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6 Steps to Start Investing in Cryptocurrency
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How to Begin Investing in Crypto: A Step-by-Step Guide

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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
By Niki Nikolaou
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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
on February 22, 2023 | 6 min
Updated on Jan 22, 2024
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Charles Archer
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Charles Archer is an experienced financial writer specialising in monetary law. With a background in stock market and private equity analysis, he’s worked for many years as a freelance investment author, and has had articles published in a wide range of regional and national titles, both online and in print. He holds a Master’s degree in Law from the University of Law, the UK’s largest legal training institution. Charles believes the key to successful investing lies in quality research, and aims to offer a unique viewpoint that investors cannot find elsewhere.
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The cryptocurrency market is projected to reach a value $4.94 billion, at a CAGR of 12.8%, by 2030. The market encompasses software (blockchains and mining software), hardware, crypto coins, decentralised apps (dApps), and much more, creating many opportunities to invest in this nascent yet highly valued market. Want to learn more about how to invest in cryptocurrencies and take advantage of their immense potential for profit? Read on.

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6 Steps to Start Investing in Cryptocurrency

How do I start investing in cryptocurrency? This is a common question and the first thing to understand is that the approach to start investing in cryptocurrencies is different from that of traditional asset classes. Here are some quick steps on how to start investing in cryptocurrency as a beginner

1. Understand How Cryptocurrencies Work

Cryptocurrencies are developed on distributed ledger technology (DLT). The ledger records all transactions on the blockchain. Crypto coins are a unique asset class, built on a blockchain with no centralised control or third-party intervention required for transactions.

Due to their lack of intrinsic value, fundamentals and associated valuation metrics determine the value of digital currencies. A few of the popular metrics that impact price are transaction speed, market capitalisation, trading volume, number of active addresses, and strength of the underlying project or the purpose/application of the blockchain ecosystem.

2. Know the Risks and Manage Them

Cryptocurrencies are infamous for their price volatility. Therefore, risk analysis and management are essential. Additionally, cryptos are not yet globally accepted as a store of value. Only Bitcoin has reached a point where some big brands, like Tesla and even UNICEF, accept it.

Cryptos are minimally regulated, so there is no litmus test to prove whether a coin has the potential to deliver outsized returns. However, a few of the popular ones and some new ones with strong fundamentals are the preferred choice of investors to minimise risks. Some traders pick the most volatile coins, with the aim to make small profits from the rapid price fluctuations. These earnings can then be converted into fiat, irrespective of how the digital currency eventually turns out.

3. Watch the Volatility

The meteoric rise and then nose-dive within a month exhibited by Terra (LUNA) recently is an example of how cryptocurrencies can bring both surprises and shocks to investors. So, beginners should be wary of choosing cryptos that exhibit drastic moves. As tempting as the price moves might be, the risks may easily outweigh the potential.

It may be wiser to start with a small investment on projects with strong fundamentals underlying the cryptocurrency and gradually grow your investment. However, experienced traders, equipped with sophisticated algorithms to automate market entry and exit, may be in a better position to take advantage of such dramatic moves.

4. Only Invest What You Can Afford

Cryptocurrencies can perform extremely well sometimes, such as MetaversePay rising by more than 1,800% in a single day on June 24, 2022. On the other hand, Cardano (ADA) and Dogecoin (DOGE) are examples that the price can drop by more than 80% within the same timeframe. Therefore, it is best to not invest more than you can afford to lose in a single trade.

Remember that cryptocurrencies are not yet a universally accepted mode of payment. Moreover, there are thousands of them to choose from, often available for pennies. Investors need to commit only the capital that does not affect their everyday expenses, since a crypto coin may even take years to deliver profits.

5. Select a Cryptocurrency Broker

Traditional brokerages do not offer cryptocurrency investment facilities. To begin investing in cryptocurrencies, look for dedicated crypto exchanges and brokers.

Crypto exchanges and brokers often offer digital wallets, called custodial wallets. Alternatively, they connect with popular crypto wallets. You can start by funding your crypto wallet with fiat and then use it on the exchange to make crypto purchases. Remember that crypto transactions are anonymous, only the wallet addresses of the sender and receiver get recorded in the transaction.

