How to Invest in Crypto: A Guide for Beginners

Key takeaways

You can invest in crypto by buying it on an exchange, purchasing crypto-related stocks, or investing in a blockchain exchange-traded fund (ETF).

• Cryptocurrency mining and crypto individual retirement accounts (IRAs) offer additional avenues for investing in crypto.

• Cryptocurrency is a high-risk investment, so taking the time to research the cryptocurrency space is essential to make an informed decision.

• You can invest in cryptocurrency with the required valid form of identification and a bank account.

Discover key crypto investment considerations and prerequisites for entering the crypto space. Afterward, if you’re ready to gain a deeper understanding of decentralized finance, enroll in the Decentralized Finance (DeFi): The Future of Finance Specialization. Beginner-friendly, this program covers lending and underwriting, financial regulation, interoperability, and more.

What is crypto?

Crypto, or cryptocurrency, is a form of digital money founded on blockchain technology. It is encrypted and decentralized, which secures the currency and prevents its value from being manipulated by a government agency or central bank. The idea of cryptocurrency is that it is a uniform currency that can be used globally; instead of having different currencies in different nations, cryptocurrency retains the same value everywhere.

While many people invest in cryptocurrency as they do other stocks, they can also use it to buy goods and services in the same way other forms of money can. However, cryptocurrency is much more volatile than other forms of payment, so owning one “coin” of cryptocurrency could be worth vastly different amounts daily. 

What is crypto investing?

Investing in cryptocurrency means buying cryptocurrency (or putting money into a related fund) with the intention of the investment increasing in value over time. Essentially, you are buying some cryptocurrency at the current rate and hoping that your purchase value will increase. Ideally, the cryptocurrency increases in value, and so does the value of your portfolio, so you can make money from the investment. 

How to invest in crypto for beginners

There are many ways to invest in cryptocurrency, such as coins, stocks, ETFs, and more, each with its own level of risk. Taking the time to learn about each type of investment can ensure you are well-informed and can decide which investment is right for you.

1. Buy crypto directly.

To buy crypto directly, you will need to use a cryptocurrency exchange service, such as Coinbase or Robinhood. To do this, you make an account with the platform and go through a verification process. After this, you can link your bank account and make your first purchase.

2. Mine crypto.

Cryptocurrency mining is the process of "digging up" new crypto coins by solving math puzzles and verifying blockchain transactions. To mine cryptocurrency, you will likely need to complete a verification process and invest in mining software and hardware.

Read more: What Is Crypto Mining? Cryptocurrency Mining Explained

3. Buy crypto-related stocks.

Investing in companies that are related to cryptocurrency, such as Robinhood Markets, Inc., is another way to invest your money in the crypto market. Buying stock in these companies lets you indirectly invest in cryptocurrency.

4. Invest in blockchain ETFs.

Similar to investing in crypto-related stocks, when investing in a blockchain ETF, you will invest in companies that support cryptocurrency rather than the actual coins. Blockchain ETFs include a variety of companies, from those that focus on developing and maintaining the blockchain to companies that directly benefit from blockchain technology.

5. Invest in a crypto IRA.

A crypto IRA gives you access to the tax advantages related to an IRA while letting you invest in cryptocurrency. You won't be able to contribute crypto directly to the IRA, so you have to find a custodian willing to accept crypto. 

What to consider when investing in crypto

Anyone can invest in crypto, but it can be beneficial to consider several factors (like risk tolerance) before you do. Cryptocurrency is considered a high-risk investment, so taking the time to research the cryptocurrency space is essential to the decision-making process.

Types of crypto

Understand the type of cryptocurrency you are investing in. Plenty of cryptocurrencies are on the market, so looking carefully at the differences in how they operate can help you choose coins for your investment portfolio. One such difference between coins is whether they are backed by hard assets, cash flow, or nothing at all. This affects the risk profile. Crypto not backed by a physical asset may not retain its value in the long run.

Risk

Before investing in cryptocurrency, it's important to know the risks. Cryptocurrency is still becoming established in modern economies, and large swings in value tend to be more common than in stocks. For this reason, some investors view the money invested in crypto as out of reach for the foreseeable future. Setting clear risk management guidelines can save you from crushing losses in the long run.

How much you can afford

Because of the volatility in cryptocurrency, you should consider how much you can afford to lose and still meet your financial goals. Staking your entire savings or retirement plan in cryptocurrency could lead to dramatic losses, and the timing of these losses can be difficult to predict. It's also important to pay attention to the tax consequences of buying cryptocurrency and transaction fees. Hidden costs could lead to spending more than you bargained for. 

Do you need a degree to be a crypto investor?

You don’t need a degree to invest your own money or assets. Anyone with a valid form of identification and a bank account can invest in cryptocurrency. However, taking a course online can help you gain an in-depth understanding of different coins, platforms, and the direction of the cryptocurrency industry. If you want to invest in cryptocurrency for others, you will likely need a degree or certification in finance or investing to land a position in this field.

How can I keep my crypto safe?

Using cold wallets, such as hardware or paper wallets, can provide increased security for your crypto assets. For added security with online wallets, consider using strong, unique passwords and enabling two-factor authentication (2FA), especially on exchange accounts.

Top courses and certifications that can help in crypto investing

The CryptoCurrency Certification Consortium (C4) is a non-profit organization that offers certifications for professionals who want to demonstrate their knowledge of cryptocurrency. Its certifications include the three listed below and a Spanish version of the Certified Bitcoin Professional certificate:

• Certified Ethereum Professional (CEP)

• Certified Bitcoin Professional (CBP)

• CryptoCurrency Security Standard Auditor (CCSSA)

Earning a certificate can help open doors for careers in cryptocurrency or provide a way to deepen your knowledge before investing. Each certification has a specific focus and allows you to focus your knowledge on a type of cryptocurrency or process.

Learn more about crypto and finance with our free resources 

Join Career Chat on LinkedIn to get weekly updates on popular skills, tools, and certifications. Then, continue your learning journey with cryptocurrency with our other free digital resources:

• Structure your learning: Blockchain Learning Roadmap: From Beginner to Expert

• Take a quiz: Which Finance Course Should You Take? Find Out in 1 Minute

• Hear from a pro: 8 Questions with an Expert: Google Financial Data Analyst

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