Dive deeper: Best crypto to buy right now
Cryptocurrency for beginners
Getting into crypto can feel overwhelming, but it doesn't have to. We breakdown the basics of crypto, how it works and how to get started with digital currencies.
Unless you’ve been living under a rock for the past several years, you’ll no doubt have heard of Bitcoin and other cryptocurrencies. But if you’re a newcomer to the world of crypto, trying to wrap your head around how cryptocurrency works can be pretty overwhelming.
To help you understand how crypto works, how to invest in crypto and whether you should invest in crypto, we’ve put together this simple guide to cryptocurrency for beginners.
Keep reading for a jargon-free rundown of all things digital currency.
What is cryptocurrency?
Cryptocurrency — or crypto for short — is digital currency. It’s completely online, so it doesn’t exist in the form of physical coins and paper notes, and it’s not controlled by a bank, government or any other type of central authority.
You can use cryptocurrency as a form of payment, just like you would regular money, or you can trade it online to try and make a profit in the same way you do when trading stocks.
How cryptocurrency works for beginners
Cryptocurrency is available as virtual coins or tokens that can be used for peer-to-peer transactions.
It gets its name from the cryptographic techniques used to secure digital currency transactions. Cryptography uses codes to encrypt information so that only the sender and receiver of a message can understand it.
Cryptocurrency also relies on distributed ledger technology in the form of blockchain. A blockchain is a ledger that keeps a record of all transactions in a network, but it’s not controlled by any central authority.
Instead, a blockchain is distributed across all participants in a network, while it can also be viewed by anyone and can’t be tampered with.
How can I get cryptocurrency?
In Canada, you can buy, sell and trade cryptocurrencies on a cryptocurrency exchange. If you’ve ever bought or sold stocks through an online trading platform, you’ll find the user interface of a crypto exchange to be quite familiar.
Some exchanges allow you to buy Bitcoin and other cryptos directly with Canadian dollars, with Interac e-Transfer, debit card and credit card among the common payment methods. Other exchanges only support crypto-to-crypto transactions.
Once you buy cryptocurrency, you’ll need to store it in a dedicated crypto wallet. You can store your crypto in a wallet that’s connected to the internet (also known as a hot wallet) for maximum convenience, or you can hold it offline in a hardware wallet (also known as a cold wallet) for maximum security.
Cryptocurrency exchanges in Canada
In order to buy and sell cryptocurrencies, you need to have an account with a crypto exchange platform. The ones listed below are all vetted, legitimate trading platforms where you can easily sign up online to start trading crypto:
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Finder Score for crypto exchanges
To make comparing even easier we came up with the Finder Score. Supported coins, account fees and features across 28 cryptocurrency trading platforms are all weighted and scaled to produce a score out of 10. The higher the score the better the exchange - simple.
What are the biggest cryptocurrencies in the world?
As of February 2025, the 10 largest cryptocurrencies by market capitalization are:
- Bitcoin (BTC)
- Ethereum (ETH)
- Tether (USDT)
- XRP (XRP)
- BNB (BNB)
- Solana (SOL)
- USDC (USDC)
- Dogecoin (DOGE)
- Cardano (ADA)
- Tron (TRX)
How to buy cryptocurrency for beginners
If you understand and accept the risks of investing in cryptocurrency, here’s how to get started.
- Identify your strategy. Start by choosing a suitable trading strategy for beginners. Will you be buying and holding for the long-term, or looking to take advantage of price movements in the shorter term?
- Choose a cryptocurrency. Research cryptocurrency projects to decide which coin or token you’d like to invest in. Look at what the crypto project is trying to achieve, what gives its coin or token value, the team behind the project, its past trading history and anything else that can help you decide if it’s a smart investment.
- Choose an exchange. Compare cryptocurrency exchanges to find one that meets your needs. The right platform for you will support the cryptos you want to trade, offer easy purchases with Canadian dollars, have strong security features and charge low fees.
- Create a trading account. Sign up for an account with the crypto exchange of your choice. It’s free to sign up, and you’ll need to provide your personal information and proof of ID.
