With the crypto industry growing seemingly every day, newcomers often look for its best uses. One of the most frequent questions that arise once you venture into this field is how to invest in crypto.
After all, crypto is, first and foremost, a financial asset. And with the industry changing as fast as it does, there are many opportunities to turn a small investment into sizable profits. However, there are things to keep in mind before you learn how to make money with crypto to ensure you do everything by the book.
We’ll take a look at some of the advice that every investor, newbie and expert alike, should follow. You’re going to learn about some of the pros and cons of choosing this investment method and how it can shape your overall financial portfolio. Finally, we’ll find out where you can learn how to invest in bitcoin and make money in practice.
So, let’s start learning how to invest in crypto.
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Table of Contents
How to Invest in Crypto: The Essentials
Before we dive into how to invest in crypto, we should figure out what such investments are and why so many people participate in them. By now, I’m going to presume that you know the gist of what crypto is and how it can be used. If you find anything we discuss here a bit confusing, feel free to hop over to our Crypto 101 Handbook.
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First, let's see the difference between trading and investing. Some use these terms interchangeably, but they mean very different things. Traders swap one cryptocurrency for another. They often are concerned with short-term price changes. Investors, on the other hand, buy cryptocurrency with the goal of maximizing profits over time.
Often, the main question that arises aside from how to make money trading crypto is why it’s worth it. After all, it’s still a pretty new branch on the giant economy tree, and it’s unsurprising that some prospective investors might want some reassurance and clarity first.
Well, the novelty of it all plays a big role here. Crypto has only been around for a little over a decade. So, technically, the user base at large is considered to be early investors in blockchain technology as a whole and cryptocurrency in specific.
So, in many cases, it’s seen as a direct investment into your future – or even that of your child. There have been a few stories floating around of parents gifting newborns their first dedicated crypto assets, which are locked away to grow over time and provide a starter for adulthood. If you want to learn more about crypto gifts, you can find an article here.
Then there’s the matter of your investment portfolio. When you look into how to invest in crypto currency, you’re looking at an opportunity to build a diverse portfolio with ease. Bitcoin and Ethereum are, of course, the most popular options out there. However, there are plenty of other coins and projects that could suddenly blast off into success.
If you make the right market moves, put your eggs in the right baskets, and get your timing down perfectly, you can find out exactly how to make money in crypto trading. Quite a lot of money, if you get very lucky. Crypto is notorious for its volatility, and while we’ll explore its downsides, it can work out in your favor if you know how to do it.
Are you interested not just in how to invest in crypto but other projects? Perhaps you’ve heard something vaguely about DeFi or want to jump in on the NFT hype – well, you can redirect your assets here with ease. Not only will you have an even broader portfolio, but you may also become part of the project governance thanks to your participation.
Besides, the asset itself is not all that you’re investing in – there’s the whole immense world of blockchain technology. It’s simply not possible to list every single project that has or can be done using blockchain, not to mention new developments, parachains, sidechains, and other innovations that sprout every single day.
The technology carries some perks of its own. For starters, it’s immutable – once the transaction record has been made on-chain, it’s there forever. Your assets are guaranteed to stay yours. And while the ledger is written in ink (or code) permanently, your name can remain secure – only your crypto wallet address can be seen by others.
So, as you can see, there are many perks to learning how to make money in crypto trading. However, we can’t lie to ourselves – it’s not all sunshine and rainbows every day. Let’s take a look at some essential know-how to ensure you invest securely and put your assets at minimum risk.
How to Invest in Cryptocurrency Cautiously
While crypto has many enthusiasts and close-knit investor communities, there are just as many skeptics and critics around. And they are not always driven purely by bad faith – there are risks attached when you’re looking into how to invest in cryptocurrency, as well as legal factors to be mindful of.
For starters, let’s look a little closer at volatility. As I mentioned before, it can be a good thing if the market wave is in your favor – whether you want to buy or sell, that might mean different things. However, while the crypto market can skyrocket to never-before-seen heights one minute, it can come crashing down just as fast.
