Image shows how to start investing in crypto currency - A Comprehensive Guide

How to Start Investing in Cryptocurrency

Cryptocurrency has exploded in popularity in recent years. With its massive growth potential and inherent volatility, it offers an exciting new asset class for investors. However, getting started with cryptocurrency investing can be daunting for beginners.

This comprehensive guide will walk you through everything you need to know to start investing in cryptocurrency.

Choosing Your Investment Platform

The first step is choosing a platform to purchase and store your crypto. Here are some of the best options:

Cryptocurrency Exchanges

Platforms like Coinbase and Binance allow you to buy, sell, and store crypto coins and tokens. They offer accessibility and a wide variety of currencies, but charge higher fees.


Mainstream brokerages like Fidelity and Charles Schwab now offer crypto trading with lower fees. This provides an easy entry point, but has limited coin availability.

Decentralized Exchanges

These peer-to-peer platforms like UniSwap allow you to trade crypto directly with others. They have low fees and provide more control, but can be complex for beginners.

Evaluate each platform’s fees, security, and ease of use to determine the best fit for your needs. Many advise starting on a mainstream exchange for simplicity.

Choosing Your Investment Coins

With over 10,000 cryptocurrencies to choose from, narrowing them down can be overwhelming. Here are a few strategies for picking coins as a beginner:

  • Focus on the "blue chips": Bitcoin and Ethereum are relatively safe and stable compared to smaller altcoins.
  • Diversify across sectors: Choose coins that serve different purposes like payments, DeFi, storage, etc.
  • Research thoroughly: Read the project’s whitepaper, check the development team, and monitor community engagement.
  • Consider staking rewards: Opt for PoS coins that allow you to earn interest via staking like Cardano and Solana.

Avoid obscurity. Stick with established, reputable projects with active development for less risk as a cryptocurrency beginner.

Securing Your Investment

Cryptocurrency introduces new security risks compared to traditional assets. Here’s how to protect your investment:

  • Store coins in a digital wallet you control, not on an exchange long-term. Choose secure hardware wallets like Ledger and Trezor for bigger holdings.
  • Use two-factor authentication on exchanges and wallet apps to prevent unauthorized access.
  • Keep investment-related accounts protected with strong unique passwords and password managers.
  • Be vigilant of phishing attempts via email or text to steal your login credentials or keys.
  • Consider using a VPN to enhance privacy and security when accessing exchanges.
  • Keep your cryptocurrency private—don't publicly flaunt holdings to avoid making yourself a target.

Proper security is critical. Take preventative measures to keep your investment protected from bad actors.

Determining Your Investment Strategy

With cryptocurrencies being so volatile, having a solid investment strategy is key. Here are a few approaches to consider:

  • Long-term holding: Known as hodling, this passive strategy involves purchasing and holding major coins like BTC and ETH long-term.
  • Trading: This higher-risk approach aims to capitalize on price fluctuations through technical analysis and well-timed buys/sells.
  • Dollar-cost averaging: Investing smaller amounts at regular intervals helps smooth out volatility.
  • Portfolio allocation: Put 5-10% of your investment portfolio in crypto to balance risks and rewards.

Decide how active or passive you want to be. Those with less time or risk tolerance may opt to simply hold, while traders can take advantage of price swings.

Managing Your Investment

Once you begin investing in cryptocurrency, follow these tips for ongoing management:

  • Reassess your asset allocation occasionally—trim positions if crypto becomes too large a share of your portfolio.
  • Stay up to date on project news and developments—subscribe to blogs, forums, discord servers.
  • Monitor overall market conditions—be aware of what could impact prices broadly.
  • Take profit during bull markets—consider selling a portion to realize some gains.
  • Diversify beyond just crypto—include other alternative assets like real estate.
  • Use dollar-cost averaging to make regular buys regardless of price dips and surges.

Proper ongoing management is key to surviving crypto volatility and maximizing returns.

Dollar Cost Averaging

Dollar cost averaging (DCA) is one of the most beginner-friendly and safer approaches to cryptocurrency investing. It simply involves investing set dollar amounts at regular intervals, regardless of price fluctuations. This helps reduce risk compared to lump sum investing.

Here is a step-by-step guide to implementing dollar cost averaging:

1. Decide on allocation

Determine what percentage of your overall portfolio you want to allocate to crypto long-term (e.g. 5-10%). This will dictate how much to invest each period.

2. Set schedule

Decide on a consistent schedule for your periodic buys - such as daily, weekly, or monthly. More frequent purchases in smaller amounts can provide tighter averaging.

3. Choose investment

Select your crypto investment - this is often Bitcoin or a diversified basket of altcoins. Some platforms even offer automated DCA.

4. Make regular buys

Stick to your schedule and purchase your chosen cryptocurrency in set amounts without regard to the current price.

5. Hold long-term

DCA requires a long-term investing mindset. Resist the urge to time the market and continue making regular buys.

6. Rebalance as needed

Every 3-6 months, reassess your crypto allocation and rebalance your portfolio if needed. You may also adjust your DCA amounts.

Dollar cost averaging takes the emotion out of investing and simplifies crypto participation for beginners. Stick to the plan and let time in the market do the work for you.

When To Take Profits on Your Crypto Investment

Knowing when to take some profit is an essential skill in crypto investing. Here are some tips for timing your sells to lock in gains:

  • Set predefined targets - Determine price levels you'll sell a portion of your holdings, for example selling 10% when BTC hits $25k.
  • Use milestones - Sell a percentage when your crypto investment hits a key milestone like doubling or 10x.
  • Follow the news - Major project upgrades or partnerships can indicate a peak time to sell a portion.
  • Watch for euphoria - When greed reaches extreme highs, it often marks the top of bull markets.
  • Stagger sells - Consider taking partial profit multiple times on the way up to hedge your bets.
  • Don't cash out completely - Balance profit taking with still having skin in the game for further upside.
  • Have a plan beforehand - Decide rules ahead of time so you remove emotion from decision making.

Avoid getting blinded by greed. Have a profit-taking plan tailored to your risk tolerance and investment timeline before investing.

Getting Started with Crypto Investing: FAQs

What percentage of my portfolio should I allocate to crypto?

Most advise allocating 5-10% of your total portfolio to cryptocurrencies due to the inherent risk and volatility. This provides solid exposure while limiting the downside.

How often should I review and rebalance my crypto portfolio?

Aim to review your crypto portfolio allocation at least every 3-6 months. Rebalance if needed to bring your crypto position back to the target percentage.

What are crypto taxes and how do I handle them?

Gains from selling cryptocurrencies are subject to capital gains taxes. Keep detailed records so you can accurately report taxes on your crypto investing activity.

Is it possible for a beginner to make money with crypto investing?

Yes! Many new investors have profited from the tremendous growth of crypto. Have realistic expectations, stick to fundamentals, and manage risks to give yourself the best shot at success.