Stocks, options and dividends used to be the topics keeping people up at night.
Now, it’s blockchain, cryptocurrency, and Bitcoin.
These words have taken the world by storm, changing not only our vocabulary but also how we allocate our investments.
The only question left for many isn’t if they want to invest, but how they cross the bridge into this new world.
On the surface, investing in cryptocurrency seems complicated, requiring knowledge of an entirely new set of apps, interfaces and processes.
Fortunately, it is much simpler to navigate when broken down into steps which include determining the cryptocurrency you want to invest in, selecting the exchange you would like to use, signing up for an account and funding it with the amount you would like to get started with.
This article will provide the depth necessary to get started on each of the five main steps to buying cryptocurrency in Canada.
1. Choose which currencies you want to invest in
While the stories of becoming an overnight millionaire may be what compelled many to start investing, there is often more strategy involved.
Rather than hearing news of a coin and crossing their fingers, investors are encouraged to do their own research and learn the foundations of building a strong portfolio.
Much like the stock market, there are stable assets that have a history of consistent growth, and there are many based on hype, such as DOGE.
Investors are encouraged to mitigate the risk of the unknown by spreading out their funds in both stable and riskier assets.
Deciding on what cryptocurrencies to buy is not just important to do.
It is important to do first.
Namely, not all exchanges or storage options will support the asset you are hoping to purchase.
For example, certain exchanges only offer a subset of the cryptocurrencies available to invest in.
Therefore, rather than going through the registration process to come up empty-handed, investors are encouraged to consider asset availability as one of the deciding factors for exchange selection.
2. Decide which exchange to buy your crypto on
There are several methods to purchase cryptocurrency, including a direct peer-to-peer transaction, after connecting with someone on LocalBitcoins, through a cryptocurrency ATM, and perhaps the most common, a digital exchange.
Most investors will select this method based on the security and convenience they offer in comparison to peer-to-peer transactions and ATMs, respectively.
Interested investors can purchase cryptocurrencies on a digital exchange, including Bitcoin, several altcoins and stablecoins, and tokens with a value pegged to another asset.
The thing is, there is more than one exchange available to users today, each with its own benefits, drawbacks and sometimes risks.
In the following table, we do a deeper dive into three well known exchanges that have simplified the process for Canadian users, with a strong list of assets and proven security features.
Newton is a Toronto-based cryptocurrency exchange that has been around since 2018. The exchange has positioned itself as an offering only open to Canadians and has since exceeded 100,000 platform users.
- The exchange supports over 60 different cryptocurrencies (at the time of writing), one of the largest selections in Canada.
- The mobile app and interface are resoundingly simple in appearance, lowering the barrier to entry for beginners.
- Although it might not be considered problematic for Canadians, it is worth noting that all fiat/crypto trading pairs are in CAD.
Bitbuy is a Canadian exchange that was founded in 2013 in Toronto. The exchange is known across Canada for its ability to easily conduct basic trades in addition to advanced services, including over-the-counter (OTC) trading.
- Bitbuy offers an express feature to simplify the process of purchasing cryptocurrencies at a 0.2% fee.
- The platform also offers security benefits, with the bulk of their assets being held in cold storage.
- The main downside for Bitbuy is the number of cryptocurrencies available for trade, which is fewer than comparable exchanges, at 15.
Binance is globally recognized as one of the largest cryptocurrency exchanges in the world. The platform offers a wide range of advanced trading features, including tools through TradingView and stop-limit orders.
- Binance offers trading pairs for 500 different cryptocurrencies, making it an appealing choice for those interested in purchasing assets that are not as well-known.
- The exchange provides a diverse selection of trading types, including spot trading, margin trading and peer-to-peer trading.
- The platform’s options are complex and can be considered overwhelming for new users.
- Not available to residents of Ontario.
For Canadians, these only represent a few of the options available for trading.
Although this is only a subset of choices, this comparison is a great place to start before beginning to weigh additional factors such as fees, assets, funding methods, customer support and security.
3. Create an account and deposit funds
An exchange account is an investor’s gateway into cryptocurrency trading, signifying the next step before you can hold your first cryptos.
It’s true that the overall process of creating an account will differ depending on the exchange the investor decides to use.
However, there are some underlying similarities.
Most exchanges will ask to provide some personal information, including a name, email address and secure password.
The email can be exchanged for a mobile number on some exchanges, although the process won’t differ too drastically either way.
After entering these details, exchanges will typically verify this is your information by sending a verification code.
The interface will then prompt users with a set of instructions to input this code on the screen, completing the initial setup.
It is also common for exchanges to abide by KYC or Know Your Customer regulations in Canada.
