Crypto trading can seem intimidating, especially if you are new to the market. But it doesn’t have to be complicated — there are just a few things you’ll want to know about before starting your journey into the world of crypto. Here are some tips and tricks to help you navigate the process:
1. Find A Wallet
The most important thing to do before diving into crypto trading is finding a wallet where you can safely store your coins. There are many different wallets out there, including hardware wallets like Trezor and Ledger, mobile apps such as Coinbase and Robinhood, online platforms like Binance and Kraken, and even paper wallets. Each type of wallet offers unique advantages and disadvantages, so make sure to research each one well before deciding what works best for you.
2. Understand Your Risk Profile
You might think that because crypto is relatively new, you don’t have much risk associated with it. However, the fact that blockchain technology is still developing makes it prone to hacking and theft. As a result, you could lose money if you invest in something without fully understanding the risks involved. For example, if you’re looking to invest $100, you probably shouldn’t put it all in one coin unless you understand how volatile those prices can be. Instead, spread your investment across multiple coins and keep track of the value of your portfolio over time.
3. Set Up An Autopilot System
Once you’ve found a wallet and set up an autopilot system, it’s time to actually begin trading. This way, you won’t have to worry about forgetting anything while you’re busy managing your portfolio. Some systems allow you to automate trades based on specific criteria, while others offer automatic buys once certain price points are reached. Either way, it’s always good practice to have a plan in place before you start making real investments.
1. Choose a Broker or Crypto Exchange
To buy cryptocurrency, first you must choose a broker or crypto exchange. There are many brokers out there, some of which offer both fiat currency trading and crypto trading. Some exchanges focus solely on crypto while others support fiat currencies. Here’s what you need to know about each type of brokerage.
A broker is a third party that facilitates trades. They take deposits from clients and provide access to markets. This gives traders the ability to trade without having to worry about liquidity, margin requirements, etc.
An exchange is where people go to buy and sell cryptocurrencies. These platforms usually provide market data and news feeds like traditional stock exchanges do. Exchanges enable peer-to-peer transactions and allow investors to connect directly with one another.
What Is a Cryptocurrency Exchange?
To buy cryptocurrency, first you must choose a brokerage or a crypto exchange. This decision will affect how easy it is to purchase digital currencies like Bitcoin, Ethereum, Ripple, Litecoin, etc. There are many different types of exchanges out there, each offering slightly different features. Some offer margin trading, while others allow you to trade without taking on additional risk. Others let you deposit fiat currency directly into your account. And some even provide a wallet where you can store your coins.
There are pros and cons to choosing one over another. For example, Coinbase offers free transactions up to $10,000 per month, whereas Kraken allows you to make unlimited transfers. Other factors include fees charged, customer support, security, and ease of use.
What Is a Cryptocurrency Broker?
Cryptocurrency brokers take the complex world of cryptocurrencies into the hands of everyday people. They provide an interface where you buy, sell, and hold digital currency without having to worry about technicalities like how much you pay for gas, electricity, and bandwidth. You don’t even have to know anything about blockchain technology.
Some charge higher fees than exchanges, some claim to be “free,” while others make money by selling information about your trades — including whether you executed it at the best possible market prices — to third parties.
Wealthsimple Crypto is one of those brokers. Its name says it all: Wealthsimple stands for wealth simplicity, and their mission is to help people build financial freedom through investing. With their brokerage, you can invest in different coins and tokens directly from your bank account.
While they’re undoubtedly convenient, you have to understand that you may face restrictions on transferring your cryptocurrency holdings off the site. For example, you might not be able to move your Bitcoin out of your Wealthsimple Crypto wallet.
2. Create and Verify Your Account
Once you decide on a cryptocurrency brokerage or exchange, you can log into your account and start buying and selling cryptocurrencies. Depending on the platform and how much money you want to invest, you may have to provide some personal information. This is an important step to avoid potential scams and ensure compliance with government regulations.
You may not be able to purchase or sell cryptocurrency until you finish verifying your identity. Some platforms require you to submit a photo ID such as a driver’s license or passport. Other platforms may ask you to submit copies of those documents along with a selfie proving your appearance matches what appears on the document.
3. Deposit Cash to Invest
To buy cryptocurrency, you’ll need to ensure you have funds in your digital wallet. If you’re looking to invest, it’s important to know how much money you have sitting around waiting to be used. You may want to consider depositing some cash into your account. There are several ways to do this depending on where you live.
Some exchanges in Canada will allow customers to link their bank accounts to their trading platforms. This allows you to fund your account directly from a bank account rather than having to pay fees to withdraw money from another source like a credit card.
