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Cryptocurrency investing guide
How to invest in crypto

Guide contents

How to invest in crypto

Quick take:

  • Investing in crypto can be high risk
  • There are several ways to invest in crypto
  • Take a long-term view and approach to be safer

So you've done your research and found a cryptocurrency you think will be a smart investment. 

The question now is, how do you actually invest in it? 

Let's kick this off with a few different ways to invest in crypto. 

Types of cryptocurrency investing

There are several options available for those who want to invest in crypto. 

Method 1 - Buy crypto directly

The first, and most common, approach is to purchase crypto directly. 

You can do this in one of two ways.  

  • From a centralized crypto exchange
  • From a decentralized crypto exchange

With these options, you'll be able to purchase the exact amount you want and hold it yourself.  

Our advice would be - if your goal is long-term hodling - to move the assets to a good cold wallet for better security. 

Method 2 - Use a crypto investing service

Another option is to enlist the services of a reputable crypto investment service. 

These are brands that specialise in wealth management and investing into cryptocurrencies for their clients. 

Some are actual consultancies, others are pieces of software that give you more detailed analysis and information to help you make informed decisions.  

We have a list of reviews of the best crypto investing services here for you to check out.  

Method 3 - Invest in crypto-related companies 

You can also add crypto exposure to your portfolio by investing in companies that support cryptocurrency.  

It's a bit of a roundabout route and, to be honest, you're really investing in the brand rather than any specific currency. 

But for those who want crypto exposure without the rigamarole of researching each coin, this could be a viable option.  

Let's look at the specific steps to investing in crypto in each of these way.  

How to invest in crypto from a crypto exchange

Buying from an exchange is likely the easiest mode for many investors.  

We have a full guide on how to use several different exchanges to buy crypto you can read here.  

We want to add a little something o that here with the below information. 

If you're planning on buying something like Bitcoin and simply hold it in the hopes it appreciates, you're going to want to get a cold wallet to store things more securely.  

We have a list of the best crypto wallets here, our recommendation is to use a Ledger Nano X as it's one of the most popular crypto cold walets.  

Trading crypto on a crypto exchange

If, however, you're not looking to hold assets for a long time and are instead hoping to trade over shorter periods, you might want to consider the trading tolls that come with many different crypto exchanges. 

Most of the big exchanges have a dedicated trading feature, some, like Binance, even include automation tools to help you make decisions.  

Bear in mind that you need to know how to use these tools. 

If you're not familiar with the advanced trading options we recommend taking time to learn them with a practice account. 

Otherwise you're putting yourself at risk.  

How to use a crypto investing service

If you don't want to use an exchange, you might want to consider a dedicated crypto investing service. 

Some of these services are software, others are consultancies that will handle almost everything for you for a fee.  

Regardless of which one you go with, you're going to want to perform some initial checks around...

  • Their reputation and user ranking
  • Their fees
  • Their approach and whether it aligns with what you want to achieve
  • Whether they support the assets you want to invest in

If they pass all of the above, we would then recommend trialling them. 

If it's a software, that means signing up and feeling out the dashboard to see if it's easy for you to use and understand.  

If you're using a fully managed service, make sure you speak to a person and ask them a lot of questions on how they approach things. 

If you get a bad feeling from them, then leave it alone. 

Final considerations for investing in cryptocurrency

Before we sign off, I want to take some time to run through a few key considerations before you decide to deposit large amount of cash into crypto.  

Cryptocurrency investment tax issues

Cryptocurrency taxation is now a huge deal and you need to be aware of tax issues or fall foul of the tax authority. 

Rules and regulations are being introduced (and aren't 100% clear in any territory yet). The rules are designed to ensure that individuals and businesses pay their fair share of taxes on any income derived from crypto trading or other activities.

They are, in essence, similar to the tax rules for any other investment where you'll be taxed based on your profits taken from the asset.  

As regulations progress, it looks like all cryptocurrency transactions must be reported on tax returns.

This includes any gains or losses from buying, selling, exchanging, or transferring digital assets.

Additionally, any income earned through mining or staking activities must also be reported.

It is important to note that failure to report cryptocurrency transactions can result in hefty fines and penalties from your countries tax authority.

Therefore, it is essential to understand the current tax laws surrounding cryptocurrency before engaging in any crypto-related activities.

Thankfully, we have a growing category of crypto tax tools to help you manage this minefield. 

Invest responsibly

Investing responsibly is essential for achieving financial success - especially with an asset as volatile as cryptocurrency. 

It's important to diversify your investments and find a qualified financial advisor who can help you create an investment plan that meets your goals.

When investing, it's important to consider how much risk you are willing to take and how long your time horizon is. Cryptocurrencies can be an intriguing prospect for a portion of your portfolio, but it's important to diversify with other holdings as well.

Be aware that preferring high risk investments is, obviously, higher risk.  

Try to manage risk responsibly.  

Have a long-term mindset

It;s easy to think you're gonna drop a little cash into crypto and suddenly see huge gains. 

After all, many people did during the last bul run. 

However, this isn't common, and people chasing these gains often take larger risks.  

Taking a long-term mindset to your investments is key in better managing risks and avoiding shortsighted decisions driven by fomo. 

It might take longer to see huge gains, but it's often safer.  

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