Investing In Cryptocurrency - A Step By Step Guide

Last Updated August 27th 2021
13 Min Read

Investing in cryptocurrency in 2021 can be quite tricky with the crypto market's volatile and dynamic nature. With the recent revolution in digital currency and the need for digital financial platforms to meet contemporary exchange demands, investing in cryptocurrency is one of the most profitable ways of earning.

Here is a comprehensive step-by-step guide to investing in cryptocurrencies in 2021. This guide will help you in investing in cryptocurrency as a beginner.

Start with the Research 

The first step is doing the homework. Before investing in the crypto market, you need to start studying it. If you are an amateur stepping into the zone for the first time, you need to prepare yourself well for the drill. You should know what you are getting into so start with basic research. You can do this by helping yourself with basics from the internet, or you can facilitate yourself with some kind of guides or courses available online or offline. 

Several platforms can be handy to create a fundamental understanding of cryptocurrency. eToro is one such platform that can assist you with investing in cryptocurrency and giving you a step-by-step guide to invest in cryptocurrencies in 2021. Investing in cryptocurrency can be very easy if you grab the basic knowledge of the crypto markets well. Therefore make sure you have done the initial research to understand how to invest in cryptocurrency. 

Preliminary Tips

Before starting investing in cryptocurrency, one should consider the following steps:

1. Make investments according to your affordability. 

2. Avoid taking loans for your investments.

3. Make sure you have made your investments thoroughly.

4. Except realistically 

5. Take calculated risks 

These concrete ideas will help you set strong grounds for your venture of cryptocurrency investment.

How Much To Invest?

The first question that comes to mind once you have decided that you will start investing in cryptocurrency is how much one should invest as a beginner? There is no rule by books about the amount of investment.

It is always suggested to start small, taking baby steps one step at a time. Since Bitcoin is divisible up to eight decimals, one should look up for buying a small fraction on an initial basis. 

Buying the Cryptocurrency of Your Choice 

The market is booming with digital currencies day by day; you should explore the crypto graphs to choose the cryptocurrency you are interested in investing in. With more than 8000 cryptocurrencies in the market with volatile and dynamic values, there is a possibility of a crypto hype "crypto craze" in 2021. T

he crypto graphs observed that the prices of cryptocurrencies fluctuated dynamically for the year 2019-20.  Different currencies plot different graphs for their market values every second. You need to study these graphs to make your decision about the choice of cryptocurrency.

As a beginner, you should check up various platforms that record cryptocurrencies' values as a rule of thumb. These platforms will help you create a clear sketch of definitive cryptocurrencies' persistent values and their market competitions. eToro can be one such platform to help you screen the values of cryptocurrencies. After a reasonable understanding, you can decide which currency you will invest in. 

Looking For a Suitable Exchange Platform

The next step is to choose the most suitable exchange platform. You should choose the exchange platform that suits better to the scale of your investment, the type of your cryptocurrency, and facilitates you in your region. You should try to find an exchange platform with the largest trading values for the cryptocurrency you have selected. You should consider your funds' source since all exchange platforms will not allow you to make money deposits via fiat. Most of the platforms will restrict you from depositing in the form of Bitcoin only.

In this respect, you should do considerable research and look for a platform that facilitates the purchase via fiat; as mentioned before, every platform has its pros and cons. You should choose an exchange platform according to your customized needs.

Eminent platforms include eToro, Binance, Kraken, Changelly. Try to look for an exchange platform that allows you to invest in several cryptocurrencies and altcoins, providing a wider scope. This will help you diversify your portfolio and have exposure on a greater scale in the crypto market. eToro can be quite handy for investing in cryptocurrency as a beginner. 

Choosing the Right Wallet 

After investing in cryptocurrency, the next step is to get a digital wallet or a crypto wallet. A wallet is just like online banking; it helps you maintain your crypto assets, exchange them, and provide you with a platform to organize them all in one place. 

Types of Wallets

There are different types of crypto wallets depending upon the mode of their functioning. The usual types are :

1. Hot Wallets 

These are mobile or desktop wallets that facilitate the day transactions of cryptocurrencies. Hot wallets can be handy to store a small number of values only because they assist daily exchanges. Hot wallets are quite safe for short-term investments only. 

2. Cold Wallets

Cold wallets are used for long-term investment. Get yourself a cold wallet when you are planning to invest in a greater period on a larger scale. Cold wallets are not proactively connected to the internet. Cold wallets can be further paper wallets or Hard wallets. 

  • Hardware Wallets - A hardware wallet; as the name suggests, is a device that practically stores your cryptocurrency in the one of hardware. There are a couple of hard wallets in the market, such as Ledger Nano and Trezor. The wallets can be connected to the internet. It is considered to be the safest way to save your cryptocurrency.
  • Paper Wallets - Paper wallets are paper receipts of your passkey and codes. Though considered safe, paper wallets are vulnerable to wear or tear and loss.

Basics of Investing In Cryptocurrency as a Beginner

There are a couple of basic tactics that can be very helpful when you start investing in cryptocurrency as an amateur. These are the basic ways of earning reasonable returns on investments in your cryptocurrency.

