If you want to invest in cryptocurrencies for the first time - you are entering a new and existing trading space, whose market value has already exceeded $1 trillion.
This beginner's guide will teach you everything you need to know about investing in cryptocurrencies. Key topics include: how to choose a safe and cheap cryptocurrency exchange, which digital currencies are best for your wallet, and what steps you should take to invest in less than five minutes.
How to invest in cryptocurrencies for beginners - 4 easy steps
In just four easy steps - you can invest in cryptocurrencies through a regulated online broker in less than five minutes.
Best of all, by using eToro for this purpose - you can immediately pay for your cryptocurrency investment in zlotys without incurring any transaction fees.
Here is a brief overview of how to invest in cryptocurrencies on eToro:
Where to invest in cryptocurrencies?
There are more than 100 exchanges and brokers in the online space that allow you to invest in cryptocurrencies. When thinking about where to invest in cryptocurrencies, we suggest choosing a provider that is regulated to ensure the safety of your investment.
It is also a good idea to choose a platform that offers low fees and, of course, support for your preferred cryptocurrencies.
In the sections below you will find reviews of places where you can safely and cheaply invest in cryptocurrency assets.
1. eToro - generally the best place to invest in cryptocurrencies
eToro was launched in 2007, and the platform is home to a wide range of asset classes. In addition to cryptocurrencies, it covers everything from ETFs and index funds to forex and commodities. Here you have access to 59 cryptocurrencies, all of which you can buy from a minimum investment of $10.
This is ideal if you want to learn about cryptocurrency assets for the first time and don't want to risk too much money. Moreover, with a minimum transaction size of $10, you can invest in expensive cryptocurrencies such as Bitcoin and Ethereum - both of which are currently worth thousands of dollars per token.
As far as fees are concerned, eToro allows customers from Poland to deposit without fees. This is regardless of the type of deposit chosen. Available options include ACH, e-wallets such as Paypal and Neteller, online banking and debit/credit cards. Trading commissions when buying cryptocurrencies cost only 1% - they are included in the price you see when you place an order. This way you can buy bitcoin and other cryptocurrencies with your credit card from the comfort of your own home.
If you are interested in gaining access to cryptocurrencies, but don't know which ones to add to your portfolio - eToro offers a set of passive trading tools. First, there are professionally managed smart portfolios that allow you to diversify over a dozen digital currencies through a single investment.
You can also consider the copy trading tool. It allows you to mirror the investments in cryptocurrencies of a proven trader in a like-for-like manner. The minimum investment in copy trading is only $200. We also found that eToro offers one of the best cryptocurrency wallets for beginners. This is because when you buy cryptocurrency here, the tokens are safely stored in your eToro online wallet.
Alternatively, for more control and flexibility over your cryptocurrencies, you can download the eToro wallet app for your iOS or Android smartphone. Finally, it is worth noting that eToro is probably the best cryptocurrency exchange on the market for complete beginners - because both its website and mobile app are extremely easy to use.
2. Binance - an exchange with low fees for investing in many cryptocurrencies
Binance is the world's largest cryptocurrency exchange. Nevertheless, the exchange offers a domestic version of its website, which is only available to US customers. Compared to the more than 600 cryptocurrencies on Binance's main website, the U.S. version of the exchange serves more than 80 markets.
Nevertheless, once you open a verified account here and make a deposit, you can trade cryptocurrencies with a commission of just 0.10% . What's more, when you fund your Binance account with ACH or transfer from a domestic bank, you won't be charged any transaction fees.
On the other hand, depositing via debit or credit card is expensive here -. Binance charges a fee of 4.5%. What's more, there's also an instant purchase fee of 0.5%. When it comes to trading tools, this is where Binance stands out. This is because you can analyze cryptocurrency markets with advanced technical indicators and charting features.
However, these tools will not be suitable for beginners, so keep this in mind before opening an account with Binance. Another popular feature offered by Binance is the Trust Wallet application, which allows you to store thousands of different tokens on multiple blockchains. For a simpler way to store your cryptocurrency investments - you can use Binance's main online wallet.
3. Coinbase - the best exchange for those starting out in cryptocurrencies
The Coinbase website itself offers a somewhat simplified service that is likely to appeal to novice investors. There is no complicated jargon on Coinbase, and when you invest in cryptocurrencies - you will be guided through the required process step by step.
