Updated: Sep 21
The cryptocurrency market is booming, with new digital tokens emerging every day. In fact, the market is growing so fast that it will surpass $1.2 trillion in value by the end of this year. As more people become aware of these virtual currencies and their potential for profit, their popularity has skyrocketed. That being said, there are a lot of misconceptions about how one can invest in cryptocurrencies like Bitcoin or Ethereum. It's not as simple as buying stock from a company. Instead, you need to understand how blockchain technology allows users to exchange digital tokens that represent value without trusting a third party like a bank or broker. If you’re interested in learning more about investing in cryptocurrencies and want to know where to start with these assets—this guide has everything you need to know about investing in crypto right now.
How to invest in cryptocurrency?
The first thing to know about investing in cryptocurrency is that you’re not actually buying the cryptocurrency itself. Instead, you’re buying a “token” that represents ownership in that cryptocurrency. To get started, you’ll need to set up an account with a cryptocurrency exchange like Newton, Coinberry or Shakepay. Then, you’ll deposit money into your account either through your bank account or by using a credit card. Finally, you can use that money to purchase any of the different cryptocurrencies listed on the exchange at any given time.
Understanding the Basics of Blockchain
The blockchain is a digital ledger maintained by a network of computers worldwide. It records every transaction ever made in the history of that particular cryptocurrency. The technology behind the blockchain is what makes cryptocurrencies like Bitcoin and Ethereum so unique. Unlike traditional currencies, these virtual coins don’t exist in the physical world. In other words, you can’t hold a Bitcoin in your hand. It’s an entry in a digital ledger that’s maintained by thousands of computers around the world. The blockchain is a decentralized digital ledger that records transactions between two parties in a verifiable and permanent way.
Which cryptocurrencies should you invest in?
Before you start investing in any of the major cryptocurrencies like Bitcoin or Ethereum, there are a few things you should consider. It’s important to diversify your portfolio, so you don’t put all your eggs in one basket. To start, consider your risk tolerance. Are you willing to make higher-risk investments in hopes of higher returns? Or are you more conservative and want to make lower-risk investments? Next, think about your investment timeframe. Are you looking to invest for the long-term (1-10 years)? Or are you looking to make quick gains in a shorter amount of time? Once you’ve considered these two factors, you can start researching specific cryptocurrencies to invest in. There are a few different factors you should consider when researching potential investments.
Trading vs. Investing in Crypto
Trading and investing are two different things. Trading is buying and selling cryptocurrencies with the goal of profiting within a short time period. Investing is buying cryptocurrencies with the expectation of holding them long-term. These are two different strategies, although they can be used in conjunction. If you’re looking to trade cryptocurrencies short-term, you should focus on the technical aspects of the market. This includes analyzing charts and graphs to try to spot which cryptocurrencies are likely to rise and fall in value. If you’re looking to invest for the long-term, you should focus on the fundamentals. This includes researching the company behind the token you’re interested in investing in. Are they reliable? Do they have a good track record? Do they have a business model that’s sustainable?
How to buy cryptocurrency?
Once you’ve decided which cryptocurrencies to invest in, you can use this money to buy more of that token through your cryptocurrency exchange. You will be charged a small fee for each transaction, although that fee varies widely depending on which exchange you use. Next, you’ll transfer your money from your account into your cryptocurrency exchange’s “wallet.” You’ll do this by transferring either your CAD or your Bitcoin from your account to your exchange wallet. From there, you can use your money to buy as many tokens as you want of whatever cryptocurrencies you choose. You can also use your wallet to sell your tokens. Once you sell them, you’ll have CAD or Bitcoin in your wallet again, which you can then transfer back to your account.
If you’re thinking about investing in cryptocurrencies, now is the time. Not only is the market growing, but there are plenty of new investors entering the space. This means that cryptocurrencies are more accessible now than they’ve ever been. If you want to get started with investing in crypto, the first thing to do is understand the basics of blockchain technology. From there, you can decide which specific cryptocurrencies you want to invest in. If you are interested in a consulting call with Correcords Bookkeeping Inc., we can help you to better understand the process and the tax implications. Set up a call on our website at www.correcords.ca