Investing in cryptocurrencies is made easy

Cryptocurrency ownership rates have been rising steadily among US investors, rising from just 2% in 2018 to 17% in 2025. This reflects a clear shift: buying cryptocurrencies may once have required technical skills and a leap of faith, but now it’s easier than ever – if you understand the basics.

From what makes cryptocurrencies unique to how they’re taxed, this guide covers what you should know to get started.

What is crypto and why do people invest in it?

Cryptocurrency is a form of decentralized money that only exists in digital form. Unlike the dollar, it is not issued or controlled by a government or central bank. Instead, it runs on the blockchain: a public ledger spread across a network of computers that permanently records all transactions involving cryptocurrency.

“Blockchain is like a spreadsheet that everyone can see but no one can change,” said Ron Levy, CEO of The Crypto Company. “It gives your digital money credibility in the real world, ensuring that ownership, transfers and exposure are all verifiable and secure.”

Cryptocurrencies are created primarily through mining, a process in which computers solve mathematical puzzles that validate blockchain transactions. The first to solve the puzzle earns new coins, adding supplies to the network and bolstering security.

Many choose to invest in cryptocurrencies because they believe in this underlying technology. Others buy it as a speculative investment, hoping prices will rise, or use it as a hedge against inflation and instability in traditional markets.

“Blockchain is changing the way we think about trust in finance,” said Charlie Brady, vice president of investor relations at BitFuFu. “It enables true peer-to-peer value transfer on a global scale without relying on traditional financial infrastructure. This decentralization is the real innovation.”

What makes cryptocurrencies different from other investments?

Cryptocurrency differs from other investments in fundamental ways. For example, while stock markets are open during limited hours, most cryptocurrency markets never close. As a result, shifts in supply and demand can cause rapid price fluctuations, especially after traditional trading hours.

“The structural differences are significant,” Brady said. “Cryptocurrency markets run 24/7, and anyone with internet access can participate. You’re looking at volatility far beyond what you see in stocks or bonds.”

This volatility creates additional risks, especially since cryptocurrencies are not backed by traditional assets or a central authority. Along with wider bid-ask spreads, investors face a greater potential for market manipulation, such as pumps and dumps.

The decentralized nature of the asset class also creates opportunities for cryptocurrency scams and fraudulent tactics, such as rug sweeps. This happens when developers introduce a new currency to attract investor money, and then suddenly disappear along with the money.

“There is no central authority backing these assets, which fundamentally changes the risk profile,” Brady said. “Frankly, regulation is still catching up, which unfortunately leaves room for bad actors and fraudulent projects.”

What do you need to get started?

Exchange account

A cryptocurrency exchange is a platform where you can buy, sell, and trade digital assets. New investors generally fund their accounts with fiat money, such as dollars, but exchanges also allow you to exchange one cryptocurrency for another.

These platforms charge various fees, such as take maker transaction fees and withdrawal fees when transferring funds to your bank account. Because the United States lacks a specific regulatory framework for cryptocurrencies, these costs can vary widely, as can the availability and security of each exchange.

Crypto wallet

A cryptocurrency wallet stores the private keys of your cryptocurrency, which are randomly generated through alphanumeric codes that control access to your digital assets, such as advanced passwords.

Cryptocurrency wallets come in two main types: custodial wallets, such as those built directly into exchanges, and non-custodial ones.

“A custodial wallet is like keeping your money in the bank,” Levy said. “A third party holds your cryptocurrencies on your behalf and handles the security, but you trust someone else with your funds. A non-custodial wallet means you keep your private keys. It gives you full control, but also full responsibility.”

It often makes sense to start with a custodial wallet when you’re new to cryptocurrencies. Once your experience and investments grow, you can move your funds to a non-custodial wallet for more independence. Just know that mismanagement could cost you your assets.

“Lose your keys or seed phrase, and your money is gone forever,” Brady warned. “No customer service to call.”

Understanding taxes and reporting

In the United States, the Internal Revenue Service (IRS) taxes cryptocurrencies as property, similar to stocks. As a result, selling, trading or spending cryptocurrencies is a taxable event and can result in capital gains or losses.

Meanwhile, the cryptocurrencies you earn through activities such as mining, staking, or yield farming are generally taxed as ordinary income.

Many exchanges now issue 1099 forms to help you properly report your activities. However, transferring coins between wallets or exchanges can complicate the cost basis, which is the value used to calculate gains and losses.

How to choose and buy your first cryptocurrency

If you’re new to cryptocurrencies, follow this step-by-step process to buy your first digital assets safely:

1. Use a beginner-friendly exchange: Start with a platform that has an intuitive user interface and robust educational resources, such as Coinbase. Advanced exchanges may offer more currencies or features, but they can be overwhelming for new investors.
2. Choose a popular currency: Stick to established cryptocurrencies like Bitcoin or Ethereum. Altcoins are more difficult to value and have a smaller market cap, which can make them more volatile and speculative.
3. Link payment method: Typically, the most efficient way to fund your crypto account is through bank transfers. Some exchanges allow you to use debit or credit cards, but at the cost of higher fees. Using a credit card may also incur cash advance fees and means taking on significant risks.
4. Start with a small amount: Many exchanges do not have a minimum investment amount, and purchasing fractional coins is considered the norm. Consider keeping initial investments at $50 or $100 while you learn how exchanges work and gauge whether investing in cryptocurrencies is right for you.

What happens after purchase?

After purchasing your first cryptocurrency, it may be tempting to constantly check prices. However, cryptocurrency markets are notoriously volatile. Although it’s important to monitor your investment portfolio, don’t let short-term market fluctuations influence your decisions.

Decide on a long-term investment strategy and stick to it. Some traders try to take advantage of cryptocurrency volatility by trying to “flip” them for short-term profits, but this is difficult to do consistently.

Instead, many financial advisors recommend the strategy popularly called “HODL,” which is short for “holding on for dear life.” This long-term approach reflects conventional investment wisdom: buy high-quality assets and hold them through market cycles.

“Don’t get obsessed with everyday prices,” Brady said. “Set price alerts at important levels, stick to your plan, and don’t let volatility shake you up. Emotional decisions are usually bad decisions in this area.”

Bottom line

Investing in cryptocurrencies is easier than ever, but it’s still complex and risky. Learn the basics of volatility, security, and taxes before you start, and keep your initial investments conservative while you learn the basics. If you later make cryptocurrencies a more important part of your investment portfolio, don’t let short-term price fluctuations scare you into making emotional decisions. Decide on a long-term strategy and stick to it.