Investing in bitcoin and other cryptocurrencies can be tricky and challenging, especially if you’re new to the crypto space, but guess what? The difference between successful crypto investors and those still lagging behind is that the successful ones got started.
For people investing in bitcoin and other digital assets for the first time, there is every likelihood that you’ll be overwhelmed with questions like, is bitcoin a good investment? How much to invest in bitcoin? What’s a reliable bitcoin investment strategy? And more.
Not to worry, today’s post will provide you with all the information you need to know on how much you can invest in bitcoin. And we won’t stop there as we will show you some tips on how to ease the process to make things easy as you proceed.
Note: Our guide will consider bitcoin and other digital assets as the same asset as we believe in cryptocurrencies as a whole and not only bitcoin.
How Much Should You Invest in Bitcoin?
This is one question we get a lot from our readers, and today, we would love to set the record straight to douse any type of confusion from those willing to take the plunge into investing in bitcoin and other digital assets. When it comes to knowing how much to invest in Bitcoin and other cryptocurrencies, we strongly advise people to invest at least 5% to 30% of their investment capital. While we consider 5% to be pretty safe, we consider 30% quite risky and would only recommend doing so for people with enough capital. Depending on your risk appetite, you can sit between 15% and 50%.
If you have a background in other types of investment, particularly gambling, we are sure you’ll be able to manage the risks of cryptocurrency investment. That said, we will never encourage our readers to invest over 50% of their investment capital. At the end of the day, only you can make the final decisions. While market forces largely determine cryptocurrency investment, how much you eventually make or lose depends on personal factors like risk tolerance as well as the amount of money you can afford to lose.
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Are you worried about making the wrong decision?
For would-be cryptocurrency investors who are worried about kicking off their investment in bitcoin because of the fear of making the wrong decisions, we have put together some helpful tips to make the process easy for you.
- Start by investing $10 in any of the top cryptocurrency exchanges or brokers. This way, you can get your cryptocurrency investment journey started. Plus, you’ll get a better understanding of what it truly means to be a cryptocurrency investor.
- Since you already have a budget you’re willing to invest in bitcoin and other digital assets, a smart thing to do is to break down your budget and invest it over some time- say one month, 3 months, and 12 months depending on what works for you. What this helps you do is that it will prevent you from making a colossal mistake while saving you money.
- Always remember this. When it comes to cryptocurrency investment, you can constantly reevaluate your decisions. This will help you right your mistakes, if any.
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- Don’t just buy bitcoin and other digital assets from just about any exchange or broker you come across. To be on the safe side, we always encourage investors to buy from top exchanges like Binance, Coindesk, Kraken, and FTX.
Now that we have given you a little background on how much you can invest in bitcoin, and other cryptocurrencies, let’s quickly deep dive into some of our cryptocurrency-related recommendations. While at this, we will also consider some important factors you should gauge when you decide to kick off your cryptocurrency investment journey.
Factor #1: Risk tolerance
Cryptocurrency and risk are like the siamese twins; they always go together. And this doesn’t come to us as a bit of surprise as we know that the crypto market can be very volatile. As a matter of fact, it is what makes cryptocurrency unique. When you sit to think about how much you’d like to invest in bitcoin, it’s always important to factor in how much you feel comfortable losing entirely.
Speaking about risk, here is what Dave Hitz, founder of NetApp, has to say. “ A lot of time, people look at risk and ask, what are the odds that I’ll succeed? A different way to look at risk is to ask, what’s the worst thing that would happen if I failed?”
So before you start investing in cryptocurrency, we want you to sit for a minute and think about how much you want to invest. Picture this amount in your head and imagine yourself in the future. Now, ask yourself if you’d feel comfortable losing the bulk of your investment, say $15,000?
If that ever happens, will you judge yourself harshly for making the move? Will it cost you your sleep or force you to consider suicide?
If your answer to these questions is remotely close to anything “maybe yes,” then you’ll need to reduce the amount you earlier planned to invest. Once you have done that, ask yourself the same question and gauge your answer sincerely. If you aren’t entirely sure about your answer, speak to your friends and family for some guidance.
Another thing we have learned from experience is that people who put a lot of money into cryptocurrency investment tend to panic sell at a loss. And just so you know, selling at a loss isn’t always a wrong decision. That said, always make such decisions from a rational point of view, not emotional.
And yes, it’s a brilliant decision to keep the amount you’d like to invest at a level where it doesn’t affect your judgment.
Factor #2: Profit tolerance
While it may seem like pretty dumb advice at first, think about it for a minute. If you invest an amount that can cause you a lot of emotions when you lose, imagine the feeling you’ll get when you make x20 your investment? Well, this is what happened to many investors who made a lot of money during the 2017 crypto boom. The reality is that they made a ton of profit because they decided to invest their life savings (poor decision).
