How To Buy Cryptocurrency

If you want to buy some cryptocurrency, but don’t know where to start? Don’t fret, you’re not alone. The NFT space has grown in leaps and bounds over the last year, and it’s become increasingly difficult to navigate the wild world of crypto, let alone find a good place to start.

For most people who are either getting into crypto or NFTs, a crypto exchange acts as square one. An exchange is a platform through which you can change dollars and cents into blockchain bucks.

A big plus about exchanges is that you don’t need to be an expert on blockchain tech to purchase crypto. Yet, there are numerous different types of services and companies out there hoping for you to spend your cash on their services.

In this guide, we’ll cut through the confusion and take you step-by-step through purchasing your first bit of crypto.

Access dozens of different cryptocurrencies buying guides 2022 here.

How To Buy Cryptocurrency?

Step 1. Choose an Exchange

As noted above, when it comes to buying cryptocurrency, you’ll first need to decide what type of platform or service you want to use to purchase crypto. The two most common platforms are crypto exchanges (there are centralized and decentralized exchanges) and crypto brokerages.

Security
Fees
Available coins

Put simply, a crypto exchange is a platform that allows users to buy and sell cryptocurrencies like Ether, Bitcoin, and Dogecoin. They tend to function a lot like traditional stock markets and brokerage firms, except users trade cryptocurrency instead of stocks.

A crypto brokerage, on the other hand, acts as an intermediary between a user and the cryptocurrency markets to facilitate the buying and selling of cryptocurrencies. As a result, users aren’t trading with each other based on current market prices. Instead, the price is set by the broker.

Step 2. Open an Account

After you’ve decided on a platform like Coinbase, Gemini, or whatever your preference is, you’ll need to set up an account. More often than not, exchanges will ask you to not only set up and verify your account via email, phone, etc. but also to provide personal information like a picture of your driver’s license or passport.

First and Last Name
Email Address
Cell Phone Number
Home Address
Date of Birth
Social Security Number

Although this can seem invasive, you may not be able to make any purchases on the platform until you complete the verification process. Furthermore, following these steps will make the cash-out process simpler if you do hope to deposit funds back into your bank account further down the line. Notably, if you don’t want to supply personal information, it can sometimes be avoided with a decentralized exchange.

Once you’ve chosen which crypto exchange and crypto wallet you’re going to use, you’ll need to add funds to your account. This basically means adding fiat currency to a crypto exchange so you can exchange it for Bitcoin.

How to fund your account may vary from exchange to exchange. Typical methods include sending money via PayPal, a bank transfer, or a wire transfer.

Beware that different funding methods may come with different transaction fees. For example, the fee for funding your account via a wire transfer may be higher or lower than the fee for using PayPal. Transaction times may also vary depending on your chosen funding method.

Step 3. Choose a Secure Crypto Wallet

Once you’ve selected your crypto exchange, it’s time to decide how you want to store your Bitcoin. Broadly speaking, there are two options to choose from: a hot or cold crypto wallet.

While a hot wallet is connected to the internet and exists in a digital form, a cold wallet is a physical piece of hardware that exists offline. Let’s break this down further

Hot wallets. There are several ways to open a hot wallet. The easiest is to use the hot wallet your crypto exchange offers you. These are known as “hosted wallets” and are generally free to use. One of the big advantages of a hosted wallet is that if you forget your password, there are usually safety checks in place to help you retrieve it. The biggest downside is that hosted wallets may be more vulnerable to hacker attacks. If that concerns you, you could consider opening a “non-custodial wallet.” This hot wallet isn’t affiliated with a third party (like an exchange) and only you can access it. This makes it harder to hack. But, if you lose or forget your password, it’s very difficult to retrieve it and your Bitcoin could be as good as lost!

Cold wallets. If security is a priority for you, then a cold wallet may be the best option. Cold wallets (or “hardware wallets”) are essentially offline apps or pieces of hardware that look like USB sticks. They generally don’t connect to the internet, which makes them less vulnerable to hacks. Cold wallets cost around 90€. To use one you’ll need to transfer your Bitcoin into it from its original hot wallet, which may incur a small fee.

