How to Invest In Cryptocurrency in Canada

The Crypto Craze- How To Invest In Cryptocurrency In Canada

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Last Updated on February 2, 2021 by Yetty Akindele

There is a global craze going on in the crypto world in recent times especially considering that Bitcoin has at some point soared past $33,000. This has led to more interest with many trying to understand how to invest in crypto.

Since Bitcoin’s first use for pizza purchase in 2010, cryptocurrencies have come a long way. After Bitcoin passed the $20,000 mark in 2019, even institutional investors could not ignore the new phenomenon.

Now that cryptocurrencies have gathered relevance in the economy, they are slowly going mainstream. Investors of all kinds are adding them to their portfolios.

Every day more average investors enter the crypto economy. Many enter knowing what they are buying into. But others invest in crypto simply due to the fear of missing out.

Ever since my contact with the Netcoins team, I have gone on a crypto learning journey. It’s important to understand financial instruments before you spend any money on them.

So, we will go over what cryptocurrencies are, their short and exciting history, and how you can invest in Canada.

The History Of Cryptocurrencies

The first time a cryptocurrency (Bitcoin) was used for a real transaction was in 2010. However, the idea of cryptocurrencies goes back decades before that.

Attempts to create a cryptocurrency go back to the 90s. There have been previous attempts to create online currencies with encryption-secured ledgers. 

Prior to the existence of Bitcoin, the best attempts at creating something close were Hashcash, B-money, and web-based money.

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Bitcoin’s Inception

In 2008, a new whitepaper was published that would soon change the cryptocurrency world. The paper was titled “Bitcoin – A Peer to Peer Electronic Cash System”.

This paper was posted online Dr. Satoshi Nakamoto. The writer’s real identity remains a mystery to this day.

In 2009, Bitcoin software was made available to the public. Mining (the process by which cryptos are produced) began at the same time. However, Bitcoin still didn’t have a price in USD and was not being used in transactions.

Everything changed in 2010 when the first Bitcoin transaction was made. Someone decided to use 10,000 Bitcoins to buy two pizzas. Oh my! I find it hilarious each time I think of that, considering that now, that much Bitcoin would be enough for you to buy several mansions.

Bitcoin grew in popularity shortly after the first purchase. By 2011, the competition had already arrived.

Altcoins

In 2011, the first alternative cryptocurrencies to Bitcoin emerged. The term “altcoin” is a blanket term covering every coin apart from Bitcoin.

The first altcoins were Namecoin and Litecoin. Since then, there have been over a thousand more. New coins are still coming out all the time.

Altcoins attempt to create a value proposition that Bitcoin doesn’t possess. Take the example of Monero, a coin that’s on a mission to create absolute privacy. It’s still a popular cryptocurrency due to the privacy it offers.

ICO Mania

Ethereum, one of the oldest cryptocurrencies, created a platform where new coins could be launched. This led to the emergence of ICOs (initial coin offerings), crypto’s answer to IPOs.

ICOs (Initial Coin Offerings) are essentially fundraising platforms that allow investors to get involved in Startup ventures. They are the cryptocurrency world’s stocks and shares.

When a project has enough support to kick-off, the development team can decide to launch an ICO. Once the ICO has raised enough money and provided enough value, it can get itself listed on exchanges.

This following ICO mania took place during the years that the crypto world was mired in scandal. Many ICOs were revealed to have been extremely short-sighted or fraudulent. Early investors and large shareholders took advantage of many projects by conspiring to create pump-and-dump schemes.

These shortcomings in the crypto world and more led the US SEC to warn investors of the lack of regulation and prevalence of scams in crypto. Some governments have banned their use.

Mainstream Crypto

In January 2018, the cryptocurrency market cap exploded and passed the $600 Billion mark. Bitcoin reached a price of $20,000, and most altcoins peaked to record prices as well. The subsequent crash left many confused. Similarly, we have seen this cycle repeat itself now with Bitcoin reaching new highs.

Blockchain crypto Startup’s are now applying blockchain technology to different industries. Ridesharing, agriculture, eCommerce, and gaming are just a few examples. Going forward, it will be interesting to see where the cryptocurrency space goes.

