Beginner’s Guide: How to invest in Crypto?

Crypto is here, crypto will stay. In my opinion ;-) Some say it’s a very big mistake if you don’t invest at least a small portion of your wealth in crypto — for diversification reasons. That’s up to you and this is not a financial advice. But for whoever is interested, here’s a detailed explanation for beginners how you exchange your EUR in your bank account to buy the big cryptocurrencies and the smaller ones.

Note: This guide is using EUR as an example. If your base bank account currency is a different one, that should work the same way for all major currencies.

  1. Get a Binance account & deposit EUR
  2. Use your EUR to buy cryptocurrencies on Binance
  3. Set up the TrustWallet App on your phone
  4. If desired: Buy smaller cryptocurrencies (example with Tixl’s TXL)
  5. Sell cryptocurrencies and get back EUR on your bank account
  6. Reports & Taxes
Photo by Executium on Unsplash

1. Get a Binance account & deposit EUR

First of all, you need a (centralized) crypto exchange where you can pay in EUR from your bank account…and from which you can withdraw back to your bank account later. I recommend Binance, one of the biggest, well known exchanges.

1. Sign up here.

2. Complete the registration. Yes, you need to provide your ID and personal information. This is similar as a bank account opening to prevent money laundering, etc.

3. After account verification, in the menu, click on “Wallet”, “Spot” and then “Deposit”.

4. Click on “Deposit Cash” (as opposed to “Deposit Crypto”). By the way, Cash (Euro and other currencies) is called “Fiat” money. So whenever you see that word, we are talking about today’s cash and not cryptocurrencies.

5. Click on the desired deposit type. You will be presented different options. You can certainly go for Credit Card, but I would recommend a bank transfer. That’s usually the cheapest option. In Germany, I recommend “Bank Transfer / SEPA” — which is free. How long the bank transfer takes, depends on your bank and not Binance. With comdirect Bank from Commerzbank, for example, you can send amounts below €2,000 for free and instantly. The money will be shown in Binance within minutes. For amounts bigger than €2,000, it takes 1–2 bank days. In those cases I would just recommend to do X times €2,000 deposits and you will have the bigger amount within Binance instantly too.

6. Do the bank transfer. Make sure that the account number / IBAN number of Binance is correct. And more importantly, add the right Reference Code / “Verwendungszweck” to the transfer. Otherwise Binance cannot find your deposit.

7. In the menu, click on “Wallet” / “Spot” again and you can see the “fiat” money or EUR you paid in. Here you can also “Withdraw” in case you want to get the Euro back to your bank account later.

2. Use your EUR to buy cryptocurrencies on Binance

Once your EUR deposit arrived, you can start buying cryptocurrencies directly on Binance. Binance, however, only supports the rather big cryptocurrencies. For smaller ones, you need to go chapter 4 of this article.

1. In the menu, click on “Trade” / “Convert” or here (If you want to work with Limit Orders or more professional tools, you can choose a more advanced trading tool in the “Trade” menu too).

2. Select your EUR in the “From” field. If you want to change all of them, you can just hit “MAX”.

3. In the “To” field, type in USDT first and convert your EUR to USDT. Afterwards, in a second trade, convert the USDT to the cryptocurrency you want to have (If you are using one of the more advanced trading tools of Binance, more EUR trading pairs will be offered and you might not need the USDT trade).

4. Once the trade is successful, you can click on “Wallet” / “Spot” again to see that your EUR amount decreased and you now own the cryptocurrency selected before.

5. Now you have 2 options: Either you leave the cryptocurrency in your Binance account or your send them to a more secure Wallet.

  • If you leave them in your Binance account, you have this risk: In case of Binance being hacked, you could potentially lose your cryptocurrencies. With currently more than $3,000,000,000 held on Binance, that would be a huge hack though. And Binance invests a lot in security.
  • Nevertheless, sending them to a Wallet is safer (but more complicated). If you want it to be safer, I would recommend you download the TrustWallet App on your Mobile and withdraw your cryptocurrencies to that Wallet App. How you set that up can be read in the next chapter. Make sure that the amount you want to withdraw is bigger than the minimum withdrawal amount. How much this is you can read here (usually $10–20).

