It’s practically impossible to start a conversation nowadays without ultimately shifting the subject to cryptocurrency. And this even if you know little about investing or finance. How to Buy Crypto is a heated debate these days.
Bitcoin, the pioneer crypto, has been around for over a decade, and it doesn’t seem to be going anywhere anytime soon. Despite their reputation for being extremely volatile, cryptocurrencies continue to attract investors globally because of their substantial potential returns. The best bit is that you don’t need millions of dollars lying around to start.
If you are finally ready to take the plunge into the world of crypto but don’t know where to begin or what terms like HODL mean, you’re not alone. After all, who doesn’t want to go from rags to riches overnight? Fortunately, learning the ropes isn’t tricky.
In this article, we lay out everything you need to know about how to buy crypto so you can catch up to speed and start reaping the rewards!
What is Crypto Currency and Blockchain?
In a nutshell, cryptocurrency is a digital asset, specifically, a form of virtual currency. While you can transfer fiat money digitally, the technology crypto relies on is what sets it apart. Traditional or fiat money, like the U.S dollar or Euro, have value only because of the governments that issue it. Their worth is impacted as economic, political, and environmental issues arise.
On the other hand, cryptocurrency relies on supply, demand, and utility to determine its value. Using blockchain technology, individuals and organizations can buy, sell or store cryptocurrencies, so financial institutions such as banks do not have to act as a mediator or middle man. But what exactly is a blockchain, and how does it work?
The Link Between Crypto and Blockchain
Every cryptocurrency transaction is recorded in a public ledger, known as a blockchain. This digital database is decentralized, which implies it is not owned or controlled by any organization or individual. Instead of storing the data in one location, it is dispersed across a shared network so that it can be accessed by anyone, anywhere in the world.
The blockchain updates the transaction every time users transfer digital cash or crypto. Each “block” holds information on the transaction, linking together with the previous one to create a chain. Using this method, no data input or previous transactions can be altered, manipulated, or erased.
As a result, cryptocurrency users can confidently conduct secure transactions thanks to blockchain. Today, thousands of cryptocurrencies exist. Bitcoin was the first of its kind, setting a precedent for creating alternative coins.
Before Buying Crypto
Regardless of the value of the cryptocurrency you want to buy, you don’t require a large sum of capital to get started. Nonetheless, users need to be realistic about their expectations on the return of this investment. Therefore, before delving into how to buy crypto, it’s important to:
- Open a cryptocurrency trading account with a reputable and trustworthy exchange or broker.
- Gather government identification (such as your driver’s license) and other required documents to verify yourself on these platforms to perform transactions.
- Select a crypto wallet to store your currency safely.
- Since these transactions are all carried out online, having a fast and dependable internet connection is essential.
For starters, we’ve covered everything you need to know about how cryptocurrency works. However, you will also need to understand that despite having a fixed supply, cryptocurrencies, especially Bitcoin, have always fluctuated in price throughout their lifetimes.
That said, instead of impulsive buys or FOMO (the fear of missing out), cryptocurrency should only be considered by those individuals willing to face a reasonable degree of risk. Despite this, your return on investment should be profitable in the long run as businesses continue to develop and adapt digital assets.
How to Buy Crypto in 5 Steps
So, you’ve decided you want to get into cryptocurrencies, but you’re unsure where to begin or how to buy crypto. Please don’t fret, as most beginners find themselves in this situation. As a result of the tremendous growth within the digital assets market, it has become increasingly challenging to navigate the crypto universe, let alone find an ideal starting point.
Although it may appear confusing, we’ve simplified the process into five simple steps so you can buy your first slice of crypto without getting overwhelmed.
Step 1: Select a Crypto Exchange or Broker
When buying crypto, the first step is deciding which platform you wish to use. The two most frequently used providers are crypto exchanges and crypto brokers.
A crypto exchange is an online meeting place for buyers and sellers. Trading on an exchange is usually less expensive than other interfaces since this software makes money through transaction fees or commissions.
However, the complex features and performance data can make things a little complicated. Moreover, crypto exchanges can be intimidating if you have no prior experience trading. Still, they also tend to offer alternative buying modes that are more user-friendly.
It’s important to note that these beginner-friendly variations could cost you far more than conventional trading. So, if you want to save money, it’s better to learn how to trade before making your purchase.
Some recommended crypto exchanges include:
On the contrary, brokers simplify buying crypto by interacting with exchanges on your behalf. Depending on the firm you select, the fees can vary from higher than those charged by the exchange to absolutely free. While convenient, you should exercise caution when moving crypto off their platform.
