Strategies for Low Budget Crypto Portfolios
Hello Degen Frens,
Last year, my friend was broke and managed to 6x his portfolio. While it's not the craziest ROI in the space, he's now in a stronger position to take advantage of the next bull market.
Car gas prices are up. And I get a sickening feeling every time I see the prices of Ribeye steaks. Less disposable income means you have to be more strategic with what you have.
So how can you make the most out of a small budget?
Here's your edge.
Strategies For a Low Budget
Small budget requires a different strategy than larger budgets. It's because they have different goals.
If you have a $2,000 budget, you're not going to retire with it anytime soon. Your goal then should be to grow it.
But if you have a $2m+ budget, then you've "made it" by most people standards. Your goal should be to preserve it. You're going to focus more on safer investments and diversifying.
The following strategies are meant for people who have low budgets, and are trying to grow it.
1. Go for Airdrops
Airdrops are free tokens. Protocols distribute free tokens as a way of encouraging adoption or generating buzz. Some airdrops last year ended up being worth five or even six figures.
- LOOKS. Looksrare is an NFT marketplace competitor to Opensea. They did an airdrop to anyone that had > 3 ETH trading volume on Opensea.
- ENS. Anyone that created a .eth address got airdropped $ENS tokens last year. There were extra points depending on the age of the address, and when the domains expire.
Airdrops are rarely announced ahead of time (they don't want people gaming the system). And each of them have their own formulas on who qualifies.
There are rumors that Metamask and Arbitrum have airdrops coming soon. The best way to get them? You have to interact with the protocols. For metamask, their airdrops are likely to be going to people who use the "swap" feature.
Remember how each airdrop has its own formula? The more value exchangde, then the more airdrops you get in general.
(Someone that has swapped $10,000 should get more than someone who swapped $100. They are considered a higher value user / customer.)
Think, "what's in it for them?" Airdrops aren't charity. It's a strategic way for them to gain adoption and buzz from the users that they want.
If I were hunting for airdrops right now I'd be focusing on the Cosmos ecosystem. Go download the Keplr wallet. Interact with as many dapps as possible.
Warning: Be careful of interacting with unknown coins in your wallet. Some of them are designed to scam you by leading you to a phishing website. Here's an article from Coinbase.
2. High Conviction Bets in Low Caps
The smaller your budget, the more concentrated your bets should be.
If you have $3,000, you shouldn't be in 20+ different coins. If one of them manages to skyrocket, you're not going to reap the benefits. Diversity is good if you're trying to preserve your portfolio.
For a smaller budget, you should be in around 4 to 6 projects.
And next, you have to go for the smaller market cap coins.
Let's say that you have a $3,000 budget. Even if Bitcoin or Ethereum 5x from here, $15,000 isn't going to change your life.
(Ok it may for a few of you, but I'm trying to make a point here).
My advice? Find an up and coming ecosystem. Bet on the most promising DAPPS in that ecosystem.
So for example, FTM was buzzing last year. You could've discovered BEETS and LQDR early, and bet on them. Or if you had conviction in Harmony One, you could've seen the explosion of Jewel.
Alright, you don't have a time machine. I get it. Let's talk about some strategies now.
Right now there's a lot of buzz around NEAR protocol and METIS.
A quick search on NEAR shows that Aurora has a ton of promise. Aurora allows Ethereum Dapps to be built on the Ethereum protocol. So I'd go to DeFiLlama and see which low market cap dapps have potential.
Here's what separates the winners from the losers.
- Research, research, and research. This strategy only works if you pick winners. (Easier said than done, I know)
- Take profits. I can't emphasize this enough: take profits. Put the profits into blue chips or stable coins. Or "roll" the profits into other small caps (super risky).
Note: Everyone thinks they're a better trader than they are. But this is the strategy I've seen for people who turned a smaller budget into a larger one. If you want to keep it simple, you can always DCA into blue chips and hold for a few years.
3. Find Ways to Earn More Disposable Income
I can't emphasize this enough: find ways to earn more disposable income. Put more coals in the fire.
It takes money to make money.
It's near impossible to trade a $1,000 portfolio into $1m+. Sure some people have done it, but that's survivorship bias and it's getting harder each year.
Let's say you have 5 hours a day to devote to Crypto.
• Spend an hour a day researching Crypto.
• Spend the other 4 hours a day trying to create an additional stream of income.
Here are some methods:
4. Lower Your Fees
Something that I learned from the stock market is how important low fees are. Every index fund I've invested in has a low "expense" ratio. Every dollar you waste on transaction fees / CEX fees is a dollar that's not making money for you.
Here are some ways to lower your fees:
- When you're buying crypto off a CEX, find ways to lower the fees. I use Coinbase, and it's cheaper to use the Coinbase Pro version. Using Binance is cheaper if you're holding the BNB token.
- Dabble in ecosystems with low fees. You're going to get wrecked if you're playing around on the ETH mainnet. Instead, there are cheaper ecosystems like AVAX and FTM.
- Transact during off hours. Think of gas like "traffic." Move it around during the dips, or during "off hours. Hint: You can use this heatmap to see when times are cheapest in general for gas fees.
Here's a quote I love from Kevin O'Leary from Shark Tank.
Money is my military, each dollar a soldier. I never send my money into battle unprepared and undefended. I send it to conquer and take currency prisoner and bring it back to me.
My final piece of advice is, just keep buying. Making the right moves in the next few years can set you up for life. Delay gratification and keep buying great projects.