- Buy cryptocurrency. Search for the crypto you want to purchase and place a buy order. Popular payment methods include credit card, debit card and e-Transfer.
- Store your crypto in a wallet. You can choose to hold your crypto in your exchange wallet if you wish, but it’s generally recommended to move your assets to a non-custodial wallet.
Dive deeper: How to trade crypto
Benefits of cryptocurrency
Crypto enthusiasts will tell you that cryptocurrency will form the basis of a new financial system, providing fast and secure peer-to-peer transactions without the need to rely on central banks.
Others are much more skeptical — like investment guru Warren Buffett, who famously referred to Bitcoin as “probably rat poison squared”.
To give you a better idea of the pros and cons of cryptocurrency, let’s explore the potential benefits of investing in crypto, then take a look at the traps and risks to watch out for.
Potential benefits of investing in cryptocurrency
Potential gains
With high risk sometimes comes high reward, so investing in crypto provides the potential for big capital gains. The price of Bitcoin soared past US$100,000 in 2024, and you only need to look at the historical price charts of some of the world’s biggest coins and tokens to see how much they’ve increased in value over the years.
Easy to get started
The fact that you can buy fractions of coins or tokens means you can start investing in crypto with as little as $10. It’s quick and easy to open a trading account with a reputable crypto exchange, and many make it easy to buy digital currency with Canadian dollars and pay by bank transfer, e-Transfer, debit card or credit card.
Diversification
If most of your money is tied up in traditional investments like stocks, bonds and savings accounts, investing in crypto assets allows you to diversify your portfolio. Diversification is a key strategy to help protect you against market downturns.
Earn passive income
Similar to how you might deposit your spare cash into a savings account to earn interest, you can put your crypto holdings to work to provide a source of passive income through what is known as staking. Staking is when you lock your cryptocurrency in a smart contract to help validate blockchain transactions. In return for your contribution, you earn staking rewards. Learn more in our full guide to staking.
What to watch out for
Volatility
Cryptocurrencies are well known for their volatility, so it’s possible for the value of your crypto holdings to fall substantially in a short period of time. If you want to invest in crypto, do so with the knowledge that crypto assets are very high risk.
Hacking
Cryptocurrency exchanges and wallets are at risk of online attacks. In February 2025, crypto exchange Bybit made global headlines when hackers stole around US$1.5 billion worth of assets from the platform.
Scams
From fake exchanges and wallets to phishing, Ponzi schemes and malware, the crypto world is rife with scams. You’ll need to do your own research and use your common sense to avoid falling victim to a scam.
Crypto is complicated
Understanding how cryptocurrency works for beginners is quite complex. The old adage that you should never invest in something you don’t understand is worth remembering.
No legal protection
If you put money in a bank account in Canada, most financial institutions offer the security of Canada Deposit Insurance Corporation (CDIC) insurance protection. If you trade stocks, the Canadian Investor Protection Fund (CIPF) provides cover.
But if you trade cryptocurrency, no such protections exist. The crypto regulatory framework is still being developed, so there’s much less security for investors in cryptocurrency compared to other financial assets.
Tax implications
Any earnings you make trading cryptocurrency are taxable. You’ll need to declare them to the CRA on your personal income tax return and keep detailed records of your trading transactions. Learn more in our Canada crypto tax guide.
Security tips for cryptocurrency beginners
Prevent yourself from becoming a victim of fraud or hacking by following these five simple security tips:
- Use reputable exchanges and wallets. It’s vital to do your research before choosing a crypto exchange or wallet. Look for established exchanges that are authorized to do business with Canadians — the CSA offers a list of crypto trading platforms authorized to do business with Canadians — and check the legitimacy of any wallet provider before transferring over your coins or tokens.
- Don’t store your crypto on an exchange. When you leave your crypto in an exchange wallet, you don’t technically own it. That’s why you should move your assets off the exchange to a non-custodial wallet that lets you hold the private keys to your assets.
- Use a cold wallet. While storing crypto in an online hot wallet is convenient, it opens you up to the risk of hacking. Holding your assets in a cold wallet that’s not connected to the internet is a safer option.
- Keep your private keys private. A private key is crucial to the security of assets in your crypto wallet, so it goes without saying that you should never share any private keys with anyone else.
- Use two-factor authentication. Set up two-factor authentication on all your accounts using an app like Google Authenticator to provide an extra layer of security.
- Watch out for scams. From unsolicited emails to offers that sound too good to be true, learn to spot the signs of a crypto scam. Find out more in our guide to 11 common crypto scams and how to spot them.
- Don’t use public wi-fi. Steer clear of public wi-fi networks when accessing a wallet or exchange. You may also want to consider using a VPN for added security.
Top cryptocurrency investment strategies for beginners
Here are some popular strategies worth checking out if you’re interested in cryptocurrency investing for beginners.
Buy and hold
This is the simplest approach to crypto investing. The basic approach is to buy a cryptocurrency and hold it for the long-term (or HODL, as it’s referred to in the crypto world). Then, at a later date once it has increased in value, you can sell the crypto at a profit.
Diversifying
Similar to how stock traders like to invest in a wide range of companies and sectors, you might like to invest in a wide range of cryptocurrencies. From peer-to-peer payments to online gaming, file storage, supply chain management and a host of other industries, cryptocurrencies cover a diverse range of sectors. You can also diversify your portfolio by investing in a mix of large-cap and small-cap tokens.
Dollar cost averaging
Dollar cost averaging is a strategy that involves making small crypto purchases on a recurring basis. It’s an alternative to making one large purchase and trying to time the market, allowing you to build your investment over time and providing protection against volatility.
Once you’re an experienced crypto investor, you might want to investigate more advanced strategies such as day trading.
Cryptocurrency glossary for beginners
Airdrop
A marketing strategy that sees a blockchain project distribute coins or tokens to wallet addresses to promote the awareness and use of their cryptocurrency.
Altcoins
Short for “alternative coins”, this term is used to describe any cryptocurrency that isn’t Bitcoin.
AML
Acronym for “Anti-Money Laundering”. To comply with AML regulations in Canada, cryptocurrency exchanges must verify the identities of users and report large or suspicious transactions to FINTRAC.
Bitcoin
The world’s first cryptocurrency and also the largest in terms of market capitalization. It was invented in 2008 as a peer-to-peer decentralized electronic cash system.
Blockchain
A decentralized and public digital ledger that keeps a record of all transactions in a particular cryptocurrency.
Cold wallet
Also referred to as cold storage or a paper wallet, a cold wallet is a cryptocurrency wallet that is not connected to the internet. This means that its private keys are stored offline, providing protection against hacking.
Cryptocurrency exchange
An online platform where you can buy and sell cryptocurrency.
Decentralized
A network that is not controlled by a single central entity.
Ethereum
The world’s second largest cryptocurrency in terms of market capitalization. It’s also a decentralized blockchain platform where developers can run smart contracts and applications.
Hot wallet
A cryptocurrency wallet that is connected to the internet, with private keys stored online. Hot wallets allow for faster transactions and are more convenient to use, but they don’t provide the same level of security as a cold wallet.
KYC
Acronym for “Know Your Customer”. Cryptocurrency exchanges must verify the identities of their customers to comply with anti-money laundering regulations.
Market cap
Short for market capitalization, market cap refers to the total value of a cryptocurrency. It is calculated by multiplying the total number of coins in supply by the cryptocurrency’s current price.
Memecoin
A cryptocurrency inspired by an internet meme, joke, viral trend or pop culture moment.
NFT
Acronym for “non-fungible token”. NFTs are blockchain tokens that represent ownership of assets such as art, music and other one-of-a-kind collectible items.
Stablecoin
A cryptocurrency that has its value pegged to a fiat currency or commodity to help keep its price relatively stable. For example, Tether (USDT) is a popular stablecoin that has its value pegged to the US dollar at a 1:1 ratio.
Dive deeper: Full cryptocurrency glossary
Bottom line
Cryptocurrency can be complex and confusing, but it doesn’t have to be scary or intimidating. With a little bit of research and a willingness to learn, it’s easy to increase your crypto knowledge and start investing in digital currencies. Just make sure you’re fully aware of the risks involved before parting with any of your hard-earned money.
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