A Beginner's Guide To Crypto Investing In Canada

Investing in cryptocurrency is a complex process, and it's important to do your research before getting started. Cryptocurrency is a decentralised digital currency, which is not issued by any central bank or financial institution. It can be bought and sold using a crypto trading platform or online exchange, and transactions are highly secure and anonymous. If you're thinking of investing in cryptocurrency in Canada, the first step is to sign up for a crypto trading platform and fund your account. It's important to remember that cryptocurrency is a very volatile asset class, and there are risks involved. These include high volatility, security risks, and the potential for scams. It's also important to consider the tax implications of investing in cryptocurrency, as gains may be taxable. When investing, it's recommended to only invest what you can afford to lose, and to diversify your portfolio.

Choose a currency exchange

When choosing a currency exchange, there are several factors to consider. Firstly, security is a top priority. Look for exchanges that are registered with major financial regulatory bodies in Canada, such as the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and the Ontario Securities Commission (OSC). These exchanges will offer greater protection for your funds. Additionally, consider exchanges that keep the majority of their digital assets in cold storage, as this provides an extra layer of security.

Another important factor is the range of cryptocurrencies supported by the exchange. If you are only interested in investing in one type of cryptocurrency, such as Bitcoin, then a specialised exchange may be suitable. However, if you want to invest in multiple cryptocurrencies, look for an exchange with a broad selection. Some exchanges offer hundreds of different coins and tokens, while others may only support a few dozen.

The payment methods and fees associated with the exchange are also key considerations. Ensure that the exchange supports your preferred payment method, whether it's a bank transfer, credit/debit card, or crypto transfer. Additionally, compare the fees charged by different exchanges for deposits, withdrawals, and trades. Some exchanges offer low or no-fee transactions, which can help minimise costs.

Finally, consider the user experience and customer support provided by the exchange. If you are a beginner, look for a platform with a straightforward and intuitive user interface. On the other hand, more experienced traders may require advanced features and charting tools. It's also worth checking the exchange's reputation for customer support, as you'll want to be able to get assistance if needed.

Determine your payment method

There are endless currencies and payment methods you can use to buy crypto. The most common payment methods include wire or bank transfer, other cryptocurrencies, and credit or debit cards.

Some methods, like other cryptocurrencies or payment cards, are faster than bank or wire transfers, which can take a few days. But remember: paying through a bank transfer from your personal bank account isn’t protected by the same insurance products as a credit card purchase.

You could also use your credit card to purchase crypto. But this isn’t advisable: your credit card provider will likely treat the crypto purchase as a cash advance, which will have a higher APR than regular credit card purchases. There’s also no grace period for cash advances, meaning you’ll start paying interest the moment you complete the transaction.

Some exchanges in Canada will allow you to use an Interac e-Transfer as well.

• PayPal
• Spotify subscription gift cards
• Prepaid cards
• Debit crypto cards

Decide how much to buy

Before investing in cryptocurrency, it's important to understand that crypto is a highly volatile and unregulated investment. This means that it's only suitable for people with a high tolerance for risk. If you're new to the world of digital assets, make sure you do your research and understand the risks involved before deciding how much money you want to spend.

Ask yourself how much money you're comfortable losing, and make a plan before starting your crypto journey. Remember that crypto prices can increase or decrease by hundreds of dollars in a matter of minutes, so be prepared for a rollercoaster of ups and downs.

When deciding how much crypto to buy, consider your investment goals and current financial situation. Crypto should only be a small part of a diversified investment portfolio. It's generally recommended that you invest no more than 5-10% of your total portfolio in crypto, especially if you're just starting.

It's also important to consider the fees involved when buying crypto. There may be deposit and withdrawal fees, trading fees, and other charges, so be sure to check the fee structure of the platform you're using before making a purchase.

Some platforms have minimum deposit requirements, so make sure you have enough funds to meet those requirements. For example, Bitbuy allows you to start trading with as little as $50.

Once you've considered all the risks and fees, decide on an amount that you're comfortable investing in crypto, keeping in mind that you should only invest money that you can afford to lose.

