How to Buy Cryptocurrency
On Mar 11, 2022
Table of Contents
If you’re new to the crypto world, determining how to buy cryptocurrencies like Bitcoin, Dogecoin, Ethereum, etc might be difficult at first. Fortunately, learning the ropes is rather straightforward. You may begin investing in cryptocurrencies by doing the five simple steps outlined below.
1. Select a Broker or a Crypto Exchange
To purchase bitcoin, you must first select a broker or a cryptocurrency exchange. While both allow you to buy cryptocurrency, there are several major distinctions to be aware of.
What is a Cryptocurrency Exchange?
A cryptocurrency exchange is a marketplace where buyers and sellers may trade cryptocurrencies. Exchanges frequently offer minimal costs, but they can have more complicated interfaces with many trading kinds and advanced performance charts, which can be frightening for beginning crypto investors.
Coinbase, Gemini, Binance, and eToro are some of the most well-known cryptocurrency exchanges. While the conventional trading interfaces of these organizations may be intimidating to newbies, particularly those with no prior experience trading stocks, they also provide user-friendly easy purchasing choices.
However, the convenience comes at a cost, since the beginner-friendly alternatives are significantly more expensive than purchasing the same cryptocurrency using each platform’s conventional trading interface. To save money, you may strive to learn enough to use regular trading platforms before – or soon after – making your first crypto buy.
An important note: if you’re new to cryptocurrency, ensure your exchange or brokerage of choice accepts fiat money transfers and purchases done in sterling. Some exchanges only allow you to buy cryptocurrency using another cryptocurrency, which means you’d have to locate another exchange to acquire the tokens your chosen exchange allows before you could start trading cryptocurrency on that platform.
What Is a Cryptocurrency Broker?
Cryptocurrency brokers simplify the process of obtaining cryptocurrency by providing simple interfaces that communicate with exchanges on your behalf. Some charge more than exchanges. Others claim to be “free,” while generating money by selling information on what you and other traders are buying and selling to huge brokerages or funds, or by failing to execute your deal at the best available market price.
While brokers are certainly handy, you should exercise caution when using them since you may encounter restrictions when transferring your bitcoin assets off the platform. Some, for example, do not allow you to move your crypto assets out of your account.
Although this may not appear to be a big concern, sophisticated crypto investors prefer to keep their money in crypto wallets for further protection. For further protection, some people opt for hardware crypto wallets that are not linked to the internet.
2. Register for and Verify Your Account
After you’ve decided on a cryptocurrency broker or exchange, you may sign up for an account. Depending on the platform and the amount you want to purchase, you may be required to prove your identity. This is a necessary step in preventing fraud and meeting regulatory standards.
You may be unable to purchase or trade cryptocurrencies until the verification procedure is completed. The platform may need a copy of your driver’s license or passport, as well as a selfie to confirm your look matches the documentation you provide.
3. Make a cash deposit to invest.
To purchase cryptocurrency, you must first ensure that you have funds in your account. You may fund your crypto account by connecting your bank account or making a payment with a debit or credit card (with the credit card option, be aware of hefty fees from your card issuer – see below).
You may have to wait a few days before you can utilize the money you deposit to acquire cryptocurrencies, depending on the exchange or broker and your funding method.
One word of caution: while some exchanges or brokers enable you to deposit money using a credit card, doing so is exceedingly dangerous – and costly. Credit card issuers see bitcoin transactions as cash advances when made using credit cards. This implies they will have higher interest rates than conventional purchases, as well as additional cash advance expenses.
When you make a cash advance, for example, you may be required to pay 5% of the transaction amount. This is in addition to whatever costs that your crypto exchange or brokerage may levy, which can range from 1% to 5%, implying that you may lose 10% of your cryptocurrency buy to fees.
4. Make a Cryptocurrency Purchase
You’re ready to place your first bitcoin order once you’ve deposited funds into your account. There are hundreds of cryptocurrencies to select from, including well-known names like Bitcoin and Ethereum as well as more esoteric coins like Theta Fuel and Holo.
When you’ve decided which cryptocurrency to buy, enter its ticker symbol — Bitcoin, for example, is BTC – and the number of coins you want to buy. Most exchanges and brokers enable you to acquire fractional shares of cryptocurrency, allowing you to purchase a sliver of high-priced tokens such as Bitcoin or Ethereum that would otherwise cost thousands of pounds to hold.
5. Choose a Storage Method
Cryptocurrency exchanges are not protected by safeguards such as the UK’s Financial Services Compensation Scheme, and thus are vulnerable to theft or hacking. You might even lose your money if you forget or lose your account access codes. That is why it is critical to have a safe storage location for your cryptocurrency.
As previously stated, if you purchase bitcoin through a broker, you may have little to no control over how your cryptocurrency is held. You have additional possibilities if you buy bitcoin through an exchange:
Keep the cryptocurrency on the exchange.
When you purchase bitcoin, it is often held in a crypto wallet linked to the exchange. If you don’t like the provider with whom your exchange partners, or if you want to relocate it to a more safe place, you may move it away from the exchange and into a separate hot or cold wallet. You may have to pay a modest charge to do this, depending on the exchange and the quantity of your transfer.
These are cryptocurrency wallets that are kept online and run on internet-connected devices like tablets, desktops, or phones. Hot wallets are handy, but they are more vulnerable to theft since they are still linked to the internet.
Because cold crypto wallets are not linked to the internet, they are the most secure way to store bitcoin. They are external devices, such as a USB drive or a hard disc. However, you must exercise caution while using cold wallets: if you lose the key code connected with them, or if the device breaks or malfunctions, you may never be able to recover your Bitcoin. While this might happen with certain hot wallets, some are administered by custodians who can assist you in regaining access to your account if you are locked out.
Since October 2020, Square (SQ), a payment services provider for small businesses, has acquired Bitcoin worth millions of dollars. In February 2021, the company revealed that Bitcoin accounted for around 5% of the cash on its balance sheet. Furthermore, Square’s Cash App allows users to purchase, sell, and store cryptocurrencies.
Before investing in cryptocurrencies or specific firms with a large interest in it, like with any investment, assess your investment goals and present financial circumstances. Cryptocurrency may be incredibly volatile – the price of a single tweet might cause it to fall – and it remains a highly speculative investment. This indicates you should invest with prudence and attention.