Cryptocurrency

Find out how to invest in cryptocurrency today. This page will show you all the different ways to invest in cryptocurrency and discuss its pros and cons.

Invest in Cryptocurrency in 2021

As cryptocurrency investing continues to gain popularity, here is a cheat sheet that all budding investors should have: learn the basics of digital coins and the technology they’re based on, explore the different ways to buy crypto assets and understand the risks involved. 

Best way to Invest in Cryptocurrency in 2021

There are different avenues to buy digital coins but for the novice investor, the best way of investing in cryptocurrencies is still through a cryptocurrency exchange or a brokerage. 

While there are several things to consider like transaction fees and storage availability, we have selected the best options so that you can get started with ease.

1
Minimum Deposit
$50
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User Score
10
More than 3,000 assets, including currencies, stocks, cryptocurrencies, ETFs, indices and commodities
Buy crypto, or trade cryptocurrencies via CFDs
CopyPortfolios: Innovative, fully managed investment strategies
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
2
Minimum Deposit
$50
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User Score
7.5
Trade and invest in over 25 cryptocurrencies
Extremely simple user interface
Over 68 million customers
3
Minimum Deposit
$50
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User Score
6
Hot wallets include insurance to protect your assets from theft and hacking attempts
4
Minimum Deposit
$50
Exclusive Promotion
User Score
4.5
First transaction fee free
24/7 customer service
Instant payouts

What is Cryptocurrency

Cryptocurrencies are a form of digital assets based on a network that is distributed across a large number of computers. This decentralized nature means that no central authority, such as a bank or government, has any control over its operation. Instead, blockchain technology is used as a public record of all transactions. Blockchains also ensure the integrity of each transaction.

Pros:

  • Cryptocurrencies have the potential for high returns, and they offer protection from any payment fraud. Additionally, they allow for immediate settlement as well as international transactions with ease. Remittance is an area where several companies and start-ups are now able to offer different forms of money transfer methods at a fraction of the cost using digital currency-backed by blockchain technology. 

Cons:

  • Unlike traditional currencies, the value of digital coins is determined by supply and demand– making them speculative, unpredictable and hard to accurately value. The high level of volatility may lead to large losses. 

How does Cryptocurrency Work

At approximately $1 trillion in market capitalization, Bitcoin is the market leader and by far the most widely transacted digital coin. It is worth noting that other digital tokens, such as altcoins, will vary as to how they work.

Cryptocurrencies such as Bitcoin have no physical coins within the real world; they are just balances kept on a public ledger that anyone can access and view freely.

All of the transactions which occur through the usage of cryptocurrency tokens are verified by computing power. In the case of bitcoin, this is what is known as the Proof-of-Work (PoW) consensus algorithm. 

The blockchain is this collection of blocks where all of the computers running the blockchain need to have the same list of blocks and transactions to ensure its security.

This means that anyone can see the transactions and that the system cannot be manipulated as a result.

A transaction in this case is the transfer of value between different cryptocurrency wallets, reflected on the blockchain. 

The wallet is responsible for keeping a secret piece of data known as the private key or seed, which is required in order to access the tokens within the wallet.

In short, cryptocurrencies are kept on the ledger and travel from one cryptocurrency wallet to another. 

PoW-based coins like Bitcoin can be generated through miners, who find solutions to complex cryptographic puzzles and are rewarded in the form of the native cryptocurrency asset within the specific network.

The funds are received within the nodes or miners’ cryptocurrency wallets. There are two types of cryptocurrency wallets, hot wallets, and cold wallets. 

Hot wallets are the ones that have an internet connection, like web-based wallets, or desktop wallets, while cold wallets are cold storage devices that can disconnect from the internet.

Ways to Buy Cryptocurrency

There are numerous ways through which you can invest in cryptocurrencies.

You have CFD Brokers, exchanges, P2P marketplaces, ETFs, index funds, mutual funds, trusts, debit cards, different applications, and wallets.

To get started with cryptocurrency investing, you’ll need an account that will give you access to these options.

Additionally, you need to ensure that you have your own personal digital wallet. Many cryptocurrency exchanges or brokerages will typically provide you with an online wallet. 

However, that wallet is typically locked to the exchange or brokerage in question and will not let you have full control over your private keys.

It is always worth doing your due diligence on each cryptocurrency token that you are interested in buying and review some cryptocurrency investment strategies beforehand.

How to Invest in Cryptocurrency

There’s a multitude of ways through which you can invest in cryptocurrencies:

  • Cryptocurrency brokers. A cryptocurrency broker is a company that connects you with the cryptocurrency market. It is the middleman standing between you and the cryptocurrency that you want to purchase, where the broker buys up a large number of cryptocurrency tokens and offers them to you on its platform. This allows you to always have access to cryptocurrency tokens. Here, the brokerage sets the price of the assets.
  • Cryptocurrency exchanges. In cryptocurrency exchanges, you are given the opportunity to invest in cryptocurrency tokens. However, unlike the case with the brokerage, here the market determines the price of the digital assets on the exchange. These exchanges match orders, which means that there have to be at least two traders for the trade to execute.
  • Cryptocurrency ETFs. These are funds through which you can access a diversified portfolio of cryptocurrency tokens or coins for you to trade. ETFs offer transparency and a higher level of liquidity, which is their main point of appeal.
  • Cryptocurrency index funds. A cryptocurrency index fund allows you to buy shares within a fund instead of directly investing in coins or other digital assets. Within these index funds, experts use their knowledge and data to invest your money in multiple tokens, depending on the fund’s index.
  • Cryptocurrency mutual funds. For investors who do not want to own cryptocurrencies through a digital wallet or exchange, mutual funds exist. These are funds that consist of different cryptocurrencies and give small or individual investors access to diversified as well as professionally managed portfolios. 
  • Cryptocurrency trusts. Cryptocurrency trusts typically hold digital currency and allow investors to trade shares through a brokerage or a retirement account instead of through the usage of a cryptocurrency exchange.
  • Cryptocurrency debit cards. Many cryptocurrency brokerages or exchanges will offer the user the opportunity to purchase crypto using debit cards. They will typically load up the account through their credit card and use the funds loaded onto the account to purchase a cryptocurrency token directly.
  • Cryptocurrency apps. There are a multitude of cryptocurrency applications out there available for a multitude of operating systems such as iOS and Android that will give investors an opportunity to invest in cryptocurrencies with ease.
  • Cryptocurrency wallets.  In order to get started in investing in cryptocurrencies, you will firstneed a cryptocurrency wallet. These wallets essentially provide you with an address to which brokerages, exchanges, or other cryptocurrency investors can send you cryptocurrency and provide you with the opportunity to send cryptocurrencies to other people, exchanges, or brokerages.

Is it Safe to Invest in Cryptocurrency Right Now?

Investing in cryptocurrencies will always come with a level of risk.

Buying cryptocurrency today is a safe option in terms of security, as many audited, ensured, regulated, and licensed cryptocurrency exchanges out there that have a high level of security and live up to all Know-Your-Customer (KYC) and Anti-Money Laundering (AML) standards. Adding digital assets to your investments can also help diversify your portfolio, if done within reason.