Step 3. Place an Order

You can buy cryptocurrencies after choosing an exchange and connecting a payment option. In recent years, cryptocurrency exchanges have slowly become more mainstream. They have grown significantly in terms of liquidity and their breadth of features. The operational changes at cryptocurrency exchanges parallel the change in the perception of cryptocurrencies. An industry that was once thought of as a scam or one with questionable practices is slowly morphing into a legitimate one that has drawn interest from all the big players in the financial services industry.

Now, cryptocurrency exchanges have gotten to a point where they have nearly the same level of features as their stock brokerage counterparts. Crypto exchanges today offer a number of order types and ways to invest. Almost all crypto exchanges offer both market and limit orders, and some also offer stop-loss orders. Of the exchanges mentioned above, Kraken offers the most order types. Kraken allows for market, limit, stop-loss, stop-limit, take-profit, and take-profit limit orders.

Aside from a variety of order types, exchanges also offer ways to set up recurring investments, allowing clients to dollar-cost average into their investments of choice. Coinbase, for example, lets users set recurring purchases for every day, week, or month.

Step 4. Practice Safe Storage

Bitcoin and cryptocurrency wallets are a place to store digital assets more securely. Having your crypto outside of the exchange and in your personal wallet ensures that only you have control over the private key to your funds. It also gives you the ability to store funds away from an exchange and avoid the risk of your exchange getting hacked and losing your funds.

Although most exchanges offer wallets for their users, security is not their primary business. We generally do not recommend using an exchange wallet for large or long-term cryptocurrency holdings.

Some wallets have more features than others. Some are Bitcoin only, and some offer the ability to store numerous types of altcoins. Some wallets also offer the ability to swap one token for another.

When it comes to choosing a Bitcoin wallet, you have a number of options. The first thing you will need to understand about crypto wallets is the concept of hot wallets (online wallets) and cold wallets (paper or hardware wallets).

Where to Buy Cryptocurrency

eToro – Overall Best Platform to Buy Cryptocurrency in 2022
Coinbase – Good Place to Buy Cryptocurrency for Beginners
Binance – Popular Place to Buy Bitcoin for Asset Diversity
Webull – Buy Cryptocurrency From Just $1
Gemini – Solid Cryptocurrency Exchange for Seasoned Investors

Should I Buy Cryptocurrency?

Investment options touted as a “hedge” — government bonds or gold, for example — tend to either keep more of their value than cash over the long term, or they tend not to be affected by declines in other parts of the economy.

That’s why so much long-term investment advice is focused on moving cash out of our bank accounts and into stocks and shares, or assets like cryptocurrency, that could appreciate over time.

Baked into the bitcoin code is the promise that no more than 21m units of bitcoin will ever be created. So instead of being an inflationary currency like sterling or dollars, some experts argue bitcoin is the opposite: it is deflationary, increasing in value just with the passing of time.

Of course, the deflationary argument in favour of bitcoin falls down if governments decide to regulate specifically against it. India, for example, has proposed a ban on cryptocurrency trading, suggesting it will impose fines on anyone caught holding onto digital assets of any kind.

Cryptocurrency investors should do their due diligence, as they would with any other investment.

Think long and hard about which cryptocurrency has the genuine potential to change the world.

Try not to be swayed by malicious money-grabbers shouting this or that coin is “going to the moon”.

Remember there is nothing quite like losing a month’s wages in a day to bring an investor right back down to earth.

Benefits of Buying Cryptocurrency

Easy Transactions
Incredible Security
Short Settlement Times and Low Fees
Exponential Industry Growth
Outsized Returns
More Private Transactions
Portfolio Diversification
Inflation Hedge
Cross-Border Payments
A More Inclusive Financial System
Transactional Freedom
24/7 Markets

When to Buy Cryptocurrency

To make it short and sweet, the best time to buy a cryptocurrency is when you’re ready to buy a cryptocurrency. Using the dollar-cost averaging approach, you’ll be able to control the volatility of your own cost (at least at some level) and avoid the roller coasters.

