How to Invest in Cryptocurrency: A Beginner's Guide

Cryptocurrencies can be a solid investment, but they aren't for everyone. It's critical that investors and traders who are new to the asset class do their homework, make an investment plan, and remain disciplined. 

Cryptocurrency investing and trading come with significant risks. Crypto prices routinely swing sharply, potentially wiping out gains in a matter of hours. And while blockchain technology is considered secure, some crypto exchanges and wallets can be vulnerable to hackers. New regulations can also quickly shift crypto markets, and most cryptocurrencies don't offer regular income like dividends or yields. 

Risks aside, cryptocurrencies might help diversify portfolios or serve as a hedge against inflation. Crypto is also a rapidly maturing asset class that could offer significant upside potential and exposure to technological innovation. The total market cap of all cryptocurrencies combined passed $4 trillion for the first time in July 2025, according to data from CoinGecko, signaling increasing interest from both retail and professional investors. 

Ultimately, deciding whether to get involved in crypto depends on each investor or trader's unique risk tolerance, goals, and level of experience. Those new to the cryptoverse or uncomfortable with volatility might prefer to stick with more traditional asset classes. But for those with a higher risk tolerance, a long-term investment horizon, or a desire to gain exposure to a burgeoning industry, crypto can offer diversification and upside potential worth considering. 

Before investing in any crypto or digital currency, it's important to make a trade plan and do thorough research. It helps to look beyond the headlines and hype, instead of focusing on the fundamentals behind each crypto project. 

A great way to start is by considering a cryptocurrency's utility. Bitcoin, for example, is considered by some as a store of value or form of "digital gold," and it can be used as a payment method or to send or receive value without an intermediary. 

Ethereum, meanwhile, differentiates itself by supporting smart contracts—programs that automatically define and enforce rules in a contract—as well as decentralized finance (DeFi) applications like the crypto exchange Uniswap and the NFT marketplace OpenSea. 

Beyond the big names, thousands of other smaller cryptocurrencies (often called altcoins) exist, but many lack staying power and carry greater risk potential. Before making an investment or trade, there are several fundamental characteristics worth reviewing—from transaction volume to liquidity. 

Here's a (non-exhaustive) list of the fundamental characteristics of cryptocurrencies to consider: 

• Token supply. The total number of coins or tokens that exist for a cryptocurrency.
• Network fees. Payments users make to perform transactions on the blockchain of the cryptocurrency.
• Token distribution. How a cryptocurrency's supply is distributed among developers, investors, and the wider community.
• Burn mechanism. A process that permanently removes coins or tokens from the blockchain to reduce the total supply.
• Inflation/emission rate. The speed at which new coins or tokens are released onto the blockchain, increasing total supply.
• Vesting schedules and unlock events. Timelines for when early investors or creators of cryptocurrencies can sell their holdings of the coin or token. 

Ultimately, it's best to invest only in cryptocurrencies that you understand—with money that you're comfortable potentially losing. And remember, there's a big difference between investing in well-known, more mature cryptocurrencies like bitcoin and diving into the latest volatile, high-risk meme coin. 

Also, don't forget that while the currencies are virtual, the tax implications aren't. It may make sense to consult with a financial advisor to learn more about the best ways to manage crypto investments and their tax implications. 

Deciding whether to focus on trading or investing in cryptocurrencies can be difficult for those with little experience in the asset class. And although it may seem daunting, remember that the choice between patient, long-term investing and active, short-term trading is similar across asset classes. 

Cryptocurrency investors—like many stock market investors—typically focus on a buy-and-hold approach. But instead of speculating on corporate cash flow growth, they're speculating on continuing expansion and adoption of blockchain technology over the long term. These investors are more focused on the fundamentals behind cryptocurrencies they buy and worry less about daily price swings. 

Alternatively, cryptocurrency trading involves buying and selling coins frequently to capture profits from volatile price swings. Traders rely on quick decision-making based on charts, technical indicators, trends, and (occasionally) fundamental news—but this approach comes with significant risk and demands constant attention. 

Neither strategy is inherently correct; it all depends on an individual's risk tolerance, temperament, and available time. And ultimately, navigating crypto markets comes down to the same choice investors make in any asset class: Commit to a long-term strategy or try to capture short-term opportunities. 

With the industry maturing, there are now many ways for long-term investors to gain exposure to cryptocurrencies, and numerous strategies for active crypto traders to consider. Most of these mirror the common tactics used by stock market investors and traders, they're just applied to a new asset class. 

Many crypto investors, for example, will simply opt for a dollar-cost averaging (DCA) strategy—investing a set amount of money at regular intervals into more mature digital assets like bitcoin. The hope is that the asset class will continue to grow and mature, leading prices to move higher over the long term. 

Meanwhile, some investors will buy crypto exchange-traded products (ETPs)—a type of fund that invests in a basket of crypto-related assets like bitcoin or ether. And others will invest in thematic crypto exchange-traded funds (ETFs), which offer broad exposure to the industry without the need for active management. 

For long-term investors who want to take a more active approach, there are many crypto-related stocks as well—like the popular crypto exchange Coinbase (COIN), the bitcoin miner Riot Platforms (RIOT), or the software company MicroStrategy (MSTR), which holds billions in bitcoin on its balance sheet. 

No matter which path an investor takes, the key is to align their crypto investments with their goals while considering their risk tolerance and broader financial plan. 

For traders, there are several common crypto trading strategies worth considering, from momentum to swing trading. Unlike investors, short-term crypto traders typically apply technical analysis to price and/or volume charts to identify trends that could potentially offer insight into future price movements. But the strategies they choose vary widely, depending on their risk appetite and level of experience. 

Just remember, trading cryptocurrencies comes with significant risks, and only traders who understand the market and are comfortable with those risks should attempt it. 

Cryptocurrencies can be complex and confusing for beginners, but getting started with crypto investing or trading doesn't have to be overwhelming. 

Begin by gaining an understanding of the basics, making a trade plan with clear goals, and establishing a comfortable risk level. Remember to choose a reputable exchange or crypto wallet—or consider gaining exposure to an asset class indirectly through investment vehicles like crypto ETPs. Consider diversification between cryptocurrencies rather than going all in on one coin and always keep security in mind to avoid issues with scams and hackers. 

Finally, never invest more than you can afford to lose. Whether you're looking to trade crypto actively or take a long-term investing approach, having a clear risk management strategy is critical. Like any investment, cryptocurrency trading comes with risk. Still, with patience, discipline, and consistent learning, crypto can become a thoughtful part of any trader or investor's broader strategy.