Crypto Investment Strategies: Linking Your Money To Profits

Investing in cryptocurrency is a risky business. It's important to do your research and understand the unique characteristics of each cryptocurrency before you invest. Cryptocurrencies are decentralised, meaning they are not issued, backed, or regulated by a central authority like the U.S. government. They are also highly volatile, with large swings in value over short periods of time.

There are several ways to invest in cryptocurrency. You can buy it directly using a crypto exchange or broker, or you can invest in crypto funds and companies. If you want to buy it directly, you'll need to choose a broker or exchange, set up an account, add funds, and then initiate your transaction. You can also invest in crypto without actually buying it by investing in companies with a partial or total focus on cryptocurrency, or investing in a cryptocurrency-focused fund.

If you decide to invest in cryptocurrency, it's important to only invest what you can afford to lose.

Choose a broker or exchange

When it comes to investing in cryptocurrency, there are two main avenues to explore: using a cryptocurrency broker, or trading on a cryptocurrency exchange. Both have their pros and cons, so it's important to understand the differences between them before deciding which route to take.

Cryptocurrency Brokers

Cryptocurrency brokers are firms or individuals that act as intermediaries between users and the cryptocurrency markets. They set their own prices and fees, and provide a platform for users to buy or sell cryptocurrencies and other assets. Brokers are generally considered a more suitable option for beginners, as they offer a user-friendly environment in which to buy and sell crypto. They also usually allow users to buy and sell at prices set by the broker, which can be more affordable for those looking to purchase smaller amounts.

Brokers may also provide additional services, such as holding cryptocurrencies for their customers, and offering educational resources and market analysis. It's important to verify a broker's credentials, ensuring they have state-of-the-art security systems in place and are compliant with regulatory measures.

Cryptocurrency Exchanges

Cryptocurrency exchanges provide an online platform for buyers and sellers to trade cryptocurrencies directly with each other, based on current market prices. They offer a wide range of digital currencies and trading pairs, and some also allow users to trade traditional fiat currencies. Exchanges are generally used by more experienced traders or those who have done their research, as there is a steeper learning curve involved.

Exchanges offer the advantage of direct trades, high liquidity, and a variety of features such as technical analysis tools. However, they have been targeted by hackers in the past, and there is a risk of downtime or technical issues. Fees can also be high, and there may be limited regulation, depending on the exchange.

Both brokers and exchanges offer access to the crypto market, but the way this is structured differs significantly. Brokers act as intermediaries, providing a more guided and user-friendly experience, while exchanges offer a direct trading platform with more flexibility and advanced tools. The right choice depends on individual needs and preferences, with brokers generally being more suitable for beginners, and exchanges appealing to more experienced traders.

Set up an account

Setting up an account to invest in cryptocurrency is a relatively straightforward process. Here is a step-by-step guide:

Choose a Platform:

Select a cryptocurrency exchange platform that suits your needs. Popular options include Coinbase, Binance, and eToro. Consider factors such as security, ease of use, regulatory compliance, and the range of cryptocurrencies offered.

Sign Up:

Provide basic personal information, such as your name and email address, to create an account on the chosen platform. You will then need to verify your email address by clicking a confirmation link sent to your inbox.

Add a Payment Method:

Link a payment method to your account, which can be used for deposits and withdrawals. This could be a bank account or a credit card. Some platforms may also require additional verification, such as your address, phone number, or government-issued identification.

Complete "Know Your Client" (KYC) Process:

Depending on the platform and the level of your engagement, you may need to undergo a more extensive "Know Your Client" (KYC) process. This involves verifying your identity and providing additional personal information, especially if you plan to make larger trades.

Choose a Wallet:

You can choose between a hosted wallet, a non-custodial wallet, or a hardware wallet. A hosted wallet, such as the one provided by Coinbase, is similar to a bank account where the platform holds your cryptocurrency. A non-custodial wallet, like the Coinbase Wallet, gives you full control, but you are responsible for remembering and safeguarding your password or private key. Hardware wallets, such as Ledger or Trezor, are physical devices that store your private keys offline, offering enhanced security but at a higher cost.

Fund Your Account:

Once your account is set up, you can fund it by purchasing your chosen cryptocurrency using your linked payment method. You can then decide whether to keep your crypto in your exchange wallet or transfer it to your chosen crypto wallet for safekeeping.

It is important to note that investing in cryptocurrency carries risks, and you should carefully consider these before setting up an account. Cryptocurrencies are highly volatile and speculative, and there is a possibility of losing your investment.

Add funds to your account

To add funds to your account, you will need to set up your fiat wallet on the crypto app by adding a bank account directly connected to your profile. This will allow you to set up your fiat wallet, for instance, a United States dollar wallet.

Step 1: Verify Your Crypto Trading Account

Log in to your crypto account and verify your identity. Crypto KYC Verification is necessary whether you want to sell, store, or add a bank account to your profile. If you fail to complete the verification, transferring money from a financial institution won't be possible.

Step 2: Add Bank Accounts or Fiat Currency Cards to Your Profile

After verification, you can add a bank account to the crypto app without any major problems. This will allow you to set up your fiat wallet. You'll also be able to withdraw money using the linked bank account. However, keep in mind that withdrawing money will incur a fee.

