How to buy Cryptocurrency
If you’re new to the crypto world, determining how to buy Bitcoin, Dogecoin, Ethereum, and other cryptocurrencies can be difficult at first. Fortunately, learning the ropes is fairly simple. Follow these five simple steps to begin investing in cryptocurrency.
Step 1: Select a Broker or a Crypto Exchange
You must first select a broker or cryptocurrency exchange to purchase cryptocurrency. While both allow you to buy cryptocurrency, there are key differences to keep in mind.
What Is a Cryptocurrency Exchange?
A cryptocurrency exchange is a marketplace where buyers and sellers can exchange cryptocurrencies. Exchanges frequently have low fees, but they also have more complicated interfaces with multiple trade types and advanced performance charts, which can be intimidating to new crypto investors.
Here’s a list of some popular cryptocurrency exchanges worldwide;
- Robinhood Crypto
While the standard trading interfaces of these companies may be intimidating to beginners, particularly those with no prior experience trading stocks, they also provide user-friendly, easy purchase options.
The convenience comes at a cost, as the beginner-friendly options are significantly more expensive than purchasing the same cryptocurrency through each platform’s standard trading interface. To save money, you could aim to learn enough to use standard trading platforms before—or shortly after—purchasing your first cryptocurrency.
Important: If you’re new to cryptocurrency, make sure your exchange or brokerage supports fiat currency transfers and purchases in U.S. dollars. Some exchanges only allow you to buy cryptocurrency with another cryptocurrency, so you’d have to go to another exchange to buy the tokens your preferred exchange accepts before you start trading cryptocurrency on that platform.
Step 2. Register for and Verify Your Account
You can open an account with a cryptocurrency broker or exchange once you decide. Depending on the platform and the amount you intend to purchase, you may be required to verify your identity. This is a necessary step in preventing fraud and complying with federal regulatory requirements.
You may be unable to buy or sell cryptocurrency until the verification process is completed. In addition, the platform may request a copy of your driver’s license or passport and a selfie to prove your appearance matches the documents you submit.
Step 3: Make a cash deposit to invest
To buy cryptocurrency, you must first ensure that you have funds in your account. Then, you can fund your crypto account by linking your bank account, authorizing a wire transfer, or even paying with a debit or credit card. Depending on the exchange or broker and your funding method, you may have to wait a few days before you can use the money you deposit to buy cryptocurrency.
One word of caution: While some exchanges or brokers allow you to deposit money using a credit card, doing so is extremely risky—and costly. Credit card companies treat cryptocurrency purchases as cash advances when made with credit cards.
This means they will have higher interest rates than regular purchases and additional cash advance fees. For example, when you make a cash advance, you may be required to pay 5% of the transaction amount. This is in addition to any fees charged by your cryptocurrency exchange or brokerage, which can range from 5% to 10%, implying that you may lose 10% of your cryptocurrency purchase to fees.
Step 4: Make Your Cryptocurrency Purchase
You’re ready to place your first cryptocurrency order once you have money in your account. There are hundreds of cryptocurrencies, including well-known names like Bitcoin and Ethereum and more obscure 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 allow you to buy fractional cryptocurrency shares and own a sliver of high-priced tokens like Bitcoin or Ethereum that would otherwise cost thousands of dollars.
Step 5: Choose a Storage Method
Cryptocurrency exchanges are not protected by the Federal Deposit Insurance Corp. (FDIC) and are vulnerable to theft or hacking. You could even lose your investment if you forget or lose the codes to your account, as has happened to millions of dollars in Bitcoin. That is why having a secure storage location for your cryptocurrencies is critical.
There you have it. 5 simple steps to buy cryptocurrency. Some of the most popular Crypto you could buy are;
- Bitcoin (BTC)
- Tether (USDT)
- Binance Coin (BNB)
- Ethereum (ETH)
- Polkadot (DOT)
- XRP (XRP)
- Uniswap (UNI)
- Cardana (ADA)
- Dogecoin (DOGE)
- USD Coin (USDC)
What Is a Cryptocurrency Broker?
Cryptocurrency brokers simplify purchasing cryptocurrency by providing simple interfaces that interact with exchanges on your behalf. Some charge more than exchanges. Others claim to be “free” while profiting by selling information about what you and other traders are buying and selling to large brokerages or funds or failing to execute your trade at best possible market price. Two of the most well-known cryptocurrency brokers are Robinhood and SoFi.
While brokers are undeniably convenient, you should exercise caution when using them because you may face restrictions when moving your cryptocurrency holdings off the platform.
Some brokers, for example, do not allow you to transfer your crypto holdings out of your account. Although this may not appear to be a big deal, advanced crypto investors prefer to keep their coins in crypto wallets for added security. For added security, some people opt for hardware crypto wallets that are not connected to the internet.
How Do I Open a Cryptocurrency Exchange Account?
Most cryptocurrency exchanges require you to provide your name, email address, personal information, and proof of identity to open an account (to follow KYC standards). This process may include answering personal questions, using a third-party application to verify your identity, or providing a picture of your driver’s license.
After your account is approved, you can deposit funds and purchase cryptocurrency.
What Factors Should You Consider When Choosing a Cryptocurrency Exchange?
There are several factors to consider when selecting a cryptocurrency exchange, including security, fees, and available cryptocurrencies. Understanding how your cryptocurrency is stored and whether you can seize control of it by transferring it to your digital wallet is also critical.
There are both centralized and decentralized cryptocurrency exchanges. Centralized exchanges are closely aligned with governmental financial regulations (such as the U.S. Securities and Exchange Commission). Many will insure deposits in U.S. dollars and require proof of identity to use the platform. Decentralized exchanges are unregulated online exchanges hosted on user-owned distributed nodes with no centralized governing authority.
While this may sound frightening, decentralized exchanges provide transparent transactions and fees and direct peer-to-peer cryptocurrency exchange. So, choose the one best for you.