How To Invest In Cryptocurrency In 2022

Last Updated March 25th 2022
17 Min Read

To get started cryptocurrency investing, pick a strategy based on the amount you'll invest, the timelines for your investment goals, and the amount of risk that makes sense for you.

The cryptocurrency market saw arguably its most exciting year to date in 2021 with some of the biggest names in the space seeing record-breaking price runs. Stories of overnight crypto millionaires were once again in the headlines and some token prices surged by hundreds of percent in a matter of days.

It wasn’t only the likes of Bitcoin and Ethereum that saw major success either. There were also several new entries into the top ten list, with DeFi projects experiencing massive growth and establishing themselves as some of the most valuable cryptocurrencies on the market. 

In fact, with the burgeoning DeFi trend that continues unabated, as well as the growing popularity of Non-Fungible Tokens, the cryptocurrency market is changing at an unprecedented rate - something which looks set to continue as we head into the new year. 

This has inevitably led to renewed interest in the market heading into 2022, with investors scrambling to try and identify the next hot property in the crypto space. There has also been increasing interest from the public - gone are the days when cryptocurrency was seen as a niche industry or, worse yet, a high-risk get-rich-quick opportunity. It seems now the true potential - and value - of blockchain is becoming apparent to all. 

If you’re new to the cryptocurrency market, however, then you might be finding things a little confusing. There have been a lot of developments since Bitcoin first hit the headlines back in 2009.

If you want to invest in crypto assets quickly and easily, check out eToro!

The aim of the following article is to give you a solid overview on how to invest in cryptocurrency in 2022. 

Contents:

An Overview Of The Cryptocurrency Market

Bitcoin bursts onto the scene in 2009

It’s probably safe to say that most people have heard of cryptocurrency at this stage. However, despite its popularity, many would-be investors are wary of approaching the market as it can seem overly complicated. Whilst it's certainly true that some of the more complex projects are understood only by software engineers and mathematicians, the fundamentals of the cryptocurrency market are relatively easy to learn. 

Whilst blockchain was actually developed over a number of years, it was the launch of Bitcoin in 2009 that brought the technology to the world’s attention. Whilst it was immediately touted as the future of currency and promised to revolutionise how we pay for goods, it wasn’t until the price of BTC started to make substantial gains against the dollar. In 2013, for example, a single Bitcoin token was worth $1,242, having been trading at less than a dollar up until 2011. 

Enter Ethereum

In 2016, the launch of Ethereum ushered in the second generation of cryptocurrencies. Whereas Bitcoin was limited to being a means of value exchange, Ethereum could handle smart contracts and provided a platform where developers could build apps. It seemed that the possibilities were endless and Ethereum sparked renewed interest in the market.

As with Bitcoin, Ethereum went on to see major price growth and despite having traded for pennies when it was first launched, a single token of Ether was worth $4,146 at the time of writing.

The Rise of DeFi

The launch of Ethereum paved the way for a new breed of blockchain project. By utilising Ethereum smart contracts, developers of platforms like Aave, Maker and Compound were able to start building complete financial ecosystems - otherwise known as decentralised finance (DeFi). 

Rather than relying on a central authority, cryptocurrency holders could use DeFi projects to buy and sell tokens, earn interest by lending their cryptocurrency or increase their market exposure by borrowing tokens. DeFi grew significantly in popularity throughout 2021 and has breathed new life into the cryptocurrency market. 

Introducing NFTs

Another trend that started gaining ground in 2021 was the buying and selling of Non-Fungible Tokens. NFTs are similar to cryptocurrency in that they cannot be altered, but whereas one BTC token is the same as any other, NFTs are unique. They are used to represent ownership of digital assets, such as online clips, music and digital artwork.

There have been several high-profile NFT auctions in 2021, most notably Jack Dorsey selling off the first-ever tweet made on Twitter for $2.9 million. Since then, numerous celebrities have held auctions to sell everything from sports clips to JPEG images. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Why Invest In Cryptocurrency In 2022?

Anyone who chose not to invest in cryptocurrency going into 2021 is probably regretting not having done so, given that some tokens yielded returns of several thousand per cent over the course of the year. Whilst there are no guarantees this will be repeated in 2022, the cryptocurrency market remains one of the most enticing investment opportunities out there.

An increasing number of institutional investors, large organisations and key business personalities are now investing in digital currency. Elon Musk’s Tesla, for example, bought up $1.5 billion worth of BTC at the start of 2021 as part of its investment strategy. Whilst Musk has always been known as a forward-thinking entrepreneur, even traditional finance experts are now advising investors to put 3 - 5% of their portfolio fund into cryptocurrency. 