3. Set up the TrustWallet on your phone

1. Download the TrustWallet App on your phone.

2. Complete the registration. IMPORTANT: Wallets do not work with your name, your email address or with passwords. All you get is a public address (to receive cryptocurrencies) and a so-called private key (usually shown as a combination of 12, 18 or 24 words). The words you will be presented are your “password” or the key to your cryptocurrencies in the Wallet. Once you lose that, there is no chance to get access to your cryptocurrencies again. Once somebody else finds those words, you might lose your cryptocurrencies. The owner of those words can do whatever he/she wants with the cryptocurrencies in the wallet, anywhere on this planet.

3. Once the Wallet is up and running, in the top right corner of the app you can add the cryptocurrencies you want to show in your wallet list. So if you bought Bitcoin on Binance and want to send it to TrustWallet, search for Bitcoin and enable it. If you bought Ethereum on Binance and want to send it to TrustWallet, search for Ethereum and enable it.

4. Once your cryptocurrencies are shown (with a balance of $0.00) in your wallet, click on one of them. Most importantly, you will see a “Send” and a “Receive” button.

5. For each cryptocurrency line, you can click on “Receive” to see your personal wallet address for this specific cryptocurrency (IMPORTANT: this address really is for this cryptocurrency in particular. So Bitcoin has a different one than Ethereum, etc. Never send other cryptocurrencies to the address you see! You will lose them!). You will also see a “Copy” button. This copies your public address so you can paste it where you need it (IMPORTANT: Never type the address; always use the copy/paste functionality. Otherwise, the chance of typing one character wrong is too high. And if one character would be wrong in a send transaction, your cryptocurrencies will be lost…happens often…).

5a. Give this address to other other people if you want them to send you an amount of this cryptocurrency to your address.

5b. Or use it to transfer your cryptocurrencies away from Binance to your Wallet. To trigger the transfer from Binance to TrustWallet, open Binance and go to Wallet -> Spot -> Withdrawal and then choose Crypto withdrawal (as opposed to Fiat withdrawal). Afterwards, choose the cryptocurrency you want to send/withdraw. You will be presented a form to enter the address where you want to send/withdraw your cryptocurrency to. Here you need to paste in your address of this cryptocurrency from TrustWallet. Plus you will be asked to insert the amount you want to send/withdraw and choose a “Transfer network”. Beginners should always choose the native “Transfer network”, even though the fees are higher. And yes, each transfer usually costs some fees on the blockchain.

4. If desired: Buy smaller cryptocurrencies (example with Tixl’s TXL)

Cryptocurrencies that are not listed on Binance can be traded on either other centralized exchanges or decentralized exchanges. For other centralized exchanges, you have to set up an account with them. Decentralized exchanges work differently: You don’t need an account. You just connect your Wallet; in our example TrustWallet.

In the following example, I show you how to buy the smaller cryptocurrency TXL from Germany’s Tixl gGmbH (smaller cryptocurrencies are called “Altcoins”) on the decentralized exchange PancakeSwap. More information about Tixl you can find here. In summary: The networks for Bitcoin and other major networks are either slow, expensive, energy-inefficient or not flexible. Tixl’s Autobahn Network solves all those problems.

You can research most cryptocurrencies with their price development, valuation and other information on Coingecko. Tixl’s TXL cryptocurrency from this example you can find here. In the chart, you can already see that smaller cryptocurrencies have a much higher volatility. But their upside potential is, of course, also much bigger than the upside of major cryptocurrencies like Bitcoin, etc.

This is how you buy TXL the easiest way:

