Curious about crypto investing but unsure where to start? You’re not alone. Interest in crypto is soaring due to its high potential return. For example, the value of one Bitcoin (BTC)—the first and most popular cryptocurrency—broke $100,000 for the first time in December 2024, while it was just above $50,000 earlier that year. However, cryptocurrencies are notoriously volatile and can drop in value just as fast. That’s why starting small is important, even if it’s just $100.
“Your first $100 in crypto is about learning the space, not getting rich quick,” said Ryan Greiser, CFP, Opulus LLC co-founder, and Investopedia’s Advisor Council member.
Key Takeaways
- You can start investing in cryptocurrency with as little as $100, minimizing financial risk while exploring the market.
- It’s crucial to understand how cryptocurrencies work before making any investments.
- Setting realistic expectations helps you manage the inherent volatility and risks of the crypto space.
- Choosing the right cryptocurrency and exchange is key to ensuring a successful investment.
- Protect your investment by using strong security measures to guard against scams and hacks.
Cryptocurrency Basics
Before investing in crypto, you must understand what it is and how it works. Cryptocurrency is a digital currency that can also be a store of value. In other words, you can use it to trade goods and services online or hold onto it expecting its value to increase over time.
Cryptocurrency gets its name from “cryptography,” the method used to secure transactions. Essentially, every transaction is encrypted and recorded on a public ledger known as a blockchain—a decentralized system that eliminates the need for an intermediary bank or government. As a result, cryptocurrencies are an alternative to fiat or commodity currencies.
To buy or sell cryptocurrency, you must create an account with a cryptocurrency exchange. There, you can exchange dollars or other currencies for crypto “coins” or “tokens” and store access to them in a crypto wallet.
Warning
Keep in mind that exchanges may charge fees for deposits, withdrawals, and trades that can cut into your returns.
Finally, it’s important to set realistic expectations. The fact is that any cryptocurrency could become worthless overnight, so you should only invest what you can afford to lose. But if you want to diversify your investment portfolio and gain exposure to a growing asset class, having a stake in crypto could be a smart move. Here’s how to start with just $100:
Step 1: Choose the Right Cryptocurrency
First, choose a cryptocurrency to invest in. While Bitcoin (BTC) is by far the most popular option, there are many others, including Ethereum (ETH), Dogecoin (DOGE), and Solana (SOL). In fact, due to the relative ease with which cryptocurrencies can be launched, there are thousands on the market.
However, that doesn’t mean all cryptocurrencies are safe. Unfortunately, rug pulls, pig butchering scams, and other forms of fraud are common in the crypto industry. To evaluate a cryptocurrency, carefully research its developers, community, and white paper. A project with an experienced, transparent team and an engaged user base is usually more trustworthy.
You should also assess the cryptocurrency’s underlying tokenomics (token economics). For example, what is the maximum supply of tokens the project will create? And how will those tokens be distributed and used? These factors influence the supply and demand dynamics that can ultimately drive the cryptocurrency’s future growth and value.
Step 2: Create a Budget-Friendly Investment Plan
Next, decide how much to invest in crypto based on your overall financial situation.
Greiser says you should have an emergency fund, retirement contributions, and low-cost index funds before buying any crypto. “Keep your crypto allocation tiny—no more than 5% of your portfolio,” he said. That way, you can prevent wild swings in your portfolio due to cryptocurrency’s volatility. $100 is a good start.
From there, consider the best way to allocate your crypto investment.
Greiser recommends dollar-cost averaging: “Break your investment into four $25 weekly buys rather than one lump sum. This protects you from bad timing and builds good investing habits. The most valuable return on your $100 isn’t the potential profit—it’s the experience you’ll gain watching how crypto markets behave.”
Step 3: Select a Cryptocurrency Exchange (or Brokerage)
A cryptocurrency exchange is an online platform that lets you buy and sell cryptocurrency, much like a stock exchange lets you buy and sell stocks. Choose a reputable, user-friendly exchange with reasonable fees, strong security measures, and sufficient cryptocurrency selection. Some of the top cryptocurrency exchanges include Coinbase, Kraken, and Gemini.
