How to Invest in Cryptocurrency for Beginners [FREE GUIDE]

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

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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? 


Cryptocurrency is a form of digital currency, that is typically used to purchase goods or services. What differentiates cryptocurrency from regular money (like the dollar) is that cryptocurrency utilizes an online ledger (also known as a blockchain).

the millennial money woman blog post "what is cryptocurrency"

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

  • Blockchain – 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.
  • Cryptocurrency – A type of currency, which is in the digital format. Cryptocurrency uses blockchain technology to process transactions (buying or selling)
  • Token – 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)
  • Bitcoin – 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 Gemini.

Gemini is arguably one of the best and most established cryptocurrency exchanges in the US.

Gemini allows you to hold, buy and sell over 10 cryptocurrencies and 6 stablecoins.

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 go-to crypto exchange is Gemini.

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 Crypto


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 a crypto exchange like Gemini, 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

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.

Crypto Pros Crypto 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.

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. If you invest today in cryptocurrency, you could become a very wealthy man tomorrow due to the astronomical return on investment opportunity cryptocurrency offers.

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.

Fiona Smith
Fiona Smith
Fiona Smith is the founder of The Millennial Money Woman. She holds her Master of Science Degree in Personal Financial Planning, has advised decamillionaires for 6 years in the corporate wealth management sector and has co-founded a local non-profit community teaching financial literacy. She is the author of the personal finance book How to Get Rich from Nothing and her work is featured on Forbes and FinCon.

14 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!

  3. This is really helpful Fiona, thank you for explaining this all so clearly.

    I think I’m ready to jump in, but I know that I know next to nothing about crypto. There are probably 10-year olds who understand crypto better than me LOL. I have so much to learn, but I guess “by doing, learn” is the way to cautiously go.

    Appreciate you very much.
    Shawn

    1. Hi Shawn,

      So glad you enjoyed this article!
      Lol – I hear you, there is so much to learn about crypto, and I feel like every day there is something new 🙂
      The more you read, research, and ultimately dabble in crypto investing, the more you’ll learn for sure. Good luck!

      Cheers,

      Fiona

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