  1. Go to your Binance account and buy the following 2! cryptocurrencies: BUSD (this is the US-Dollar cryptocurrency of Binance) and BNB. The amount you need of BUSD is the dollar amount you want to invest in TXL. BNB you only need a small amount as this is not for investing but for covering small transaction fees when trading on PancakeSwap. I would recommend you buy BNB worth $50 (One transaction on PancakeSwap costs approx. $0.5-$2.0 transaction fees, paid in BNB. So with $50 you have some BNB to cover some buy/sell transactions. Otherwise increase/decrease that amount.).
  2. Open your TrustWallet App, search for BNB and add BNB Smart Chain (BEP20) to your list. Additionally, search for BUSD and add Binance USD (BEP20) to your list. Once added, copy their addresses and send the cryptocurrencies from Binance to this address (how this works you can read in Chapter 3.5.b). When withdrawing BNB and BUSD in Binance, you need to select the BEP20 network.
  3. Once the BNB and BUSD arrived in TrustWallet, add the TXL cryptocurrency to your list in TrustWallet. IMPORTANT: It needs to be “Tixl Token TXL” with the add-on “BEP20”, not one of the others. If you cannot find it, click on “Add a custom token” and insert the following: Network: Smart Chain, Contract Address: 0x1FFD0b47127fdd4097E54521C9E2c7f0D66AafC5, name: Tixl Token, symbol: TXL and decimals: 18.
  4. On your computer (and not your phone), go to this trade link on PancakeSwap and confirm the pop-up saying “Token Imported”.

In the top right corner of PancakeSwap, you need to click on “Connect”. The following options pop-up:

Here you click on “Wallet Connect” (don’t click TrustWallet!). Afterwards, you open your TrustWallet App on your phone, click on “Settings” and “WalletConnect” to scan the QR-code. Confirm (don’t click on “Cancel” on your phone afterwards, just leave this page open during your trade; you will need it again). You are now conneced and ready to use your major cryptocurrencies for swapping (which equals trading) for smaller cryptocurrencies straight away.

In the upper “From” section, change to “BUSD” (not BNB!) and your TrustWallet amount of the BUSD you bought on Binance should show up as “Balance”. At the bottom, in the “To” section, select “TXL”. Now type the amount of BUSD you want to trade for TXL. If you want to trade all of your BUSD, you can just click on “MAX”.

Once everything is inserted, you can start the swap/trade. During the swap, you might have to confirm 2 times (one “Approve” transaction and one “Swap” transaction). The confirmations are done on your phone in the TrustWallet App. So make sure you have your cell phone open next to you during the whole process.

The result of the swap is: The decentralized exchange takes your BUSD out of your TrustWallet, exchanges them for TXL and puts the TXL in your TrustWallet.

After the trade, you can cancel the connection in your TrustWallet App. Now you are done and you can see that your BUSD and BNB balance decreased (BNB because of the minimal transaction fees that are paid in BNB) and your TXL balanced increased.

5. Sell cryptocurrencies and get back EUR on your bank account

The way back works exactly the same. Just do every step in the opposite direction.

  1. If you bought TXL or a different smaller cryptocurrency: Connect to PancakeSwap and sell TXL for BUSD.
  2. For all major cryptocurrencies which are supported by Binance: In your TrustWallet App, click the cryptocurrency you want to send (e.g. BUSD, BTC, ETH, etc.) and then on “Send”. Now you need to enter your address that specific cryptocurrency from your Binance account (again, this will be a different address for each cryptocurrency). In your Binance account, go to Wallet -> Spot -> Deposit of the cryptocurrency you want to send to Binance. There you will be presented the address which you need to insert in your TrustWallet app. Again, don’t write that address down. Use copy/paste to avoid mistakes and losing cryptocurrencies! IMPORTANT: You cannot send TXL or other smaller cryptocurrencies bought on PancakeSwap directly to Binance. You first need to convert back to BUSD or any other major cryptocurrency that is supported by Binance.
  3. Once arrived on Binance, trade the BUSD (or other major cryptocurrencies) to EUR by clicking on Trade -> Convert.
  4. After the trade to EUR, withdraw the EUR to your bank account.

6. Reports & Taxes

In case you have to pay taxes on cryptocurrency gains (in Germany currently only if you hold them for less than a year), you need a trade documentation for your annual tax reporting. If you don’t trade a lot and only use Binance, Binance offers reports about all your trades. If you also had transfers and trades outside of Binance (e.g. with TrustWallet to buy smaller cryptocurrencies), I recommend writing down the transaction in an Excel Sheet if you only have a few trades. If you change cryptocurrencies more often, I recommend setting up an account here.

You are responsible for making sure you comply with your local tax regulation! Speak to a tax expert in case you need help.

Happy Investing!

I really hope this little guide helps. If you like the content, follow me on LinkedIn or Twitter.