How to invest in crypto: a complete guide

Alright, I see you, reader. You’ve scoured the Reddit threads, got your head around how the blockchain works and which wallet you need. You’ve bought eye drops to counteract those late nights pouring through endless videos predicting either huge gains or utter doom instead of sleeping. Most importantly, you’ve put some money aside, because you’re ready to take the plunge. You’re ready to own some of the cryptocurrency. What can you expect? How does it all work? Let’s take you through it.

First things first, let’s make sure you’re actually ready to invest, and that you’re going to do so safely. It’s just as easy to lose money as it is to gain profit when investing, particularly in crypto as it’s so volatile. While there’s analytics, news, and rumours spilling about that might help you land the next moonshot (a tiny coin that people are tipping to go up by a huge percentage in value). There is, in actual fact, no real chance of predicting what will happen, you kinda have to be prepared to lose everything you’ve put in. It’s rough, but it’s the safest approach. Assume the worst.

So initially, consider that, if the amount you’re investing suddenly disappeared from your account, beyond being a bit of a shit time, would it seriously impact your life? If the answer is yes, reduce how much you’re investing. In crypto, unless you make a point of splitting your money between a few coins, you’re backing a certain coin to do well. You have one horse in the race, so to speak. There’s no diversification so there’s a much bigger risk.

Most people will be looking to invest in either Bitcoin or Ethereum, given they’re by far the two most popular and accessible coins. If you’re looking at an altcoin or even a moonshot, then make sure it’s legit. There’s a lot of scams out there, and you need to know how to spot them.

There are endless ways to buy crypto. The most popular coins can be purchased across many exchanges, such as coinbase and etoro. These may take a little getting used to if you haven’t got any experience with trading platforms – but they offer an easier process for buying and selling, when you know what you’re doing. They’re also very widely used, and therefore you can guarantee they’re trustworthy. This week PayPal has started allowing people in the UK to buy, sell and hold a few of the most popular cryptocoins (bitcoin, ethereum and litecoin) so it’s becoming quite accessible. Plus many of these services (including the ones mentioned here) are FCA-regulated, so there’s a mainstream safety along with much of the security crypto comes with.

When you buy from an exchange, you can keep the money in an in-built wallet. You can also buy cryptocurrencies from a platform and transfer them to a wallet (usually done through the wallet’s app or a broker) which offers an additional layer of security. When it comes to altcoins and tokens, you will likely buy directly from their sites and then add the transaction to your wallet manually. Whichever you’ve chosen to use, there’s pros and cons. Also, expenses that we’ll get into.

You sometimes need to confirm your identity when making an account for most wallets and exchange sites too. Yes, this sounds a little counterintuitive, given the whole decentralised-nothing-is-traceable, ethos. Don’t worry though, all of that still applies. The checks are just to make sure you’re legitimately depositing fiat money (pounds, dollars, etc.) into the platform. Usually, you’ll need a driver’s license and a selfie.

When that’s all sorted, you’ll notice there are different brokers that you can use for transactions (especially with mobile and online wallets) and they charge different fees. Often you’re making a trade-off between speed and price. It’s sort of up to you what you do here, but if you’re trying to ​“buy the dip” (trying to buy the coin when it’s at a low-point in value, for maximum profit when the value then rises again) speed can be useful as things change quickly. On the flip side, you want transaction fees to bite into as little of your cash as possible.

When you’ve decided on who to buy through, you simply follow the instructions. Very important point though: make sure you’re buying the amount you intend to. Always double-check that you’re buying (for example) £100 of bitcoin, not 100 bitcoin. Granted, your bank will probably just void the transaction, but if it didn’t, it’d be a bit of a nightmare. Especially with smaller coins, where realistically it could easily go through as a transaction and you suddenly find you’ve spent like five times what you meant to. Yeesh.

Now that’s all done, you’re good! You should see your crypto in your wallet. Success! From here, you can spend it, exchange it, buy more, sell it, or join those doing the #hodl (this just means sitting on the money, it’s a crypto joke) and hoping for long-term gains. Many retail outlets across the world (but especially in the USA, UK, Europe and South America) are increasingly opening up to accepting crypto as a payment – meaning you can use it for anything from hotels and bars to houses and clothing. Coinmap is a great tool for finding places that accept crypto payments. You can even get debit cards for your crypto, with household names Visa and Mastercard supporting many of them.

All the best, be responsible!

Speak to a Financial Conduct Authority registered financial adviser before taking financial advice, and think carefully before making any decision.