So, you should always be mindful of what you invest. Don’t mess around with more than you can afford to lose; otherwise, your venture into how to make money trading crypto will leave you with losses that far exceed your gains. Always keep an eye on the market movements – not just the minutiae ones, but the broader picture, too.
Then there’s the unfortunate matter of scams. Crypto has seen a few significant hacks and money laundering attempts over the years. Unfortunately, this can spoil the opportunities for many interested investors. Sometimes, a new project will pop up and build up hype, only to fade away before the week ends. So, what can you do to protect yourself from scams?
There is a four-word golden phrase that you must always remember as you learn how to make money trading crypto:
Do your own research.
DYOR is an acronym you’ll be seeing a lot in various crypto communities, and it’s the core philosophy that you should uphold during your venture into how to invest in crypto. However, if you play smart, you can start telling the scammy projects apart from the real deal easier.
You need to filter the suspicious projects from the legitimate ones and make sure things are in order. Read whitepapers and tokenomics, follow community feedback, and as tempting as it may sometimes be, don’t fall for blind hype.
Speaking of research, don’t forget regulations. While many cryptocurrency projects follow the principles of decentralization, governmental institutions in different countries may have varying policies. As digital assets become more popular, measures have been taken to try and prevent some of the criminal issues we discussed a moment ago.
There’s no single policy across the world either – even in the EU, where the member states adhere to the same recommendations, the local laws may vary. In some places, crypto investments may be outright banned, while services like direct purchases could still be supported. Others are more lenient. It all depends on where you are.
Let’s have a quick rundown of the main pros and cons of investing in crypto:
|Volatility can lead to favorable prices
|Volatility can lead to market crashes
|Ability to diversify the investment portfolio
|Not all projects are legitimate
|Immutable & anonymous technology
|May be subjected to regional regulations
Table: The pros and cons of investing in cryptocurrency
With that out of the way, let’s get a bit more hands-on experience and take a look at how to invest in bitcoin for beginners.
The Investment Toolkit
Here’s where the fun starts. Let's go through our inventory and see if we have all the tools. You’ve done your homework thoroughly, and you’re ready to invest.
Except… Where can you invest?
Well, it’s really not too different from traditional finance. Tangible assets are traded on exchanges or stock markets. Digital assets like crypto are also handled by designated institutions – cryptocurrency exchanges. They’re online platforms that can host a broad range of blockchain-based financial institutions.
In general, you'll come across two types of crypto exchanges – centralized and decentralized. However, the former is where you want to try your hand at how to invest in crypto currency. The reason for that is simple. Centralized crypto exchanges (CEXs) are compliant with various regulations, such as KYC, and are generally more secure.
There's a lot of variety between the different CEX platforms. Some focus solely on spot trading, while others offer additional financial services. There are the usual questions like security, KYC compliance, and regional restrictions. As you research exchanges, pay attention to fees, trade volumes, and whether your preferred assets are listed on them.
To keep things simple, our platform recommendation for you is Binance. It’s one of the biggest centralized crypto exchanges in the world and a great place to start practicing your how-to-invest-in-bitcoin-and-make-money skills. Bear in mind that if you’re in the US, you’ll need to access the Binance.US platform, but the process will be the same.
Binance offers a broad range of financial services. In addition to investments, you can also buy cryptocurrency, trade it in the spot and derivatives markets, and even claim a physical debit card. If you want to learn more about how to buy and trade crypto on Binance, we have an article for you right here.
Next, we’re going to need to select a trading asset. As I mentioned before, this can be a tricky process to juggle. On the one hand, you might want your portfolio to be diversified and see that not everything is banking on a single token, in case things go south. On the other hand, you don’t want to invest in the wrong things and go into negative.
So, let’s stick to the basics here. Bitcoin (BTC) is the biggest and best-known crypto asset out there. After all, it pretty much kickstarted the whole thing. Chances are that you won’t be able to purchase a single bitcoin at once and will instead own fractions known as satoshis. But for the sake of clarity, we’ll keep referring to it as bitcoin throughout.