Select a Bitcoin wallet

When investing in cryptocurrencies like Bitcoin, it is essential to select a secure wallet to store your assets. Here is a comprehensive guide to selecting a Bitcoin wallet for your needs:

Types of Bitcoin Wallets:

• Hardware Wallets: These are physical devices that store your private keys offline, providing enhanced security for your Bitcoin savings. Examples include the Coldcard wallet and the Blockstream Jade wallet.
• Software Wallets: These are free downloadable apps for your mobile phone or desktop computer, offering convenience and ease of use. Examples include BlueWallet and Zengo.
• Hot Wallets: Wallets that are connected to the internet, often less secure but more convenient for frequent transactions.
• Cold Wallets: Wallets that are offline and not connected to the internet, providing stronger security for your funds.
• Hosted Wallets: These wallets are stored on a server that the user does not control, making them more susceptible to hacking attempts.
• Decentralized Wallets: These wallets allow only one person to hold the keys, providing greater privacy but no third-party support.
• Exchange Wallets: Wallets that are integrated with crypto exchanges, making it seamless to trade and transact.
• Mobile Wallets: Supported on mobile operating systems, allowing users to control private keys and trade on the go.
• Desktop Wallets: Run on desktop devices, providing users with private keys and often enhanced security compared to mobile wallets.

Factors to Consider when Selecting a Bitcoin Wallet:

• Security: For larger amounts of Bitcoin, prioritize hardware wallets and cold wallets over hot wallets and software wallets.
• User Experience: Choose a wallet with an interface that matches your experience level and needs. If you're a beginner, opt for a user-friendly wallet.
• Cost: Hardware wallets typically incur a cost, while most software wallets are free to download.
• Operating System: Some wallets are mobile-only or desktop-only, so ensure the wallet is compatible with your device.
• Payment Methods: Consider the payment methods supported by the wallet, such as credit/debit cards, bank transfers, or crypto deposits.
• Advanced Features: Look for features like two-factor authentication, biometric encryption, staking capabilities, and integration with crypto exchanges.
• Backup and Recovery: Ensure the wallet provides a secure way to back up and recover your private keys in case of device loss or damage.

Recommended Bitcoin Wallets:

• Blockstream Jade: A lightweight, affordable, and open-source hardware wallet, offering robust security features and a user-friendly interface.
• BlueWallet: A free and intuitive mobile app for iOS and Android, suitable for beginners with basic features like sending, receiving, and securing Bitcoin.
• Coldcard: A highly secure hardware wallet made in Canada, offering air-gapped transactions and advanced security features for maximum protection.
• Zengo: A secure software wallet that eliminates the need for private keys, offering a simple recovery process and the ability to buy other cryptos directly from the Zengo account.
• CoinSmart: A user-friendly wallet with low fees, fast verification, and advanced options for experienced traders, supporting over 16 coins, including Bitcoin, Ethereum, and Solana.
• Coinbase: A well-known wallet with a diverse selection of over 100 cryptocurrencies, offering biometric security, insurance protection, and 24/7 customer support.

Remember, it is crucial to research and select a Bitcoin wallet that suits your specific needs, security requirements, and level of experience.

Purchase your Bitcoin

Once you've decided how much Bitcoin you want to buy and where you want to buy it from, it's time to make your purchase.

You can use a crypto trading platform to buy and sell cryptocurrency. These platforms normally don't allow you to transfer your Bitcoin to someone else. You generally have to sell your Bitcoin to withdraw the money you invested. Crypto trading platforms are often the cheapest option, and they bring together multiple exchanges to get their clients the best Bitcoin prices.

A cryptocurrency exchange is a digital marketplace where cryptocurrencies are bought and sold for other cryptocurrencies. This is where 99% of cryptocurrency trades take place. You can trade hundreds of cryptocurrencies, including stablecoins, which are coins pegged to fiat currencies like the US dollar.

There are a few things to watch out for when choosing to trade through exchanges. Exchanges technically control the crypto that's held in exchanges—even if it's in your wallet on the exchange—so, should the owners decide, they could drain the exchanges of user funds.

There are a small number of kiosks that allow users to purchase Bitcoin using debit or credit cards. Bitcoin ATMs aren't particularly common yet, and they sometimes charge very high fees and have less-than-ideal exchange rates.

You can also buy Bitcoin directly from other people on peer-to-peer marketplaces, trading them for anything you want. But watch out for scammers. On some sites, it's possible to sell Bitcoin for Xbox Live gift cards, although sellers frequently receive worthless cards in exchange.

Over-the-counter (OTC) trading occurs outside of exchanges, and it generally refers to brokers that help high-net-worth clients trade millions of dollars worth of cryptocurrencies. This means their trades probably aren't registered on the public ledger, making them more discreet.

You can also find someone in your area who'll take cash for Bitcoin. In France, they've formalised this process, making it possible to buy vouchers for cryptocurrencies in corner shops.

When purchasing Bitcoin, always remember to invest only in the amount that you feel comfortable with losing money on, and start slowly. Accept that you're unlikely to become an overnight success, and set time aside to learn the market before making any large investment decisions.

Frequently asked questions