Never put more into a crypto than you’re willing to lose. They are not guaranteed winners or asset classes that provide any sort of security, especially if they tank to zero. Some people have made significant amounts of money on the right buy at the right time, but this is often just luck and not from timing the market.

Again, because crypto trades all day long, even into the wee hours of the morning (no matter where you happen to live), timing your trades to a certain time of day can be fraught with peril. However, if you analyze a few months of data, a few very general patterns emerge.

Based on the same data used to determine the best time of day to buy crypto, the best time of the week to buy crypto seems to be Thursday. Yes, Thursday. Six of the eight weeks saw a dip on that day. If that trend continues (which is most certainly not guaranteed), Thursday morning is the best time to buy.

The second-best day of the week to buy is Monday (five of eight saw a dip), followed by Friday and Saturday (four of eight for both).

Timing a cryptocurrency buy can be a difficult if not treacherous thing to attempt since there are all kinds of elements that go into the price of a coin. Although there are fewer personality-based drivers (such as sex scandals involving CEOs of major companies, for example), there are more lemming-like sell-offs. People have only so much tolerance for risk, and the fear of missing out on selling a crypto holding for a short-term profit is a tempting siren song.

Risks of Buying Cryptocurrency

Now that we have talked about the benefits of buying cryptocurrency, we need to discuss some of the main risks that need to be considered.

The most pressing risks of buying cryptocurrency are outlined below.

Volatility

We have mentioned several times throughout this guide that cryptocurrencies are extremely volatile. This means that the value of your investment can go up or down by a large percentage in a very small period of time.

For example, had you bought Dogecoin at the start of 2021 and sold just seven months later, your investment would have increased in value by more than 10,000%.

On the other hand, if you had bought Dogecoin in July 2021 and held on until the start of 2022 – you would be looking at losses of over 75%.

As a result, before you buy cryptocurrency for your portfolio – you must be prepared for rapid pricing swings.

Oversaturated Market

The next risk that you need to consider when learning how to buy cryptocurrency is that this marketplace is now oversaturated.

As noted, more than 17,000 cryptocurrencies are listed on CoinMarketCap – and even more that are yet to be added to the platform.

This means that outside of the top-100 projects, the cryptocurrency market is extremely fragmented. In simple terms, this means that the total amount of money being injected into the markets is now being allocated across a huge number of tokens.

As such, your chosen cryptocurrency might struggle to make an impact when you consider the amount of competition in this space.

Hacks and Security

Another major risk to consider is that over the course of the past few years – billions of dollars worth of digital assets have been stolen from cryptocurrency exchanges. If you had funds at one of these platforms, you might have had your tokens stolen with nowhere to turn.

As such, it is crucial that you stay away from unlicensed platforms and only buy cryptocurrency from a regulated exchange or broker – of which there are very few. Additionally, if you are looking to store your cryptocurrency tokens in a private wallet – further risks are at play.

If you lose your private keys and do not back your wallet up with a recovery passphrase, your funds will be lost forever. Moreover, if your cryptocurrency wallet is hacked, this will also result in a loss of funds.

Which is the Best Cryptocurrency to Buy 2022?

DeFi Coin (DEFC) – Most Promising Cryptocurrency to Buy in the DeFi Sector
Lucky Block (LBLOCK) – Best New Gaming Cryptocurrency to Invest In 2022
Decentraland (MANA) – Popular Crypto for Exposure to the Metaverse
Ethereum (ETH) – Leading Cryptocurrency Project with Imminent Upgrade
Shiba Inu (SHIB) – Cheap Cryptocurrency to Buy with ‘Meme Coin’ Potential
Avalanche (AVAX) – New Cryptocurrency to Buy 2022 with High Price Potential
Algorand (ALGO) – Eco-Friendly Crypto that Rivals Ethereum
Chainlink (LINK) – Best New Crypto for Smart Contract Platforms

