Investing in cryptocurrency is a tremendous opportunity to diversify your portfolio and take advantage of hot markets.
At first glance, it may seem complicated to invest in cryptocurrency, particularly if you only have experience with more traditional investments. In this guide, you’re going to learn how to invest in crypto safely and securely.
How to invest in cryptocurrency
The world of crypto has come a long way in the last 10 years. Early adopters had to take far more risks and undergo a more complex process. According to Pew Research, 16% of Americans now own cryptocurrency.
Today’s investors will find it easier than ever before to browse a cryptocurrency list, view the latest prices and invest.
Step one – Choose a place to buy
Cryptocurrency exchanges are by far the most popular way of buying and selling due to their convenience and security. While anyone can buy through peer-to-peer (P2P) trading, this is a far riskier affair and isn’t recommended.
Using an online platform, you have access to security features such as two-factor authentication, along with an online wallet for safely storing your crypto.
There are many types of cryptocurrency exchanges to choose from. Some allow their users to remain anonymous by not requiring personal information. Others resemble centralized stock investing platforms. The most popular platforms will not be decentralized and will follow much the same security measures as banks and other investing platforms.
Think about how you want to invest. Some exchanges are aimed at more advanced traders who require more functionality and access to an expanded range of altcoins within the cryptocurrency list.
Do your research before committing to any one platform.
Step two – Connect your exchange to a payment solution
As part of creating your brokerage account, the chances are you’ll need to submit a copy of a piece of personal identification, such as a passport or driving license.
Most exchanges today make it easy for you to directly connect your bank account or a credit/debit card.
Fees will vary between payment options, so it’s worth examining what your exchange of choice charges before selecting one method over another.
Step three – Place your order
Many people are surprised at how advanced cryptocurrency exchanges can be. The evolution of crypto has meant these platforms have most of the same features as the average stock brokerages.
Not only can you buy and sell, but you can also implement limit, stop-loss and market orders. Depending on your investing style, you may even want to implement dollar-cost averaging in your investments by setting up recurring investments.
However, before placing your order, do your research into current cryptocurrency prices and the direction of the market. You’ll already have an advantage if you’ve invested in stocks, precious metals or other assets in the past.
Step four – Safely store your coins
Most orders are processed nearly instantly. If you’re already working with an exchange, you’ll be working with what’s known as a hot wallet.
A hot wallet is an online wallet that can be accessed via your computer, smartphone or tablet. These wallets come with private keys to your coins. Strictly speaking, exchange wallets are custodial accounts monitored by your exchange.
Hot wallet holders run the risk of losing their funds to theft, underlining the importance of creating a strong password and implementing two-factor authentication. These wallets are best for smaller crypto amounts or coins that you don’t intend on holding for long.
On the other hand, you have cold wallets. These wallets allow you to store your coins away from an internet-connected device. Cold wallets are the most secure storage option available because they cannot be hacked.
Also known as hardware wallets, these wallets store your private key offline. There’s also such a thing as a paper wallet that can produce private keys printed on a piece of paper, which can then be stored at home or within a safe deposit box.
Most hardware wallets are similar to USB or external hard drives. Cold wallets are the most secure way of storing your cryptocurrency, but they do require more effort to set up in the first place.
Conclusion
As you can see from this guide, buying and owning cryptocurrency is simple. However, like any investment, you need to do your research and understand what you’re really investing in. Crypto has the same risks as any traditional investment. You can gain money, and you can also lose money.
Smart investors know the importance of diversified portfolios. In terms of crypto, this extends not only across the type of assets you hold but the assets within crypto you hold.
Are you ready to invest in cryptocurrency?