Growing support from the world of traditional finance and increasing adoption of blockchain projects by big businesses could bring more stability to the market and make cryptocurrency investment less risky. Whilst the market is still highly volatile, 2022 looks to be one of the best years yet and choosing to invest earlier rather than later could maximise any potential returns. 

Check Out: How To Invest In Crypto With Just $200?

Cryptocurrency Investment Strategies

If you’ve never invested in cryptocurrency before then there are few things you need to know before you get started. As we’ve noted above, cryptocurrency investment is still seen as high risk, so it's important to do as much research as possible before you start building your portfolio. 

As with any other asset, there are a few ways in which you can invest in cryptocurrency in 2022.

1. Buy and forget

The simplest way to invest in cryptocurrency is what’s known in the industry as HODLing. This means you simply buy up a quantity of a particular token and hold it over time, as you would with a stock or bond, with the view that it will increase in value.

This is a highly accessible way of gaining exposure to the market and will also go some way in helping you understand exactly how some currencies work, as you’ll need to send your tokens to a wallet for storage and send them on when it comes time to sell. 

As we have seen, most tokens are worth considerably more after a number of years, so HODLing is a very valid means of investment. It also means that you actually own the asset outright, as opposed to derivatives trading wherein you trade a contract. 

2. Short-term trading

Due to its high levels of volatility, the cryptocurrency market has become an increasingly popular place for day and swing traders. Rather than buying a cryptocurrency and holding onto it over a number of years, traders will look to profit from small fluctuations in price over the short time. Day traders, for example, might have positions open for just a few minutes.

Trading differs from traditional investing in a number of ways. Firstly, traders can profit whether a cryptocurrency increases or decreases in value, by long selling or short-selling. This is made possible by the second major difference: traders generally don’t buy the actual asset, but trade cryptocurrency via CFDs.

CFDs are complex financial instruments and you should only consider trading cryptocurrency if you have conducted plenty of research and are in a position to understand the finer points of this approach to the financial markets.

Don't Miss: Cryptocurrency Investing vs Trading: What's the Difference?

3. Liquidity Mining

The plethora of DeFi platfoms on the market means that you can actually invest your cryptocurrency, in a manner of speaking. Projects like Aave, Compound and Maker require liquidity. This comes via liquidity pools and these are key to how such platforms operate.

Users can effectively lend their cryptocurrency to the liquidity pools, in exchange for fees based on the interest the platform charges for lending out your cryptocurrency to other users. Put simply, liquidity mining is a way of making cryptocurrency from cryptocurrency. 

Once again, liquidity mining can get complicated and you should make sure you fully understand how a particular DeFi platform works before committing your cryptocurrency to its protocols. 

4. The importance of diversification

Just as with any other form of investment, diversification is an important factor in putting together a well-planned cryptocurrency portfolio. Fortunately, the range of projects in the space has made this easier than ever before.

Firstly, if you are investing in other asset classes, then you’ll need to decide how much of your budget to dedicate to cryptocurrency. After this, you’ll want to choose which cryptocurrency to actually invest in. This is where diversification comes into play again.

Binance Coin and Tether, for example, are regarded as more stable than many other tokens. The former is the native currency of the world’s biggest decentralised exchange, whilst the latter is a stablecoin pegged to the US dollar. These factors help to reduce volatility. A project like Shiba Inu, on the other hand, is largely driven by popularity. Whilst this makes it less stable, in theory, it is also prone to more sudden, substantial price movements.

A good cryptocurrency portfolio will be balanced, with a few higher risk ‘punts’ along with several more prominent blockchain projects that have significant mainstream backing. 

What Are The Top Cryptocurrencies To Invest In In 2022?

You’ve probably already noticed that quite a few cryptocurrencies exist. In fact, it has been estimated that over 6,000 different tokens existed as of 2021.

How do you choose which cryptocurrencies to invest in in 2022? If you’re new to the crypto market, then we’d advise initially focusing on a few top tokens.

1. Bitcoin

Bitcoin is undoubtedly the most biggest, most valuable and most well-known cryptocurrency in existence. Since bursting onto the scene in 2009 Bitcoin has hit the headlines several times for its incredible price increases. Having started life almost worthless, today a single BTC token is trading for 62,664.70.

Bitcoin is now something of an institution. It is often seen as an indicator for the wider cryptocurrency market and is arguably the most supported token when it comes to retail payments. 