If you don’t have access to a bank account, there are other options. For example, you could authorize a wire transfer from your bank to the exchange. Or, if you’re buying cryptocurrency with fiat currency, you could purchase it with a credit or debit card. But be aware that each option carries additional costs and risks.
4. Place Your Cryptocurrency Order
Once there is money in your bank account, you’re ready for the next step: placing your first cryptocurrency order. While some people use an exchange to trade one coin for another, others prefer to deal directly with a broker.
There are hundreds of cryptocurrencies to consider, each with its own unique characteristics. Some are designed to be used as currency, while others exist solely to provide a decentralized network where developers build applications and run smart contracts.
When you make your selection, you’ll see the price per unit of the crypto you’ve selected. You can either select the number of units you want to purchase, or you can enter a dollar amount and let the system figure out what the cost per unit is.
With most exchanges and brokers, it’s possible to purchase fractions of a single token. For example, Coinbase allows you to purchase 0.1 bitcoin for $10.99. This option is especially useful if you don’t know exactly how much you want to invest in cryptocurrency.
5. Select a Storage Method
If you want to keep your cryptocurrency safe, there are three main ways to do so:
1. Keep it on the exchange. When you buy cryptocurrency, it’s typically stored in a so called crypto wallet attached to the exchange. This way, you don’t have to worry about keeping track of your private keys. However, if your exchange gets hacked, your funds are still vulnerable.
2. Keep it offline. In some cases, you can store your cryptocurrency offline. For example, Coinbase offers customers the option to download a copy of their digital wallets directly onto a device. The downside is that you won’t be able to use those coins unless you upload the file to the same device.
3. Use a hardware wallet. Hardware wallets are devices that look similar to USB drives. They generate one-time passwords for you, making it hard for hackers to steal your coins. Some popular examples include Trezor and Ledger Nano S.
6. Confirm Your Transaction
After you’ve made all of your selections, you need to confirm your transaction. Once you click “Buy” (or whatever you named your order), you’ll be taken back to your exchange’s dashboard. Here, you should see a confirmation screen showing you the details of your completed order. If everything went according to plan, you’ll also see a green check mark appear next to the transaction.
7. Wait for Your Funds
After you place your order, you’ll need to wait until your payment clears before you can access your new cryptocurrency. Most exchanges will take anywhere from 1 hour to 3 days to process payments. During this time, your balance will remain at zero.
Alternatives Ways to Buy Cryptocurrency
Investing in cryptocurrencies isn’t always easy. Buying directly through exchanges or brokers requires either having a bank account or a credit card, neither of which most people have. There are some ways around this, though. One option is to use a brokerage firm to buy and sell cryptos. Another way is to use a peer-to-peer trading platform where you trade directly with other investors.
CoinSmart is one such site that allows you to do both. You sign up with just a username and email address, and once you’re verified, you can start buying and selling cryptos. And there are no fees to use the platform.
1. Wait for Crypto Exchange-Traded Funds (ETFs)
Cryptocurrency exchange traded funds (ETFs) are gaining traction among investors looking to invest in cryptocurrencies without having to manage multiple accounts. For example, Evolve Bitcoin ETF (NYSE Arca: EBBT) allows investors to purchase bitcoin futures contracts directly from the stock market.
The fund offers daily liquidity and access to the latest price information for bitcoin. In addition, it provides investors with the ability to short bitcoin and bet against rising prices.
2. Invest in Companies Connected to Cryptocurrency
If you’re looking to diversify beyond traditional investments into something less volatile, there are some ways to do it without taking too much risk. One way is to look for stocks of publicly traded companies that are involved in the crypto space. These include companies that produce technologies related to mining, exchanges, wallet providers, and even those that offer consumer-facing applications such as exchange platforms.
Here are three examples of companies worth considering:
Nvidia (NVDA) – This technology company designs and sells graphic processing units, which are the core components of the computers that power cryptocurrency miners. NVDA shares are down about 25% since hitting a record high in late December. But the stock is still trading above its IPO price of $55 per share.
PayPal (PYPL) – This payments platform already allows consumers to transfer money to each other and pay merchants via credit cards. Now, the company has added support for purchasing cryptocurrencies directly from its app. Many analysts think this could help PYPL grow its customer base and increase revenue.
Square (SQ) – This payment services provider for small business owners offers free tools that let them accept credit card payments and send invoices. SQ has been expanding into the cryptocurrency world, partnering with Coinbase to make it easier for consumers to purchase digital coins. SQ has acquired several startups in the space including Earnest, which helps consumers earn points while shopping.
