How to Invest in Cryptocurrencies?

In 2026, the cryptocurrency market surpassed a total capitalization of $3 trillion, making investing in cryptocurrencies no longer seem like just a speculative bet. 

Speculation is still very prevalent, but alongside it, there are now genuine investment strategies integrated within diversified portfolios. 

However, investing in cryptocurrencies requires knowledge, caution, and a clear understanding of the risks, which remain decidedly significant. 

Why Invest in Cryptocurrencies?

Cryptocurrencies are digital currencies that use cryptography to ensure secure transactions and to control the creation of new units. 

Bitcoin (BTC) is the progenitor and is decidedly the main one, closely followed by Ethereum (ETH). 

What attracts investors the most is the potential for price growth, given that, for example, in the last ten years the price of BTC has risen from less than $1,000 to over $100,000, before retreating below $90,000, while the price of ETH has increased from less than $1 to over $4,000, before retreating below $3,000.

The fact is that even major companies like Tesla have now invested in Bitcoin, and on traditional exchanges, there are several ETFs approved by the SEC in the USA on different cryptocurrencies. 

However, it is a highly volatile market, capable of jeopardizing not only returns but also the value of one’s cryptocurrency investments. Therefore, investing in this sector requires an informed approach.

The Risks 

It is therefore crucial to understand the risks. 

The primary risk is price volatility, as prices can sometimes fluctuate by as much as 20% in a single day for major cryptocurrencies, and by significantly higher percentages for smaller ones. 

However, there are also regulatory risks, as in various jurisdictions, undeclared investments or unpaid taxes can lead to severe penalties. 

Another crucial aspect to consider is security, as hacks on crypto exchanges or the loss of private keys for non-custodial wallets are not uncommon. 

Additionally, there are also systemic risks, such as those related to potential market manipulations by whales (large holders), or outright scams like rug pulls in DeFi or pump&dump schemes.

In this regard, it is always advised to never invest more than you are willing to lose, and to diversify in order to spread the risk across multiple assets and platforms.

First Step: Wallets and Exchanges

The first step to investing in cryptocurrencies is to create a wallet to store them. 

These are, in fact, software or hardware that store private keys, which are necessary to use one’s tokens. 

There are centralized custodial wallets, very easy to use but at risk of closure or hacks, and decentralized non-custodial wallets, significantly more difficult to use but with lower risks of being hacked. 

Generally, the latter are recommended, but investors often choose the former for their ease of use. 

Among non-custodial wallets, which are recommended, there are those defined as “hot”, connected to the internet and thus ready for use, but more susceptible to theft or hacking, and “cold” ones, like hardware wallets, which are offline and more secure, albeit less convenient, primarily used for long-term storage.

The second step is to choose the exchange on which to make the purchase. 

In this case as well, there are centralized platforms (the so-called CEX) and decentralized ones (DEX). CEX are by far more widely used, both because they are much easier to use and especially because they support fiat currencies like dollars, euros, etc. However, DEX are theoretically more secure, but they are also more difficult to use and generally do not support fiat currencies, but only stablecoins on blockchain.

However, nothing prevents using CEX solely for purchasing, and then immediately transferring everything to secure non-custodial wallets. It should be noted that nowadays there are also DEX that can be connected to centralized platforms supporting fiat currencies.  

How to Invest in Cryptocurrencies

Investment in itself is the simplest thing. 

If you use a CEX, you simply need to make a purchase after depositing fiat currency or by paying with a credit/debit card. However, if you use a DEX, the procedure is quite similar but a bit more complex, as the purchase must be made in stablecoins, which therefore need to be acquired first using platforms that support fiat currencies. 

Problems generally arise later. 

The first issue to carefully consider after the purchase is custody. 

The best approach would be to transfer the purchased cryptocurrencies to a cold wallet, such as a hardware wallet, to achieve the highest level of security possible. However, it is important to remember that if you lose the private keys, or the seed, or if they fall into the hands of third parties, you still risk losing everything. 

The second issue concerns volatility. 

The value of cryptocurrencies is constantly changing, and there’s no guarantee that it will necessarily increase. In fact, there are several smaller cryptocurrencies whose value has almost diminished to zero over time. 

The third issue is security, because if centralized tools are used, one must hope they are not shut down or hacked, whereas if decentralized tools are used, one must inevitably assume full responsibility and risks for the custody of private keys and funds. 

Derivatives

However, there is also the option of not directly purchasing cryptocurrencies that need to be stored, but instead buying derivatives. 

The most commonly used are ETFs, or shares of exchange-traded funds (Exchange-Traded Fund) that essentially constitute certificates of ownership of portions of the funds themselves. If you choose ETFs directly and exclusively collateralized in a cryptocurrency (such as those on Bitcoin or Ethereum), it is like investing in those cryptocurrencies but without having to deal with custody, which is entrusted to the fund manager. 

The risks are more or less the same, but it is unlikely for an ETF to be closed or hacked. Additionally, their managers generally use secure custody systems, so the risk arising from potential custody issues should theoretically be limited. 

The disadvantage is the inability to use decentralized tools in any way to operate in this manner. 

Analysis and Research

However, before investing in cryptocurrencies, it is highly advisable to conduct thorough research on the subject. 

There are several websites, such as CoinMarketCap or CoinGecko, that provide access to extensive data on prices and trading volumes. 

Furthermore, before investing in a single cryptocurrency, it would be advisable to thoroughly study its functionality, and especially the purposes for which it was launched on the market. 

Then it’s advisable to follow the news, but only if it comes from reliable sources. 

If desired, there are also advanced tools for blockchain traceability, or on-chain usage metrics.

Conclusions

It is worth reiterating once again to pay close attention not only to the nature of the projects behind individual cryptocurrencies but also to security. 

It is indeed advisable to ensure the best protection for your assets, for example by using two-factor authentication on exchanges.

It is crucial to always be very careful never to share seed phrases and private keys of non-custodial wallets with others, and always remember that in case of loss, there is a risk of completely and permanently losing access to your funds. 

Therefore, investing in cryptocurrencies can also prove to be profitable, but it requires a lot of information and a great deal of diligence.

It’s advisable to start with small amounts and learn from the inevitable mistakes that will eventually occur. 

Finally, it is absolutely essential to always remember that the market is unpredictable, so one must account for the serious risk of losing money right from the start.