Some brokers have restrictions on transferring crypto off their platforms. For this reason, advanced crypto traders store their currencies in digital or offline hardware wallets for extra security. Robinhood and SoFi are two of the most widely known digital currency brokers.
How to Select the Best Platform for You?
To choose the most suitable exchange or broker for your needs, you’ll have to research and evaluate. It is highly likely that all the platforms listed above support Bitcoin as it is the most widely used crypto.
To expand your digital portfolio, look into the altcoins they provide. Investigate what safeguards, insurance, or protection mechanisms they have to protect their customer’s investment.
Step 2: Activating and Verifying your Account
Once you have decided on a crypto exchange or broker, it’s time to sign up and open your account. Every platform has its own verification process depending on the amount of currency you want to buy. This helps ensure they are compliant with federal regulations and can prevent fraudulent activity.
To complete authentication, follow the platform’s prompts. For example, you may be requested to share an official photo ID like your passport or driver’s license as proof of your identity. Moreover, you may be asked to post a selfie to check that you match up with your documents.
Step 3: Add Funds to your Account
If you’re wondering how to buy crypto for free, the answer is you can’t. You’ll have to use real money to fund your account to purchase cryptocurrency. The most common method of depositing funds is connecting your bank account, which makes withdrawals fuss-free. But, verifying your bank details can be time-consuming.
If banking isn’t your cup of team, you can wire transfer or use your credit or debit card to add money to your account. Many major credit card providers count virtual currency (VC), such as cryptocurrency, as a cash advance rather than a purchase.
For example, if your bank’s fee on cash advances is 5% and your exchange charges an additional 10%, you may lose 15% of your crypto to fees. Therefore, check with your bank for any additional fees or interest.
Step 4: Buy Your Crypto
Next, it’s finally time to buy your first cryptocurrency. There are a plethora of cryptos to choose from. Well-known names include Bitcoin, Ethereum, and Ripple, to name a few. Examples of popular alternative coins (also known as altcoins) are Solana, Tron, and PolkaDot.
When you have decided which crypto you want to buy, you can input its symbol letters – BTC for Bitcoin, ETH for Ethereum, and so on, and the number of coins you want. Most brokers and exchanges let users buy fractional shares of cryptocurrencies, so you don’t end up splurging a fortune.
After placing your order, the platform searches for updated market prices before executing the order. Any fees will be automatically charged at the time of purchase. But remember that withdrawing your crypto as Fiat currency could later cost you an arm and a leg.
Step 5: Securely Storing Your Assets
The process doesn’t end at solving how to buy crypto. Now that you’ve set up an exchange or broker account, there is a slew of buying, exchanging, and storing options at your disposal. If you plan to experiment with frequent trading, it’s all right to retain your crypto on your account.
On the other hand, unlike banks, crypto platforms are not protected by any form of insurance, increasing the likelihood of hacking or theft. Millions of dollars worth of bitcoin have already been lost due to forgotten passwords or account codes. If you buy crypto via a broker, you may have no choice in how to store your currency.
But if you are trading on an exchange, you can choose between hot or cold wallets. A hot wallet refers to crypto wallets that save data online and can be used on various devices, including smartphones, tablets, and laptops.
Coins in a cold wallet can’t be accessed over the internet, making them considerably more secure than the former. Cold wallets are external storage devices, such as USBs and hard drives. But, even with hot wallets comes the risk of losing access if the device breaks or falls.
Alternative Ways to Buy Cryptocurrency
Rather than buying through a broker or exchange, you can invest in stocks of those firms that use or own crypto and blockchains. For example, public companies like Nvidia, PayPal, and Square are connected to cryptocurrency services. But, if you want to invest in publicly traded businesses, you’ll need a particular brokerage account which can be time-consuming.
As a new form of decentralized digital currency, crypto is both fascinating and thrilling. As an investment, cryptocurrencies can be intriguing because of their strong returns, regardless of their losses. It may seem difficult to understand how to buy crypto, but it only requires a few simple steps to get started.
But, it’s important to consider your present situation and long-term financial goals before buying crypto or stocks. Most experts recommend transferring your funds to a cold wallet for safekeeping as soon as you have accumulated a significant amount of crypto. Alternatively, they also advocate for the buy and HODL (hold on for dear life) strategy to ride out market crashes and hefty taxes on your profits.