KYC regulations have become an integral part of using the Canadian financial system and in this context exist to prevent the use of digital currencies in illegal activities.
In practice, this means users will need to provide more detailed verification methods, including a phone number, government-issued identification and a selfie that can be compared to the photo ID provided.
Providing this information on an exchange is generally safe if users use a reputable exchange.
After verifying their identity, eager cryptocurrency traders can proceed to the final step, deciding the payment method they would like to use for deposits and withdrawals.
Some of the options for funding include wire transfers, e-transfers, bank transfers and in some cases, debit or credit card.
4. Purchase your desired amount of crypto
After the account has been fully verified, a process that may take a few hours to a couple of days, users can begin purchasing their desired amount of cryptocurrency.
The interface on most exchanges will consist of search functionality that allows users to search for the coin they would like to invest in by name.
Investors may select the coin of their choosing, browse a brief price chart, and determine the amount they would like to purchase.
That said, there is no universal, optimal amount that is best for everyone looking to diversify their holdings.
5. Store your crypto in a wallet or keep it on your exchange account
One common misconception first-time investors have when purchasing digital currencies is that they need to get a wallet first.
While wallets are often recommended, an exchange account will automatically issue users an online wallet upon the completion of their order.
Cryptocurrencies may be stored here if the user has the assets in their possession.
However, other crypto wallets present benefits that far outweigh the convenience of an exchange wallet.
Similar to how you would store fiat currencies in a physical wallet, digital currencies also need to be stored somewhere.
The difference is that in the world of digital currencies, this is in a cryptocurrency wallet, which is more like a bank account with functionality to store, send and receive assets.
Since assets exist on the blockchain, cryptocurrency wallets don’t store anything other than the cryptographic public and private keys that verify your holdings are yours.
Wallets can take on many forms, falling into one of two categories: hot wallets and cold wallets.
A hot wallet, or software wallet, is a form of digital storage that users can access through a device such as their computer or phone, which remains connected to the internet.
Some examples include mobile wallets, desktop wallets or web-based wallets.
Hot wallets are popular since they are easy to use, often leveraging guided processes that hide the behind-the-scenes complexity of a digital asset.
They are also convenient since users will never need to transfer funds that are online, offline.
Their counterpart, the cold wallet, remains offline, making it safer alternative.
Cold wallets exist in one of two formats, hardware and paper.
As the name suggests, a hardware wallet is a plug-in device that acts as a portable key to accessing cryptocurrency assets.
In contrast, a paper wallet is a physical, printed-off version of a user’s private key, which may be laminated and stored in a physical vault for safekeeping.
The major drawbacks are the inconvenience of turning the device on and the cost, which may be up to $200 or more for a top-of-the-line model.
Hot wallets are often free in comparison.
Typically, the answer to whether one should invest in a hot wallet or cold wallet isn’t a one or the other choice; it is a matter of how much should be stored in each.
As previously mentioned, cryptocurrencies can be stored directly in an exchange account as a method of hot storage in a format known as the custodial wallet.
Exchange storage is typically only recommended for active traders who need their funds accessible to engage in a trade on short notice or those who have only a small holding.
Exchange accounts are also beneficial when it comes to keys.
Holding a cryptocurrency gives users both keys, one used like an email and the other like a password.
The only caveat is that a key is a random string of letters and numbers, making it harder to memorize than another password.
This entire step is eliminated with a hot wallet since the provider stores the private key.
Therefore, users may never know what this key is.
To access their funds, they just need to remember the password for their account.
Unfortunately, online exchanges are no stranger to hacks, especially as cryptocurrencies go up in value and are seen for the honey pot of assets they are.
As a platform user, storing assets in an online exchange means you are putting your trust in the security that the company has set up.
Fortunately, modern exchanges typically take extra security precautions, even setting up “safe funds” as insurance that remain in cold storage.
Frequently Asked Questions
- What is the best way to buy cryptocurrency in Canada?
- The best way to buy cryptocurrency in Canada depends on your goals as an investor. That said, cryptocurrency exchanges are often the easiest way to dip your toes into the world of digital assets, balancing the benefits of matching buyers with sellers, and fees that are lower than what is offered at an ATM. Traders also appreciate the simple user interface (UI) integrated on most modern exchanges, making the process increasingly intuitive and simple.
- What is the best crypto exchange in Canada?
- No exchange is clearly “the best.” The answer is subjective, based primarily on the types of cryptocurrencies a user is interested in, limiting what exchanges can be used. Other factors to consider are deposit/withdrawal methods, security, fees and user interface. Based on a combination of these factors, Newton, BitBuy and Binance offer a diverse enough blend that users are likely to classify one of them as a preferred choice.