How Much Should You Invest In Cryptocurrency?

When it comes to crypto, people often get startled with how much money they need and what currencies they should invest in. Today we’ll try to figure out the answer to this dilemma and help you prepare for crypto investing. Let’s begin!

Reasons To Invest In Cryptocurrencies

Before talking about the amount of money to invest in crypto, let’s analyze why it is worth it. Here are the 5 most standout reasons for it:

1. High growth potential: crypto has proven the possibility to give a lot of profit to those who invest in it, with some assets delivering returns that far outpace traditional investments like gold, stocks, and bonds. Judge it yourself: as of January 9, 2025, the global cryptocurrency market capitalization is approximately $3.33 trillion, which is a signal of trust and high hopes from investors. However, volatility always remains a factor influencing the market fluctuations, but this same volatility provides opportunities for investors to capitalize on fast price movements. Those who do their research and time their investment well could see substantial long-term gains.

2. Portfolio diversification opportunity: the crypto market is a newborn system, but it operates almost fully independently from the traditional fiat market. Digital currencies show a low correlation with stocks, bonds, and commodities, making them a valuable tool for spreading risk. Having crypto in your portfolio can protect you during market downturns, as it may perform differently from other investments in response to economic events.

3. Hedge against inflation: the concept of max supply, whether capped or not, makes crypto an inherently deflationary asset. While central banks continue to print money to address economic challenges, traditional currencies risk losing purchasing power due to inflation. On the contrary, crypto suggests an alternative store of value, so investing in digital currencies can safeguard your wealth against the depreciating effects of fiat currency inflation over time.

4. Growing institutional adoption: major corporations like Tesla, MicroStrategy, and Square have made substantial investments in Bitcoin, while financial giants such as PayPal and Mastercard now support cryptocurrency transactions. It made crypto’s legitimacy grow significantly, which signals long-term confidence in the market and is likely to drive further growth and stability.

5. Full control over funds: crypto operates on decentralized networks, removing the need for middlemen like banks. This means you have direct control over your digital assets, reducing dependency on traditional financial institutions. Also, blockchain technology ensures transparency and security, offering a system where transactions are verified and recorded without the risk of tampering or fraud.

What To Consider Before Investing In Crypto?

Investing in crypto requires vigilance. We suggest you be careful and consider these factors:

• Potential of the coin: not all cryptocurrencies operate on the same terms. To make an informed decision, study the coin’s history, including its development and price changes. Look through the forecasts of its value to invest successfully.

• Market volatility: crypto prices can fluctuate strongly, bringing significant gains and losses in short periods. Be prepared for the market’s ups and downs and only invest money you can afford to lose.

• Security measures: don’t think that control over your funds means freedom and doesn’t include responsibility. It’s critical to understand how to protect your funds by using reputable wallets like Cryptomus. It has enhanced security, including encryption technology and AML, and is also intuitively clear for beginners. Enable 2FA and come up with a strong password to feel more confident.

• Regulatory risks: cryptocurrencies face varying regulations worldwide, and new laws could impact the market. Research the legal environment in your region and stay informed about changes.

• Tax implications: crypto transactions may be subject to taxes, including gains, losses, or even transfers. Consult a tax professional to understand your obligations and avoid unexpected liabilities. You may also learn some rules about crypto taxing in our guide.

Don’t forget to have a clear plan for your investment, including entry and exit points. Decide whether you’re investing for the short-term or holding long-term to avoid emotional decisions during the market fluctuations. You can read more about creating the right investment strategy here.

Which Cryptocurrency Should You Buy?

Choosing which cryptocurrency to buy depends on your investment goals and risk tolerance. The first coin to come to mind is obviously Bitcoin (BTC), often considered the safest entry point for beginners due to its status as the first and most widely recognized cryptocurrency. It is often referred to as “digital gold” for its store-of-value properties; the proof is that Bitcoin has a track record of turning its early investors into millionaires, like many coins can.

Another strong player on the market is Ethereum (ETH), which offers more versatility with its smart contract capabilities, making it the backbone of decentralized applications (dApps), DeFi (decentralized finance), and NFTs (non-fungible tokens). If you’re looking for established projects with proven utility, Bitcoin or Ethereum are solid options to consider.

