Crypto or cryptocurrencies refers to the digital assets created using cryptographic techniques and are powered by blockchain technology to make transactions possible. The blockchain’s ledger is distributed and electronic, allowing network participants to audit and verify the transactions without the need of a third party like central banks.
Bitcoin is the world’s first cryptocurrency, created in 2008 by an anonymous founder named Satoshi Nakamoto to solve the issue of ‘centralisation’ in the traditional banking system. After a decade of Bitcoin’s introduction, other digital assets like Ether, Dogecoin, Litecoin, and XRP are also towards mainstream adoption. Countries like the US, the UK, Singapore, India, etc., are putting efforts to regulate cryptocurrencies, portraying that crypto is here to stay!
So, if you have yet not tried investing in cryptocurrencies, here’s a simple guide for you to start exploring the cryptographic currencies.
Buy cryptocurrency directly
You can opt to buy and store one or more cryptocurrencies directly by following the instructions below.
Step1: Select a crypto exchange or broker
Crypto exchanges like Coinbase, Binance, eToro, and Gemini allow buyers and sellers to trade cryptocurrencies with varying fee structures. You can buy crypto with fiat, or some exchanges will enable you to exchange crypto for crypto.
On the contrary, the crypto broker is an intermediary that trades on your behalf. Beware: Crypto brokers may not allow you to transfer funds off 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 ahead. It is a mandatory requirement to comply with the regulatory requirements of a jurisdiction where your crypto exchange/broker is operating.
Such requirements may require you to upload a copy of your personal identification documents like passport, national ID card, driver’s license, or in some cases, selfie as well.
Step 3: Deposit funds
To purchase cryptocurrency, 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. Beware that credit card charges can be costly.You may have to wait a few days before utilising the money you deposit to acquire cryptocurrencies, depending on the exchange or broker and your funding method.
Step 4: Place your cryptocurrency order
Once you have funds in your account linked to an exchange or broker, you can buy any crypto-asset out of more than the 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 begin, search the crypto of your choice using its ticker symbol—for instance, BTC for Bitcoin and DOGE for Dogecoin. Enter the number of coins you’re willing to buy 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 must be cautious of your funds and either leave your crypto assets on your chosen exchange or store them in hot or cold wallets. However, please note that hot wallets are online wallets and involve the risk of cyber theft as they are connected to the internet, whereas cold wallets are offline wallets in the form of USB or hard drive.
Cold wallets, on the other hand, must be used with caution: if you lose the key code connected with them, or if the device breaks or fails, you may never be able to recover your digital currency.
Alternative ways to own crypto
Instead of directly buying cryptocurrencies, you can invest in crypto exchange-traded funds (ETFs) or invest in cryptocurrency companies.
Investing in crypto exchange-traded funds
Rather than investing in an individual crypto asset, park your funds in a pool of cryptocurrencies called ETFs that track 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.
Investing in cryptocurrency companies
You can acquire shares in firms that utilise or own cryptocurrencies and the blockchain that enables them — if you prefer to invest in companies with actual products or services that are subject to regulatory control but still want exposure to the cryptocurrency market.
To acquire shares in publicly traded firms like PayPal, you will need an online brokerage account (PYPL). This payments technology company is already famous among individuals buying things online and sending money to family and friends. In 2021, it expanded to allow clients to purchase and sell chosen cryptocurrencies using their PayPal and Venmo accounts.
Another company of interest can be MicroStrategy Incorporated (MSTR), which has many cryptocurrencies on its books, followed by crypto mining companies like 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 must be treated for educational purposes only.
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Published on: Sunday, May 01, 2022, 07:00 AM IST
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