Cryptocurrency Investment: Where To Begin?

Cryptocurrency is a hot investment that is gaining mainstream adoption. The crypto market is known for its volatility and unpredictability, but it has also generated incredible gains for long-term investors.

There are several ways to invest in cryptocurrency. One way is to use a traditional broker, although brokers typically only offer futures contracts and not direct trading in cryptocurrency. Another way is to use a crypto exchange, which offers a wider array of cryptocurrencies and allows you to own the currencies directly. Payment services such as Cash App and PayPal also allow users to buy and sell popular cryptocurrencies.

When choosing a broker or exchange, it is important to consider your individual goals, investment timeline, and risk profile. Additionally, due diligence is necessary to ensure that any crypto project is legitimate and secure. It is also crucial to understand all the costs associated with buying and holding cryptocurrency before investing.

Some of the most popular cryptocurrency exchanges include Coinbase, Kraken, Gemini, Bitstamp, eToro, and Crypto.com. These platforms offer a range of features, including the ability to trade multiple cryptocurrencies, low fees, and user-friendly interfaces.

It is important to note that investing in cryptocurrency is speculative and carries high risk. The market is largely unregulated, and there is a potential for significant losses.

Choosing a broker or crypto exchange

When choosing between a broker and a crypto exchange, it is important to consider the differences between the two. Both platforms allow you to trade cryptocurrency, but a broker offers indirect trading, acting as an intermediary between traders and the market, while a crypto exchange is an intermediary between traders.

A crypto broker is a firm or individual that acts as a financial intermediary for those who want to exchange their fiat money for cryptocurrencies. They set their own prices and fees. Crypto brokers are regulated at the international level and are suitable for beginners as they offer a more convenient and secure way to buy and sell cryptocurrencies. They also usually allow users to buy and sell cryptocurrencies at prices set by the broker, making it a more affordable option for buying smaller amounts.

On the other hand, a cryptocurrency exchange provides an online platform for buyers and sellers to trade cryptocurrencies directly with each other based on current market prices. Crypto exchanges are more common among average crypto traders but are less feasible for larger amounts. They offer a wide selection of cryptocurrencies and often introduce service tokens that help reduce trading fees. However, they are relatively unsafe and vulnerable to hacking incidents.

When deciding between a broker and a crypto exchange, consider your level of experience, the amount you want to trade, the range of cryptocurrencies available, the fees and commissions, the level of convenience and security, and whether you want direct or indirect trading.

Creating and verifying your account

Choose a Broker or Exchange:

Firstly, you need to select a cryptocurrency broker or exchange that suits your needs. Brokers offer user-friendly interfaces and simplify the process of purchasing crypto, but they may charge higher fees. On the other hand, exchanges often have lower fees but can be more complex with advanced charts and trade types. Examples of well-known exchanges include Coinbase, Kraken, and Binance.

Sign Up and Verify Your Identity:

After choosing a platform, you'll need to create an account and verify your identity. This typically involves submitting proof of identification, such as a government-issued ID or passport. The verification process is essential to prevent fraud and meet regulatory requirements.

Set Up Your Account Security:

Make sure to enable two-factor authentication and use a strong password to secure your account. Some platforms may also allow you to set up additional security questions or biometric authentication for added protection.

Complete the Know Your Customer (KYC) Process:

Many platforms will require you to complete a KYC process, which may include providing additional personal information such as your address, date of birth, and sometimes even a selfie to match your appearance with your ID.

Link Your Bank Account:

To deposit funds into your crypto account, you'll need to link your bank account. This can be done by providing your account and routing numbers or using a debit card associated with your bank. Ensure that your bank allows transactions with cryptocurrency exchanges.

Verify Your Payment Method:

Before you can start investing, you may need to verify your payment method. This could involve a small test deposit or withdrawal to confirm that you own the bank account. This step ensures that your transactions are secure and helps prevent fraud.

By following these steps, you'll have successfully created and verified your account on a cryptocurrency platform. Remember always to do your research, understand the risks involved, and never invest more than you can afford to lose. Happy investing!

Depositing cash to invest

Choose a Broker or Crypto Exchange:

Select a platform that suits your needs, such as Coinbase, Binance, or Kraken. These platforms offer a range of cryptocurrencies and easy-to-use interfaces. Some exchanges may only allow the purchase of crypto using another crypto, so ensure your chosen exchange accepts fiat currency deposits.

