Do you want to invest in cryptocurrencies? Here’s an easy guide to get you started

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Crypto or cryptocurrencies refer to digital assets created using cryptographic techniques and powered by blockchain technology to make transactions possible. The blockchain ledger is distributed and electronic, allowing network participants to audit and verify transactions without the need for 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 problem of “centralization” in the traditional banking system. After a decade of Bitcoin being introduced, other digital assets like Ether, Dogecoin, Litecoin, and XRP are also on their way to mainstream adoption. Countries like the US, UK, Singapore, India, etc., are making efforts to regulate cryptocurrencies, showing that crypto is here to stay!

So, if you haven’t tried investing in cryptocurrencies yet, here is a simple guide to start exploring cryptocurrencies.

Buy cryptocurrency directly

You can choose to directly buy and store one or more cryptocurrencies by following the instructions below.

Step 1: Select a crypto exchange or broker

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 let you trade crypto for crypto.

On the contrary, the crypto broker is an intermediary who trades on your behalf. Please note: Crypto brokers may not allow you to transfer funds off the platform. So choose wisely

Step 2: Create and verify your account

After choosing a crypto exchange or broker of your choice, you must register for an account and verify your identity before proceeding. This is a mandatory requirement to comply with the regulatory requirements of a jurisdiction where your crypto exchange/broker operates.

These requirements may require you to upload a copy of your personal identification documents such as passport, national ID, driver’s license, or in some cases, selfie as well.

Step 3: deposit funds

To buy 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. Beware, credit card charges can be expensive. You may need to wait a few days before using the money you deposit to acquire cryptocurrency, depending on the exchange or broker and your funding method.

Step 4: Place your cryptocurrency order

Once you have funds in your account linked to an exchange or broker, you can buy any crypto-asset from over hundreds available in the crypto space. You might want to opt for widely known names like Bitcoin or Ethereum or coins like Shiba Inu or Dogecoin.

To get started, search for the crypto of your choice using its ticker symbol, for example, BTC for Bitcoin and DOGE for Dogecoin. Enter the number of coins you are willing to buy to complete your transaction.

Step 5: Select a crypto wallet to store your coins

You cannot get compensation if you lose your crypto assets. Therefore, you should be careful with your funds and leave your crypto assets on the exchange of your choice 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, while cold wallets are offline wallets in the form of a USB drive or hard drive.

Cold wallets, on the other hand, should be used with caution: if you lose the key code associated 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 buying cryptocurrencies directly, you can invest in crypto exchange-traded funds (ETFs) or invest in cryptocurrency companies.

Investing in Crypto Exchange Traded Funds

Rather than investing in an individual crypto asset, put 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 the knowledge and time-intensive operations associated with crypto token selection are all benefits of ETFs.

The ProShares Bitcoin Strategy ETF was the first cryptocurrency ETF to start trading in October 2021. On the other hand, this ETF invests in Bitcoin futures rather than the asset directly.

Invest in cryptocurrency companies

You can buy shares in companies that use or own cryptocurrencies and the blockchain that enables them – if you prefer to invest in companies that offer real products or services that are subject to regulatory scrutiny but still want exposure to the cryptocurrencies.

To buy shares in publicly traded companies like PayPal, you will need an online brokerage account (PYPL). This payment technology company is already famous among individuals who buy things online and send money to family and friends. In 2021, it expanded to allow customers to buy and sell select cryptocurrencies using their PayPal and Venmo accounts.

Another interesting company may be MicroStrategy Incorporated (MSTR), which has many cryptocurrencies on its books, followed by crypto mining companies like Bitfarms Ltd. (BITF) and Marathon Digital Holdings Inc. (MARA).

(Guneet Kaur is Chief Technology Editor at Cointelegraph)

Warning: This article contains the author’s own opinions and should be treated for educational purposes only.

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Posted: Sunday, May 01, 2022, 07:00 IST

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