How Much Do I Need to Invest to Make 1000$ a Month?
How much do I need to invest to make 1000$ a month? What market should you invest in to earn $1,000 per month? Let's try to answer these questions and let’s start with the crypto market.
Why Should Investors Pay Attention to the Crypto Market?
In the words of crypto enthusiasts who claim that the digital asset market is promising and deserves the attention of investors, there is indeed a lot of rationality:
The crypto market has a low entry threshold. The price of many assets is much less than $1, and expensive coins/tokens can be bought in parts, up to millionths. Thus, you can start investing and trading here, even with only a dozen or two dollars.
The liquidity of cryptocurrencies is high. According to some reports, the number of users of digital assets in the world exceeds 220 million, and the daily volume of transactions is 150 billion dollars. At the same time, all operations are performed online, and transaction speeds, especially in decentralized networks, are quite high.
The yield of crypto assets is higher than the assets of any markets – currency, stock, commodity. A good example is bitcoin. In 2011, its cost was 1 dollar, and in 2021 it reached 68 thousand at the moment. Almost 6,800,000% in 10 years has never been demonstrated by any investment instrument!
Bidder costs are minimal. An investor, for example, in the stock market pays a lot of commissions – for opening bank and brokerage accounts (although not always), replenishing them, concluding transactions (for a broker and an exchange), etc. Everything is simpler in trading crypto assets – you have to pay commissions only for transactions (for example, when replenishing an account). Naturally, investing in cryptocurrency looks much more profitable.
At the same time, beginners are assured that it is very easy to learn how to trade cryptocurrency. Analogies are drawn between the cryptocurrency and stock markets. But trading in bonds and stocks is considered all over the world to be one of the easiest investment options, and participants in such trading do not even pass tests (neither in the US nor in Europe). There’s an opinion that it is just as easy to invest and earn on crypto assets. In fact, this is not true.
What Difficulties Await Traders and Investors in the Crypto Market?
In reality, the cryptocurrency market is not a stock market, although, for example, the SEC suggests considering many tokens as an analogue of securities. And the investor is waiting for a lot of pitfalls that can cause very serious damage to investment capital.
Cryptocurrency High Volatility
In some aspects, there are similarities between the stock and cryptocurrency markets. One of the key ones is permanent growth. The stock market is growing with the progress of mankind, the inevitable growth in consumption and, accordingly, production. The constant increase in the number of cryptocurrency holders, the penetration of blockchain technologies in all areas are similar drivers for digital assets.
However, there is an essential difference between the tools. Shares always have a real value, since their owners are guaranteed the ownership of a part of the company. Bonds are debt securities, mainly also secured by the assets of the borrower. What about crypto coins and tokens? They have no security, and their value is just the result of an agreement between the seller and the buyer. That is why fluctuations in cryptocurrency quotes have practically no restrictions.
Difficulties with the Selection of Assets
In the stock market, there is a fairly clear division into shares of the first echelon ("blue chips"), second and third. Accordingly, investors are aware of the difference in their returns and risks. Based on their own preferences, they are gaining an investment portfolio.
In the crypto market, things are somewhat more complicated:
It is quite difficult to find clear signs by which cryptocurrencies can be divided. There are no problems with the selection, except for the two giants – Bitcoin and Ethereum. For the rest, for example, division by capitalization does not work. Terra Luna token was in the top according to this indicator, but practically depreciated to zero. Some investors are advised to pay attention to the division by project level. Thus, blockchain coins (the same BTC and ETH) are proposed to be considered the first echelon, useful projects within blockchains (for example, crypto exchange tokens) – the second, and internal application tokens (the so-called shitcoins) – the third. The division looks logical, but some crypto assets literally destroy it. Thus, the Dogecoin, which should not become a leader by any means, takes 8th place in the world top in terms of capitalization.
There is no need to talk about portfolio diversification at all. Almost 50% of the capitalization of the crypto market is the share of one coin, Bitcoin. Together with Ethereum, this is almost 70%. This pair has a fairly high correlation, as a result of which almost all 10 thousand tokens show almost synchronous price charts with slight differences. Cryptocurrencies that have a low correlation with a pair of leaders (at least less than 50%) can be counted on the fingers of one hand.
Even for those cryptocurrencies that are less correlated with BTC and ETH, “self-sufficiency” is usually an attribute of a bull market. On a bearish market, the correlation coefficient increases significantly and, as a rule, does not fall below 0.75.
In the stock market, manipulation and the use of insider information is a punishable act. Regulators are watching this closely and protecting investors. The specificity of the crypto market is different – the manipulators here almost always remain anonymous and, therefore, go unpunished. Needless to say, manipulation in such conditions is an almost commonplace phenomenon. For example, the collapse of Luna is nothing but a product of market manipulation, and those who executed this plan so masterfully still remain unknown.
Difficulties in Analysis
On the stock, currency, commodity, derivatives markets, methods and tools of fundamental and technical analysis work quite well. On the crypto market, their use gives results, it’s good if 50/50:
- Literally everything can serve as fundamental factors for coins and tokens – from the publication of macroeconomic indicators to Elon Musk's tweets.
- There are still no uniform criteria for evaluating and comparing cryptocurrencies.
- Technical analysis of cryptocurrencies can work in calm areas without external disturbances. But when an insignificant event from paragraph 1 occurs, the interpretation of the results turns into a shamanistic ritual.
However, you can work with this too. You just need to adapt to the news background, know how to choose the right timeframes and settings for technical analysis tools, and do not forget about the principles of money and risk management.
In general, despite the significant difficulties in trading cryptocurrencies, it is quite possible and even necessary for investors to master it. Digital assets really penetrate into all areas, and accordingly, there is a great future for investing in this market.
