The Beginner's Guide to Buying Your First Cryptocurrency
Key Points
You can buy your first cryptocurrency through a crypto exchange or a brokerage that sells crypto.
Consider starting with Bitcoin, as its performance often follows or leads the crypto market.
Other cryptocurrencies sometimes outperform but also carry much greater risk.
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When you're ready to buy your first cryptocurrency, it's basically a two-step process. To start, you'll need an account with either a broker that sells crypto or a crypto exchange, such as Coinbase or Gemini.
That's the easy part. The next part is more challenging: picking a cryptocurrency and deciding how much to invest.
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My recommendation, especially for beginners, is to start with Bitcoin (CRYPTO: BTC). It may look expensive -- even after the recent downturn, its price is still about $66,000 as of March 29 -- but you can buy small portions of one Bitcoin. If you want to put in $100 or less, you can. You also have the option of investing in a Bitcoin ETF if you want to directly buy a crypto investment in your brokerage account.
The advantage of Bitcoin is that its performance is often similar to that of the overall crypto market, since Bitcoin accounts for such a large share of the market. The crypto market as a whole is worth about $2.3 trillion, and Bitcoin accounts for $1.3 trillion (58%).
Altcoins, a term for all cryptocurrencies other than Bitcoin, can sometimes outperform Bitcoin, making them popular among investors seeking higher returns. But altcoins are also far riskier. They're much smaller than Bitcoin, so they tend to be more volatile, and for every one that outperforms, several others lag the market. Consider investing in Bitcoin first, and then you can always add altcoins later.
Be conservative about how much you invest in cryptocurrency. A good rule of thumb is not to invest money you can't afford to lose. I also recommend dollar-cost averaging, which involves making smaller, equal investments on a regular schedule rather than putting in everything you plan to invest at once. This helps protect you from crypto's volatility. If prices drop after you buy, you'll still have money to invest, because you didn't use all your cash right away.
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Lyle Daly has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.
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