Making a fortune from crypto trading is not as easy as Crypto enthusiasts make it seem. In the early days of bitcoin, it was possible to earn thousands from trading with a hundred dollars or less. But those days are long gone.
Many exchanges accept shallow minimum deposits. As a result, you can start trading crypto on a reputable exchange or brokerage company for as little as $50. But can you make a reasonable profit with this trading amount? Can you grow your crypto trading account with $100?
The answer to this depends on what “large” means to you. And if it means doubling the amount or making profits in thousands, the answer is “not really, no.”
Here are 11 reasons why it is near impossible to achieve this:
Leverage on cryptocurrencies are lower than on other assets
Many brokers and exchanges offer lower or zero leverage on crypto assets. Apart from this, leverage trading is risky. The crypto market is not a place for an inexperienced trader to take such a risk. Seasoned traders may succeed and make money from using leverage here. A seasoned trader would also know that to make a reasonable profit; you need at least 100:1 leverage. Most brokers don’t offer this much on their crypto products.
Not all brokers allow margin trading
Margin trading is similar to leverage trading and allows you to use borrowed funds. But not all exchanges offer margin trading. With a $100 trading amount, you would need a much wider margin to grow your investment. The risk is also high; this type of trading should be done if you have sufficient experience.
Volatility also has limits
Bitcoin, the original crypto, is worth $20000+ as of now. And that’s because it is in a downtrend. Ethereum is worth over $1000+. Other popular altcoins range from $0.6 to $100+. You can trade all these coins for $100. But what are the odds that their prices would swing high or low enough for you to cash in big? Despite crypto market volatility, the chances are slim. Assuming your money is on ethereum, the price suddenly jumps or drops by 100%. You make a profit of $100 if the trade favors your position. This profit is fees deductible, leaving you with less. This scenario would need to recur consecutively for the trading account to grow significantly. The odds of it happening once in the current trend is slim enough.
High spreads on crypto trading
Crypto trading typically attracts much higher spreads than forex. There are no raw spreads, and some brokers charge a commission in addition to the spreads. Every profit you make on trading will get halved by the fees. This will be worse if you are using an overpriced broker or exchange. The fees will always eat out of your profits, making it almost impossible to grow the investment.
No leverage on holding
Some brokers offer leverage trading on crypto. But none give leverage if you wish to buy and hold the investment. Therefore, you can only earn according to your capital. If you buy bitcoin worth $100 today, there is a chance that the price could rise by the end of the year or early 2023. It would have to rise as high as the $100000 predicted for you to earn up to $400 profit. Though experts keep making predictions, the possibility of this happening soon is low. Unless you plan to hold for a long time, the chances of making this much are almost non-existent.
Trading profits are in pips
Price increases and decreases occur in pips, the smallest market price movement unit. Pip conversion depends on the position size. With $100, prices would have to consistently swing hundreds of pips in your favor before you make a reasonable profit.
If you can not access leverage in your jurisdiction
Regulations in most jurisdictions only permit limited leverage. Some allow 30:1 while others are 20:1 leverage. High leverage is synonymous with unregulated jurisdictions. Crypto trading is risky enough. It is better to use regulated exchanges or brokers, and these may offer much lower leverages. If your region does not permit leverage above 30:1, trading bigger positions with $100 will be impossible.
Short-term strategies require larger capital for sizable profits
As mentioned, price movements occur in pips, which are tiny amounts when converted. Popular short-term strategies, such as scalping, require more than $100 for the daily profits to be worth something that could grow the account. With a $100 trading amount, you can only expect small gains.
Profits are proportional to capital
The higher the capital, the greater the earnings, which are reinvested to grow the trading account. Increasing the investment to $1000 with $100 capital will be difficult unless you are a long-term trader.
Crypto arbitrage is difficult in bearish markets
Arbitrage is buying crypto from one exchange and selling it in another at a higher price. It is a great money-making opportunity and could quickly grow a trading account. Many traders repeat buying and selling several times a day. This generates good profit and grows the investment. However, the crypto market is in a bearish trend, and reselling at a higher price will be challenging, if not impossible.
Crypto binary trading is risky
Crypto binary options are another way to double capital quickly. But it is very risky. You could lose all the $100 in a trade. And even if you win, growing the account will require several consecutive winning trades.
Many brokers and crypto exchanges offer $100 minimum deposit accounts. These accounts are great for testing the waters and gaining live market experience. However, growing the capital with this minimum deposit is only possible to a certain extent. The profits earned from the $100 capital may never be enough to enlarge the trading account.