Should I Invest In Crypto?

Cryptocurrencies can be an interesting investment. A word of caution thou, you need to understand that they are more volatile than other financial instruments.

The crypto markets have been slowly regulated in some jurisdictions, but they still represent the wild west of the financial markets. So, as is with any high risk investment, you can’t reasonably expect guarantees.

There are a few guidelines that are worth following if you want to start investing in cryptos.

First, as with any other investment, don’t invest more than you can afford to lose. It’s unlikely that you’ll lose too much of your crypto investments. However, the crypto market has demonstrated extreme fluctuations, so you must be patient and stress-tolerant with your investments.

There is certainly a lot of money to be made through cryptocurrency investments. Take early Bitcoin investors who multiplied their initial investment many times over. But you can’t forget to stick to only the most reputable cryptos.

It may be tempting to invest in an ICO trying to recreate Bitcoin’s success. You should note that  most ICOs don’t make it that far. So, it’s best to stick with the mainstream coins that have proven themselves or with coins that are well-vouched for and run by trusted names in the cryptocurrency space.

Next, remember to take it slow. Day trading with crypto is a very dangerous game. Long-term investments are far more likely to produce the results you’re looking for.

If you can stay disciplined and are interested in diversifying your portfolio with this new financial instrument, you can reasonably allocate a portion of your portfolio towards cryptocurrencies. I would like to think it is wise to invest just about 1 – 2% of your portfolio in crypto.

How To Invest In Crypto In Canada

Cryptocurrency is a global phenomenon. It’s no more difficult to invest in cryptocurrency in Canada than it is anywhere else in the world.

Buying Bitcoin is easier than buying any other cryptocurrency. In fact, many other cryptocurrencies can only be purchased easily with Bitcoin.

However, depending on the platform you’re using, you can buy other cryptocurrencies, often by converting your CAD into USD, to purchase the coin for its cash price. Using trusted Canadian platforms, you can simply buy at the current CAD price with a small margin.

Speaking of platforms, here are some of the most popular and trusted ones for Canadians to buy and sell cryptocurrencies.

The Best Canadian Crypto Trading Platforms

Netcoins

Netcoins is a Canadian platform for trading some of the most common cryptocurrencies. The site offers Bitcoin, Ethereum, Tether, Bitcoin Cash, Litecoin, Ripple, and QCAD.

The platform boasts 0% funding fees and free cash withdrawals. You can easily fund a Netcoins account through crypto transfer, wire transfer, online bill payment, or Canada’s very own Interac e-Transfer.

If you are looking for a hassle-free, easy-to-use, safe, no deposit and withdrawal fees platform to invest in crypto in Canada, Netcoins is probably your best bet.

Verification on Netcoins is usually immediate and their service is also fast so you can make your trades when you need to at any time. You also get a $50 bonus for every friend you refer who trades $100 or more. Your friend gets a $10.

Netcoins charges a minimal amount of 0.5% trading fee

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CoinSmart

CoinSmart is a Toronto-based exchange that trades the most popular cryptocurrencies. The platform was created in 2018 as a solution to the challenges Canadians had getting verified on other exchanges.

CoinSmart is centred around user-friendliness. It offers a great customer experience while maintaining strong security. But the platform also offers tools for more advanced crypto traders.

CoinSmarts’ friendly referral bonus is $15 each for both you and the person you refer.

Bitbuy

Some regard Bitbuy as the best overall Canadian crypto exchange. The platform charges a low funding fee of 0.5% and a trading fee of 0.1%. 

Bitbuy offers a lot of professionalism and enhanced security for the fees they charge. The company’s mission is to provide consistently dependable and convenient access to the crypto markets.

Wealthsimple Crypto

Wealthsimple is one of Canada’s most popular online brokerage platforms offering a diverse range of services. With Wealthsimple Trade, you can carry out Self-directed investment in stocks and ETFs. The Wealthsimple Trade platform also has a Crypto trading platform.

Like Netcoins, Wealthsimple trade offers no withdrawal and deposit fees. There is also no minimum deposits with Wealthsimple crypto. However, a 1.5% operations fee per transaction applies.

