Even though the cryptocurrency market has cooled down substantially since the incredible bull run of 2017, the market is as hot as ever.
Every day tons of new investors decide to test their luck, and more importantly, their skill on the highly volatile cryptocurrency market.
However, before you start investing in cryptocurrencies, you need to understand how the market works and identify the differences between these types of investments and other instruments.
Luckily, we have all the experience needed to give you a quick introduction on how to invest in cryptocurrencies so let’s get right to it.
Two Ways of Investing in Cryptocurrencies
First and foremost you have to choose how you want to invest in cryptocurrencies because there are currently two ways to do it.
The first method we’ll discuss is the “traditional way” of buying cryptocurrencies and an easy way to get started immediately, while the second method is a bit more complicated.
Invest Using an Exchange
The most common way of buying cryptocurrencies is to do so directly from a cryptocurrency exchange. In most cases, you have to start by investing in either Bitcoin or Ethereum and then use those funds to buy other cryptocurrencies. The reason for this is that many of the leading exchanges do not support fiat to cryptocurrency trading.
An easy way to do this is to go with an established exchange such as Coinbase where you can buy BTC, ETH, LTC, and XRP and then either keep the initial investment or transfer the funds to an exchange where you can invest in other digital currencies.
If you’re planning to invest long-term, we recommend that you also make sure you protect your investments, but more about that in a second.
Trade Cryptocurrencies Using a Broker
The second method that you can use to invest in cryptocurrencies is to use forex and CFD brokers. All modern investment solutions today like eToro and Plus500 These brokers were some of the first to jump on the cryptocurrency bandwagon.
Now, some brokers only allow you to trade cryptocurrencies as a CFD or as currency pair with other digital or fiat currencies. However, lately, it has become increasingly more common for brokers to offer both derivatives as well as the asset itself.
In other words, cryptocurrency brokers offer a combination of both trading and investment opportunities.
Using Wallets to Buy Cryptocurrencies
As mentioned, keeping your cryptocurrencies safe and storing them properly is key to succeeding and we go into details below. First, we wanted to highlight that there are cryptocurrency wallets that can be used for storage as well as for when you want to spend your cryptocurrencies.
Additionally, some of the cryptocurrency wallets also allow you to invest in cryptocurrencies using a system that’s similar to the above-mentioned exchanges.
Safekeeping Your Investments
One of the things that makes a cryptocurrency investment different from other more traditional investments is that you are responsible for storing and protecting your own investments.
Most cryptocurrency exchanges today use incredible safety measures to protect their clients’ funds, although cyber attacks are still quite common and exchanges are far from the safest storage option. Instead, cryptocurrency exchanges should be used to purchase digital currencies as well as trading, but if you want to keep your assets for longer other storage is recommended.
Today there is a multitude of different wallets and storage units for cryptocurrencies. Some of these are available online while others are cold storage or offline storage such as the Ledger Nano S or even a paper wallet.
We always recommend keeping your assets in cold storage and that you protect your keys with the utmost care. If you ever lose your keys or someone else steals them, you won’t be able to recover the cryptocurrencies.
Because of this, we advise you to not settle for any simple wallet. Instead, it is paramount that you actually do your research and then store your investments wherever you think is the safest and most practical place.