How to Make Money in the Cryptocurrency Market?
Where should an entrepreneur invest in cryptocurrency to start?
A person who knows absolutely nothing about this market should start by studying the theory. Now there are many materials that are freely available on various sites, there are video tutorials on YouTube. It is necessary to learn the basics in advance, because if this is not done, then you can face losses.
How to increase the profitability of investments in cryptocurrency?
If a person is determined to actively earn money on crypto, then the “buy and hold asset” strategy will not suit him. With the help of procedures such as staking, farming and others, you can not only receive profitability and increase it, but also gradually increase the amount of one or another cryptocurrency as a percentage. To do this, it is enough to buy an asset on a cryptocurrency exchange – now this can already be done through a regular bank card.
Next, go to the site (service, some exchange protocol), where you can freeze digital coins (strictly speaking, send them to the liquidity pool), and in return receive another cryptocurrency in the form of a reward. The amount of remuneration depends on the amount of frozen assets. Thus, you can earn 50% per annum or more. That is, you can buy BTC and ETH, freeze them, and receive Cardano in return – this is one of the farming options. At the same time, the third asset – the cryptocurrency that is credited to you as a reward – can also grow in price, which most often happens.
Here it is important to understand how much time you are ready to allocate for investments, and based on this, choose the best option. Here is a simple example.The entrepreneur, as a rule, does not have enough free time, he is busy building the main business. Therefore, a “lazy” approach to investing is more suitable for him – to create a certain portfolio and monthly, over a long period, buy cryptocurrencies for a certain acceptable amount. Such a strategy will allow you to increase capital over time.
Now there is a certain trend when large investment funds diversify their assets with cryptocurrency. That is, they store a certain percentage of assets in crypto. And if we assume that at least 5-10% of all stock assets (the volume of the stock market is about 100 trillion dollars) will begin to flow into cryptocurrencies, then the growth of the crypto-currency market will increase several times.
Is it profitable to invest in crypto? And if so, which one exactly?
In general, the cryptocurrency market is characterized by high volatility, that is, rather dynamic price fluctuations. This is where many traders make money. They use the so-called speculative approach, that is, they benefit from rapid market changes, but this model is not suitable for everyone, primarily because of the high risks and stress level. If you are afraid of active price dynamics, use a long-term strategy.
The long-term investment strategy in the crypto market is quite simple: you need to choose the 10–20 largest assets by capitalization and buy them consistently. Why is it important to understand which coins to invest in? Because you can invest in some hype, that is, an advertised, promoted token, which actually turns out to be a dummy and does not live up to expectations. And then you can say goodbye to your money.
New crypto projects can either shoot or fail. This must always be remembered. Of course, even among small-cap tokens, there are those that can become really in demand, that is, show themselves well and grow in the future. But for "lazy" investors, this method is not suitable. They are better off choosing stable cryptocurrency assets: BTC, ETH, Binance Coin (BNB), Cardano (ADA), Polkadot (DOT). In fact, there is always a risk of unsuccessfully investing and losing funds, however, you can earn a lot on crypot, which generally eliminates such risks in the long term.
Who should not use high-risk instruments, and who, on the contrary, should increase their share in the portfolio?
There are those who act consciously, they have a strategy. They monitor the funds, look at what assets large investors are paying attention to. There is another category of players – those who come to quickly make money. And, unfortunately, there are many of them today. The cryptocurrency market is improving, exchanges will soon come to a unified legal regulation. Then both volatility and profitability will decrease. But if we view the crypto market through the prism of long-term investment, its potential is much higher than that of the stock market.
You should not engage in cryptocurrency if you are looking for quick money and are not ready to invest for the long term. Considering the cryptocurrency market as an investment field should be for those who have chosen medium and long-term investments for themselves, those who are already working on this strategy with the stock market. Even if you invest 10% of the total portfolio in crypto, this can significantly increase income.
In general, all the tools of the cryptocurrency market, with the right approach, competent analysis and compliance with risk management rules, make it possible to earn money.
Is it Real to Have the Main Income Only from Trading?
Is it possible to have the main income only from trading on the stock exchange (forex, stock, commodity, cryptocurrency, etc.)? If yes, what is the best direction? The following should be taken into account:
- Professional participants are asset managers, analysts, consultants, brokers, traders and other proletariat of the investment market. They all live from this market, but they do not live from trading. For them, this is a routine daily job. They are the infrastructure of this market.
- Professional traders are big players handling billions. They are working both on their own money and on a huge bank shoulder. They are also known as “puppeteers”. Yes, they are, but they are very few. Most often, they live from this market. The same goes for the big hedge funds.
- Collective investors – mutual or other funds, trusts, family offices, insurance companies, pension funds. Large structures whose mission is to earn on a good time horizon.
- Finally, "small fish". Private investors who dream of beating this market, living off the profits they make, etc.
What are the prospects for a novice trader? You can carry out successful speculative transactions three times in a row. Maybe even five times in a row. But luck will definitely run out.
Is It Possible to Make Money Solely by Trading?
- If you have an amount that is about 200-250 times your monthly need for money, then everything is in order. Today you can earn 5% per annum in dollars. Not guaranteed, but highly likely. How to make 1,000$ passively? If you want to earn $1,000 a month, you must have at least $240,000 under management. 5% per annum is 1 thousand per month or 12 thousand per year. Everything else is a risk.
- There are algorithmic trading and arbitrage strategies. Robots can often perform real miracles. But also make losses.
- There is an IPO market. But you must be aware that this market is insanely risky. When you are told about hundreds of percent per annum, always remember the second part of this process – the huge risks. There are some rare examples of successful work. But they are rather an exception and confirmation of the general rule.