We’ll go over how to get the lowest trading fees and blockchain fees. So you spend the lowest amount possible. Then go through some simple basics on how to choose potential investments. And how to get in and out.
The first thing to be aware of when trading in smaller amounts is an initial hundred dollars. Or if you want to put in a hundred dollars every month over the long term.
Trading fees are going to eat away at your investment. So the first step is to choose an exchange that will give you reliable and low fees.
Binance is a good example. They are the world’s largest crypto exchange their trading fees are 0.1%. But if you hold some of their own cryptocurrency known as BNB coin, they will actually reduce the fees by 25%. So you’ll be paying 0.075% as a trading fee. This is an extremely competitive fee.
There are other examples, though, for example, Kraken. They charge a similar amount. And that will be charging in the region of 0.16 to 0.26 percent.
Yes, it is higher than Binance, although, at this level, it isn’t a big deal. However, something to be aware of is that Binance Kraken and other exchanges also offer very simple to use instant buy features.
They’re called different things in different apps, but an instant buy or a convert feature will be very easy to use, but the fees will be higher. For example, on Kraken, using this will be a charge of 3.75 plus 25 cents.
If you use credit cards to make your purchases, you’ll be paying in the region of 3 to 4 per cent across platforms. And if you are putting in a hundred dollars or a smaller amount regularly, that is seriously going to eat away at your investment, so it’s definitely something to be aware of.
Also, if you are new and a beginner, Coinbase is a platform that many beginners use. However, to be aware that their fees are astronomical.
If you purchase 10, the fee will be 99 cents, so essentially 10% as a fee for trading on Coinbase. There is Coinbase pro as well, though, that charges half a per cent, still way higher than Binance or Kraken.
Talking about trading fees is boring, but you mustn’t give away your money in trading fees when drip feeding smaller investments into the market.
If you’ve never heard of DCA before, it is essentially taking a small amount of money and investing the same amount at regular intervals over time until the end of your investment time horizon.
Dollar-cost averaging is the opposite of lump-sum investing. For example, you took a hundred thousand dollars and just put it in the market at one time and then forgot about it for your investment time horizon.
Dca is what most of us will be doing because most of us will have a wage paid to us regularly, and we will take a small proportion of that and then invest it on a weekly or monthly basis into the market over time.
Dca may have some benefits and some drawbacks. Firstly DCA is a long term strategy, and it’s completely priced agnostic if you want to invest a hundred dollars, a 100 usd investment can rarely make you rich without putting in extra funds over time.
However, a longer-term investment strategy can compound your gains over time as long as the asset you’re investing in over that time is also compounding and, in general, rising in price.
One of the biggest benefits of dollar-cost averaging, specifically with crypto, is that you don’t get any fomo or fear of missing out. It’s really a benefit psychologically because of how volatile cryptocurrencies are.
Yes, there are good projects and bad projects, but even good projects have very high and low times. If you are investing over the long term, you will buy some at a higher price at a lower price, but the fear and the doubt and the fomo will not be there, which is a huge positive.
Something to note is that there’s no mathematical advantage for DCA versus lump-sum investing. However, as I said, most of us will have a wage where we take a small proportion and put in an amount over time.
So DCA is going to work for a lot of us. As you can see here, if you put in a two and a half thousand dollar investment and you put in 500 every single month in May, June, July, August and September, you would come out. With a 13 profit over that time.
If you put a lump sum of 2500 usd half thousand dollars in May, you would have more money. Why because you got in at a lower price overall.
However, if you chose the time you invested poorly with a lump sum, for example, in July, you would make less money overall when the price was very high.
The mathematics then show us that dollar-cost averaging isn’t mathematically better or worse than a lump sum, but it does depend on when you get in, and dca can be a long-term strategy for us with the benefit that fomo isn’t there.
Choosing cryptocurrencies to invest in and how you can do your own research, including tokenomics. Tokonomics really is the thing that tells us about a project. How many coins are there, how many coins will there be, how many owners are there, who owns the coins? Are there any lockup periods? What is there that we need to be aware of in the asset that we’re investing in.
We should know this before putting any money in, even if it’s our first 100 usd. So firstly, your best resource is coin market cap or coin gecko.
This will tell you pretty much everything you need to know about the coin. Firstly the price of the coin actually isn’t very relevant in terms of how the project is put together. What is more important is market capitalization.
Cmc tells us that the market cap is the total market value of a cryptocurrency circulating supply. So that’s basically just how much is the project worth. Bitcoin, of course at the moment, is the biggest at around 600 billion.
The size of a project is important. The bigger a project is, potentially the less explosive growth it may have. But also, you could say that the project being bigger has more invested parties and is probably more solid as a project overall.
That isn’t always the case, though, of course. When it comes to every project, each and everyone is different.
If you click into a project, though, you can also see some very important tokenomics. So yes, the price is important, but like I said, the market cap is more important.
As long as the market cap goes up over time, then you will make money. So when comparing cryptocurrencies, it’s about comparing the market capitalization and not the price of each. The price is simply a factor of taking the value of the project, which is the market cap and dividing it by the circulating supply of coins.
Each project has a different amount of coins. This is just like a stock in the stock market, so the actual price doesn’t really tell us much. What does tell us a lot, though, is the white paper and the community.
You can actually come to the watchlist, which is important. So you can see how many people have Cardano on their watchlist.
This would suggest that Cardano is quite a popular cryptocurrency because over a million people are watching Cardano. Secondly, we can come to the white paper of the project, which is vital if you invest in anything.
Also, we can come to their socials which is another way of proving how many people are interested in the project itself.
Cordano being a top-five cryptocurrency. Clearly has a lot of followers and a lot of interest overall.
