2020 was a big year for crypto currencies, and things haven’t slowed down in 2021 either. In fact, the total value of the digital coins briefly went above $2.5 trillion last May as more and more people are starting to invest in them. And, about 14% of American adults now own crypto currencies.
After Bitcoin more than 7000 crypto currencies have popped up
Cryptocurrencies are exchanged online on places like Coinbase and Gemini, or through online brokers like Robinhood and SoFi Invest, and contrary to what some may believe, cryptocurrencies are not new. Bitcoin was created in 2009 and was the first and biggest cryptocurrency by market capitalization. After Bitcoin, more than 7,700 other cryptocurrencies have popped up. Other notable names include Ethereum, tether, and dogecoin (which started out as a joke but is now one of the 10 biggest cryptocurrencies).
Investing in cryptocurrencies is not an option at most traditional online brokers, However, there are some brokers that will allow you to hold cryptocurrencies among other assets like stocks and bonds. These include Robinhood, SoFi Invest, and Tradestation.
- Robinhood is commission-free and easy-to-use, however after halting trading during the GameStop situation earlier this year, many find it controversial.
- SoFi Invest is not commission-free (it charges up to 1.25% on crypto transactions) but often has promotions where users can get a certain amount of money free in crypto if they invest a certain amount.
- Tradestation is not commission-free either (it charges 0.3% per trade for new accounts, but the percentage drops as your balance gets higher). The site also states that they are best for “active or advanced traders.”
You could also sign up for an account with a crypto exchange, on sites such as Coinbase, Gemini, or eToro.
- Coinbase is the biggest U.S. crypto-only exchange, and offers trading for over 60 cryptocurrencies. However, they charge about 0.5% on transactions and a fee of at least $0.99. They also charge fees for making transactions with digital tokens.
- Gemini offers 40+ digital tokens to trade, but its fees can be up to 1.49%.
- eToro offers more than 20 cryptocurrencies. The fees vary, but bitcoins’ start at 0.75%.
Be Prepared to Expect the Unexpected
Each cryptocurrency is unique, so you should learn as much as you can about the one that you’re interested in purchasing as an investment. Also, you should learn specifically about why the coin was created, its purpose, the creator and its usage in the future.
Cryptocurrencies present a great opportunity to diversify your portfolio, however they are more unpredictable than most other investments as trading can occur any day at any time, with many referring to them as the “wild west.” Traders often react immediately to news (an Elon Musk tweet, for example), causing currencies to jump or fall instantly. This is why less is more when it comes to crypto – when you first start investing, do so in moderation. Lastly, we always caution everyone to do your research and only invest what you can afford to lose.