lost half then all of your investment on the last two. However, in the end, you made $105. Nice. Yet, what if you’d have invested only in the first two?
- 50 x 10 = 500
- 50 x 5 = 250
- Total: $750
Damn. Pretty nice, yes. Now, you might be asking, “oh T.C., where is your freakin’ crystal ball that tells you which ones to pick?” Ah-ha! Well, I have no such device. No one does. But, the point here is while investing your money across a bunch of cryptos can yield success, you can gain even more yields by pruning your list and focusing on a few. So, therefore, if you’d like, get whatever you like to take notes with, write down all the cryptos you think you want, and follow along because we will put them under examination. And, not every coin will survive the process. Sorry, old chaps.
Why do you want to buy the coins on your list?
Most crypto coins exist for a purpose beyond making money. Revenue generation is merely the vessel by which the coin’s project achieves its goals. However, some exist for things like a store of value, such as Bitcoin. Yet, after Bitcoin, when the altcoins began coming into play, almost everyone had a goal in mind. For example, Candela coin (CLA) supports the Candela project, providing decentralized solar power to investors. So, if you are someone who values what that could mean for the environment and individual freedom from power company monopolies, CLA might be on your list.
Yet, if your sole reason for your coin pick is, you like the dog-themed name or that you’ve heard a lot of hype, then you can cross that one off your list right now. Also, I’m not disparaging DOGE, but if you’re buying it because you like dogs, you need to be more strategic.
Okay, fine, so what factors should you look for in a coin?
Let’s talk about social engagement
Now, maybe I’ve been too judgemental, and you know a few things about what makes a crypto coin good, and a coin meets all of your criteria. Yet, it has virtually no social engagement. That’s a big ouch because the coin might as well be dead. Yet, there is a way to check whether a coin you like has sufficient social engagement to keep it viable. And that’s by visiting the coin’s social media accounts and its watchlist counts on CoinMarketCap. For example, Polkadot’s (DOT) watchlist count on CMC as of this writing is 765,561. Compare that to BTC and ETH sitting at 2.2 million and 1.8 million, respectively, and you can appreciate the genuine interest in Polkadot as it’s new compared to those old contenders. As for social media, look for more than 100K followers. Looking at DOT again, we see they sit at 642K followers on Twitter. Not bad.
Understand that if your coin has a watchlist of 60K on CMC and a Twitter following of 10K, it doesn’t mean doom. However, it would be best to be careful because a lot of the price action you see for that coin could be from manipulation and no momentum or equilibrium sentiment caused. You look for social engagement activity because if there is none, who is doing all the trading? Whales? Bots? You want widespread market participation. Otherwise, you’re jumping into a swimming pool full of rubbing alcohol.
Some factors to help you gauge market manipulation of a coin are:
- Low market cap
- Sudden spikes with little exchange support
- Low 24 hour trading volume. E.g., volume in the tens of millions. (Hundreds of millions or billions preferred)
Once you’ve established your crypto picks have a good amount of social engagement, and you don’t see anything fishy with market caps or trading volume, you can move on to supply sources and demand drivers.
Sell pressure and buy pressure
Broadly speaking, there are two supply sources behind cryptocurrency: inflation and vesting. You all know inflation too well, but what about vesting? Vesting is the unlock period where private backers say from an ICO offering can participate in price activity for the coin. You and I have yet been given the go-ahead to play in the game. Now, that’s not to say every coin doesn’t have real inflation. They do. And it’s because even if a coin has a maximum supply, miners or stakers “create” new coins every day. Yet, inflation isn’t a problem as long as you hold your coin short-term — say weeks or months. However, inflation can be a butt-kicker if it coincides with a vesting schedule. Vesting schedules exist to keep private investors from selling too soon or too many investors selling at once as it could cause the price to crash. Vesting schedules come in all varieties, but what you need to look out for are vesting cliffs. If project leaders allow too many participants to act during a vestment period, it creates a cliff. The cliff is what you’d think, a sudden hike nearly straight up. Also, many times, private investors are allowed to stake the coins they invest during the period. This nets them massive gains on inflation periods during the vesting schedules, and some vesting periods have lasted for years. Therefore, by the time the coin comes to market, there’s a good chance private investors would be ready to sell, and that much selloff would tank the currency — possibly into oblivion.
