4 Ways to Invest in Cryptocurrency

WRITTEN BY Dan Kent | UPDATED ON: January 27, 2020

Investing In Cryptocurrency

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Once envisioned as a new-age replacement for fiat currency, cryptocurrency has in recent years become better known as an asset for investment. We included it in our look at The Best Ways to Invest $1000 in Canada and by and large it’s emerged as one of the more popular alternatives to investing in stocks.

As much as this may be the case though, plenty of people are still a  bit unsure as to how to invest in cryptocurrency. And if you’re a new investor, looking to learn how to invest, you can lose a lot of money with cryptocurrency.

So in this piece, instead of focusing on Canadian stocks, we’ll take a look at four options for cryptocurrency.

1. Open a Crypto Wallet

The most straightforward way to invest in cryptocurrencies is to open a crypto wallet account with which to buy and sell them. These wallets can work in different ways, and are classified in different categories.

The main options, however, function as online or mobile programs within which you can buy major cryptocurrencies with your own money, hold them securely for as long as you’d like, and sell when you’re ready.

This way, a standard crypto wallet acts essentially like a personal investing app.

CryptoNews lists a few specific wallet options including Coinbase, Electrum, and Jaxx to game a few examples — though for that matter, the personal investing app Robinhood also handles some cryptocurrencies.

2. Use a Hardware Wallet

We just mentioned that cryptocurrency wallets are classified in different categories.

One such category is hardware wallets, and some would argue that they’re the best options for long-term investment. Specifically, they’re perceived by many to be the more secure wallets for storage over time.

A hardware wallet — such as a Trezor or Ledger — stores the information you need to access your cryptocurrency, but does so entirely offline. That means you can buy cryptocurrency and hold it as an investment as long as you like with no concern for its digital security, and then hook your hardware wallet up to a computer when ready to sell.

3. Buy & Sell CFDs

Buying and selling CFDs is effectively a way to invest in the price fluctuations of cryptocurrency, without actually having to trade cryptocurrency itself.

More specifically, CFDs — “contracts for differences” —  allow traders to bet on whether a given asset’s price will rise or fall over the course of a set period time.

They’re popular trading options in currency and commodities, which now include cryptos as well.

Plus500 explains the perks of crypto CFDs in more detail, and it’s clear that they may appeal to many investors. Basically, trading via CFDs means that there’s no need to deal with a crypto wallet; you can profit off price drops as well as gains; and the market is available 24-7.

4. Trade The Futures

Futures trading is a little bit more involved, in some sense, because it’s generally done through a more traditional brokerage or financial institution.

The concept, though, can appeal to some in a vaguely similar way to that of buying or selling CFDs. NerdWallet breaks down futures trading in more detail, but to summarize, in this case you’re making an agreement at one time to purchase a given amount of currency for a given price at a later time. 3

Essentially, you’re investing based on where you think the price will go. If it goes up higher than what you agreed to pay in between when you make the deal and when the transaction is set to occur, you’re getting a good deal; if it falls lower, you’ll wind up overpaying.

As with any form of investment, each of these cryptocurrency trading options comes with potential for losses and gains alike. There is always risk, even in the most strategic of investments, and the most important thing is to educate yourself on the market at hand. If you do decide to invest in crypto, however, these are some of the ways to do it.