gold-colored Bitcoin

The current craze around cryptocurrency began more than a year ago when Bitcoin’s price started skyrocketing from around $10,000 in the summer of 2020 to almost $60,000 in March of 2021. Additionally, Elon Musk began tweeting about the “meme currency” Dogecoin in 2020, which attracted many casual and amateur investors. The momentum that came from these events (and the rise in the value of cryptos like Ethereum) continues into the present day.

In this article, we will be talking about all things crypto—most importantly, what it is and how you can invest in it. So, if you still haven’t hopped on the digital money train and you want to learn more before deciding to invest, keep reading.

What Is Cryptocurrency? 

Put very simply, cryptocurrency is essentially digital money. Cryptocurrencies use blockchain technology, which can be compared to an old-school bookkeeper’s ledger used to track transactions and assets. Anyone with access to the ledger can act as the bookkeeper.

Nowadays, there are many cryptocurrencies available that exist on a blockchain network, including popular names like Bitcoin, Ethereum, Solana, Litecoin, and Dogecoin.

Behind the Scenes of Cryptocurrency Investing 

When you consider investing in cryptocurrency, you’re probably thinking about holding or buying fractions of coins or entire coins. Purchasing cryptocurrency directly is perhaps the most popular way to add crypto to an investment portfolio. However, there are a few other options available: 

  • Invest in cryptocurrency companies: Instead of buying coins directly, you can invest in a company with a total or partial focus on cryptocurrencies. That includes organizations that deal with cryptocurrency mining, mining hardware makers, or financial operations like Robinhood Markets and PayPal that support crypto.
  • Invest in cryptocurrency funds: If you don’t want to choose and invest in a single cryptocurrency company, you can invest in a fund focused on the new technology. 
  • Invest in crypto IRA: If you want to get the tax benefits of an individual retirement account while investing in crypto, then you can consider putting your money in a cryptocurrency IRA. 
  • Become a crypto miner or validator: The most direct approach to investing in crypto is by acting as a miner or validator in the network. By doing so, you can earn rewards in crypto for your efforts, which you can later decide to hold as an investment or sell.

How Does Investing in Cryptocurrency Work?

If you’re set on investing in crypto directly, then you can do so by following the steps outlined below:

  • Choose the cryptocurrency exchange you want to use—go for one that has a good reputation and is well-known such as eToro, Binance, Coinbase, Webull, or Robinhood. Take some time to figure out which exchange fits best into your strategy.
  • Create an account on their platform. Remember, you will have to provide personal bank and identity information.
  • Fund your account with another currency like the U.S. dollar or the euro. 
  • Decide which coins you want to invest in. It’s good to research market trends and real-world value (can you use this coin for e-commerce or in-store purchases anywhere?) before buying.
  • Place an order to purchase the cryptocurrency you’ve chosen. 
  • Store your crypto in a digital wallet that can be hosted either by an independent wallet provider or by the cryptocurrency exchange you choose to use.

You now have a cryptocurrency investment. From there, you just have to manage your investments well and see what returns they bring you. 

Final Thoughts

Investing in crypto is turning from a “hot new trend” to a solid strategy that can provide great returns. However, you shouldn’t invest in something you don’t understand just because of FOMO (fear of missing out). Be sure to take the time to research different cryptocurrencies before starting your investment journey, and remember the tips above when you decide it’s time to take action.