Finally, we're going to need storage. When it comes to your fiat investments, you're probably looking for secure storage solutions like savings accounts or bond funds. The same rules apply to crypto. With the market being as volatile as it is, you want to take the most cutting-edge safety measures that you can get your hands on.
You've got a few options to choose from here. Since we'll be looking at options for how to invest in bitcoin for beginners on Binance, you don't have to look far. Binance has its own built-in digital wallet, meaning that you can store your assets with the exchange without the need for any third-party tools.
However, there can be some safety concerns when it comes to this storage method, also known as hot storage. Since everything is stored digitally, it can fall victim to hacking attempts. So, while it can be a good solution as you're setting up, you may want to look for some alternatives.
Here's where cold storage comes in. If "hot" refers to software for safekeeping crypto, "cold" is the hardware option. There are numerous options for cold storage, but the safest and most popular is getting a hardware wallet. And as far as brands go, Ledger is going to be your top industry choice.
These devices are developed specifically with asset storage in mind and use measures like passwords and seed codes to ensure that only the owner of this private data can access the funds. Another bonus is that they can be accessed offline, so you don't need to worry about accessing your assets if your connection is unstable or not wholly secure.
How to Invest in Bitcoin and Make Money
Platform – check. Assets – check. Wallet – check. With everything at the ready, let’s talk about how to invest in crypto with a lower risk of losses. As we discussed earlier, you should be mindful of the resources you want to put forward. So, what’s the recommended investment amount if you’re only getting started?
According to some experts, up to 5% of your overall net worth is reasonable. However, roughly 2% is the golden mean you should be aiming towards. Of course, it’s completely up to you – if you trust that an asset is stable enough, you might want to go higher. However, you should always keep the volatility in mind.
Next, consider what your strategy is going to be in the short term. We’re starting with bitcoin, but you also know that diversifying your portfolio is an option. However, play around carefully here – especially if you’re interested in brand-new projects. It might be better to solidify your portfolio with just bitcoin first and start exploring later.
If you want to build an investment portfolio in a more secure way, you might like to check out some of the stablecoins available in the market. These tokens are becoming increasingly popular. Stablecoins are a type of digital asset that has its value tied to a tangible asset, like the US dollar or precious metals like gold.
In fact, stablecoins are kind of the middle ground between the more volatile cryptocurrencies and fiat money. They’ve been the basis for the development of central bank digital currencies (CBDCs) – digitized versions of legal tender. So, it’s possible that in the future, your knowledge of how to invest in crypto will come even more in handy.
So, what's the easiest way to learn how to invest in crypto currency? Well, you just need to buy it. By purchasing coins, you directly add them to your portfolio. Many cryptocurrencies, including bitcoin, are deflationary. This means that their supply is fixed. By buying such assets, you're ensured to see their value increase in the long term.
As a Binance user, you have access to Auto-Invest. It's a dollar-cost averaging (DCA) investment strategy that allows you to automate your investment schedule. It uses a subscription-based model. You can select your preferred investment asset, like bitcoin or the Binance coin, and the schedule, such as weekly or monthly.
Auto-Invest offers two types of plans:
- Portfolio Auto-Invest – the plan automatically purchases multiple cryptocurrencies based on your selection;
- Auto-Invest – the plan that automatically purchases a single selected cryptocurrency.
Once you've set up your plan, your task is done until you're ready to redeem the investments. During the subscription period, the plans will automatically purchase your preferred assets, lock them in your Binance storage, and generate passive income. The number of plans for one account is unlimited, and you can pause the service at any time.
Then, you can invest in projects. Blockchain developers that work on various new technology, games, or tokens often raise funds via initial offerings. These can be initial coin offerings (ICOs), initial game offerings (IGOs), and others. As an investor, you can provide a certain amount of your funds to the project in return for certain rewards.
What your investment grants you might vary from project to project. The key goal is that you will gain access to the finished product – possibly even before its official launch. Rewards might also entail early airdrops and exclusive access to tokens, the ability to consult the development process, and even becoming part of its direct governance.
