How to Invest in Cryptocurrency for Beginners [FREE GUIDE]

Disclaimer: This post may contain affiliate links. Please read my disclosure for more information.

the millennial money woman blog post "how to invest in cryptocurrency"

Learning how to invest in cryptocurrency could be one of the most profitable investments.

In fact, take a look at the immense growth rate of Bitcoin’s price below.

As you can see, over the long-term, Bitcoin has proven to be very profitable.

So if you’re ready to start investing in crypto, this will be your go-to guide.

Keep reading.

Sneak Peek: Top Cryptocurrency Platforms


Cryptocurrency Exchange 👇

Hardware Wallet 👇

What is Cryptocurrency?


Before we head into the nitty-gritty of how to invest in cryptocurrency for beginners, let’s answer the first question: What is cryptocurrency?

For those of you who are visual learners, take a look at my simple infographic below.

the millennial money woman blog post "what is cryptocurrency"

Here’s a general break-down of the terminology – from the most general (blockchain) to the most granular (Bitcoin – as an example).

Crypto Language What it Means in the English Language

This is a form of digital technology that is (in theory) unhackable.

Blockchain is decentralized (meaning not controlled by 1 single entity such as a government or bank).

Blockchain manages transactions across many computers.

A type of currency, which is in the digital format.

Cryptocurrency uses blockchain technology to process transactions (buying or selling).

The currency issued by other companies, to be stored on the blockchain, which can be exchanged for goods or services that this company offers (like poker chips being exchanged for money, a good or service).

The different types of tokens:

- Payment tokens
- Security tokens 
- Utility tokens

This is a type of token (specifically, a payment token).

For those of you who are visual learners, take a look at my illustration below.

This is how I was able to make more sense of cryptocurrency and how Bitcoin and Ethereum fit into the picture.

the millennial money woman blog post "blockchain payment token example"

As you can see from the chart above, blockchain is merely the technology that can allow virtually any type of transaction to be securely and immutably recorded.

Bitcoin uses the blockchain to record transactions.

Voting records could also be recorded on the blockchain and you would have an unchangeable, un-hackable voting record.

Why use Blockchain Technology?


The bottom line is that blockchain technology is decentralized.

In other words, blockchain removes the middle man, which could include:

Process Type The Middle Man that Blockchain Removes

Currency

Bank (or the Federal Reserve in the US)

Voting

Vote counters / government

Property Records

Local property recorder’s office

Healthcare

Hospital staff and others who would have access to these health records.

Blockchain would ensure accessibility only to certain individuals

As you can see, blockchain technology could improve efficiency substantially.

Below I’ve created an infographic that should help you better understand the process of a blockchain transaction:

the millennial money woman blog post "the process of a blockchain transaction"

Blockchain transactions could help you save:

  • Time
  • Energy
  • Money

… And still get your tasks done in a minimal amount of time.

fiona smith the millennial money woman

The Bottom Line:

With Blockchain technology, you don’t just rely on 1 player (the bank) to verify your transaction. Instead, with Blockchain technology, you rely on thousands and thousands of computers within the blockchain network to verify the transaction and add that transaction to the blockchain itself.

Where to Buy Cryptocurrency


The cryptocurrency topic has seemingly exploded (not just in the world, but also in my household – mainly being my husband trying to convince me to buy cryptocurrency!).

And that’s where this question comes into play: Where can you buy cryptocurrency? 

You can buy cryptocurrency in what is known as a cryptocurrency exchange. 

Let’s take a look at how a cryptocurrency exchange works in the graphic below.

the millennial money woman blog post "how a cryptocurrency exchange works"

The cryptocurrency exchange I use is called Coinbase.

Coinbase is arguably one of the best and most established cryptocurrency exchanges in the world.

Coinbase allows you to hold, buy and sell over 30 cryptocurrencies.

Coinbase also:

  • Offers a digital wallet (a place to store your cryptocurrency)
  • Offers FDIC protection for any USD stored in your account
  • Offers insurance in the case the website is hacked
  • Only requires $2 to open an account
  • Offers 30+ cryptocurrencies

One thing to know is that the trading fees could be a little steeper than other cryptocurrency exchanges, ranging from 0.5% to 4.5%, depending on how you pay for your cryptocurrency (cash vs. credit vs. debit, etc.). 

