Investing in Cryptocurrencies: Complete Guide for Beginners, Intermediate, and Advanced Investors

Cryptocurrencies went from being a technological experiment to a global multi-trillion-dollar market in just a few years. Bitcoin, Ethereum, and thousands of altcoins offer unique investment opportunities, but also risks very different from traditional stocks, bonds, or ETFs.

In this article, we’ll break down what each investor profile should know: from those just hearing about Bitcoin to those already trading crypto futures or derivatives.

First steps in the crypto world

What is a cryptocurrency?

A cryptocurrency is decentralized digital money. It isn’t controlled by a central bank, but by a network of distributed computers that validate transactions on a blockchain.

  • Bitcoin (BTC): the first and most well-known, created in 2009 as “digital gold.”
  • Ethereum (ETH): the second most important, famous for enabling smart contracts.
  • Altcoins: all other cryptocurrencies (e.g., Solana, Cardano, Dogecoin).
  • Stablecoins: cryptos designed to maintain a stable value (e.g., USDT, USDC, DAI), usually pegged to the dollar.

Risks and categories (compared to car insurance):

  • New altcoins: very high risk (basic mandatory insurance).
  • Bitcoin/Ethereum: medium risk (theft/fire insurance).
  • Reliable stablecoins (USDT, USDC): low risk (full coverage), though there’s always regulatory or issuer mismanagement risk.

How to buy cryptocurrencies?

  1. Centralized exchanges: Binance, Coinbase, Kraken, Ripio (in LatAm). They’re like brokers, but for crypto.

  2. Self-custody wallets: apps or devices where you store your crypto (e.g., Ledger, Metamask). “Not your keys, not your coins.” It’s recommended to keep crypto in a hardware or software wallet, because if the exchange disappears (bankruptcy, hack, withdrawal freeze), all coins are lost. They aren’t strictly necessary for quick trading, but they are crucial for long-term holding.

Starting amount

You can start with as little as $10 or $20 USD, since crypto can be bought in fractions (you don’t need to buy a whole BTC).

Beginner’s recommendation: start with Bitcoin and Ethereum, small amounts, and learn how to use a wallet.

More strategic investing

If you already understand the basics, you can explore other tools:

Diversification within crypto

  • 60% Bitcoin and Ethereum (a stable base within the volatile market).
  • 30% Large-cap altcoins with solid projects (e.g., Solana, Polygon).
  • 10% Experiments or microcaps (very high risk, but high potential):
    • Microcaps are cryptocurrencies with very small market caps, often new or unknown projects that could multiply 100x but also carry the risk of vanishing overnight.

Staking and passive income

Some blockchains (Ethereum, Cardano, Solana) allow you to “stake” your coins on the network and earn interest. This creates passive income similar to a savings account, but with more risk.

DeFi (Decentralized Finance)

Financial apps that work without banks:

  • Uniswap, Aave, Curve: let you lend, borrow, and trade tokens without intermediaries.
  • Risk: code bugs, hacks, or scams (rug pulls: when token/platform creators raise liquidity from investors, then disappear with the money).

Legal implications

  • In some countries crypto is legal and regulated (U.S., EU, Japan).
  • In others, it’s restricted (China, Turkey).
  • Always check how crypto is taxed in your country.

Intermediate recommendation: start with ETH or SOL staking, use stablecoins as a safe haven, and experiment with a bit of DeFi to understand the ecosystem.

Advanced: Professional tools

Here we enter a world of high risk and high complexity.

Trading with derivatives

  • Bitcoin and Ethereum futures and options (calls/puts): allow you to bet on price rises or drops.
  • Example: a BTC future lets you profit if the price falls, something impossible by just buying Bitcoin.
  • Risk: you can lose everything very quickly (leverage).

Hedging

Strategies to manage risk:

  • Example: if you hold a lot of Bitcoin, you can buy a “put” (sell option) to protect against a drop.

Mining and validation

  • Mining (Bitcoin): using computers to validate transactions and earn rewards. Miners compete, consume electricity, and earn BTC rewards.
  • Validation (Ethereum and other proof-of-stake): locking large amounts of coins to secure the network and earn rewards.

Offshore accounts and taxation

Some advanced investors use offshore structures to optimize taxes.

  • Warning: this depends entirely on local laws; it can be legal or illegal.

Advanced recommendation: diversify between spot, derivatives, and hedging strategies. Always keep part of your capital outside centralized exchanges (self-custody).