To open a Wealthsimple crypto trading account, you need to sign up on Wealthsimple and then log in to the Trade platform. All Wealthsimple applications can be accessed using one login details.

Currently, you can only trade Bitcoin and Ethereum on Wealthsimple Crypto.

MogoCrypto

Mogo is a popular financial services platform in Canada offering a varying number of services. These include free updated credit score checks, free ID fraud protection, personalized loan offers, crypto trading, and a few other services.

With MogoCrypto, you get $5 upon account activation to kick-off your crypto trading. The platform also offers access to Bitcoin cashback and rewards.

MogoCrypto offers free sign ups, no funding and withdrawal fees and a 1% trading fee. To enjoy all of Mogo’s services, you only need to sign up once. Then, activate any service you would like from within your Mogo dashboard.

Crypto Trading Platform With Interest Yield

Blockfi

If you’re looking for cryptocurrencies alongside a broader wealth management plan, Blockfi offers both. The platform allows you to borrow against your cryptocurrencies instead of holding them.

You can earn monthly interest on your crypto investments. Currently up to 8.6% APY. Best of all, there are no minimum deposit or monthly fee requirements for this service. Additionally, you could get up to $250 when you open an account and deposit.

Blockfi offers BTC, ETH, LTC, USDC, and GUSD to investors.

How Much Does It Cost To Invest In Crypto?

Your cryptocurrency investment cost will depend on the platform you use. Normally, you will need to consider the platform’s:

  • Deposit and withdrawal fees
  • Funding fees
  • Trading fees
  • Any other fees they charge

Here’s a quick overview of the fees charged by the platforms we have gone over.

Netcoins

Trading Fee: 0.5%

Funding Fee: ZERO

Withdrawal Fees: ZERO

CoinSmart

Trading Fee: 0.2% for single trade, 0.4% for double trade

Funding Fee: 0%-6% depending on funding method (apart from credit cards, maximum is 1.5%)

Withdrawal Fees: Crypto

Bitbuy

Trading Fee: 0.1% to 0.2%; CAD to any crypto (buy or sell) is 0.5%

Funding Fee: 0.5% to 1.5% 

Withdrawal Fees: 1.5% for CAD; 0 for all cryptocurrencies 

Wealthsimple Crypto

Trading Fee: 1.5% operations fee

Funding Fee: Zero

Withdrawal Fee: Zero

MogoCrypto

Trading Fee: 1% CAD value of amount being bought or sold

Funding Fee: Zero

Withdrawal Fee: Zero

Blockfi

Blockfi’s borrowing rates start at a 4.5% APR. The collateral requirement starts at 1.56 BTC.

Cryptocurrency Taxation In Canada

A common question by those who are looking to invest in crypto in Canada is taxation. Cryptocurrency can be taxed in Canada either through income tax or capital gains tax. In general, the CRA views cryptocurrencies as a commodity regulated under the Income Tax Act.

This means that income from transactions involving cryptocurrencies is usually treated in one of two ways. Either as business income or as capital gains. The circumstances under which the transaction was made will determine how the income is viewed by the CRA.

On the flip side, dollar losses incurred from cryptocurrency transactions are treated as business losses or capital losses. If your cryptocurrency transactions result in income, you must declare it.

Unfortunately, the CRA is vague when it comes to determining taxation when cryptocurrencies are used to pay for goods or services (including for other cryptocurrencies). These exchanges are considered “barter transactions” for income tax purposes.

The Government of Canada states that you must use a “reasonable method” to determine the value of a cryptocurrency transaction when a direct CAD value cannot be determined. You should keep records of how you make any such determination.

If you simply buy cryptocurrencies and hold them until the time come to sell, you don’t need to worry about any of this. As an individual investing in a commodity, you will simply have to pay capital gains taxes on any profits you make. If you sell at a loss, you can claim deductions just as you would with other investments.

Conclusions

There is a reasonable assumption that investing in cryptocurrencies could pay off big time. However, you should remeber that cryptocurrencies are more volatile than other investments and require more constraint.

If you want to diversify your portfolio with the world’s youngest financial instrument, you can start today. Canadian crypto trading platforms make it easy to get started with your own investments. We hope that this guide has helped your understanding of how to invest in crypto in Canada.

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