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The No-Nonsense Guide To Investing In Cryptocurrency

Looking to invest in cryptocurrency? Read this guide to find out how you can buy cryptocurrencies like Bitcoin, Ethereum, Solana, Dogecoin, and more in 5 simple steps.
November 22, 2021

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Cryptocurrencies like Bitcoin, Ethereum, Dogecoin, and others have taken the world by storm. The returns that some cryptos have offered have been remarkably higher than assets like stocks and real estate.

That’s why everybody wants to own a piece of popular cryptos, especially when they’re still growing and relatively affordable. But the thing is, the world of crypto is relatively new to almost everyone.

Most people who would like to invest in crypto may find it difficult to understand how to buy cryptocurrency due to a lack of clarity on the basics. If you’re one of those people, don’t worry. 

We’ve got you covered! In this blog, we’ll walk you through the 5 simple steps required to invest in crypto. Stick around till the end to get a list of the best cryptocurrency to invest in by market cap.

What Is Cryptocurrency?

A cryptocurrency is a digital asset that’s based on blockchain technology. It can’t be counterfeited because transactions and pertinent details are logged in a decentralized ledger. 

The validity of the transactions can be confirmed with digital signatures. This immediately adds a layer of security and trust that’s otherwise dependent on traditional gatekeepers like banks. 

The decentralized nature of crypto means that no one single entity can control it, including the government. Not to forget, cryptocurrencies can be used to buy goods and services. 

In fact, several big brands like Tesla, Virgin Galactic, Shopify, Dallas Mavs and Acker Wines have begun accepting crypto payments. Enthusiasts point to these factors and the potentially high returns as the USP of investing in crypto. 

What Do You Need To Invest In Cryptocurrency?

You’ll see similarities in the pre-investment flow of how to buy a cryptocurrency and other assets like stocks and mutual funds. All you need to invest in a crypto is:

  • KYC documents (Aadhaar & PAN for Indians)
  • Bank account
  • Crypto wallet (Hard or Digital Wallet)

Now that you know what’s needed to start investing in crypto, let’s move on to the simple steps involved in buying crypto for the first time. Hint: it involves crypto exchanges and wallets.   

5 Steps To Invest In Cryptocurrency

Regulatory uncertainty and speculation aside, it’s super simple to invest in crypto. Here’s what you need to do to get started. 

1. Find A Cryptocurrency Exchange

A cryptocurrency exchange is a place where you can buy and sell (trade) cryptos. Think of these crypto exchanges as the middleman who puts buyers and sellers of cryptos in touch. 

Most of these exchanges are accessible in the form of a website, app, or both. The most popular cryptocurrency exchanges include (but are not limited to):

  • Binance
  • Coinbase
  • FTX
  • Kraken
  • KuCoin
  • WazirX
  • CoinDCX
  • CoinSwitch Kuber

Since there’s an absence of crypto regulation, it’s important to choose the cryptocurrency exchange carefully. Look for leading indicators like the number of users, their reviews, and the authenticity of the brand.  

2. Complete KYC Formalities

Just like any fintech platform, you’ll have to go through a KYC process that’s specific to each cryptocurrency exchange. You’ll need to furnish simple docs to verify your identity, which is contingent on your location. 

3. Fund Trading Account/Link Crypto Wallet

Depending on the exchange you’ve chosen, you’ll have to either: 

  • Open a trading account and fund it 
  • Link a crypto wallet to your bank account

Transferring money to a trading account is fairly straightforward. Most exchanges like WazirX have this option where you can use internet banking or Google Pay to transfer funds.

On the other hand, linking a crypto wallet to a bank account is required by certain exchanges. Some crypto exchanges provide their own wallet, termed “hot wallet” so that you can store your crypto without hassle. 

Investors are also known to use “cold wallets” to store crypto. A cold wallet is a piece of hardware much like a regular hard disk. Either way, you’ll have to link your bank account to the trading account or wallet. 

4. Start Investing In Cryptocurrency

This is perhaps the most important and honestly, the most difficult part of the whole process. You’ll have to do your fair share of research thoroughly before investing in cryptocurrency. 

Most investors tend to gravitate towards popular cryptos like Bitcoin, Ethereum, XRP, Solana, Polkadot, USDT, and more while others are known to spot cryptos that are supposedly future winners. 

5. Choose How You’ll Use Cryptocurrency

You’ve registered on the crypto exchange, done the KYC, linked your bank account to the wallet or trading account, and invested in the crypto that you’ve always wanted to own. Great!

This means we’ve moved past the stage of “how to buy crypto” and have entered the broad domain of “what to do with crypto”. There are multiple answers to this question, some of which include:

  • Stay invested and sell for a future profit 
  • Tap into swing trading and look for short term profit
  • Use crypto to buy goods and services
  • Exchange one crypto for another

Eventually, it all boils down to what you want to get out of your crypto investments. That said, let’s look at some of the factors you should be wary of before investing in crypto. 

3 Things To Consider Before Investing In Cryptocurrency

1. Volatility 

Cryptocurrencies are known to be purely speculative assets that are prone to rampant volatility and price fluctuations. Investing in cryptocurrency thus carries significant risks.  

2. Intrinsic Value

According to experts, cryptocurrencies have no intrinsic value primarily because they’re not backed by the government or issuing authority. This is why crypto is speculative and by association, extremely volatile. 

3. Uncertainty & Legality

Most governments are dumbfounded by crypto and don’t know whether to ban it, regulate it, come up with their own crypto, or all three. That’s why there’s a lot of uncertainty surrounding crypto. 

Conclusion

Buying and selling cryptocurrencies like Bitcoin or Ethereum can be done through a recognized crypto exchange like Coinbase or Binance. You’ll have to go through the KYC and verification process.

After that, you can fund your account to start investing in crypto. That said, investing in crypto carries significant risks like volatility and uncertainty along with the possibility of certain coins going to 0.  

The naysayers of crypto point to the lack of intrinsic value being the reason why crypto has no future use case. However, there’s been mainstream adoption of cryptocurrencies across different domains. 

Cryptos can be used to pay for goods and services even if they can’t be converted into fiat currencies. For example, Dallas Mavs began allowing fans to buy merchandise and tickets using Dogecoin in March 2021. 

Best Cryptocurrencies In 2021 By Market Cap

Name

Ticker

Market Cap

Bitcoin

BTC

$1,115,193,207,631

Ethereum

ETH

$491,072,533,176

Binance Coin

BNB

$97,490,749,974

Tether

USDT

$73,828,275,516

Solana

SOL

$65,379,742,889

Cardano

ADA

$61,061,654,456

XRP

XRP

$49,692,242,065

Polkadot

DOT

$38,244,282,146

USD Coin

USDC

$34,436,112,791

Dogecoin

DOGE

$30,205,841,351

Note: Facts & figures are true as of 19-11-2021. None of the information shared here is to be construed as investment advice. Exercise caution when investing in unregulated assets like cryptocurrency. 

Shriram Shekhar
Shriram is a Content Marketer at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. He has developed cutting edge IT products for over 2 years before turning to his passion for the written word. Shriram’s love for philosophy, product development, and empowering people through quality content is what got him to Cube Wealth.

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