Conclusion: How to start depending on your level

  • Beginner: research local laws, start with Bitcoin and Ethereum, small amounts, and learn to use a wallet.
  • Intermediate: diversify across BTC, ETH, altcoins, and stablecoins. Explore staking and DeFi, but cautiously.
  • Advanced: use futures, options, and hedging strategies. Consider international structures and network validation.

In summary: cryptocurrencies are a unique global investment opportunity, accessible from anywhere with internet. But they are also extremely volatile and require constant education.

It’s very important to diversify your portfolio to do it well—revisit the oracle to find out what else to invest in and how to do it right.

Glossary

Blue chips: established companies with decades of existence, billions in revenue, product diversification, consistent profits, cash reserves, and if they need financing, banks and markets lend to them because they trust their solvency.

Broker: a platform or financial intermediary that allows you to buy and sell stocks. Some brokers are international (e.g., Interactive Brokers, eToro), and others are local (depending on the country).

Call: a financial contract known as a derivative, whose value depends on a stock. It is the right to buy a stock at a certain price in the future.

Cap rate: capitalization rate, an indicator of the annual return of real estate investment.

Cash flow: monthly cash generated by the property after expenses (rent – taxes – maintenance).

Certificates of Deposit (CDs): "similar to fixed-term deposits, but usually issued by banks or financial institutions in more formal or international markets. They allow investing in local or foreign currencies. They may have fixed or variable interest options, depending on the contract.

Commodities: any basic, homogeneous, tradable product produced in large quantities and traded in global markets. They are used both for direct consumption and for industrial production.

Covered Call: investors holding stocks who sell “Call” options to generate extra income.

Covered bonds: bonds backed by specific assets, lower risk than regular corporate bonds.

ETF: an investment fund traded on the stock exchange like a stock.

Fixed-term deposits: depositing money in a bank for a set period in exchange for a fixed interest rate. At the end of the term, you recover your capital plus interest.

Futures contracts: agreements to buy or sell a certain quantity of an asset at a fixed price in the future.

Hedging: investing in stocks of other types such as precious metals or utilities to balance losses if company stocks fall.

High yield / junk bonds: small companies or those with liquidity problems, high risk, and high return.

Interest-bearing accounts: bank accounts that generate daily or monthly interest on the available balance.

Interest rate swaps: a financial contract between two parties to exchange interest payments on a notional principal. The most common swap is exchanging fixed rates for variable interest rates or futures.

Inverse ETFs: gain value when the index they track goes down.

Joint ventures: partnerships between two or more parties to develop a joint project, sharing risks, costs, and profits.

Leverage: using financing (mortgage or loan) to buy more properties than your capital would allow.

Leveraged ETFs: multiply market movements (2x or 3x), up or down.

Liquidity: in economics, liquidity is the ease with which an asset can be converted into cash without losing value.

Microcaps: very small cryptocurrencies by market cap since they are new or unknown projects. They have the potential to multiply by 100 but also the risk of disappearing overnight.

Mining (Bitcoin): using computers to validate transactions and earn rewards. Miners compete, consume electricity, and receive rewards in BTC.

Mutual Fund: a collective vehicle where multiple people contribute money that a professional manager invests in different financial assets: stocks, bonds, commodities, or a combination of them.

Net Asset Value (NAV): the price of each unit, which fluctuates according to the value of the mutual fund’s assets.

Offshore accounts: accounts opened in another country, used by some investors to access products not available locally or for tax advantages. It’s legal if declared, but each country has its own regulations.

Portfolio: the total set of financial assets (such as stocks, bonds, mutual funds, or real estate) owned by an investor or entity, aimed at achieving financial goals through diversification and risk management.

Put: a financial contract known as a derivative, whose value depends on a stock. It is the right to sell a stock at a certain price in the future.

REITs (Real Estate Investment Trusts): real estate funds that allow investing in large portfolios without directly buying property. They are traded through brokers like regular stocks, and there are even REIT ETFs.

Staking: some blockchains (Ethereum, Cardano, Solana) allow you to “stake” your coins on the network and earn interest. This generates passive income similar to a fixed-term deposit, but with more risk.

Unit share: when you contribute money to a mutual fund, you receive “units” representing your proportional participation in the portfolio.

Validation (Ethereum and other proof of stake): locking large amounts of coins to maintain the network and receive rewards.