Crypto or cryptocurrencies refers to digital assets created using cryptographic techniques and powered by blockchain technology to make transactions possible. The blockchain ledger is distributed and electronic, allowing network participants to audit and verify transactions without the need for a third party such as central banks.

Bitcoin is the world’s first cryptocurrency, created in 2008 by an anonymous founder named Satoshi Nakamoto to solve the problem of ‘centralization’ in the traditional banking system. A decade after the introduction of Bitcoin, other digital assets such as Ether, Dogecoin, Litecoin, and XRP are also heading towards mainstream adoption. Countries like the US, UK, Singapore, India, etc. are making efforts to regulate cryptocurrencies, proving that cryptocurrencies are here to stay!

So if you haven’t tried investing in cryptocurrencies yet, here is a simple guide to get you started exploring crypto currencies.

Buy cryptocurrencies directly

You can choose to buy and store one or more cryptocurrencies directly by following the instructions below.

Step 1 – Select a Crypto Exchange or Broker

Cryptocurrency exchanges like Coinbase, Binance, eToro, and Gemini allow buyers and sellers to trade cryptocurrencies with different fee structures. You can buy crypto with fiat, or some exchanges will allow you to trade crypto for crypto.

On the contrary, the cryptocurrency broker is a middleman who trades on your behalf. Beware: Cryptocurrency brokers may not allow you to transfer funds outside of the platform. So choose wisely

Step 2: Create and verify your account

After choosing a crypto exchange or broker of your choice, you need to sign up for an account and verify your identity before proceeding. It is a mandatory requirement to comply with the regulatory requirements of a jurisdiction where your cryptocurrency exchange/broker operates.

Such requirements may require you to upload a copy of your personal identification documents such as passport, national ID card, driver’s license or in some cases also selfie.

Step 3 – Deposit Funds

In order to buy cryptocurrencies, you must first ensure that you have funds in your account. For example, you can fund your cryptocurrency account by linking your bank account or paying with a credit or debit card. Keep in mind that credit card charges can be expensive. You may need to wait a few days before using the money you deposit to purchase crypto, depending on the exchange or broker and their funding method.

Step 4: Place your cryptocurrency order

Once you have funds in your account tied to an exchange or broker, you can purchase any crypto asset from over hundreds available in the crypto space. You may want to go for widely known names like Bitcoin or Ethereum or meme coins like Shiba Inu or Dogecoin.

To get started, search for the crypto of your choice using its ticker symbol, for example, BTC for Bitcoin and DOGE for Dogecoin. Enter the number of coins you are willing to purchase to complete your transaction.

Step 5 – Select a crypto wallet to store your coins

You may not get compensation if you lose your crypto assets. Therefore, you should be careful with your funds and leave your crypto assets on your chosen exchange or store them in hot or cold wallets. However, keep in mind that hot wallets are online wallets and carry the risk of cyber theft as they are connected to the internet, while cold wallets are offline wallets in the form of a USB or hard drive.

Cold wallets, on the other hand, should be used with caution: if you lose the key code connected to them, or if the device breaks or fails, you may never be able to get your digital currency back.

Alternative ways to own cryptocurrencies

Instead of buying crypto directly, you can invest in crypto exchange-traded funds (ETFs) or invest in crypto companies.

Invest in crypto exchange-traded funds

Instead of investing in an individual crypto asset, park your funds in a group of cryptocurrencies called an ETF that tracks the price of one or more digital tokens. Diversification, low cost of ownership, and outsourcing of knowledge- and time-intensive operations associated with crypto Token selection are all advantages of ETFs.

The ProShares Bitcoin Strategy ETF was the first cryptocurrency ETF to begin trading in October 2021. On the other hand, this ETF invests in Bitcoin futures contracts rather than directly in the asset.

Invest in cryptocurrency companies

You can buy shares in companies that use or own cryptocurrencies and the blockchain that enables them, if you prefer to invest in companies with real products or services that are subject to regulatory control but still want exposure to the cryptocurrency market.

To purchase shares in publicly traded companies like PayPal, you will need an online brokerage account (PYPL). This payment technology company is already famous among people who buy things online and send money to family and friends. In 2021, it was expanded to allow customers to buy and sell chosen cryptocurrencies using their PayPal and Venmo accounts.

Another company of interest may be MicroStrategy Incorporated (MSTR), which has many cryptocurrencies on its books, followed by crypto mining companies such as Bitfarms Ltd. (BITF) and Marathon Digital Holdings Inc. (MARA).

(Guneet Kaur is technology editor at Cointelegraph)

Disclaimer: This article contains the author’s own views and should be treated for educational purposes only.

Posted On: Sunday, May 01, 2022, 07:00 am IST