Ways of Buying Cryptocurrency

If you’d rather invest in companies with tangible products or services and that are subject to regulatory oversight—but still want exposure to the cryptocurrency market—you can buy stocks of companies that use or own cryptocurrencies and the blockchain that powers them. You’ll need an online brokerage account to buy shares of public companies like:

Paypal – Send Money, Pay Online or Set Up a Merchant Account

Credit Card or Debit Card – Give You Access to a Line of Credit Issued By a Bank

Neteller or Skrill – One of the Best Methods to Move Money Around Online

Bank Transfer – Not Fastest, But Cheap

How to Buy Cryptocurrency Safely

It’s important to keep your investment safe. If you want to buy Cryptocurrency safely, you’ll need to consider the risks.

Cryptocurrency is extremely volatile. And even though a reputable exchange or brokerage can help protect your investment, you’re still going to want to pay attention to how you can safely buy and store your Cryptocurrency.

Buying cryptocurrency is similar to buying stocks, but it is still in its infancy stage. That’s one of the reasons it’s so volatile. And with over 4,000 currencies out there, you have a lot of options to explore. Unfortunately, there isn’t a crypto equivalent to an index or mutual fund to help guide you. You’ll have to look into individual coins for yourself and decide which ones you believe will be profitable in the long term.

And you also won’t have the same protections. If you buy stocks and the brokerage fails, the Securities Investor Protection Corporation (SIPC) provides coverage to protect your investments. If your money is in the bank, it will be FDIC insured.

What is Cryptocurrency Wallets

Crypto wallets keep your private keys – the passwords that give you access to your cryptocurrencies – safe and accessible, allowing you to send and receive cryptocurrencies like Bitcoin and Ethereum.

Unlike a normal wallet, which can hold actual cash, crypto wallets technically don’t store your crypto. Your holdings live on the blockchain, but can only be accessed using a private key. Your keys prove your ownership of your digital money and allow you to make transactions. If you lose your private keys, you lose access to your money.

Crypto wallets range from simple-to-use apps to more complex security solutions. The main types of wallets you can choose from include:

Paper wallets: Keys are written on a physical medium like paper and stored in a safe place. This of course makes using your crypto harder, because as digital money it can only be used on the internet.
Hardware Wallets: Keys are stored in a thumb-drive device that is kept in a safe place and only connected to a computer when you want to use your crypto. The idea is to try to balance security and convenience.
Online Wallets: Keys are stored in an app or other software – look for one that is protected by two-step encryption. This makes sending, receiving, and using your crypto as easy as using any online bank account, payment system, or brokerage.

Each type has its tradeoffs. Paper and hardware wallets are harder for malicious users to access because they are stored offline, but they are limited in function and risk being lost or destroyed. Online wallets offered by a major exchange like Coinbase are the simplest way to get started in crypto and offer a balance of security and easy access. (Because your private info is online, your protection against hackers is only as good as your wallet provider’s security – so make sure you look for features like two-factor verification.)

What Can You Do with Cryptocurrency After You Buy It?

So, once you’ve bought Cryptocurrency—what next? Well, you have several options. You can:

Do nothing! You can hold onto your Bitcoin with the idea that its value may continue to increase over time.

Trade it. You can exchange your Cryptocurrency for fiat or other cryptocurrencies, though beware that trades may be considered taxable events.
Buy things with it. Using Cryptocurrency to buy products and services is becoming increasingly popular. However, the adoption of crypto as a means of payment is proving slow.

Conclusion

The process for purchasing Cryptocurrency is slightly more complicated than the process to buy regular equity or stock. This is mainly because the cryptocurrency ecosystem and infrastructure are not as well developed as those of mainstream trading.

A cryptocurrency purchase process consists of four steps: selecting a service or venue for the purchase, connecting with a payment method, placing an order, and ensuring safe storage for your purchased cryptocurrency. Each of these steps requires research and a careful assessment of the pros and cons of each service. You can also buy Cryptocurrency at ATMs or from payment services like PayPal and mainstream brokerages like Robinhood.