How to invest in crypto: the basics for beginners

Step by step

1. 1

   Know what you are buying

   A crypto asset is a digital asset recorded on a blockchain. Bitcoin and ether are the best known, and both are highly speculative investments. Each coin is built differently and carries its own risks. Crypto is not money in a bank: it is not FDIC-insured, and a crypto payment usually cannot be reversed.

2. 2

   Get your money ready first

   Pay off credit cards first: they often charge 18% or more, and almost no investment earns that reliably. Keep savings for emergencies; some people keep up to six months of income. Then decide how much you can lose without trouble, and do not go above it.

3. 3

   Choose how you want to own it

   On an exchange or in an app you buy the coins themselves. In a brokerage app such as Robinhood or Webull, crypto sits next to your stocks. A spot bitcoin or ether fund (ETP) is bought in a brokerage account like a stock: you own shares of a trust that holds the coins, not the coins. You can also buy stocks of companies in the crypto business, but their price can move apart from the coins.

4. 4

   Pick an app that takes your documents

   Every exchange and broker on this page accepts an SSN. With an ITIN, Binance.US and Webull sell crypto, and Cash App and Venmo let you buy it; for a bitcoin fund, Webull opens a brokerage account with an ITIN and lists 11 spot bitcoin funds, from $5. Compare the full cost: a simple Coinbase buy is 1.875% plus a spread, while a spot bitcoin fund such as Fidelity's FBTC charges 0.25% a year. Webull also needs a green card or a visa such as E, F-1, H-1B, L-1, O-1 or TN.

5. 5

   Start small and buy on a schedule

   Buying the same dollar amount every week or month is called dollar-cost averaging: you buy more when the price is low and less when it is high. It lowers the risk of buying everything at a peak, but it does not stop losses if the price keeps falling. Some apps make it cheap: recurring buys are free on Strike after the first week and on River 7 days after you set them up, and Cash App Auto Invest has no fee.

6. 6

   Decide where to keep your coins

   You can leave coins with the exchange or move them to your own wallet. A wallet holds your private key, a password that cannot be changed: if you lose it and the seed phrase that restores the wallet, the coins are gone for good. Keep the seed phrase offline in a secure place and never share it.

7. 7

   Keep records for taxes

   For US taxes, crypto is property. Selling it, trading one coin for another or paying with it goes on Form 8949, and Form 1040 asks a yes-or-no question about digital assets; if you only bought with dollars and held, the answer is No. A gain on coins held over a year is usually taxed at 0%, 15% or 20%, and on coins held a year or less at your regular rate. Exchanges report sales on Form 1099-DA for transactions from January 1, 2025.