Recommended Reading: Coinbase Review

How to Invest in Cryptocurrency for Beginners


Let’s take a look at how you can start investing in cryptocurrency.

Spoiler Alert: It’s a lot easier than you think.

how to invest in cryptocurrency for beginners

Step 1. Open an Account with a Cryptocurrency Exchange


First, you want to open an account on a cryptocurrency exchange. 

My husband and I opened our first account with Coinbase and I kid you not, it took us all but 10 to 15 minutes. 

Opening an account is in most cases free and very straightforward. 

Step 2. Confirm Your Identity


Below are some things you will typically need for opening an account:

  • Photo ID (typically a driver’s license)
  • First & last name
  • Email address

Many people (myself included!) wonder why you need a photo ID to purchase cryptocurrency – especially Bitcoin. 

The answer is typically because to buy Bitcoin, some cryptocurrency exchanges require the identification of the customer in an effort to discourage fraud and obtain some form of personal information in the case of theft.

Step 3. Buy Your Cryptocurrency


Typically speaking, you can buy cryptocurrency in dollars through:

  • Cash
  • Debit cards
  • Credit cards

However, there are other cryptocurrencies that will require you to purchase their currency in bitcoin.

If you buy your cryptocurrency through Coinbase, it will be stored in what is known as a “Digital Wallet.”

Typically speaking, digital wallets offer some of the following functions:

  • Ability to store cryptocurrency
  • Ability to sell other cryptocurrencies
  • Ability to store personal information
  • Ability to buy other cryptocurrencies

Check out the section below to learn more about how to store your cryptocurrency.

How to Store Your Cryptocurrency


Now that you set up your account and are ready to trade your cryptocurrency, it’s also time to consider how to store your cryptocurrency – safely. 

I’ve listed 3 ways that are typically safe ways to store cryptocurrency, below.

the millennial money woman blog post "how to store your cryptocurrency"

1. Hardware Wallet (Offline Wallet)


A hardware wallet is typically one of the safest ways to store your cryptocurrency.

The hardware wallet that I use is called the Ledger Nano X.

That way, no other hacker can obtain your passwords to “open” your cryptocurrency accounts. 

If they cracked your passwords to your cryptocurrency accounts, you would lose your investments. 

A hardware wallet is my personal choice to securely store my cryptocurrency information.

2. Crypto Interest Account


Have you ever heard about regular
savings accounts?

Well, they are a thing of the past.

Now, there are interest accounts designed specifically for cryptocurrency.

And one of the best crypto interest accounts is BlockFi 👇

BlockFi essentially works like a digital wallet (storing your cryptocurrency) but gives you the chance to accrue interest on your cryptocurrency – similar to a regular savings account. 

Essentially, the more you deposit into your BlockFi account, the more interest you receive. 

Recommended Reading: BlockFi Review

Let’s take a look at the potential interest rates you can earn on your cryptocurrency with BlockFi.

Cryptocurrency Type Ticker Symbol Interest Rate

Bitcoin Tier 1

BTC

6.00% (amounts of 0 to 2.5)

Bitcoin Tier 2

BTC

3.20% (amounts of 2.5+)

Ethereum

ETH

4.50%

Litecoin

LTC

5.00%

PAX Gold

PAXG

4.00%

Tether

USDT

7.00%

USD Coin

USDC

8.60%

Gemini Dollar

GUSD

8.60%

Paxos Standard Token

PAX

8.60%

The downside to BlockFi is that this crypto interest account only offers interest rates for a limited amount of the cryptocurrencies out there.

You’ll also see some fees for withdrawing your currencies from BlockFi, but you can withdraw your currency for free 1x every month.

Bonus: New BlockFi clients can get up to a $250 bonus when you deposit $100 or more in crypto! Check out BlockFi here.

3. Cryptocurrency Exchange (Digital Wallet)


Similar to storing your cryptocurrency information in a hardware wallet (offline) you could also store your cryptocurrency information (including your password to your crypto account) in what is known as a digital wallet.

Digital wallets come in many different shapes and forms.

Some of these include:

  • Allied Wallet
  • Amazon Pay
  • Exchanges
  • Apple Pay
  • Venmo
  • PayPal

However, a digital wallet is not the safest way to store your cryptocurrency. 

That’s why I would stick with a hardware wallet like Ledger Nano X (offline storage) if you prefer to be on the side of safety.