Create and Verify Your Account:

Sign up and create your account on the chosen platform. You may need to verify your identity by submitting documents and completing the Know Your Customer (KYC) process. This step is essential to prevent fraud and meet regulatory requirements.

Deposit Cash to Invest:

Link your bank account or debit card to your crypto account. Transfer the desired amount of funds into your crypto account. Some platforms may charge fees for deposits, so check the fee structure beforehand.

Place Your Cryptocurrency Order:

With funds in your account, you can now place your first cryptocurrency order. Decide which cryptocurrency you want to purchase and enter the amount you wish to buy. Most exchanges allow you to purchase fractional shares of high-priced cryptocurrencies.

Remember that investing in cryptocurrency is speculative and carries risks. The market is highly volatile, and you may lose some or all of your investment. Always do your research and understand the potential risks before investing.

Placing your first cryptocurrency order

Once you have chosen a broker or exchange and set up your account, you can place your first cryptocurrency order.

There are hundreds of cryptocurrencies to choose from, ranging from well-known names like Bitcoin and Ethereum to more obscure cryptos like Theta Fuel or Holo.

When you decide which cryptocurrency to purchase, you can enter its ticker symbol – for example, Bitcoin's ticker symbol is BTC – and how many coins you’d like to purchase. With most exchanges and brokers, you can purchase fractional cryptocurrency shares, allowing you to buy a sliver of high-priced tokens like Bitcoin or Ethereum that otherwise take thousands of rupees to own.

You can also buy and sell cryptocurrencies through traditional brokers, crypto exchanges, or certain payment services such as PayPal.

If you want to own the currency directly, you can use crypto exchanges, which offer a wider array of cryptocurrencies beyond Bitcoin and other popular coins.

If you want to trade futures, you can use traditional brokers. This option offers higher risk and higher reward, but you will not be able to own the currencies directly.

• Coinbase Global (COIN): A top cryptocurrency trading exchange that made its initial public offering (IPO) in April 2021.
• Block and PayPal Holdings: Block's Cash App consumer-facing application began allowing Bitcoin trading in late 2017.
• Canaan and Hut 8 Mining: Canaan designs high-powered, application-specific integrated circuit (ASIC) machines for Bitcoin mining. Hut 8 Mining is a popular Bitcoin mining stock that generates strong cash flows.
• Meta Platforms and Shopify: Meta Platforms attempted to develop a new cryptocurrency called Diem. Shopify allows merchants to accept cryptocurrencies as payment through its integration with cryptocurrency payment processor CoinPayments.
• Robinhood Markets: A popular discount brokerage app that allows users to buy stocks, options, rare metals, and now, cryptocurrencies.
• CME Group: Operates the world's largest financial derivatives exchange, trading futures and options on various assets, including Bitcoin and Ethereum.

Selecting a storage method

When selecting a storage method for your cryptocurrency, you have several options. These include leaving your crypto on the exchange, using a hot wallet, or opting for a cold wallet. Here's a more detailed look at each of these storage methods:

• Leaving Crypto on the Exchange: When you buy cryptocurrency, it is typically stored in a crypto wallet attached to the exchange. This can be a convenient option, but if you prefer a different wallet provider or want to move your crypto to a more secure location, you can transfer it off the exchange to a separate hot or cold wallet. Depending on the exchange and the size of your transfer, there may be a small fee for this.
• Hot Wallets: Hot wallets are crypto wallets stored online and run on internet-connected devices like tablets, computers, or phones. They are convenient and easily accessible, but there is a higher risk of theft since they are connected to the internet.
• Cold Wallets: Cold wallets are not connected to the internet, making them the most secure option for holding cryptocurrency. They are external devices like USB drives or hard drives. However, you need to be careful with cold wallets because if you lose the associated key code or the device fails, you may never be able to retrieve your cryptocurrency.

It's important to carefully consider the level of security and accessibility you need when selecting a storage method for your cryptocurrency. Additionally, always remember that investing in cryptocurrency is a risky endeavour, and there is a possibility of losing some or all of your investment.

Frequently asked questions