THUNDER BAY — TECH – Many people have heard of bitcoin, or crypto-currency, but few really understand how this investment portfolio works, or if it is something they should look into.

Many Canadians have made money in crypto. Others have lost a lot. Here’s a basic guide to how people profit, what the real risks are, and whether this strategy fits your plan.

What is Crypto-Currency?

Cryptocurrency is a form of digital money that exists only online. It isn’t issued by a central bank like the Bank of Canada. Instead, it runs on computer networks around the world. Well-known examples include Bitcoin and Ethereum. The core idea is to move value directly between people over the internet without a bank in the middle.

It works through a public record called a blockchain. When you send crypto, you create a transaction from your “address” to someone else’s and approve it with a secret private key (like a very strong password). Computers on the network check that the sender really owns the coins and hasn’t spent them before. Verified transactions are bundled into “blocks” and linked together, making a permanent, time-stamped chain that’s very hard to change. Different coins secure this process in different ways—proof-of-work uses energy-intensive mining, while proof-of-stake relies on holders who lock up coins to validate blocks.

To use crypto, people keep coins in wallets (apps or hardware devices) and can buy or sell through online exchanges. Payments move 24/7 and can be fast and low-cost, especially across borders, but they’re usually irreversible, and you can lose access if you lose your private key. Prices can rise or fall sharply, and scams are common, so security and caution matter. In short, cryptocurrency is internet-native money secured by math and shared records, not by a single company or government.

Is crypto a good investment strategy?

It depends on your goals, time horizon, and risk tolerance. Canadian regulators say crypto is high-risk and not suitable for everyone. If you invest, most planners suggest keeping it as a small, speculative slice of a diversified portfolio—not the core.

How people make money in crypto

• Buy and hold (“HODL”): Purchase Bitcoin or other coins and hold for years, aiming to sell higher later.

• Dollar-cost averaging: Invest smaller amounts on a schedule to smooth out price swings.

• Staking & yields: Lock certain coins on a network/platform for rewards. Returns aren’t guaranteed and can change quickly.

• Active trading: Try to buy low/sell high over days or weeks. High risk—most retail traders underperform after fees and taxes.

• Airdrops/loyalty rewards: Some projects reward early users with free tokens; value is uncertain.

• Indirect exposure: Buy crypto ETFs (e.g., Bitcoin or Ether ETFs) through a regular brokerage; in Canada these can be held in TFSA/RRSP, unlike holding coins directly.

The potential upsides

• High growth potential: Prices can move fast in bull markets.

• 24/7 markets & global access: You can trade any time.

• New tech exposure: Some investors want a small slice of emerging payment and computing networks.

• Convenience via ETFs: Easier to buy/sell and keep in registered accounts; you avoid self-custody but pay fund fees.

The real risks (no sugar-coating)

• Extreme volatility: Prices can rise or crash in hours. Canada’s central bank notes crypto’s high price swings and fewer safeguards than traditional finance, exposing investors to large and sudden losses—including stablecoin risks. Bank of Canada

• Platform risk & custody: If a trading platform fails or is hacked, you could lose access to assets. Regulators warn to use registered platforms only and to understand how your assets are held.

• Fraud and scams: Pump-and-dump schemes, fake “advisers,” and phishing are common. High guaranteed returns are a red flag.

• Liquidity gaps & trading halts: Some tokens are thinly traded; withdrawals can be delayed.

• Leverage danger: Borrowed trading can wipe you out on small moves.

• Regulatory uncertainty: Rules keep evolving; projects or platforms can be restricted or banned.

How Canadians can do this more safely (a quick checklist)

1. Use a registered platform (or a Canadian-listed crypto ETF through your broker). Check a firm’s status via the CSA’s National Registration Search or the list of platforms authorized to do business with Canadians.

2. Turn on 2-factor authentication; beware of SMS codes—apps or hardware keys are safer. (General cyber hygiene.)

3. Decide on custody:

   • Keep it on a registered platform for simplicity; or

   • Self-custody with a hardware wallet if you’re ready to manage your own keys (and the risk of losing them).

4. Start small; avoid leverage.

5. Track fees (spreads, funding, withdrawal, ETF MERs).

6. Plan your taxes: In Canada, selling or swapping crypto is a disposition and may be taxed as capital gains or business income depending on your activity; staking/mining can be taxable income when received. Keep detailed records.

7. Use registered accounts if you want ETF exposure: Crypto ETFs can be held in TFSA/RRSP; direct coins generally can’t.

Tax basics in plain language (Canada)

• When you sell, swap, or use crypto to buy something, you’ve likely made a taxable disposition.

• Profits can be capital gains (you include 50% in income) or business income (you include 100%)—it depends on your intent and activity.

• Mining/staking rewards may be income when received; later sales can trigger capital gains/losses.

• Keep records of every transaction and how you calculated fair market value. Canada.ca

Bottom line

Crypto can create wealth—but it can erase it just as fast. If you invest, treat it as speculative, use registered platforms or Canadian ETFs, protect your accounts, and plan for taxes. If you don’t understand it, don’t buy it. That’s the old-school rule that still protects wallets today.

This article is information for readers, not investment advice.