How to invest in cryptocurrencies?
Crypto or cryptocurrencies refers to the digital assets created using cryptographic techniques. They are powered by blockchain technology to make transactions possible. The blockchain ledger is distributed and electronic, allowing network participants to audit and verify the transactions without the need of a third party like central banks. Bitcoin is the world’s first cryptocurrency, created in 2008 by an anonymous founder named Satoshi Nakamoto to solve the issue of ‘centralisation’ in the traditional banking system. Countries like the US, the UK, Singapore, India, etc., are putting efforts to regulate cryptocurrencies. You can opt to buy and store one or more cryptocurrencies directly by following the instructions below.
SELECT A CRYPTO EXCHANGE OR BROKER
STEP 1
Crypto exchanges like Coinbase, Binance, eToro, and Gemini allow buyers and sellers to trade cryptocurrencies with varying fee structures. You can buy crypto with fiat, or some exchanges will enable you to exchange crypto for crypto. The crypto broker is an intermediary that trades on your behalf.
CREATE AND VERIFY
STEP 2
After choosing a crypto exchange or broker of your choice, you need to sign up for an account and verify your identity before proceeding ahead. It is a mandatory to comply with the regulatory requirements of a jurisdiction where your crypto exchange/broker is operating. Such requirements may require you to upload a copy of your personal identification documents.
DEPOSIT FUNDS
STEP 3
To purchase cryptocurrency, you must first ensure that you have funds in your account. For example, you can fund your cryptocurrency account by linking your bank account or paying with a credit or debit card. You may have to wait for a few days before utilising the money you deposit to acquire cryptocurrencies, depending on the exchange or broker and your funding method. Credit cards, however, can be costly.
PLACE YOUR CRYPTO ORDER
STEP 4
Once you have funds in your account linked to an exchange or broker, you can buy any crypto-asset available in the crypto space. To begin, search the crypto of your choice using its ticker symbol. Enter the number of coins you are willing to buy to complete your transaction.
SELECT A CRYPTO WALLET TO STORE YOUR COINS
STEP 5
You may not get compensation if you lose your crypto assets. Therefore, you must be cautious of your funds and either leave your crypto assets on your chosen exchange or store them in hot or cold wallets. However, please note that hot wallets are online wallets and involve the risk of cyber theft as they are connected to the internet, whereas cold wallets are offline wallets in the form of USB or hard drive. Cold wallets must also be used with caution. If you lose the key code connected with them, or if the device breaks or fails, you may never be able to recover your digital currency.
ALTERNATIVE WAYS TO OWN CRYPTO
Instead of directly buying cryptocurrencies, you can invest in crypto exchange-traded funds (ETFs) or in cryptocurrency companies.
INVESTING IN CRYPTO EXCHANGE-TRADED FUNDS
Rather than investing in an individual crypto asset, park your funds in a pool of cryptocurrencies called ETFs that track the price of one or more digital tokens. Diversification, low cost of ownership, and outsourcing of knowledge, and time-intensive operations associated with crypto token selection are all advantages of ETFs.
INVESTING IN CRYPTOCURRENCY COMPANIES
You can acquire shares in firms that utilise or own cryptocurrencies and the blockchain that enables them — if you prefer to invest in companies with actual products or services that are subject to regulatory control but still want exposure to the cryptocurrency market.
To acquire shares in publicly traded firms like PayPal, you will need an online brokerage account (PYPL). In 2021, it expanded to allow clients to purchase and sell chosen cryptocurrencies using their PayPal and Venmo accounts.