Step 3: Transfer Funds from Your Bank Account to Your Crypto Profile

Now that your bank account has been added to the app, you can transfer funds from your bank account to your crypto profile. There are two options for doing this: ACH transfers and wire transfers. ACH transactions are generally cheaper, but there will still be fees depending on the amount you transfer. To initiate the transfer, follow these three steps:

• Go to your recently created fiat wallet (it will be available after verification) and tap on "Deposit".
• Select ACH transfer or Wire Transfer.
• Wait for 3 to 5 business days for the money to reach your crypto account.

Remember that you won't be able to withdraw or deposit money if the information of the bank account doesn't match the previously completed user verification process.

Adding Money to Your Crypto Wallet

If you have an external wallet on another exchange but want to sell or manage those funds on a different crypto platform, you can fund your account using crypto. Here are the steps to follow:

Step 1: Complete Verification on the Crypto Exchange

You won't be able to receive funds in your account if you don't complete the verification process. Go to the platform and fill in all the information required. If you want a safer environment, enable multi-factor authentication on your profile.

Step 2: Go to "Transfer" or "Deposit" and Look for the Crypto

Tap on the "Transfer" or "Deposit" button and look for the specific crypto you want to fund. Remember that choosing a different wallet might cause your funds to be lost forever.

Step 3: Get the Wallet Deposit Address

Copy the wallet address of the crypto you want to fund. If you're having trouble finding your address, check the platform's support pages or help centre.

Now, you need to send funds from the external exchange to your wallet address on the crypto platform, and you'll be good to go!

Place your order

Once you've decided to invest in cryptocurrency, you'll need to place your order. There are several ways to do this, and it's important to understand how each works. Here's a step-by-step guide to placing your cryptocurrency order:

Step 1: Choose a Crypto Exchange

You'll need to select a reputable crypto exchange to facilitate your transactions. Examples include Coinbase, Binance, and Kraken. These platforms provide a marketplace for buying and selling cryptocurrencies.

Step 2: Create an Account

Sign up for an account with your chosen crypto exchange. You will typically need to provide personal information and verify your identity as part of the registration process.

Step 3: Fund Your Account

Before you can start buying cryptocurrencies, you need to deposit funds into your exchange account. This can be done by linking a bank account or using a payment service.

Step 4: Decide on the Cryptocurrency

With your account funded, it's time to decide which cryptocurrency you want to invest in. Examples include Bitcoin, Ethereum, and Litecoin. Research the different options and choose the one that aligns with your investment goals and risk tolerance.

Step 5: Choose the Type of Order

There are several types of orders you can place when investing in cryptocurrencies:

• Market Order: This is the simplest type of order. You buy or sell the cryptocurrency at the current market price. It's executed almost instantly but offers less control over the price.
• Limit Order: With a limit order, you specify the maximum price you're willing to pay (for a buy order) or the minimum price you're willing to accept (for a sell order). This gives you more control over the price but doesn't guarantee execution if the market doesn't reach your desired price.
• Stop-Loss Order: This type of order is used to limit potential losses. You set a stop price, and if the cryptocurrency's price reaches this level, it triggers a market order to buy or sell.
• Stop-Limit Order: This is a variation of the stop-loss order. You set a price range, and if the cryptocurrency's price reaches this range, it triggers a limit order instead of a market order. This allows you to control the price even during volatile market conditions.

Step 6: Place Your Order

Once you've decided on the type of order, it's time to place it. Specify the amount of cryptocurrency you want to buy or sell and review the order details carefully before submitting it.

Remember that investing in cryptocurrency carries risks, and it's important to do your research and understand the volatility of the market before placing your orders.

Select a storage method

There are several ways to store cryptocurrency, each with its own advantages and disadvantages. The most common methods are hardware devices, applications, and paper wallets. Here are some things to consider when choosing a storage method:

• Security: Cold wallets, or offline wallets, are generally considered to be more secure than hot wallets, or online wallets, as they are not connected to the internet and are less susceptible to hacking attempts.
• Convenience: Hot wallets are typically more convenient and accessible than cold wallets, as they can be accessed from anywhere with an internet connection.
• Cost: Some storage methods, such as hardware wallets, may require the purchase of a device, while others, such as paper wallets, can be created for free.
• Ease of use: Some storage methods, such as hardware wallets, may be more user-friendly and intuitive than others, such as paper wallets, which require more technical knowledge.
• Amount of cryptocurrency: If you plan on storing large amounts of cryptocurrency, a cold wallet is generally recommended as it provides greater security.
• Backup options: Consider whether you want the option to back up your wallet and recovery phrases in case of loss or damage.
• Hardware wallets: These are physical devices, such as USB drives, that store your private keys and cryptocurrency offline. They offer strong security but can be more expensive and less convenient than other methods. Examples include Ledger and Trezor.
• Paper wallets: Paper wallets are physical pieces of paper that contain your private keys and wallet address. They are a free and secure way to store cryptocurrency offline but are less user-friendly and more susceptible to physical damage or loss.
• Hot wallets: Hot wallets are online applications or software that allow you to send, receive, and store your cryptocurrency. They are convenient and easy to use but may be more vulnerable to hacking attempts. Examples include Guarda and Mycelium.
• Crypto exchanges: Crypto exchanges are online platforms that allow you to buy, sell, and trade cryptocurrencies. They often provide free hot wallets for users but may have limitations on transferring crypto off the platform. Examples include Coinbase, Binance, and Kraken.

Frequently asked questions