Tip
Alternatively, you can buy and sell crypto with a brokerage offering crypto trading. For example, Robinhood is a popular trading app offering both stock and crypto trading.
Finally, instead of buying crypto outright, consider investing in a crypto-related exchange-traded fund (ETF), such as iShares Bitcoin Trust ETF (IBIT) or Grayscale Ethereum Trust ETF (ETHE). That way, you don’t have to sign up for a special crypto exchange or wallet. You can “focus on the investment without the technical complexity,” Greiser said.
Step 4: Set Up a Crypto Wallet
That said, if you buy crypto directly, you’ll need a crypto wallet to store the private keys that control access to your cryptocurrency. Private keys are like passwords. They prove you own the crypto and let you send or spend it.
There are two main types of crypto wallets: self-custody and custodial wallets.
A self-custody wallet puts you in full control of your keys. When you set one up, you’re given a seed phrase—a series of words that you can use to recover or regenerate your keys as needed. The seed phrase is generated locally on your device and should be stored securely, such as on paper or hardware like a USB drive. If you lose it, you lose access to your crypto.
In contrast, a custodial wallet means a crypto exchange holds your private keys for you. This can be more convenient for beginners since it doesn’t require managing a seed phrase. But it also means you’re trusting the exchange to keep your crypto safe. If the platform is hacked or shuts down, your crypto could be at risk. That’s why it’s important to use a reputable exchange with strong security features like two-factor authentication (2FA).
Step 5: Make Your First Purchase
To make your first crypto purchase, create an account with a crypto exchange and complete any required identity verification. Once your account is set up, you can fund it by linking your bank account, debit card, or another supported payment method to deposit funds.
Next, choose the cryptocurrency you want to buy, enter the amount, and review the transaction details before executing the trade. Depending on your crypto wallet type, the private keys to access your crypto will be stored on the exchange or in a secure offline location you choose.
Key Considerations After Your First Investment
Once you’ve purchased crypto, it’s important to monitor and protect your investment.
Managing and Monitoring Your Investment
Keep an eye on your crypto positions by using a portfolio tracking app like CoinStats or Delta by eToro. You can even set up price alerts for when your crypto exceeds or dips below certain values. That said, don’t obsess over prices. Remember that crypto is volatile, and too frequent monitoring can lead you to make emotional decisions that you might regret later.
Understanding the Risks and Protecting Your Investment
Investing in crypto comes with many risks, both financial and security-related. To minimize them, choose reputable cryptocurrencies and crypto exchanges and implement robust security measures. For example, create strong passwords, enable two-factor authentication, and beware of crypto scams like phishing and pump-and-dump schemes.
What Are the Tax Implications of Investing in Cryptocurrency?
The IRS treats cryptocurrency as property, not currency. As a result, you may owe capital gains taxes when you sell, trade, or use it. Consult a tax professional to learn more.
How Can I Stay Up to Date on the Latest Trends in the Cryptocurrency Market?
Follow trusted sources like CoinDesk or online forums dedicated to cryptocurrency. Be wary of hype so you don’t fall for scams.
What Are Some Common Mistakes To Avoid When Investing in Cryptocurrency?
According to Greiser, “most new crypto investors buy at market peaks after seeing social media success stories. By then, early gains are gone, and you’re buying at premium prices. Stick to established cryptocurrencies that solve real problems and have actual users.”
How Do I Know if a Cryptocurrency Exchange Is Trustworthy?
Look for crypto exchanges with good reputations, strong security features, and clear fee structures. Avoid those that have a short track record or a small user base.
What Are the Benefits of Using a Hardware Wallet Over a Software Wallet?
A hardware wallet stores the private keys to your cryptocurrencies offline. That way, they’re protected against cyber theft or loss. With software wallets, there’s always a risk that they’ll be hacked.
The Bottom Line
Investing in crypto for the first time with just $100 is a great way to learn how the asset class works. By starting small, you can minimize risk while setting a strong foundation for future investments. No matter where the market goes, the knowledge and experience you’ll gain will be your biggest return.
