Lack of money

Lack of money limits the trader in operating trading system. It is recommended that diversifying across at least 15-20 cryptocurrency or funds will be a reasonable investing strategy. However, many novices have limited capital, often under $5,000 based on statistics, restricting them to only 1-2 cryptocurrency. Such undiversified portfolios face huge risks from individual crypto fluctuations. They also fail to hedge against systematic risks relative to a diversified market portfolio.

Furthermore, trading frequently across few cryptocurrencies with low capital results in excessive transaction fees eroding profits. Study found median transaction fees consumed 74% of gains for investors with under $3,000, exceeding income for 18%. The lack of capital restricts access to zero or low-fee brokers. Excessive fees severely undermine returns.

Investing the full capital in only 1-2 cryptocurrency also leads to massive loss risks, with undiversified portfolios having over 3 times higher probability of 20%+ losses. Excessive concentration can have devastating consequences if individual picks underperform.

Apart from that, low capital is also hard to profit with traditional trading method. Due to the information asymmetry between individuals and institutions, traders find it challenging to gain profits using traditional trading strategies. Statistics show 70% of U.S. crypto trades come from high frequency trading firms able to execute trades in milliseconds.