For investors seeking higher potential growth, smaller-cap altcoins such as Solana (SOL), Cardano (ADA), or Polygon (POL) could be worth exploring. These coins are innovating in scalability, speed, and energy efficiency, making them attractive for long-term growth. However, speculative cryptocurrencies or meme coins like Dogecoin (DOGE) and Shiba Inu (SHIB) may gain rapid popularity but carry significant risks due to their reliance on community-driven hype.

Best Investment Strategy For Beginners

There are many developed strategies of trading and investing in crypto, such as day trading, swing trading, scalping, arbitrage, HODLing, and dollar-cost averaging. We wrote about it in our article considering crypto trading strategies; you can click here to read it.

As for beginners entering the world of cryptocurrency investing, Dollar-Cost Averaging (DCA) is one of the safest and most effective strategies. Using DCA, you invest smaller, fixed amounts regularly over time, regardless of the cryptocurrency's price, instead of investing a large sum of money all at once. Remember that cryptocurrencies do not have a set limit that you have to reach to start investing in them. For example, you might invest $100 into Bitcoin or Ethereum weekly or even monthly.

This method reduces the impact of market volatility, as you buy more cryptocurrency when prices are low and less when prices are high, averaging out your cost over time. The strategy of DCA is safe for those who just begin to invest in crypto and don’t have much of an experience.

How Much Money Do You Need To Invest To Become Rich?

The amount of money you need to invest to become "rich" depends on several factors, including your definition of wealth. As we’ve already mentioned, you should consider your investment strategy, the assets you choose, and the time frame for achieving your goals. A common approach for beginners is to start small, such as allocating 5-10% of your monthly income to cryptocurrency investments. This ensures you’re not overexposing yourself to the market’s volatility while still participating in potential growth. For example, if you have $1,000 in disposable income, consider investing $50–$100 in crypto consistently. This approach will definitely guarantee profits even if the market remains unstable for some time.

Also, instead of focusing on how many coins to buy, think about how much of your overall portfolio you want in crypto. Experts generally recommend that beginners allocate 1-5% of their total investment portfolio to cryptocurrencies. For instance, if your portfolio totals $10,000, an initial crypto investment of $100 to $500 would be a conservative starting point. This tactic allows you to explore the market while minimizing risk, incurring more profits than losses.

Tips For Successful Investing

We’ve gathered some useful recommendations for you to consider before diving into crypto investing:

1. Set clear goals. Define what you want to achieve with your investments. Are you saving for a vacation, a house, or financial independence? Having a clear purpose will guide your strategy and help you determine your risk tolerance and investment timeline.

2. Stay consistent. Regular contributions, even small amounts, can make a big difference over time. Use strategies like Dollar-Cost Averaging (DCA) to invest regularly and reduce the impact of market volatility.

3. Diversify your portfolio. Don’t put all your money into one asset. Spread your investments across various coins and tokens, including memecoins and altcoins, to reduce risk. Diversification helps balance losses in one area with gains in another.

4. Think long-term. Successful investing is about patience. Prefer long-term while beginning and focus on building wealth steadily over time by holding investments. Once you’re familiar enough with the process, have some experience, and can analyze the market at the right pace, you can try to participate in short-term strategies.

5. Manage risks. Invest only what you can afford to lose, as cryptocurrencies are high-risk assets. Keep an emergency fund to cover unexpected expenses like taxes or fees, so you’re not forced to sell investments at a loss during a downturn.

6. Control your emotions. Market fluctuations can be stressful, but reacting emotionally to short-term changes often leads to poor decisions. Stick to your investment plan; don’t let fear or greed dictate your moves.

7. Stay educated and updated. The financial markets are always evolving. Stay informed about market trends, economic conditions, and updates related to your investments. This helps you make better decisions and adjust your strategy as needed.

8. Monitor and rebalance your portfolio. Review your portfolio regularly to ensure it aligns with your goals and risk tolerance. Rebalance if necessary by adjusting the allocation of your investments to maintain your desired asset mix.

9. Seek professional advice if needed. If you’re unsure about your investment strategy or need personalized guidance, consult a financial advisor. They can provide insights tailored to your situation and help you navigate complex financial decisions.

By following these tips, you can build a solid foundation for successful investing while managing risks and maximizing returns.

Did you find this article useful? What do you think of investing in crypto? Let us know in the comments below.