A Complete Guide to Investing Online in Cryptocurrencies

Investing Online: Why Cryptocurrencies are a great option
Investing Online: Why Cryptocurrencies are a great option

If you have landed on this page, the chances are that you have already heard about the rise of cryptocurrencies. In truth, they are one of the hottest online investment assets available today, offering some of the best possible returns, both short and long term. Cryptocurrency advocates believe there will come a time in our world when these digital assets will replace fiat currencies such as GBP, USD and EUR to create a free, decentralised digital economy.

If you are thinking of incorporating cryptocurrencies as part of your online investment portfolio, you should be prepared for a white-knuckle ride of emotions. It is an asset class that’s not for the faint-hearted. Nevertheless, although they are considered highly volatile assets, they can deliver whopping returns on investment. It is not unheard of for traders to reap the rewards of 3-400% ROI within a few days.

A lot of it depends on knowing the right crypto coins to invest in and the best places to do so. That’s where we come in…

What does investing online actually mean?

Those who invest online are individuals that buy and sell securities or assets over a digital exchange, sometimes via a brokerage firm. Digital investing has been common among private investors and traders ever since the dotcom boom, with a raft of online trading platforms available today; many of which now offer cryptocurrencies as an asset class.

Today, those who prefer investing online are usually given a portfolio of state-of-the-art trading tools – all of which are helpful to trade profitably online. These tools include trading graphs to monitor support and resistance price points for assets, as well as real-time news releases and quotes from influential organisations and individuals that can have a significant impact on trading markets.

How to get started with cryptocurrencies by investing online

There are two primary methods for investing in cryptocurrencies online:

Cryptocurrency exchanges

Crypto exchanges are becoming the leading marketplace for the buying and selling of digital assets. Once transactions have been made by individual investors, each acquisition is then registered and stored via the appropriate blockchain network. Some cryptocurrency exchanges also have their own dedicated crypto wallets where you can store the assets you buy on the platform.

As these crypto exchanges have steadily grown in popularity, the variety of trading pairs available has also expanded over time. A trading pair is the price of two assets in relation to one another e.g. BTC/USD (Bitcoin/US Dollar). Trading pairs exist between cryptocurrencies and fiat currencies, as well as crypto/crypto trading pairs e.g. BTC/ETH (Bitcoin/Ethereum).

Cryptocurrency brokers

The second option for cryptocurrency investors is to buy and sell digital assets using contracts for difference (CFD) brokers. CFD trading is a highly leveraged, potentially lucrative trading product. CFDs allow investors to speculate on the price movements of a digital asset such as Bitcoin, instead of physically owning and storing BTC. CFD traders never own the underlying asset and they aren’t directly trading the asset in question; they are merely speculating on whether its market value will rise or fall over time.

It’s important to note that although CFD trading can be highly profitable, users can also stand to lose more than their initial capital. It’s therefore vital to trade cryptocurrency CFDs with a well-regulated, responsible broker.

The best places for investing online in cryptocurrencies

eToro

etoro
etoro

The broker, eToro, was developed as the world’s first social trading community, offering brokerage for CFDs on cryptocurrencies as well as forex, stocks and commodities. Today, it boasts a global community of more than six million active users across 170 countries. It was one of the first CFD brokers to offer access to cryptocurrencies. Users that sign up to eToro can choose one of three online trading platforms to execute trades: eToro Webtrader, eToro Openbook and eToro Mobile Trading.

Coinbase

coinbase logo
coinbase logo

Coinbase exchange is one of the simplest and most popular cryptocurrency exchanges. It allows users to buy and sell the leading digital assets, Bitcoin, Litecoin and Ethereum. Coinbase also has its own web-based wallet that provides a one-stop-shop for buying, selling and storing crypto coins. What lets Coinbase down is the fact that it only supports a tiny percentage of all available cryptos to trade.

