Contrary to popular belief, you don’t need much money to start investing in tokens. In this guide, we explain why.
Token Takeaways ✍
✨New token adopters do not need a lot of money to start collecting tokens.
✨It’s important to understand how token projects are valued before making an investment.
✨While it’s up to every individual to make decisions based on their own risk tolerance, there’s no need to rush into the market.
The token universe is an ever-evolving, limitless realm, meaning there’s much to learn when entering the space. After picking up the basics, new adopters face the challenge of navigating the token market. One of the top questions people have is how much they need to start their journey. Contrary to popular belief, you don’t need lots of money to start collecting tokens. In this piece, we explain why and offer tips to help you enter the market for yourself.
Starting slow 🐢
When new users want to buy tokens, they usually start by asking, “What is a token?” But after that, they face two more critical questions: “Which token projects should I invest in?” and “How much should I invest?”
As we’ve discussed in the previous chapters, many people look at Bitcoin and Ethereum first. This is because they are seen as the least risky token projects. But that doesn’t answer the question of how much to invest.
Many people avoid the token market, as they assume participating requires making a significant investment. In fact, you don’t need a lot of money to start collecting tokens.
Before making any token investment, it’s important to cover your expenses and make sure you have some savings set aside. When entering the market, it’s a good idea to start slow. Experts recommend investing smaller amounts that you can afford to lose.
While some token experts have large holdings, they typically grow their portfolios over long timeframes. You do not need to start with a big portfolio or compare yourself to seasoned token users—you can always invest more as you learn more.
Understanding market capitalisation vs. token prices 📈
When people want to find out a token’s price performance, they look at the market price. But this doesn’t tell the whole picture. A token’s price shows the cost of one unit (e.g., one MATIC token). However, we use market capitalisation to determine a project's overall size.
Token tips: The market capitalisation (or market cap) measures the size of a project based on the total price of all its tokens or a company based on the price of its shares. At $26,300 per BTC, Bitcoin’s market capitalisation is around $512 billion. Or at the MATIC price of $0.77 per token, Polygon's market cap is $7.3 billion.💡
When looking at the token market, many people assume you must buy a full token for a given project. But this is not true: you don’t need to buy a whole BTC or ETH if you don’t have enough to buy one unit.
Bitcoin’s price is currently just under $26,300 per BTC. That puts the project’s market capitalisation at around $512 billion.
Understanding unit bias ⚠
1 BTC currently costs around $26,300, and 1 ETH currently costs around $1,700. As many tokens have a lower price per unit, this often creates unit bias. It’s important to understand how unit bias can impact the token market. The effect has helped many meme coins with large token supplies soar in value in the past.
Token tips: Unit bias is a cognitive bias where people try to complete, consume, or engage with an entire “unit.” That could mean finishing a whole plate of food, reading to the end of a chapter of a book, or buying a whole token 💡
While unit bias deters people from projects like Bitcoin and Ethereum, they are widely viewed as the least risky projects in the space. This is because they are more time-tested and less volatile than most others. For this reason, experts generally recommend putting more into BTC and ETH than smaller projects. BTC and ETH feature alongside other big token projects in our curated Collection, The Crypto Giants.
Beyond bigger projects, it’s a good idea to put smaller amounts into projects with smaller market capitalisations. In general, smaller projects tend to be more volatile and risky.
Once you’ve put some money into tokens, you may want to consider strategies like holding for the long term or selling small amounts when prices rise. Learn more in our chapter on dollar-cost averaging.
token.com is designed to help new adopters enter the token market. You don’t need much money to start collecting tokens through our app. You can put in as little as $0.25 into a given project and adjust your allocation according to your personal preference.
As token.com is simple and intuitive, it’s useful for following the dollar-cost averaging strategy to buy different tokens. Dollar-cost averaging involves buying a specific token amount at regular intervals regardless of the price. Learn more about it here.
While experts recommend starting slowly, it’s up to every individual to make their own decisions based on their risk appetite. If you’re more comfortable with risk, you may consider putting more into the token market as you learn more.
Looking to the tokenized future🌌
While tokens have shown early promise, it could take decades for the technology to reach its full potential.
If tokens achieve mass adoption, they could offer a massive upside to long-term investors. This means there’s no rush to enter the space or take big risks today.
If token technology is successful, it’s better to start slowly, study what are tokens and everything about them, and prepare for the future without taking on unnecessary risks today.
Learn more💫
Now that you’ve read this guide, you should have a better idea of how to start investing in tokens. Overall, it makes sense to start slowly, learn in detail what tokens are, and look into the most prominent projects before taking any significant risk. Make sure to revisit our chapter on dollar-cost averaging for more tips on investing, and then head to the app to start exploring the token market.
Please note: Investing in cryptoassets is risky. Due to the volatile nature of the cryptocurrency market, investors run the risk of losing their funds when they make an investment. Returns from cryptoasset investing are not guaranteed, therefore users should always be aware of the risks.