Coinbase is a heavily regulated exchange that is currently listed on NASDAQ as a tradable stock. We like the fact that the platform keeps 98% of customer funds in cold storage, and all accounts must have two-factor authentication installed. All in all, Coinbase is one of the safest cryptocurrency platforms in the industry.
However, Coinbase also charges some of the highest fees we've encountered. For example, when you invest in cryptocurrencies here, you will pay a standard commission of 1.49%. This commission of 1.49% will be charged again when you close a position. Although ACH payments can be made without fees, debit/credit card transactions are charged at 3.99%.
However, this includes a trading commission. Nevertheless, cheaper fees are certainly available elsewhere. If you decide to use Coinbase to invest in cryptocurrencies - you have several options when it comes to storage. This includes a dedicated wallet app that allows you to manage your private keys.
Investments in cryptocurrencies - an explanation
It's fair to say that blockchain technology, which underlies cryptocurrencies such as Bitcoin and Ethereum, may seem a bit complicated at first glance. However, when it comes to investing in cryptocurrencies, the process is no different than buying stocks.
This means that the overarching concept of investing in cryptocurrencies is that you will make money if the value of the token increases. As with stocks, the process is based on supply and demand.
This means that as more and more people invest in a particular cryptocurrency, its value will increase.
To emphasize how simple the process of investing in cryptocurrencies is, we will use the example of buying a Binance coin:
- Suppose you decide to invest $3,000 in BNB.
- When you place an order on the cryptocurrency exchange of your choice - BNB is priced at $390 per token
- You decide to keep your BNB tokens for two years.
- Two years have passed and BNB is now trading at $1,050 per token.
- This means that since your investment, the value of BNB has increased by 169%.
According to the above example, if you were to withdraw your invested funds in BNB when the token was valued at $1,050 - your 169% profit would total $8,070. Thus, from your original investment of $3,000, you made a profit of $5,070.
Interestingly, although a return of this magnitude may seem high - consider that the BNB has increased in value by more than 10,000% since its launch in 2017.
Are cryptocurrencies a good investment?
As with all asset classes, there is no guarantee that you will make money investing in cryptocurrencies. Moreover, it is important to remember that cryptocurrencies are volatile and speculative.
Therefore, before deciding to invest in cryptocurrencies, it is important to weigh both the benefits and risks.
Should I invest in cryptocurrencies? Benefits of investing in cryptocurrencies
In this chapter, we will discuss some of the reasons why so many investors in the US are now turning to cryptocurrencies for long-term financial gains.
Thousands of cryptocurrency tokens to choose from, which to choose?
First of all, we like the fact that there are now thousands of cryptocurrency projects on the market.
Consequently, as with thousands of stocks listed on exchanges NYSE i NASDAQ, you are sure to find a cryptocurrency that is in line with your financial goals.
For example, if you just want to dip your toes into cryptocurrencies for the first time, you can opt to stick with established large-cap projects such as Bitcoin i Ethereum.
Compared to lower-capitalization tokens, these cryptocurrency projects are less volatile, although growth potential may be more limited.
On the other hand, you can also consider investing in cryptocurrencies with smaller market capitalization. Such tokens will appeal to investors who have a higher risk tolerance and want to make larger profit margins.
Cryptocurrencies break through stock market gains
While cryptocurrencies are inherently riskier than traditional stocks, the former generate much higher returns.
For example, the S&P 500 Index has risen 94% over the past five years. Moreover, the NASDAQ Composite has returned 144% over the same period.
For comparison, consider that over the past five years Bitcoin has risen by more than 3600%.
Bitcoin is not the best performing cryptocurrency, however, as many other tokens in this market have generated even higher levels of growth.
Ethereum, for example, increased in value by more than 7,000% during the same period, and BNB, as mentioned earlier, by 10,000%.
When you look at some of the best Metaverse crypto on the market - the gains are even more impressive. For example, Decentraland and its token MANA have increased by more than 25,000% since its release.
Major companies get involved in cryptocurrencies
Some of the world's largest and most dominant companies are now getting involved in cryptocurrencies - once again proving beyond any doubt that this industry is here to stay in the long run.