Kraken

Kraken
Kraken

Kraken exchange is one of the oldest cryptocurrency exchanges in the crypto space. Established way back in 2011 when Bitcoins were still something of a myth, Kraken has evolved to become the leading crypto exchange for investors using Euros. Its streamlined, intuitive user interface makes it easy to execute and monitor cryptocurrency investments.

24option

24 option

As can be seen in this 24option review, it is a CFD broker that has grown in popularity in recent years. It allows users to place trades on an increasing number of cryptocurrency pairs, as well as a host of stocks, commodities, indices, bonds and more. The concern for some risk-averse online investors is that 24option is unregulated by leading financial conduct organisations, which is a concern for those investing large sums of money into digital assets.

Why eToro is our recommended broker for investing online in cryptocurrencies

eToro 24Option Coinbase
FCA regulated X
CySEC regulated X X
Multiple payment methods
Wallet? X X
Social community? X X
Trading tools? X
Stocks & commodities available? X

How to start cryptocurrency investing online in your country

Although you might have the personal funds ready to make your first cryptocurrency investment with eToro, it’s important that you make sure what you’re doing is legal in your country. Some countries have taken a very dim view of crypto tokens and opted to prohibit their use entirely.

The likes of Russia and China have denied all access to cryptocurrency exchanges and brokers and have criminalised the use of digital assets for goods and services. It’s important to make sure that your cryptocurrency investments are legitimate and cannot leave you liable for prosecution.

In summary, there is no doubt that cryptocurrency has the potential to provide many investors a ‘rags to riches’ fairytale. There are several examples of crypto tokens that have experienced immense growth, with Bitcoin the biggest success story to date, of that there is no doubt. However, investing online in cryptocurrencies should only be part of your investment portfolio. For example, if you choose to buy Bitcoin, you should look to balance the volatility of these digital assets by investing some of your personal wealth in more stable commodities that can hold firm when some of your crypto coins experience a downturn in fortunes.

Investing online FAQs

Are cryptocurrency investments low-risk?

It would be wrong to suggest investing online in cryptocurrencies was a low-risk strategy. These digital assets are at the forefront of a new fintech revolution, with the potential to create a truly digital economy. However, with revolution comes uncertainty, and the price of Bitcoin and other leading crypto coins fluctuates wildly at times due to their unprecedented nature.

Is it important to have an exit strategy when investing online in cryptos?

There will definitely be crypto tokens that you won’t want to store forever. In fact, some you might only hold onto for a matter of hours due to their volatility. It is definitely a good plan when investing online to set a plan for taking profits or implementing stop losses if the price of your asset goes against you.

What does trading leverage mean when investing online in cryptocurrency?

Some cryptocurrency exchanges and brokers will allow crypto traders leverage or a margin. Put simply, crypto investors can leverage their existing cryptocurrency or fiat currency by borrowing funds to enhance their investment power. For instance, if you invest £25 and leverage 5:1 to purchase £100 worth of Ethereum (ETH), your exchange will insist that you pay them back £100 plus transaction fees. Leverage gives investors a chance to maximise profits, but it can also magnify losses too.

Why are some cryptocurrencies labelled a ‘bubble’?

In recent times, financial experts – some of which predicted previous global financial crises – have likened Bitcoin and other leading cryptocurrencies to bubbles. In the context of the global economy, a bubble is an asset where its price far exceeds its intrinsic value. Experts believe the likes of Bitcoin are bubbles simply because the basis of its value is unclear, aside from supply and demand. The value of cryptocurrencies in general is hard to determine because they are so unprecedented. That’s what makes them such volatile yet exciting assets for investing online.

How many cryptocurrencies exist to invest in online?

Every day it seems like a new digital asset is unleashed to the world. At the time of writing, there are more than 1,600 active cryptocurrencies available to invest in online. Bitcoin is the largest by market capitalisation, followed by Ethereum, Ripple and Bitcoin Cash.

Featured image source: Flickr

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