What can offset a catastrophe like the above example would be strong demand drivers. Even if an aggressive vesting schedule coupled with pre-market inflation spikes happens, the equalizer would be a great demand for the coin on release. What drives that kind of demand? Two things:
- Use case
- Institutional demand
For example, BTC’s use case is a store of value, while ETH pays for gas fees on the Ethereum network. The robustness (albeit antiquated) of Bitcoin’s network and the size and scope of Ethereums network are why they dominate the cryptocurrency markets.
Now, if you’re lucky, the coins you like might be on the radar of institutional investors. Unfortunately, sometimes, you need their interest to give significant influxes of positive sentiment for an emerging coin. Nowadays, institutions are getting more comfortable with some altcoins. For example, Grayscale bought billions of crypto on behalf of its clients. However, be warned. Many cryptocurrencies will shill for institutional investors to gain public trust even if it has no practical effect on their coin, such as Hedera.
The critical takeaway here is, does the coin you’re interested in have any value beyond speculative promise? They must offer real long-term benefits, not just short-term pump and dump activity. Then, compare your coin’s long-term goals with coins providing similar benefits. For example, Cardano’s goal is to be a better Ethereum with its layered blockchain structure. Finally, if the coins on your list meet everything we’ve covered so far, it’s time to check for growth potential.
With the coins you have left on your list, go to CMC and sort coins by market cap from highest to lowest. Remember what I mentioned earlier about market cap sizes? Well, investing in a substantial market-capped currency will not provide you with huge gains. Although BTC and ETH might see a 2x or 3x growth by year’s end, that’s not exciting for your $100 contribution. So, scroll down until you reach a coin that has met your criteria so far but still has room to grow. One way you can do this is by taking a detailed look at the currency to see what exchanges it’s trading on. If your coin has a decent market cap but hasn’t yet been listed on AAA exchanges like Binance or Coinbase, it’s likely to see a price hike when it gets listed. AAA exchanges each have their criteria for eligibility, but if your coin looks promising, it could be headed for a nice pump when the news comes out about its acceptance on one of those exchanges. Another place for growth potential in your coin is from the project’s roadmap.
Many coins will list their project roadmap on their website. If this is true for a coin on your list, visit the site and see if they have specific dates or estimates for the next phase. The news a currency has reached its next stage usually correlates with a price pump as it fuels investor confidence that the project is committing to its plan. While it isn’t always the case, a price will pump. In almost every case, it does.
Here’s the part that takes a little more work. And while I won’t get into technical analysis, you can still look at a few simple indicators to help you see a potential growth spurt. Now, since we haven’t technically reached the end of the current bull market for crypto, some coins still have yet to test against their previous all-time high from the last bull run. Therefore, you can check the all-time performance on your list and see if that’s the case. If a coin still hasn’t been marked off your list and it shows a vigorous climb over its project period without having a previous all-time high, you could be looking at a coin that’s going the distance. However, if your currency barely moved during its all-time period, it might be time for a cross off of your list.
So, you have $100, and you want to jump into crypto, then use the techniques from this article to help you. It’s not the best idea to spread your investments too thin in the beginning. Instead, look for two or three coins that pass all your rigorous tests — such as social engagement, demand meeting supply, growth potential, and your ethical beliefs in the project’s goals — using all the above criteria to make your pick will hopefully yield you beautiful results to your portfolio.
I invest in ten cryptocurrencies, and to be honest, that’s about my limit. After that, keeping up with the news, project changes, and market forces taps me out. So, taking on more coins will have to be for my broker (if I ever employ one). Whether your limit is more or less isn’t crucial, but making the best decisions you can is. Therefore, I hope you’ve found this article helpful, and I wish you the best of luck on your journey toward building your crypto empire.
Did any of the coins on your list make the cut?
Oh, one more thing, if you’d like to support my writing directly, you can do so by signing up to Medium through my link. When you do, part of your subscription goes to me. In addition, reading more of my work helps too. Thank you.