For example, Tesla, which is one of the world's largest companies with a market capitalization of more than $1 trillion, invested $1.5 billion of its balance sheet in Bitcoin at the end of 2020.
There are also companies such as Overstock, Paypal, Micrisoft i Starbucks - All of them allow you to pay with bitcoin for their products and services.
Cryptocurrencies can bring capital gains and regular income
Another important reason why more and more people are investing in cryptocurrencies is that digital assets allow you to make money on two fronts.
First, as mentioned earlier, you will make a profit on your cryptocurrency investment if the value of the token increases on the open market.
However, you can also deposit your digital tokens in cryptocurrency savings accounts to earn passive income. For example, if you were to deposit your Bitcoins in a Crypto.com - You would earn 5% in interest per year.
This can be achieved without having to sell your cryptocurrencies. This means that while your tokens are stored in an interest-bearing cryptocurrency account, you will still make money if the value of the token increases.
Cryptocurrency is still a new concept
On the one hand, cryptocurrency has become legitimate in many ways - especially when you consider the huge number of established companies and brands that are now involved in this space.
However, it is important to remember that the world's first cryptocurrency - Bitcoin - was only launched in 2009. Moreover, some of the biggest cryptocurrency projects in this space are even younger.
- For example, Cardano and Solana were only released in 2017.
- Avalanche and Shiba Inu, which have multi-billion dollar market capitalizations, were not launched until 2020.
In conclusion, it is not too late to invest in cryptocurrencies, as the cryptocurrency market is still in its infancy.
What are the risks involved in investing in cryptocurrencies?
It's a good idea to focus on the many benefits you can gain by investing in cryptocurrencies.
However, experienced traders always consider the risks associated with a particular asset class before investing.
Therefore, in the following paragraphs, we will take a closer look at some of the main risks to consider when investing in cryptocurrencies.
- Speculative: Many investments in the cryptocurrency market are highly speculative. This means that the overriding goal is short-term price appreciation, not long-term value.
- Volatility: A direct consequence of the speculative nature of cryptocurrencies is that the market can be extremely volatile. Moreover, the smaller the market capitalization of a given cryptocurrency, the more volatile it becomes.
- Rug Pulls: The term "rug pull" refers to a cryptocurrency project that was created with the sole purpose of defrauding investors. A recent example of such a project is Squid Coin, which caused investors to lose millions of dollars.
- Hacking: Another risk to consider before investing in cryptocurrencies is that hackers often favor this asset class. The biggest threat is remote hacking of your wallet - your entire balance can be stolen in seconds.
There are many things you can do to reduce the risk of losing money from cryptocurrency investments. These include good diversification, involving many different projects and in-depth research before spending any money.
Also, to make sure your cryptocurrency tokens remain safe - consider using a heavily regulated broker such as eToro.
The best cryptocurrency to invest in
While it's great that you have thousands of digital tokens to choose from, knowing which cryptocurrency to invest in can be a perplexing and difficult process.
If this is your first time investing in cryptocurrencies, you may want to consider some of the solid projects discussed below.
It probably won't come as a surprise to learn that Bitcoin is the best cryptocurrency to invest in 2022, if you are entering this market for the first time. Bitcoin is the world's first and still de-facto cryptocurrency, and consequently has the longest track record.
Not counting stablecoins such as Tether, Bitcoin attracts the largest trading volume. Moreover, Bitcoin has the largest market capitalization of all cryptocurrencies, so it is theoretically one of the least volatile currencies to own.
Another cryptocurrency that is well established in this area is XRP. Launched in 2012, XRP is a cryptocurrency native to the Ripple blockchain.
The project provides banks and large financial institutions with technology that enables cross-border transactions. Unlike traditional systems, Ripple and XRP allow low-cost and near-instantaneous transfers - regardless of the currency in which they are made.
Established in 2017, although BNB is younger than its Bitcoin and XRP counterparts, it is still one of the best cryptocurrencies to invest in today. This digital currency is backed by Binance, the world's largest exchange.
BNB is among the top five cryptocurrencies in terms of market capitalization and is the primary token used in the Binance smart chain, which is home to thousands of projects. BNB is also used by traders to reduce Binance exchange commissions by 25%.
