Despite cryptocurrencies being volatile assets, cryptocurrency investing has exploded in popularity over the past years. But even though buying Bitcoin and other cryptocurrencies has never been easier, many people are still intimidated by this form of investment.
Beyond choosing the right cryptocurrency, you also want to figure out how to buy it, safely store it, and potentially trade it. In this guide, you will learn to get started investing in cryptocurrencies and find out why it is a good idea to do so.
Cryptocurrency investing explained
Investing in cryptocurrency can be done in a few simple steps:
1. Choose a crypto exchange
Cryptocurrency exchanges are platforms where buyers and sellers meet to exchange crypto. These exchanges demand fees for their service. However, many tend to have complex interfaces that can make things discouraging for the first-time user.
Fortunately, there are more and more exchanges that offer beginner-friendly operation. But these beginner-friendly options usually come at a higher cost for users compared to the standard trading interface of the platform. So finding a broker suitable for beginners and advanced traders is the first step in your journey into the crypto world.
As a beginning crypto investor, you should also choose a platform that accepts "fiat currency" – a term used in the crypto space for traditional money such as euros or US dollars.
This is because some platforms only allow you to trade crypto for another crypto.
SMART VALOR ticks all the boxes as we offer:
- Enterprise level security standards
- Purchase crypto with fiat currency (CHF, EUR, GBP, USD)
- Low service fees
- An easy-to-use trading interface
- Crypto-friendly Swiss heritage
2. Create an account
The next step is to sign up for a user account. You may need to verify your identity depending on the platform you choose and how much you choose to invest. This verification is to satisfy "Know your Customer" (KYC) requirements put in place to help prevent money laundering and other criminal activities. These KYC requirements help ensure the highest security standards. You may be asked to submit a copy of your passport or driver's license. You may also be asked to upload a selfie or do a video chat to confirm your identity.
3. Deposit money
To purchase crypto, you first need to fund your account. You can usually do this in several ways: You can link your bank account, pay with a debit or credit card, or arrange a bank transfer. These options to pay with fiat currency make purchasing cryptocurrencies very easy. Note that buying with a credit card will incur additional fees from the card operator.
Depending on the exchange, it might take a few days before you can start your investing journey. Also, keep in mind that purchasing with a credit card will result in higher interest rates as banks process these purchases as cash advances.
4. Purchase crypto
Once your account is funded, you can finally buy some cryptocurrency. There are hundreds of cryptocurrencies to choose from, but you don't have to feel overwhelmed. SMART VALOR helps by listing a smaller universe of tokens that have been vetted by our crypto experts.
Many investors choose to start with well-known cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH). This is an excellent way to begin building a portfolio while learning more about the universe of altcoins such as DeFi tokens. SMART VALOR’s low fees and intuitive trading platform give new crypto investors an easy and affordable way to start building a portfolio.
We suggest doing some research on the available cryptocurrencies before you make your decision, following the rule: DYOR – do your own research.
5. How to store your crypto
Having a secure storage place for your crypto is of the utmost importance, as crypto isn’t backed by any government insurance programs. Additionally, if you forget or lose your access codes, you may not be able to recover your money.
One way to store your coins is simply to leave it in the exchange’s crypto wallet. This is an easy solution as it allows you to store your cryptocurrencies without downloading and learning other software. SMART VALOR offers every client a crypto wallet on the platform that’s secure, backed by the highest level of security. All funds are kept in cold storage wallets not connected to the internet. In addition, through a partnership with BitGo we can offer $100 million in custody insurance.
Another option is to store your crypto in a non-custodial hot or cold wallet. These allow users to maintain full control over their private keys. Hot wallet means you store your crypto online. While this option is convenient, the risk of theft is higher since the wallet is connected to the internet. The full responsibility lies with the user and in the past, huge amounts of Biitcoin and other cryptocurrencies have gone lost forever. This happens, for example, through forgotten passwords, non-saved private keys or lost devices such as laptops or mobile phones.
Cold wallets aren’t connected to the internet, making them the most secure option for storing crypto. The best-known cold wallets are paper wallets and hardware wallets. The paper wallet is considered a very secure storage option – as long as you keep your piece of paper safe and inaccessible for others. Hardware wallets are available from various manufacturers and they differ in terms of user-friendliness and the number of coins supported.
Hardware wallets are used to store Bitcoin and other cryptocurrencies securely.
Crypto investing vs. crypto trading
Even though the terms crypto investment and crypto trading are often used interchangeably, they are not the same thing. Crypto investing is about buying cryptocurrencies and holding them to make profits over the long term. As a result, investors do not worry about daily volatility as they have confidence their investment will appreciate over time.
On the other hand, crypto traders aim to make quick profits by buying their crypto low and selling it for a higher price. However, this strategy involves more risk, as it can be tricky (some say impossible) to time the market. Potential traders also need to consider the amount of time it takes to gain the proper market knowledge, as well as ongoing research on a day-to-day basis.
Is cryptocurrency a good investment?
Despite being a volatile investment, cryptocurrency can be very lucrative for those willing to take on some risk and for those who think in the long term. Cryptocurrency is a relatively new investment vehicle, as it’s only been around for a little over a decade. However, there are already 106 million people worldwide who invest in crypto. For example, over one-third of German crypto investors have been trading for over a year.
Benefits of crypto investing
To understand why cryptocurrency is a good investment, let’s look at some of its benefits:
Diversification
Investing in crypto is a great way to diversify your portfolio, especially if you invest in many low-risk assets. Additionally, diversification is possible within your crypto portfolio. For example, you can invest in various cryptocurrencies, stablecoins and NFTs.
Best asset class
Crypto is considered to be the best asset class by many. For example, the average annual return on Bitcoin from 2011 to 2021 was 230%. Furthermor, ttransactions are easy to make, settlement times are short, and it provides a hedge against inflation. Additionally, you can make cross-border payments and conduct private transactions (peer-to-peer).
Crypto and taxes
If you hold onto your crypto for a long time, you can take advantage of tax benefits. For example, depending on the region you live in, crypto gains may be completely tax-free after a one-year holding period. Note that tax laws vary from country to country. Therefore, familiarise yourself with the regulations of cryptocurrencies in your country.
Investing in cryptocurrencies in 4 easy steps
Investing in crypto is easy with SMART VALOR. Here’s what you need to do:
1. Register at SMART VALOR
Sign up for an account by entering some basic information and verifying your identity so you can begin building your crypto portfolio.
2. Deposit
Deposit money into your account so you can purchase crypto.
3. Research
Choose from the varioius cryptocurrencies available. SMART VALOR offers a range of cryptocurrencies, including Bitcoin, Ethereum, Paxos, and Valor.
4. Make an investment
Once you have selected one or more cryptocurrencies, it’s time to make an investment. You can then decide whether you want to hold your investment for the long term or try to trade actively in order to make profits as quickly as possible.
Conclusion
Investing in cryptocurrencies may seem complicated at first glance. But with the information above, you have everything you need to get started. The learning curve for crypto newbies is steep in the beginning. That's why we do our best to help you build your knowledge and get the best service on our platform.
Sign up to SMART VALOR today to get started!