BTC saw record breaking price runs in 2021 and many industry experts believe it has the potential to keep growing in 2022. DigitalCoinPrice, for example, believes that Bitcoin could grow by as much as 90% over the next year or so. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

2. Ethereum

Ethereum was the first of a new breed of smart chains that utilised smart conrtacts and today is the go-to platform for some of the biggest DeFi projects operating in the crypto space. With a market cap of $493 billion, ETH is the second biggest cryptocurrency behind Bitcoin. 

Upon its launch, Ethereum was the most advanced blockchain on the market. Whilst several competitors have since emerged, such as Cardano and Solana, Ethereum had already managed to establish itself as the ultimate platform for the development of DApps and smart contracts. Several other notable blockchains are actually built on Ethereum, including Maker, Compound and Uniswap. 

The platform is currently undergoing a major upgrade and in 2022 we expect to see further refinements to the protocol - including a shift from proof-of-work to proof-of-stake, which will massively improve Etheruem’s speed and scalability. Naturally, this should have a positive impact on price. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

3. Binance Coin

Another big name in the cryptocurrency space is Binance Coin - the native token of the Binance Exchange. The Binance Exchange is the largest of its kind and has been known to handle around 1.4 billion transactions. Holders of BNB can pay for fees on the exchange as well as get access to preferential rates. Naturally, this means Binance Coin sees extremely high trading volumes. 

As of September 2020, Binance also has the binance Smart Chain - a highly advanced platform that has proven a hit with DeFi developers looking for seamless access to the Binance Exchange. BSC is probably the biggest rival to Etheruem when it comes to attracting DeFi to its platform, hosting several projects, including Venus, PancakeSwap and Linear Finance.

Binance Coin offers a degree of stability thanks to its parent exchange and the protocol has some exciting upgrades on the horizon that could help to push its value up across 2022. It is also one of the most widely listed tokens, making it a good choice for those just starting their journey into cryptocurrency investment. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

4. Dogecoin

Dogecoin is something of an anomaly in the cryptocurrency market. The project was actually started as a joke, a way of satirising the hype that surrounded the the cryptocurrency market back in 2013. However, Dogecoin’s quirky branding and lighthearted approach have not only allowet it to foster a notoriously loyal fanbase, but also seen become amongst the ten biggest cryptocurrencies of 2021.

It’s important to understand that DOGE is very much driven by its community and ongoing popularity thanks to support from several high profile figures, not least Tesla’s Elon Musk, who has tweeted about Dogecoin on numerous occasions - often sending its token price skyrocketing. Whilst Dogecoin does have solid technical credentials, it is somewhat dated when compared to other top projects.

Whilst Dogecoin is probable a higher risk investment than the other tokens we have discussed here, it’s a suitable option for new entrants to the cryptocurrency market as it has a relatively low token price. This means investors can acquire a greater holding of DOGE with minimal outlay. 

buy dogecoin

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

5. Ripple

Ripple is sometimes known as the bankers’ cryptocurrency, as the system was set up to facilitate international funds transfers between financial institutions. Another mainstay of the top ten cryptocurrencies by market cap, Ripple is owned and operated by Ripple Labs and was launched in 2016. 

As it stands, most banks rely on SWIFT for inter-currency payments, which is quite a complicated and costly process, on some level involving the buying and selling of currencies. However, Ripple can provide a much faster, more efficiently and, most importantly, cheaper service. Several institutions have already entered into a partnership with the platform, including Santander, Standard Chartered and American Express.

The benefits of a protocol like Ripple should be obvious. Whilst the token price did take a hit in 2020 due to some regulatory difficulties, it has since gone on to recover well and many analysts are predicting growth in the near future. TradingBeasts, for example, has the token price of XRP increasing by up to 30% by December. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

How To Invest In Cryptocurrency In 2022

If you’ve made the decision to start investing in cryptocurrency in 2022, then there are a few things you’ll need to think about - in addition to actually choosing which tokens you plan to buy. 

Where to Buy Cryptocurrency

It goes without saying that you’ll need to find a broker or exchange that will give you access to the market. There are hundreds to choose from and each has there different strengths and weaknesses. Before committing to a provider, you might want to consider a few factors:

  • Do you want to buy cryptocurrency and store it in a wallet?
  • Do you plan on day/swing trading?
  • Will  your portfolio include other financial assets?
  • What is your current level of expertise?
  • How tech savvy are you?

By considering the above, you’ll be able to build a better idea of what you need from an online broker. For example, some platforms will offer a simple user interface with basic trading tools. This will suffice for the novice investor, but pro-level traders will probably want to go with a platform that can offer advanced trading tools and the latest charting systems. 