Ethereum was launched in 2015 and since then the value of its native ETH token has increased by more than 28,000%. The Ethereum blockchain allows developers to deploy smart contracts and decentralized applications (DApps).
Importantly, Ethereum is not only the second largest cryptocurrency in terms of market capitalization, but it is also the preferred blockchain protocol for many other successful projects. These include Basic Attention Token, Uniswap, Axie Infinity, Maker and many others.
The best low-cost cryptocurrencies to invest in
If you come across the term "penny crypto," it simply means digital tokens that trade for less than $1. So you can explore the cheapest options in our guide to the best cryptocurrencies under $1.
It's important to remember that just because a cryptocurrency is cheap, it doesn't mean you're taking an increased risk. After all, the value of a cryptocurrency depends on the number of tokens in circulation and its current market price.
- For example, XRP is currently trading at just 0.86$ per token, despite having a market capitalization of more than $40 billion.
- On the other hand, Yearn.finance has a market capitalization of less than $1 billion, even though one token would cost you more than $23,000 as of today.
Nevertheless, if you are looking for the best penny cryptocurrency to invest in 2022, because you want to own a large number of tokens - consider the projects presented below:
- The Graph: It provides blockchain projects with indexing capabilities. This means that blockchains can separate and prioritize data. In turn, blockchains can avoid information overload.
- Dogecoin: Have you ever wondered if Dogecoin is a good investment in 2022? As one of the best meme coins on the market, this speculative cryptocurrency is favored by Tesla CEO Elon Musk. Over the past five years, Dogecoin has returned more than 800% in profit to investors.
- Stellar: Although Stellar was launched in 2014, this penny cryptocurrency has never exceeded $1. Its underlying blockchain offers fast transactions with near-zero fees. Notable partners include IBM and MoneyGram.
Investing in cryptocurrencies versus trading cryptocurrencies - What is the difference?
The terms "investing" and "trading" are usually used interchangeably in the cryptocurrency industry. However, as with stocks and shares, the two terms refer to different strategies.
For example, when investing in cryptocurrencies:
- When you invest in cryptocurrencies, you usually do so with a long-term vision in mind. That's why so many investors are looking for the best long-term cryptocurrency investments on the market.
- This means that you are likely to keep your tokens for at least a year.
- Investing in cryptocurrencies requires a small contribution on your part once you purchase the tokens of your choice.
And also if you trade cryptocurrencies:
- Cryptocurrency trading is usually seen as a short-term strategy.
- This means that you can buy cryptocurrency and withdraw it in the next few weeks or months. This is also referred to as cryptocurrency day trading.
- In some cases, traders open and close a position in a single day.
- Most importantly, cryptocurrency trading requires active participation in research and technical analysis.
As a newcomer to the industry, it's best to stick to a long-term approach to cryptocurrencies. This means that you'll try to choose solid projects that offer a long-term perspective, and therefore you won't be interested in short-term volatility.
Is it safe to invest in cryptocurrencies?
In short, investing in cryptocurrencies is very safe. However, as we mentioned earlier, there are still a few risk factors you need to take into account to make sure your investments remain safe at all times.
The most important of these is to make sure you only invest in cryptocurrencies with a broker that is regulated.
For example, when you use eToro, you can rest assured that your capital and digital tokens are in safe hands - because this brokerage firm is regulated by multiple top-tier institutions.
Moreover, when it comes to portfolio security, this is another area in which eToro excels.
That's because when you invest in cryptocurrencies through this broker, your digital tokens are safe thanks to the platform's internal wallet, which is subject to institutional-level security controls.
And if you're a beginner, keeping your cryptocurrency investments in an eToro online wallet will certainly appeal to you, as you don't need to have any knowledge of private keys or remote security against hackers.
To start investing in cryptocurrencies right away - this registration process takes just five minutes from start to finish.
However, you should make sure you've done plenty of research to decide which cryptocurrency to invest in. You should also remember that digital currencies are volatile, so consider the risks involved before investing.
Ultimately, eToro offers the best place to invest in cryptocurrencies in Poland because of its industry-leading fee structure, support for 60 digital assets and the ability to deposit without paying fees.
The views and opinions expressed here are solely those of the author and should not be taken as financial advice either. Every investment and transactional activity involves risk, so you are advised to do your own research when making any trading, investment or financial decisions.