Consider the minimum investment amount, ease of conversion to fiat, maker and taker fees, the number of cryptocurrencies offered and any additional perks when choosing a crypto broker.

6. Manage Your Investments

Use secure and reliable crypto wallets to hold the public and private keys that connect to the blockchain where the coins belong. Since the digital space is prone to theft and other forms of cybercrime, key-based security and 2-factor authentication are crucial. Keep the keys safe, as transactions or access to your assets requires the keys. 

You can choose from a hot (always connected to the network) or cold wallet (connected temporarily to carry out a transaction). Some wallets offer facilities such as lending and staking which may grow your crypto portfolio without active mining. However, the wallet might charge you for such facilities. MetaMask is the most popular crypto wallet that connects to almost all the top exchanges.

More Ways to Invest in Cryptocurrencies

Investing in crypto is not just about the coins. There is much more that this novel asset class can offer:

· Buying Crypto Outright 

You can buy cryptocurrencies directly from a crypto exchange/broker or from another investor who wishes to sell them. Exchanges are safer than an individual for buying cryptocurrencies outright.

Beginners can buy well-known cryptos, such as Bitcoin or Ethereum, or choose to invest in initial coin offerings (ICOs) for newly launched tokens. But due diligence is essential before investing in any new coin.

· Blockchain ETFs 

Investing directly in a coin with your own research may seem complex for beginners. They can choose to invest in Exchange Traded Funds (ETFs) that track the stock prices of companies that have invested in blockchain technology. This can also mitigate the volatility associated with crypto investments.

· Buying Crypto Stocks

Buying crypto stocks involves investing in the shares of a company that is directly involved in the digital assets sector. It includes companies that develop crypto mining software or blockchains and blockchain projects.

· Crypto Funds 

Beginners can invest in new altcoins or blockchain projects with high growth potential at a low cost with cryptocurrency funds. These funds are the portfolios of individuals or companies that manage diverse digital assets. Investors can buy shares in crypto funds and earn profits as the fund grows its basket of crypto assets. These may be capital funds or hedge funds, or you could divide your investment between the two for better exposure.

· Crypto CFDs 

Cryptocurrency CFDs allow investors to take advantage of price fluctuations of an alt coin or a crypto fund without owning the underlying asset. CFDs are derivative instruments that allow investors to take advantage of both rising and falling asset prices. CFDs can also be traded with leverage, which helps investors magnify their market exposure.

3 Best Cryptocurrencies for Beginner Investors

Based on market cap and their potential, the top 3 crypto coins to invest in are:

1. Bitcoin (BTC) 

Bitcoin is the pioneering crypto, which started trading in 2010. The underlying blockchain has never had a security breach and it is one of the most accepted cryptos for payments across the world. It is often called “digital gold.”

2. Cardano (ADA) 

Cardano has the capacity to process 250 transactions per second (TPS) and claims that it is 1.6 million times more sustainable than Bitcoin. It is designed with scalability as its primary goal, using two separate layers to carry out and validate transactions.

3. Meta Masters Guild (MEMAG) 

MMG is a blockchain that built the first dedicated Web 3.0 mobile games. The company accumulated over $4 million in the presale itself. The team believes that it will be a turning point for the play-to-earn model, with the primary focus on fun, rather than tokens.

Why Do People Invest in Crypto?

The increasing global demand for transparency and efficiency in the financial sector, a growing number of international transactions by small and medium businesses and individuals, and the need for higher levels of security within the financial system are propelling the growth of cryptocurrencies. A few popular reasons that attract people toward the digital asset class are:

  • The industry has diverse instruments for beginners to invest in and diversify their portfolios.
  • Digital currencies are inherently designed for safety against double spending and identity theft.
  • They offer an instant payment settlement mode, compared to fiat currencies.
  • Cryptocurrencies are more accessible and inclusive for emerging economies than the traditional markets.
  • Complete ownership and control lie with the user and no bank or intermediary is required to validate transactions.

Final Thoughts

Blockchain technology is growing rapidly and disrupting businesses across industries. Cryptocurrencies provide an opportunity to capitalise on this revolution. However, it is crucial to ensure thorough due diligence and manage volatility risks when investing in digital assets.

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About Niki Nikolaou
With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
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