How to Start Investing in Cryptocurrency Safely: A Step-by-Step Guide for Beginners

Why Cryptocurrency?

Cryptocurrency is no longer a niche investment. In 2024, the total market capitalization of cryptocurrencies surpassed $2.5 trillion, marking a 300% growth since 2020 (Source: CoinMarketCap). With institutional investors like BlackRock and Fidelity entering the market, crypto adoption is growing.

But for beginners, How to Start Investing in Cryptocurrency Safely? Which exchanges are reliable? How do you avoid scams? This guide will walk you through the essential steps.

1. Understanding the Basics of Cryptocurrency

What is cryptocurrency? Digital assets like Bitcoin (BTC), Ethereum (ETH), and stablecoins (USDT, USDC).

How to Start Investing in Cryptocurrency Safely: A Step-by-Step Guide for Beginners

Types of crypto networks:
- Public blockchains (Bitcoin, Ethereum) vs. Private blockchains (Central Bank Digital Currencies).
Ways to profit from crypto:
- Trading: Short-term buying and selling.
- Holding (HODLing): Long-term investment strategy.
- Staking: Earning passive income by locking crypto.

2. Step 1: Choosing a Reliable Cryptocurrency Exchange

Key Factors to Consider:

Security: Does the exchange offer insurance and cold wallet storage? (e.g., Coinbase provides FDIC insurance).
Regulatory Compliance: Which institutions regulate the exchange?
- Binance: Dubai, France, Australia
- Coinbase: U.S. SEC, FDIC insured
- Kraken: FCA (UK), FinCEN (U.S.)
Liquidity: High trading volume ensures easy buying/selling.
Trading Fees: Binance (0.1%) vs. Kraken (0.26%).
User Experience: Coinbase is beginner-friendly.
Features: Staking, futures, NFT support.

Recommended Exchanges

Best for low fees: Binance
Most secure: Coinbase
Best for beginners: Kraken

Check official exchange rankings on CoinGecko.

3. Step 2: Creating and Securing Your Crypto Account

Creating and Securing Your Crypto Account, How to Start Investing in Cryptocurrency Safely: A Step-by-Step Guide for Beginners

Sign up tutorial (Kraken example, Click here with Offical Tutorial).
Complete KYC verification (ID, address proof, Click here).
Enable Two-Factor Authentication (2FA) via Google Authenticator.
Beware of phishing attacks
- Kraken will never ask you for:
  - Your passwords.
  - Removal of 2FA methods or Master Key.
  - Access to your devices via remote desktop access software like AnyDesk or Teamviewer.

4. Step 3: Buying Your First Cryptocurrency

Best Cryptocurrencies for Beginners

✅ Safe Choices

Bitcoin (BTC): Store of value, institutional support.
Ethereum (ETH): Smart contracts, DeFi, NFTs.
Stablecoins (USDT/USDC): Reduces volatility risk.

❌ Avoid These Risks

New, unknown tokens (e.g., Squid Game Token scam).
Meme coins (DOGE, SHIB): High volatility, speculative.

Buying Process

Deposit funds via bank transfer or credit card.
Choose a trading pair (BTC/USDT).Choose a trading pair (BTC/USDT).
Place an order (Market vs. Limit order).

To deposit cash to your Kraken app(Of course, if you already have cryptocurrencies, you can also choose the deposit cryptocurrencies in the step of selecting the deposit method, which is also very simple):

1.Open the Kraken app and tap the Deposit button. This is located at the bottom of your app screen.

2.Search for the currency under cash you’d like to deposit and tap on it.

3.If you are shown multiple options, tap on your preferred payment network.

4.Review the important notes and instructions. For this example, we are using USD Swift Bank:

5.Copy the bank account details on the deposit instructions and provide it directly to your bank or financial institution to initiate the transfer.

6.To help your deposit go smoothly, use Kraken deposit checklist before sending any funds.

7.Once your deposit arrives, you will receive an email confirming the funds have been credited to your Kraken account balance.

5. Step 4: Storing and Securing Your Crypto Assets

Types of Crypto Wallets

✅ Best for beginners: Hot wallets (MetaMask, Trust Wallet, Kraken Wallet).
✅ For long-term security: Cold wallets (Ledger, Trezor).
✅ Best Crypto Wallets: Hot vs. Cold, Custodial vs. Non-Custodial & How to Choose

How to Set Up a MetaMask Wallet

Download and install MetaMask.
Secure your seed phrase.
Transfer crypto from an exchange to MetaMask.

📌 Best Practices:

Use a cold wallet for large holdings.
Store seed phrases offline.
Enable multi-signature security.

6. Step 5: Understanding Crypto Investment Strategies

Beginner-Friendly Strategies

✅ Dollar-Cost Averaging (DCA): Invest fixed amounts regularly to reduce risk.
✅ Long-term holding (HODL): Keep assets for years, ignore short-term volatility.
✅ Earning yield: Stake crypto for passive income.

High-Risk Strategies to Avoid

❌ Leverage trading: Increases liquidation risk.
❌ Jumping into hype coins: Many fail after initial spikes.

7. Step 6: How to Sell and Withdraw Your Profits

You can choose to withdraw cryptocurrencies directly to any of your cryptocurrencies wallets, or you can sell your cryptocurrencies on an exchange for fiat currency and then withdraw the funds to your bank account.

Convert crypto to fiat (USD, EUR, etc.).
Withdraw via bank transfer, PayPal, or stablecoins.
Compare fees:
- Binance P2P trading: Low fees.
- Direct bank withdrawals: Higher fees.

Withdraw cryptocurrencies(Kraken example)

1.Select the currency from your available balances. Tap withdraw.

2.Input the amount.

Note: Different cryptocurrencies may share the same address format, so make sure you are sending to the right type of address as well.

3.Click confirm.

Withdraw cash

Go to your Portfolio and select the currency you would like to withdraw from your available balances.
On the next screen, tap the Withdraw button.
Then follow the steps to fill in the relevant information
Tap Review and confirm once you’re ready to withdraw.

8. Step 7: Tax Considerations and Legal Compliance

Cryptocurrency taxes vary by country:
U.S.: Capital gains tax on crypto sales.
- UK: Tax-free up to £12,300 gains per year.
- Germany: Tax-free if held for 1+ years.
Use tax software: CoinTracker, Koinly.