1. Crypto CFD

A contract of difference or CFD is a tool for trading in investments that fall in T+0 margin. This helps with risky investments proving high leverage with a low deposit. It also helps in screening cryptocurrencies without even buying them.

Day Trading 

This type of trading strategy demands, making crypto exchanges multiple times a day. Due to the volatile nature of cryptocurrencies, this type of crypto trades can help you get started on an initial basis.

Day trading can create a drill for you to check up the crypto markets consistently and give you a comprehensive understanding of crypto markets as a beginner. Various platforms like eToro and Coincap can help you in day trading. 

2. Bitcoin Mining

Another very clever investment can be Bitcoin Mining. Mining is a different form of investment. Initially, you might find it difficult to make profits Mining Bitcoin, but it is more profitable in terms of returns. 

3. Arbitrage

In this form of investment, the investor buys a cryptocurrency from one exchange and sells it off to another. It is quite instant but not much profit in comparison to other ways of investing in cryptocurrencies.  

4. Crypto Faucets 

Another very effective method of investing in cryptocurrencies is crypto faucets in case you are trying to pull profits from small-scale investments. Crypto Faucets can be defined in terms of dripping faucets of some websites which realize a limited amount of cryptocurrencies during a certain time lapse.

Several platforms can facilitate you in practising these methods of investing in cryptocurrency. You can choose yours according to your needs and scale of investments.

Creating Your Investment Blend 

You need to make your blend for trading in cryptocurrencies. Shifting your strategies for investing in cryptocurrency according to your investments and market drifts' contemporary scale is crucial.

The best thing in this regard is to study the patterns of crypto markets very closely. The more you understand the crypto market, the greater your profits will be. A few considerations while creating your crypto mix can be as follows: 

1. Choice of Cryptocurrencies 

Choose your cryptocurrencies wisely. Choose the cryptocurrencies which are volatile and tend to create profits consistently. Decide according to your affordability and threshold for risk.

Exchanges and Demands

Continually look for the demands of different cryptocurrencies in the markets. Study the demand and supply charts for definitive cryptocurrency. Before investing in cryptocurrency, you should study the competitive trend of the crypto market. This will help you in making smarter choices about investing in cryptocurrency. 

2. Duration of Trade & Fund Categorization 

You should choose a certain duration for different types of investments in cryptocurrencies.  

Long Term 

Investments can be long-term for a longer duration of time. These can be done for less volatile cryptocurrencies that have less steep graphs.

Short Term 

Short-term investments tend to be volatile and are done for cryptocurrencies showing dynamic values.

Medium Term

Another approach can be a medium investment. These types of investments can be fruitful for taking calculated risk while investing in the currency as an amateur. 

Specialists suggest investing in cryptocurrency perspectively according to the market demands.

3. Basic Investing Strategies

There can be a couple of investing strategies that can help you initially in investing in cryptocurrency.

Long/Short Equity

In this type, the funder should look if the cryptocurrency is undervalued or overvalued and consequently place it in the long or short-term investment grades. Right considerations result in consequent gains and losses. 

Market Neutral 

In market-neutral investments, you put half of your investments in the long-term assets and the other half in the short-term. The idea is to make a calculated market-neutral gain attained from the total gains of your investments.

Global Macro 

This technique emphasizes the following of market trends. These are rather short-term investments. 

4. Risk Management 

While investing in cryptocurrency, the most important attribute to consider is risk management. You should closely look up for the factors that affect the risk graphs of your investment. Make sure you are aware of the limits of risk you can afford. Using a risk management tool for this purpose can also be a smart approach.

Ready To Invest In Cryptocurrency?

Pareto Principle

The Pareto Principle of the 80/20 rule is applicable in the crypto markets as well. When you are investing in cryptocurrency, you should know that the top investments make the highest shares of your revenues.

Follow Up the Crypto Markets

After you are done with all the above steps, you are now supposed to keenly observe the cryptocurrency markets. Make sure you keep yourself updated with the latest market trend. Look for the various market capitals of each cryptocurrency. Each cryptocurrency will have its low, high, or medium market capital, respectively.

eToro – The Best Cryptocurrency Platform 

eToro is a smart platform that facilitates the process of investing in cryptocurrencies. The platform provides a wide range of cryptocurrencies giving the user a sleek and user-friendly interface



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

Virtual currencies are highly volatile. Your capital is at risk.

Key Points 

  • It is very important to study and understand cryptocurrencies before investing.
  • Ensure you are aware of the imminent risks in the crypto market, and you have a keen understanding of what you are getting yourself into.
  • The decision, how much you are going to invest should be based on the scale of investment you are willing to put out.
  • The preliminary steps of investing in crypto include choosing the cryptocurrency, getting a platform to trade, and obtaining a crypto wallet.
  • There are four types of wallets to store your coins: hot wallets, cold wallets, hardware wallets and paper wallets.
  • You can choose various strategies for investing in cryptocurrency according to the demand of the crypto market.
  • There are five main forms of investing in cryptocurrency: crypto CFD, day trading, Bitcoin mining, arbitrage and crypto faucets.
  • When investing choose the cryptocurrencies which are volatile and tend to create profits consistently.
  • The Pareto Principle of the 80/20 rule in cryptocurrency means that when you are investing in cryptocurrency, you should know that the top investments make the highest shares of your revenues.