Exchange-traded funds (ETFs) are also a good option to consider when you're looking into how to make money with crypto. ETFs are essentially security baskets that can be treated as trading stocks. The baskets may include various assets, making for a simple way to diversity your portfolio.
This might sounds unconventional – especially if you're not as familiar with the technical side of blockchain – but becoming a cryptocurrency miner can also turn you into an investor.
To put simply, miners create new blocks on the blockchain and are rewarded with crypto for their efforts. So, you don't need to master the "how to make money trading crypto" art if you're not comfortable messing with the markets directly. Contributing your time and technology to the blockchain can work, too.
As far as learning how to invest in bitcoin for beginners goes, these strategies are the essentials. Some exchange platforms may offer custom-built investment services. However, no matter which cryptocurrency or exchange interests you most, there are plenty of investment options and strategies to choose from.
So, you’ve successfully made your first investments, and your portfolio has seen some growth. What's your plan now that you've mastered how to make money in crypto trading? It can stay safely in your account, generating more profits.
However, money is of little use if it’s just sitting in your account, untouched. There's no harm in putting it to practical use. After all, as the industry is working towards becoming more mainstream, it's more than likely that crypto payments will become as common as fiat transactions.
So, let's take a look at some of the things you can do with your well-earned investments.
For starters, there's the very popular way to go – trading. Since you're already handling your investments on an exchange platform, it's not a huge leap to make. At first it might seem confusing – there are a lot of terms to figure out, different markets to navigate, and trading data to analyze.
However, there's no need to fret. Exchange platforms like Binance offer beginner-friendly trading tools that will make your experience simple and stress-free. If you're curious to learn how the Binance spot market works, you can read our guide here.
You can also convert your crypto assets back into fiat. This is a process known as fiat off-ramp. That way, you know not only how to make money with crypto, but also how to make it tangible and give it more utility. Our guide on fiat in crypto will answer the questions you might have about the link between the two types of currencies.
And while the applicability of crypto is still limited today, it's not awfully restricted. In fact, many platforms support crypto as a standard payment method for various purchases. Whether we're talking software, digital events, or even physical goods, crypto opens more doors for you than ever before.
So, if your investments have seen substantial growth, you can easily reward yourself for your achievement. Simply make sure that your preferred cryptocurrency is accepted by a platform. If not – don't worry. You can take advantage of exchange platforms to, well, exchange your tokens.
Perhaps you'll find yourself wanting to share your investment journey with others? You can always help them out with getting started. After all, the crypto world can be confusing and overwhelming at first, especially if you have little to no knowledge beforehand. So, step 1 – you can forward this article for a friend.
Step 2? Well, if you're feeling generous, you can even back them up and provide them with some crypto assets to get started. After all, money can be a very respectable gift for special occasions.
And if you feel like just transferring assets seems tacky, we have a fancier solution for you – you can purchase a gift card that allows your recipient to get crypto themselves. If you're getting a card on a platform like Binance, you can even choose a custom design. If this idea intrigues you, you can read more about buying crypto with gift cards here.
So, as you can see, there are quite a few options when it comes to putting your crypto assets to good use. And even if you decide to keep holding for a while longer, having some ideas for the future never hurts.
By now, we’ve covered the essentials of how to invest in crypto. Whether you’re completely new to the space or have been dipping your toes, this can be useful knowledge in the long term, especially as crypto becomes more mainstream and new opportunities to put your investments to good use begin to pop up.
At the end of the day, mastering how to invest in cryptocurrency is a high-risk, high-reward affair. While there are things you need to be mindful of to ensure the security of your assets, it can be a great way to diversify your portfolio and contribute to new technological developments.
Hopefully, you’re leaving this article with a good understanding of how to invest in bitcoin and make money. Feel free to return and consult the article whenever you need. And if any new questions arise, chances are you’ll find them answered in the Crypto 101 Handbook.
So, be safe, be smart, and good luck investing in crypto!