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What is cryptocurrency?
Cryptocurrency is an online-based digital currency that is decentralized. That means it is not backed, controlled, or regulated by a central bank like the Canadian dollar. You cannot physically carry crypto coins in your wallet, or keep them in a bank account. They are created, used, and stored online. You can use cryptocurrency as a form of payment, a store of value, or as an investment.
How does cryptocurrency work?
Cryptocurrencies run a public ledger called the blockchain. The blockchain is spread across millions of computers around the world, and everyone can access it. It records and stores every crytpocurrency transaction ever made. Cryptocurrency transactions cannot be reversed, like traditional transactions through a bank, and you cannot alter the information stored on the blockchain either. You can use cryptocurrnecy in much the same way you use traditional money to buy goods or pay for services. You can also use cryptocurrency as an investment if you believe the value of a coin will increase in the future, or as a store of value if your believe your tradtional money may lose value in the future.
Why should I buy cryptocurrency?
Cryptocurrencies are an exciting new technology revolutionizing how we think about money. Here are a few reasons you might want to buy some cryptocurrency for yourself: 1) Bitcoin was the best performing assest class in the last 10 years. 2) Cryptocurrency adoption is speeding up. 3) Cryptocurrency can help protect the value of your money against inflation. 4) Cryptocurrency gives you more control over your money. 5) Cryptocurrencies could help you generate wealth over the long term. 6) Cryptocurrency could end up being a mainstream form of payment.
How do I buy cryptocurrency?
You can buy cryptocurrency in Canada using a crypto exchange platform. Use our cryptocurrency comparison tool to find the right exchange for your needs. Then simply open an account, fund it, and make a purchase. It's that easy!
How much cryptocurrency should I buy?
How much cryptocurrency you should buy depends on your goals, risk tolerance, and level of interest in the crypto market. Never spend more money on cryptocurrency than you are willing to lose. The cryptocurrency market is very risky. There is the potential for significant gains, but there is also the risk you could lose it all. If you are new to cryptocurrency, most financial professionals advise investing 1-4% of your portfolio depending on your experience and comfort level in the market. However, this is just a general rule of thumb. Only you can decide how much cryptocurrency is right for you.
Should I choose a custodial or non custodial exchange?
You should choose the type of exchange that fits your needs and goals. A custodial exchange will store your cryptocurrency for you. That means they hold the keys to your crypto which gives them control. Letting a custodial exchange hold onto your cryptocurrency is easier and less stressful than storing it yourself, but it requires you to trust them. There are many reputable custodial exchanges that transfer your cryptocurrnecy to an institutional cold wallet and insure against theft, fraud, hacks, and other perils. A non-custodial exchange does not store your cryptocurrency. You hold the keys to your crypto, and the keys prove that the cryptocurrency is yours. However, that means you are solely responsible for protecting your crypto and storing it in a private wallet. That requires quite a bit more tech savvy and diligence, and you are not protected against theft, fraud, or hacks.
Do I need to pay taxes on my cryptocurrency?
Yes, you need to pay taxes on your crypto. Cryptocurrency is considered an investment asset just like stocks, bonds, and mutual funds. Therefore, any gains you make on your crypto activity is subject to capital gains tax. There are also tax implications anytime you exchange one crypto coin for another, use it to buy goods or services, use it to generate passive income like staking, or sell it back into Canadian dollars. If you actively trade your crypto, like a day trader, there could be other tax implications too. It is your responsability to keep track of your crypto activity and report it to the Canada Revenue Agency (CRA).
Is my cryptocurrency insured?
The Canadian Deposit Insurance Corporation (CDIC) does not protect your cryptocurrency in the event the crypto market fails. You cannot insure your crypto through your homeowner or tenant's insurance policy either. Some custodial cryptocurrency exchanges insure your cryptocurrency from theft, fraud, hacks and other perils while it is in their custody. However, you may be able to obtain a private insurance policy for your cryptocurrency. Private insurance policies for digital assets and crypto wallets are a new emerging market and growing in popularity.
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