Seasoned investors continue to cross over from the more mature asset classes and regulators have eased off on the Crypto assault that led to the 2018 slump.
With Bitcoin and the broader market sitting at more than 50% below their all-time highs, there is still plenty of incentive to enter the crypto sphere.
For many, however, the crypto market may seem like a maze. There are a tremendous number of exchanges and brokers and that is before considering regulations imposed by regulators in recent years.
Investing in cryptocurrencies requires a level of due diligence not too dissimilar to the research involved in other more mature asset classes.
The volatility and sizeable returns on offer have certainly allowed investors to dream. After all, Bitcoin has yielded a mass number of Bitcoin millionaires, more commonly known as whales.
So, how do we invest in cryptocurrencies?
While there are multiple considerations, some are more important than others when looking to enter the crypto market.
Just jumping in on a whim that the majors will reach historical highs is a dangerous game. This is no dissimilar to jumping into the equity markets when they are sitting at record highs.
There is one material difference, however. The regulatory landscape has materially changed since late 2017. For this very reason, investors may continue to face plenty of uncertainty before the market can find a return to the hay days.
Understanding the key drivers and market characteristics are therefore particularly important.
Basic Essentials
In this guide, you will learn the key preparations that you need in order to build your cryptocurrency portfolio.
Before making an investment, deciding on the source of funds would certainly be step 1.
In spite of the current interest rate environment, it is recommended that you avoid funding the portfolio with debt.
Credit Card or Bank Account – Investors will, therefore, need to decide on cash or credit card. As an investor, you can either fund your crypto trading account with a debit/credit card or by funding with a bank transfer.
It is worth noting, however, that certain jurisdictions have banned the funding of crypto exchanges with credit cards. Some banks have even taken a step further and banned the transfer of fiat money to such exchanges.
Nonetheless, the simplest method to fund a crypto exchange account is with a credit/debit card. This does tend to come with higher fees and caps on transfer amounts, however.
Fiat to Bitcoin Exchange
First, you need to decide on which cryptocurrency or cryptocurrencies that you wish to trade.
You would then need to identify the exchanges that have the largest trading volumes for the chosen cryptocurrencies.
One consideration here is your source of funds. Not all exchanges allow fiat money deposits. A vast majority of exchanges restrict deposits to Bitcoin.
Carrying out the necessary research on the most appropriate exchange is important. If you are looking for an exchange that accommodates the purchase of Bitcoin with fiat money:
Coinbase is popular and easy to use, with a strong global presence. The exchange has the necessary security measures as well as delivering adequate liquidity for trading.
When searching for the right exchange, it is worth noting that each has its pros and cons. The important thing is to identify the exchange that, first and foremost, delivers on your personal requirements.
Other popular exchanges include:
These crypto exchanges not only cater to Bitcoin investors and traders but altcoins in general.
It’s also worth considering exchanges that offer a wider choice of cryptocurrencies and altcoins. This would allow you to diversify your investments and gain exposure to the broader crypto market.
We recommend that you use Coingecko to research the respective cryptocurrencies and volumes across the exchanges.
Bitcoin to Crypto Exchange
The next exchanges that you should look into are the ones you will be using for the Altcoins. Many of the smaller coins, my market cap, are generally not supported by larger exchanges. Generally speaking, the only way to buy those smaller coins is by buying them using Bitcoins or Ethereum.
On most exchanges, you need to deposit Bitcoins as you cannot buy coins directly from the exchange. This is why it’s crucial that you have a Fiat to Bitcoin Exchange first.
You can buy Altcoins from Binance, BitTrex, Kucoin, and Kraken.
Choose the Right Wallet
The next step in the crypto investment journey is to select the appropriate crypto wallets. It is essential to have your crypto wallet before buying any cryptocurrencies. You will need wallets to store your coins within your secure personal wallets.
While exchanges allow investors to hold purchases coins within assigned exchange wallets, it’s recommended that you withdraw your cryptos and hold them in private wallets. This protects you and your investments from hackers and theft. It is also worth noting that wallet compatibility also needs to be considered.
Crypto wallets to choose from include but are not limited to: