How To Invest In Cardano - Step-by-Step Guide
Cardano is a blockchain-based platform that relies on the Proof of Stake protocol and aims to enable innovators, change-makers and visionaries to bring positive change leveraging the power of blockchain and cryptocurrencies. This is an open-source project which was initiated by Charles Hoskinson in 2017 who is also a co-founder of Ethereum blockchain. The development team working on this layered blockchain wants to enable easy development of modular decentralised apps and smart contracts.
The blockchain's native token is denoted by ADA and the cryptocurrency’s market cap has now crossed the $40 billion mark.
Table of Contents
Invest in Cardano in 3 Steps
Get a Cardano Wallet
Before you invest in ADA, you need to ensure you have the means to store your tokens securely. The best way is to get a Cardano wallet that comes in both software and hardware variants. You will need to select the wallet depending on your investment strategy along with essential features such as security, ADA accessibility, ease of use, customer support, and more.
Join a Cardano Exchange
After you have selected a Cardano wallet, the next thing you need to do is create an account on an exchange. You will also have to go through the account verification process to validate your identity. There are many top crypto exchanges you can pick including Binance and Coinbase. Bear in mind that you will need to deposit funds either through fiat or crypto and then use those funds to purchase ADA.
Invest in Cardano
Creating an account on an exchange or a broker website requires you to provide your particulars such as name, contact, email and country of residence. You also need to have a strong password which is ideally a blend of lower and upper case letters as well as a special character and a digit. For account verification, the crypto platform will ask you to provide a piece of documentation that confirms your identity. It could be anything from your passport to your driver's license. This way exchanges and brokers maintain compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.
Investing in Cardano Explained
It doesn't matter if you are investing in Cardano or any other blockchain-based cryptocurrency, you first need a secure wallet. Getting a cryptocurrency wallet means that you need to take multiple factors into account including control of your private keys, wallet security, customer support, ease of use, ability to back up your data and more. Remember that there is no best wallet, you need to pick one that aligns with your investment plans and requirements.
If your objective is to hold ADA for months or years, you are a long-term investor or 'hodler'. For such investors, the best variant is a hardware wallet which is like a flash drive and doesn't contain any technology that can make it accessible online. This ensures that your ADA tokens remain safe from any hacking attempts. Some of the top hardware wallets for storing ADA include Trezor Model T, Ledger Nano X, and Ledger Nano S.
But if you are a day trader or short-term investor who needs to trade cryptocurrencies and other digital assets on the go, you would be better off with a mobile wallet that offers a decent combination of security and ADA accessibility. However, if you want more security and a wide range of features, then a desktop wallet would be a better fit for you. These are software programs that you will need to install on your PC and then you'd be able to store your ADA tokens.
If you are just storing currencies for a few minutes for your short trades, then web wallets that are built into your exchange or brokerage websites can get the job done. These wallets are not particularly secure as they exist on the crypto platform which is always a prominent target of hackers but on the other hand, if you are not storing a substantial quantity of ADA or want to hold it for the short term, then there is nothing wrong with using web wallets. If you want better security, you can consider third-party web wallets. The best feature of web wallets is that they enable you to execute your trades and open and close positions within seconds. You have instant access to your tokens to ensure you don't miss out on trading opportunities.
Whether you are investing through a broker, a crypto exchange, or a peer-to-peer network, every cryptocurrency service that values its users will verify your identity to adhere to KYC and AML laws. This allows them to ensure that there are no illegal, fraudulent, or ethically questionable activities taking place on the platform providing you with a healthy and safe investment environment where your funds remain secure.
Where Can You Invest In Cardano?
There are a number of leading exchanges that you can rely on to purchase ADA tokens. But to make your decision-making process easier, we have picked some of the most popular crypto investment platforms and reviewed them for ease of use, affordability, regulatory compliance, customer support, payment modes, and other key features to find out the best services for you.
If you register your account on a cryptocurrency exchange or a broker platform, you will see that they provide you with a multitude of payment methods. These generally include wire transfers through a bank account, debit card, credit card and e-payment services. The availability of these payment services is dependent on the country of residence and the platform you are using to buy ADA. If you are starting out as an investor, it is recommended that you deposit your seed capital with a debit or credit card. It will be a bit costly but it is also highly convenient and your transaction is processed quickly. Once you make your minimum deposit, you can invest in ADA tokens.
There are a few cryptocurrency exchanges and brokers that will allow you to deposit your funds directly through your bank. The method is simple to use but the funds may take some time to show up, especially if it's an international transaction. To use this payment mode, provide the platform with your bank and your fiat currency. You will be taken to another web page where you will be required to validate your bank account details. Once you have gone through this process, you can make the deposit and start investing in Cardano.
Cardano Investment Strategies
To invest in ADA, there are a number of short and long-term trading and investment methods. Below, we have discussed the most popular ADA investment strategies and when and how you should use them to capitalise on the cryptocurrency market.
Buy and 'Hodl'
What is it?
The word 'hodl' was coined when a frustrated Bitcoin investor posted a long comment and misspelt 'hold'. His comment went viral and the term became an inside joke of the crypto world. When it comes to 'hodling', the strategy is exactly what you are thinking it is. You basically buy ADA coins and hold onto them for a long period of time until the price is high enough to sell your tokens and earn profits.
How to use this strategy
'Hodling' requires you to buy tokens and hold them for which you'll need a wallet. Then you will have to sign up on an exchange and verify your account. Deposit your funds and purchase ADA. You have to keep in mind that the 'hodling' strategy is for patient and disciplined investors who don't want to sell right away. For this investment method to work, you will need to be tolerant and resist the urge to sell early.
When to use this strategy
The best method to execute this strategy is to buy ADA when it's going through a bearish trend. Buy your ADA tokens and store them in your secure wallet until the price is high enough to sell and make big gains. In the meantime, the crypto market will go through a multitude of price surges and declines but you shouldn't let these affect you. Just wait for your moment when the price has reached the point where it is profitable for you to sell.
Buy Fractional Cardano
What is it?
Similar to many other cryptocurrencies, Cardano doesn't force you to buy the whole token as the blockchain network offers smaller units of the coin. ADA's smallest unit is called Lovelace and 1 ADA = 1 million Lovelaces. The ability to buy a fraction of ADA means you can invest any amount you want in Cardano. Whether you have $5,000 or $50 to spare, you can purchase Cardano and store it until the price is high enough to sell. The fraction investment method also allows you to invest periodically so you can increase your investment portfolio by enhancing your stake in ADA across months or even years.
How to use this strategy
If you want to use this strategy for investment, the most effective method is to make it a habit to save a certain percentage of your income every month and invest it in ADA. If you can do that for 12 to 24 months, you would be able to buy a good quantity of ADA tokens which will increase your stake and chances of potential profitability.
When to use this strategy
This is an investment strategy for beginner investors or those who either don't have sufficient enough disposable income or don't want to put a lot of money in cryptocurrencies. This enables you to invest in multiple phases and you can back out if you feel that your investment isn't working out.
Long Position on Cardano
What is it?
Long positions are often opened by seasoned investors who believe that the price of ADA coin will go up in the coming hours or days. This is generally done relying on CFDs and leveraged trading which enables traders to put in more capital than they have in their crypto trading account. CFDs allow a user to bet on the future price of ADA without buying the token. It is a high-risk and high-reward investment method that should only be used by highly informed and experienced traders who understand the repercussions of their decisions and financial risks related to leveraged trading.
How to use this strategy
If you are supremely confident that the ADA price is going to surge in the coming hours, you can open a long position on the asset through a broker website. Once you have registered and verified your account, you will need to deposit funds and select the amount you want to invest in your trade. If you are going for leveraged trading, you will also need to define the extent of leverage you want which generally ranges between 2X and 500X. Apart from that, you will enter the price at which you want your trading position to initiate. Once ADA hits that price and continues to ascend in terms of value, you can close the order and take your profits. On the other hand, if it doesn't reach that price, you will have to bear the losses.
When to use this strategy
Long position with leverage should only be used by someone who understands both cryptocurrency price volatility and financial markets. Because if the price goes down even a few cents, you stand to lose a lot of money. This strategy should only be deployed when you are almost 100% confident that the price will go up and will need to be executed with due care and precision.
Benefits of Investing in Cardano
- Deflationary Digital Currency – Since there is a limited supply of ADA tokens, it is a deflationary currency that is unlikely to lose value like traditional fiat currencies.
- Versatile Blockchain – Cardano is a highly versatile blockchain that includes layers to support the development of modular smart contracts and dApps.
- User-Friendly – Trading and investing Cardano is quite easy and you just need rudimentary understanding to get into ADA trading.
- Autonomy – Since Cardano is a decentralised blockchain, no central authority has any control over ADA tokens including federal banks and governments.
- Anonymity – When you rely on the Cardano blockchain for quick financial transactions, it is next to impossible to track your personal identity.
- Environment Friendly – Cardano uses the Proof of Stake protocol which means it doesn't require enormous computing power which is harmful to the environment due to emissions.
Disadvantages of Investing in Cardano
- High Volatility – As Cardano is the third most popular currency on the crypto market, it’s highly volatile because of constant trading and betting.
- Beware of scams – As the crypto market is still in its early stages, there are a number of scams and frauds associated with the industry. You need to ensure that you are trading on a legitimate platform.
- Superior Currencies – Although Cardano has enjoyed a lot of success, there are many blockchain projects which can be potentially superior to Cardano.
Other Ways of Investing in Cardano
If you are searching for alternative ways to invest in ADA, you can-
- choose to meet with an ADA seller face-to-face whom you can find on a peer-to-peer crypto platform. Make sure you are meeting the seller at a safe spot.
- Another way to acquire ADA coins is to use the ATM Radar website to find the nearest ADA ATM in your region.
Invest in a Cardano ETF
An Exchange-Traded Fund which is commonly known as ETF is a trading instrument that provides a simple and legal way for beginner investors to trade ADA. Technically, an ETF is an investment driver whose value depends on the assets it represents. ETFs normally contain more than one assets to diversify investment and minimise risk. ETFs provide an ideal investment method for those who don't want to deal with the technical know-how of cryptocurrency trading such as public and private keys, ADA wallets and security.
Stake Cardano to Get Passive Income
Since the Cardano blockchain uses a Proof of Stake protocol called Ouroboros instead of a Proof of Work algorithm, it provides you with a way to generate secondary income by purchasing a stake in the project. All you have to do is buy a certain amount of ADA and hold it in a wallet to demonstrate your trust and faith in the project. Ouroboros offers an incentive mechanism where participants holding a stake in the network are rewarded for their participation.
Frequently Asked Questions
No. The smallest unit is Lovelace which is a millionth of 1 ADA. You can use Cardano for fraction investment which allows you to invest any amount you want, even if it is as low as $10.
Nobody can guarantee 100% profitability of any crypto investment or trade including ADA. You can minimise your financial risk by investing in multiple tokens and only putting in the capital you can afford to lose.
That depends on the capital gain tax laws of your country. Check your local laws.
Cardano blockchain relies on a Proof of Stake algorithm. It means that it cannot be mined using computing power. This also makes Cardano an environment-friendly project and digital asset.
Many popular cryptocurrency exchanges as well as brokers require you to confirm your identity because they are complying with AML and KYC regulations which allow them to prevent illegal and fraudulent activity on their website. This may be a bit inconvenient to you but it also ensures that your funds and personal data remain secure.