Pros and Cons of Investing in Cryptocurrency


Cryptocurrency has been the talk of the year – and likely decade.

Let’s take a look at the pros and cons of investing cryptocurrency below.

Cryptocurrency Pros Cryptocurrency Cons

Astronomical return potential

High Volatility

Short time before major returns could be made (you can cash out very fast)

Potential failure of attracting fiat currency users, which would cause the cryptocurrency network to stall

Extreme transparency with transactions recorded forever on blockchains

No safety in the case of loss or hacking

24/7 instant availability to trade/sell

Possible mishandling of cryptocurrency by company founders

Total anonymity

Very difficult to understand

The more you learn about cryptocurrency, the more you can consider whether its pros and cons are worth the investment for you.

FAQs

There is no minimum amount to invest in cryptocurrency. Typically the investment platform you use will tell you the minimum investment amount. 

Coinbase, for example, mandates that users buy cryptocurrency for a minimum of $2.

How much you invest in cryptocurrency depends on:

  • Your financial ability
  • Your ability and willingness to take risk
  • Your comfort level investing in cryptocurrency

I suggest to make sure you do your research and take some time to think about your financial goals before you start investing in cryptocurrency.

There are more than 4,000 cryptocurrencies in existence as of January 2021.

Here are the top 10 cryptocurrencies by Market Capitalization:

  1. Bitcoin
  2. Ethereum
  3. Tether
  4. Polkadot
  5. Ripple
  6. Cardano
  7. Litecoin
  8. Bitcoin Cash
  9. Chainlink
  10. Stellar

Investing in cryptocurrency is similar to investing in stocks and bonds.

However, the major difference is that cryptocurrency is still in its infantile stages – we don’t know much about cryptocurrency and it’s very complex.

That’s why if you invest today in cryptocurrency, you could become a very wealthy man tomorrow due to the astronomical return on investment opportunity cryptocurrency offers.

My suggestion is this…

If you have a little bit of spare cash, after having:

  • Completely funded your emergency savings account
  • Maximum invested in your IRAs and/or 401(k)s
  • Paid off all credit card bills

Then, it could be the right time to consider investing your spare cash into cryptocurrency exchanges, like with Coinbase.

Here’s how the typical cryptocurrency prices fluctuate: 

  • Skyrocket tomorrow 
  • Plunge the day after tomorrow 
  • Soar above any other price the following day

We don’t know how cryptocurrency prices will change in the future.

You won’t know how a cryptocurrency will perform in 1 month from now, let alone 1 year from now.

Closing Thoughts


The more you know about an investment, the better you’ll be able to decide for yourself whether it’s the right fit for you and your current lifestyle.

Now, will I invest 100% of my net worth in Bitcoin or another cryptocurrency?

Never. 

But I am willing to dabble in cryptocurrency and invest a little. And I’m 100% OK with losing that money.

I would not suggest that you use your cryptocurrency investments as your retirement fund. 

Instead, consider your cryptocurrency investments to be a way to potentially grow your net worth. 

Read first, learn now, and invest once you’re comfortable. 

Your bank accounts will thank me later!

Have you invested in cryptocurrency? What’s your experience been so far? Let me know in the comments section below.

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Fiona Smith
Fiona Smith
The Millennial Money Woman was founded by Fiona Smith. She holds her Master of Science Degree in Personal Financial Planning and has co-founded a local non-profit community teaching financial literacy to young professionals.

6 thoughts on “How to Invest in Cryptocurrency for Beginners [FREE GUIDE]”

  1. I believe cryptocurrency is such a revolutionary technology. Not for “omg look at how much money I made!” purposes but for the underlying technology and how it actually works. It’s pretty genius at how the creator of cryptocurrencies was able to take control away from big banks and the government into the hands of the people.

    It will change the payment landscape in a decade!

    1. David,

      I completely agree with you. Blockchain technology is revolutionary and can help improve efficiencies with not just digital currencies but with so many other processes. You’re absolutely right in that blockchain technology will certainly challenge and very likely alter the traditional payment and banking landscape as we know it.

      Thanks for sharing your thoughts!

      Fiona

  2. This is one of the best articles I’ve seen for explaining how to buy crypto! You keep everything clear and concise. And you even made a case for why blockchain technology is the future. Great job, Fiona!

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