A good platform for most traders, however, is eToro. It has one of the best reputations in the industry and whilst its trading platform is highly user-friendly, it provides all the tools you are likely to need to start building your cryptocurrency portfolio. 

Cryptocurrency Wallets

If you plan to buy and hold cryptocurrency, then you’ll need a crypto wallet to actually store your tokens. A wallet is basically a place that you keep your cryptocurrency keys - i.e. the long codes which allocate your token allocation on a particular blockchain. 

Cryptocurrency wallets are available in a variety of formats. You can use a hardware wallet, which is like a super-secure flash drive, a desktop wallet, which is software downloaded to your computer, or a web-based wallet, which means holding your crypto with an online platform. 

If you’re looking to invest in cryptocurrency in 2022 then you’ll need to get yourself a wallet. Fortunately, platforms like eToro offer their own proprietary wallets as standards. This is particularly handy for novice crypto investors as it means you can buy, sell and manage your tokens via a single platform. 

Read Also: Top 10 Best Cryptocurrencies To Invest In For High Returns

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Managing Your Cryptocurrency Investment

Before you start building your cryptocurrency portfolio, it's important that you conduct your research thoroughly and understand what's involved with buying and selling different cryptocurrencies. However, once you’ve started making investments, it’s equally important that you keep a close eye on things.

A key part of learning how to invest in cryptocurrency in 2022 is understanding that the cryptocurrency market changes quickly. You need to learn about the particular project you invest in and how they might be affected by rival cryptocurrencies. 

You’ll also need to keep an eye out for any regulatory changes in the world’s major economies. Most countries are still figuring out how to deal with cryptocurrency and any new legislation can have a huge impact on the cryptocurrency market. 

As time goes on you’ll become better at spotting trends - just remember that the cryptocurrency market requires sustained attention - regardless of whether you are HODling or trading.

Conclusion

The next twelve months or so look set to be an exciting time for cryptocurrency. There have been several developments across 2021 that have breathed new life into the industry and seen it grow to an unprecedented size. Naturally, this growth has been fantastic for those who chose to invest in the sector before the record-breaking price runs kicked off in the first half of the year.

Learning how to invest in cryptocurrency in 2022 is the first step in gaining access to one of the most exciting markets in the world. It’s important not to rush this step. Take the time to understand what the different cryptocurrency projects do, consider their strengths and weaknesses and make sure you’re aware of any potential rivals. 

Whilst it is known for its volatility, the cryptocurrency market presents a good investment opportunity for the future and now is a great time to get involved. No one can say for sure which cryptocurrencies will explode in 2022, but by building a sensible diversified portfolio, you stand yourself in good stead to reap any potential rewards. 

As with any form of investment, never commit more than you can afford to lose and always stick to a plan and budget. Never be tempted to make high-risk investments in the hope they will offer quick returns and always ensure you are up-to-date with the latest market developments. 

eToro – The Best Platform to Invest In Cryptocurrencies

eToro have proven themselves trustworthy within the Crypto industry over many years – we recommend you try them out.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

FAQs

Where can I learn how to invest in cryptocurrency in 2022?

If you’re looking to star investing in cryptocurrency in 2022 then you'll want to learn as much as possible before you start committing funds. Here at Trading Education, we have numerous guides and explanations covering everything from cryptocurrency wallets to long-term price predictions.

Is 2022 going to be a good year to invest in cryptocurrency?

After a record-breaking year in 2021, the cryptocurrency market looks set to continue growing in 2022. Some of the biggest projects in the space have exciting new upgrades on the horizon and the DeFi and NFT trends look set to continue apace. If you’re looking to invest in cryptocurrency in 2022, then now is the time to start researching the top prospects.    

How do I buy cryptocurrency?

In order to build a cryptocurrency portfolio, you’ll need to open an account with a reputable broker that can give you access to the market. We recommend checking out eToro as it lists most of the major tokens and offers an approachable yet powerful trading platform.     

Which cryptocurrencies should I invest in 2022?

Choosing which cryptocurrencies to invest in 2022 is a tougher decision than ever before, as there are numerous tokens that appear to be poised for significant growth. The best approach is to research potential investments thoroughly and consider how much risk you are prepared to take as well as how long you are prepared to hold onto particular tokens. For a few ideas on which coins to invest in, feel free to check out our guide to the 7 Top Cryptocurrencies That Could Make You a Millionaire in 2022. 

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