How to Build a Crypto Portfolio on a Budget
Harnessing DCA to turn small investments into big potential
I remember when I first heard about bitcoin, and I will confess, I was skeptical, I was where you probably are today: it sounded unreal and the technical jargon made my head spin. I knew I wanted to get involved, but I didn't want to risk my savings on something I didn't fully understand. I admit that 11 years ago I hardly knew anything about money other than I had to work hard to make it and save for my old days. If you know me at all, you know I didn't grew up in a capitalist economy and financial education wasn’t a thing (not that today is a thing, but that’s a topic for another day 🙂). I knew nothing about investing or how money actually works, so I decided to learn because bitcoin was stirring my thoughts and curiosity.
Since bitcoin was so new, I had the luxury of time. Time to read, to learn, no matter how hard it was compared to today (lots of educational content out there now). My first investment was $2000. I was fortunate to have a decent income level and savings so I felt it’s not a big risk to my livelihood. I appreciate that the current global economic landscape has presented significant challenges for many. Economic uncertainties, market volatility, and unforeseen events have impacted people's ability to earn, save, and invest. Despite these hurdles, it's important to remember that even small steps towards financial literacy and prudent investing can make a difference over time.
Why consider crypto now, you might ask? Well, cryptocurrencies have evolved from a niche interest to a significant part of the global financial landscape. They offer exciting possibilities for financial freedom and innovative technologies. However, the crypto market's notorious volatility can be off-putting for newcomers. That's where DCA -Dollar Cost Averaging comes in, a strategy that can be used when investing in anything, not just bitcoin or crypto. DCA is a fancy term for a simple idea: instead of trying to time the market and make one big investment, you invest small, fixed amounts regularly. For example, you might put £50 (dollars, euro, whatever you fancy) into Bitcoin every week, regardless of whether the price is up or down.
This approach really appealed to me and I believe any beginner in crypto should give it a try. It means you could start exploring the world of crypto without the stress of trying to predict market movements. Plus, by spreading out your investments over time, you will reduce the risk of buying at a peak and regretting it later:
It reduces the impact of market volatility on your investment.
It takes the stress out of trying to time the market.
It allows you to start with small amounts, making it more accessible.
If I were starting now, I'd focus on three types of cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), and a promising protocol coin.
Bitcoin is often called 'digital gold' and is the most well-known cryptocurrency. It's seen as a store of value and a hedge against inflation by many.
Ethereum goes beyond just being a currency. It's the foundation for many decentralised applications, smart contracts, and NFTs (Non-Fungible Tokens). Think of it as the 'fuel' that powers a new generation of digital services.
For the third coin, I'd choose a newer protocol coin like Polkadot, Solana, or Avalanche. These projects are working on solving some of the challenges in the crypto world, like improving transaction speeds or making different blockchains work together seamlessly. Remember, these are mere examples, please do your own research when deciding where to invest.
Now, I understand that many people feel hesitant about using decentralised tools like crypto hard wallets or exchanges. It's natural to feel more comfortable with traditional financial tools. But remember, similar anxieties existed when online banking first appeared, and now it's a part of our everyday lives.
If you're ready to start your crypto journey, here's how I'd go about it:
Choose a reputable, user-friendly exchange. Look for one that's regulated and has good security measures in place.
Start small. You can begin with as little as $20-$50 per month.
Set up automatic purchases to DCA into your chosen cryptocurrencies.
Take time to learn about the cryptocurrencies you're investing in. Understanding the technology and potential use cases can help you make more informed decisions. When I say you need to understand the technology, I mean you need to understand what it does and how, not how it’s coded!
As your portfolio grows and your confidence increases, you might want to consider moving your crypto to a non-custodial wallet. This means you'll have full control over your digital assets, rather than leaving them on an exchange. Wallets like MetaMask or Trust Wallet are popular choices for beginners, but you should find your fit.
It's worth noting that there are other ways to get exposure to crypto, such as through ETFs or options. While these can be a bridge for those more comfortable with traditional finance, they often come with higher fees and don't give you the same level of control, ownership or understanding of the crypto ecosystem.
The beauty of decentralised tools is that they offer true financial independence. You're not reliant on banks or other intermediaries, which can mean lower fees and fewer restrictions. Plus, you have global access to your assets, which can be particularly valuable in areas with limited banking services.
If you're intrigued by the idea of crypto but still feeling unsure, why not set yourself a mini-challenge? Try setting aside a small amount, say $50, to DCA into Bitcoin and Ethereum over the next month. Use a beginner-friendly exchange and observe how the process works. If you're feeling adventurous, you could even try moving a small amount to a non-custodial wallet by the end of the month.
Getting into crypto doesn't have to be intimidating or overly complex. By starting small, using a DCA approach, and learning as you go, you can build your confidence and understanding over time. Who knows? This could be your first step towards a whole new financial future. It certainly has been for me.
Wrapping up, I hope this guide has shed some light on how to start your crypto journey using DCA. Remember, everyone's financial journey is unique, and what works for one person might not work for another.
If you found this information helpful, consider passing it along to a friend or family member who's been curious about crypto but unsure where to start. Sometimes, all it takes is a bit of straightforward information to help someone take that first step towards financial empowerment.
Have you tried DCA with crypto or have any tips to share? I'd love to hear about your experiences in the comments. Let's keep learning and growing together in this exciting space.