We can come to Polkadot as well, and this is the Polkadot network website.
So we can see exactly what Polkadot is doing. Yes, they will tell us absolutely everything about their project. So if we come to the technology, we can see exactly how it works and learn for ourselves.
What is more important, though, is to also look for updates. So you can come to Polkadots twitter they have a large number of followers, and they will update those followers on how the project is developing.
Remember that cryptocurrencies are still extremely new, even the biggest ones, and still in development. It’s therefore important for us to keep up to date with these improvements and developments over time.
As we use dollar-cost averaging, we can potentially move our money from one project to the next depending on how bullish we are with the news flow and the development.
You can look up the tokenomics by searching on google for the project that you want to look at and then searching either for their tokenomics or token distribution, which is also extremely important.
For example, with Solana, we can come and read everything about Solana. But more importantly, we can see the token supplier distribution. This is essentially like a company in the stock market that owns its shares.
Usually, it will be large investment funds, wealth funds and pension funds. With cryptocurrencies, it’s actually quite similar. You can see the seed sale. These are essentially first time investors who have 16 of the project.
They will be early investors, and early investors usually like to get out quite early and recycle their money into new fresh projects. So a founding sale usually goes to the founders of the project or some other Very early investors.
It’s also important to see how much of the token supply that the team has. So the early developers and people that started the cryptocurrency.
How much of the token supply do they actually own, and then also very important in the community. So these are basically you and I who are investing in the project later on.
A healthy project will have a high secondary supply in the secondary market, which means the community. You and I and other traders that are trading the cryptocurrency. If this is very high, it will mean that the market in the cryptocurrency potentially is healthy.
If you have an extreme amount of the token supply going to seed sale and the team, they will be locked in for a certain period of time. Also, they could potentially have an unlock period on a given date where they could all dump their currency in the market. Take out their money and go and live on an island somewhere.
It could potentially happen if you see a project with 90 of the coins held by one or two whales. This means that the market in that cryptocurrency will be almost entirely controlled by what they want to do. And so potentially not the healthiest market overall and potentially not a token that you might want to get into.
As an overview, staking or savings products essentially let you put your coins up for a given time period, maybe 15 30 60 days or ongoing. And then you will receive some passive income in return.
We just looked at Solana as a project, then you can see that on Binance. Solana actually offers a 9.2% return on your money if you stake those coins for 30 days. And then if you stake for 90 days, it actually goes up to almost 13% per cent.
Binance has a very good earn platform where you can go and buy cryptocurrencies at a low cost on the exchange. And then use the earning platform directly to earn some extra passive income on your cryptos.
The same for Kraken. You can use the exchange to buy a subset of cryptocurrencies that you can see here and then earn anywhere from around 4% up to 12% just for holding those cryptocurrencies on your account.
Keeping your cryptocurrencies on centralized exchanges isn’t often recommended by blockchain experts. However, if you only have a small amount, you are going to have to look at those fees because transferring your cryptocurrencies out from the exchange into a decentralized wallet to go then and stake these cryptocurrencies is going to cost you those fees.
This may be a decision that you can make when you have a slightly larger portfolio if you want to pay the fees and then take your asset in a wallet like trust wallet or metamask.
I want to come to some decentralized platforms that allow you to lend out cryptocurrencies for a yield. Aave is the most known one. This may also influence what cryptocurrencies that you actually want to buy.
There are certain cryptocurrencies that you can lend out. For example, dai cryptocurrency pays you 3% per year plus a bonus of 1.3 in another token just for lending out that token on the AAve platform.
You can check on various platforms if the crypto you want to buy allows for staking or not or can lend it out and earn extra income just for holding your investment.
Using decentralized platforms sounds like a lot of work and many blockchain fees to pay with a smaller investment. Then a lot of people also used centralized lending platforms like Blockfi.
You can hold your Bitcoin and earn 5% simply as an apy for holding the Bitcoin on the account; for Ethereum, you can have 4.5% as a return. And other supported cryptos will pay you extra simply for holding your money and your investment in there.
The next thing that you might want to think about is what drives the growth of a project over time.
Coming to Cardano, they actually have a very easy to understand roadmap about the development of their project. They went from the byron era to the Shelley era, now in the Goguen era, and they will be moving through the eras.
After you’ve done your research, you will be able to know exactly when these developments and upgrades are coming. This is really important because what drives the growth and uptake of a project is the development over time. Mainnet launches exchange listings and upgrades.
For something like Bitcoin, which has been around a lot longer, there still are upgrades. For example, moving the majority of mining to green energy is definitely going to be a positive for the price and update of Bitcoin.
And so, keeping up to date with the roadmap of projects is extremely important. But, there are also easier ways actually to know this. For example, rather than doing hours of research, you can come to a website like icodrops.
This is actually going to give you a calendar of what type of new projects are dropping, when, where and how to get in.
Icos are initial coin offerings, and so these will be new projects and very small projects if you want to take that risk. There is also a website called coinmarketcal.com.
It’s going to give you the upcoming events of every cryptocurrency. So you can search for the cryptocurrency that you want to know about. So go and search, and it will tell you some important events in the network that are coming up over time.
So, for example, on the 30th of September 2021, the smart contract launch on Cardano is a possibility. These are important bits of news to trade around, and potential developments to look forward to may drive growth.
So in a recap, then fees are going to eat away at your investment. Especially if you’re putting in smaller amounts over time. But in crypto, you get some of the lowest fees of any investment.
Project tokenomics and token distribution are also extremely important. And you can go to the docs of any project and see exactly what the distribution is.
To see if the project is healthy or unhealthy. Then we have the long-term growth factors of projects, for example, the developments, upgrades and launches over time that will drive the project both short and long term.