But if they were too greedy or unreasonable about their investment, do you think they sold their assets and cashed in on their profits? Well, the answer is a resounding no. Most of them returned back to where they were during the 2018 market crash.
Let us tell you straight away that only a reasonable investor will make money investing in bitcoin and other cryptocurrencies. And like we reiterated earlier, it’s important you give some thought to the amount you plan on investing. Let’s assume for a minute that you invest some specific amount in bitcoin, and within the next one year, it is worth 20x its initial value; what will you do?
Will you buy a fancy car or rent a much bigger apartment? Will you fall in love with your investment and hold onto it until you are no more?
Once again, investing an amount you don’t feel emotionally attached to is the key to making significant profit from cryptocurrency investment. Taking this route will make you a solid investor, especially one that doesn’t lose money if the market goes down.
Factor #3: Timing
We bet you always hear about cryptocurrencies like bitcoin when the price is skyrocketing as opposed to when it is declining or stabilizing. This is because many people, including the media, tend to have a neutral tendency to stick with existing trends.
But guess what? The cryptocurrency market is governed by repeated market cycles. And yes, these market cycles can last between 1 to 2 years. During these cycles, markets tend to surge pretty fast, creating bubbles. BIG bubbles. While many people end up profiting from these bubbles, they eventually burst badly.
When it comes to investing in cryptocurrency, timing is a big deal. It can change your journey completely and the way you approach investment. To this end, when you make up your mind on how much you’d like to invest in bitcoin, take a minute to look at the current market cycle and what the market is doing.
To know the current market cycle and trend, head to the global market chart as provided by CoinMarketCap. Look at it carefully and answer the below questions.
- Are we anywhere close to the all-time market high?
- How long since we saw a market bull run?
The closer we are away from the all-market high both in terms of price and time, the least you’d want to invest. On the flip side, let’s assume the current market price of bitcoin is $5000, and the all-time high was $25,000, say a few years ago, then it will be a brilliant time to invest in Bitcoin.
Before you get us wrong, let us quickly add that even though we are currently in the middle of price surges, it’s isn’t such a bad time to invest in cryptocurrency and that’s because doing so will get you started on investing in cryptocurrency. That said, the timing should impact how you approach your investment while also helping you decide to either lower or increase the amount you want to put in.
Factor #4: Change of mind
We haven’t seen a cryptocurrency investor say, “I’ll invest $X amount in cryptocurrencies,” and went through with those commitments. And that’s because humans have a likelihood to change their minds every now and then. When confronted with the ever-changing market trend as prevalent in the crypto-verse, they tend to change their mind even much quicker.
Before you make your mind on how much you’d like to invest in bitcoin, always leave room to accommodate changes just in case you change your mind in the future. And the most thoughtful way to do this is to break up your investment over time. Decide on the amount you’d like to invest in your mind and proceed to invest it within the next 3, 6, and 12 months, depending on what works for you.
Let’s assume that you plan to invest $12,000 in the next 12 months. But a close look at the market reveals that it is at an all-time high. Instead of investing $1,000 every month, you can tweak the amount and start with $400 per month. You can invest more to compensate for when there is a drop in price.
Factor #5: Diversification
Diversification is one of the brilliant techniques leveraged by mature traders to mitigate the importance of luck. Through diversification, you get to invest in cryptocurrencies while allocating some of your resources to real estate, vehicles, stocks, bonds, and gold. And yes, you can leave some of your money in your bank account and make some small interest along the way.
Like we always tell our readers, when it comes to cryptocurrency investment, don’t put all your eggs in your crypto basket, except you want to be playing roulette martingale, where you’ll keep winning and eventually lose everything when you don’t get things right.
Where to buy bitcoin
There are tons of websites where you can easily buy bitcoins. But before you put your money into any exchange, we recommend exploring different exchanges, as we have come to learn that people have different tastes when it comes to investing in cryptocurrency.
That said, we have found exchanges like Binance, Coinbase, Crypto.com, Kraken, and FTM worth giving a try. These exchanges offer a blend of unique services you don’t want to miss out on.
What’s the Minimum Bitcoin Investment You Can Make?
There is no minimum amount you can start with when it comes to investing in bitcoin and other digital assets. The only minimum amount you have to worry about is the one set by your preferred cryptocurrency exchange or broker. For instance, a crypto exchange like Coinbase allows traders to invest a minimum of $2.
Unfortunately, we don’t always recommend that investors put in such a meager amount, and that’s because most exchanges charge special fees for buying, selling, and transferring cryptocurrencies. If you decide to go for these small investment options, it will end up killing your investment. To be on the safer side, investing a minimum of $50 sounds like a better idea.
