Best Cryptocurrency Exchange

How To Buy Cryptocurrency – Forbes Advisor

How To Buy Cryptocurrency
Written by publisher team

Editorial note: We earn commission from partner links on Forbes Advisor. Panels do not influence editors’ opinions or ratings.

If you are new to the crypto world, knowing how to buy Bitcoin, Dogecoin, Ethereum and other cryptocurrencies can be confusing at first. Fortunately, the ropes are very easy to learn. You can start investing in cryptocurrency by following these 5 easy steps.

1. Choose a crypto broker or exchange

To buy cryptocurrency, you first need to choose a crypto broker or exchange. While either of them allows you to buy cryptocurrency, there are some key differences to keep in mind.

What is cryptocurrency exchange?

Cryptocurrency exchange is a platform where buyers and sellers meet to trade cryptocurrency. Exchange fees are often relatively low, but they tend to have more complex interfaces with multiple trading types and advanced performance charts, all of which can make it intimidating for new crypto investors.

The most popular cryptocurrency exchanges are Coinbase, Gemini, and Binance.US. While the standard trading interfaces of these companies may overwhelm the novices, especially those without a stock trading background, they also offer easy-to-use buying options.

Convenience comes at a cost, as the beginner-friendly options charge much more than it would cost to purchase the same cryptocurrency via each platform’s standard trading interface. To save costs, you might aim to learn enough to use standard trading platforms before you buy your first cryptocurrency – or shortly thereafter.

Important note: As someone new to the crypto space, you will want to make sure that the exchange or brokerage you choose allows fiat currency conversion and US dollar purchases. Some exchanges only allow you to buy cryptocurrencies with another cryptocurrency, which means that you will have to find another exchange to buy tokens that your favorite exchange accepts before you can start trading cryptocurrencies on that platform.

What is a cryptocurrency broker?

Cryptocurrency brokers get rid of the complexity of buying cryptocurrencies, and provide easy-to-use interfaces that interact with exchanges for you. Some charge higher fees than exchanges. Others claim to be “free” while making money by selling information about what you and other traders are buying and selling to brokerage firms, big funds or not executing your trade at the best possible market price. Robinhood and SoFi are two of the most popular crypto brokers.

While it is undeniably convenient, you should be careful with brokers as you may face restrictions on moving your cryptocurrency holdings outside the platform. At Robinhood and SoFi, for example, you cannot transfer your crypto holdings from your account. This may not seem like a huge deal, but advanced crypto investors prefer to keep their coins in cryptocurrency wallets for added security. Some even choose crypto wallets for offline devices for added security.

2. Create and verify your account

Once you have decided on a cryptocurrency broker or exchange, you can register to open an account. Depending on the platform and how much you plan to buy, you may have to verify your identity. This is an essential step to prevent fraud and meet federal regulatory requirements.

You may not be able to buy or sell cryptocurrency until you have completed the verification process. The platform may require you to provide a copy of your driver’s license or passport, and you may even be asked to upload a personal photo to prove that your appearance matches the documents you provide.

3. Investment cash deposit

To purchase cryptocurrencies, you will need to make sure that you have funds in your account. You can deposit money into your crypto account by linking your bank account, authorizing a wire transfer, or even making a debit or credit card payment. Depending on the exchange or broker and your funding method, you may have to wait a few days before you can use the funds you deposit to purchase cryptocurrency.

Here’s a big buyer beware: While some exchanges or brokers allow you to deposit money from a credit card, doing so is risky — and expensive. Credit card companies process cryptocurrency purchases using credit cards as cash advances. This means that they are subject to higher interest rates than regular purchases, and you will also have to pay an additional cash advance fee. For example, you may have to pay 5% of the transaction amount when making a cash advance. This is in addition to any fees that your crypto exchange or brokerage may charge; It can be as high as 5% by itself, which means you could lose 10% of your cryptocurrency purchases for the fee.

4. Place your Cryptocurrency order

Once you have funds in your account, you are ready to place your first cryptocurrency order. There are hundreds of cryptocurrencies to choose from, from well-known names like Bitcoin and Ethereum to more obscure cryptocurrencies like Theta Fuel or Holo.

When you decide which cryptocurrency you want to buy, you can enter the ticker symbol – Bitcoin, for example BTC – and the number of coins you want to buy. With most exchanges and brokers, you can buy shares of cryptocurrency, allowing you to buy a piece of high-priced coins like Bitcoin or Ethereum that requires thousands to own.

Here are the symbols of the 10 largest cryptocurrencies based on market capitalization*:

  1. Bitcoin (BTC)
  2. Ethereum (ETH)
  3. rope (USDT)
  4. Binance Coin (BNB)
  5. Cardana (ADA)
  6. Dogecoin (DOGE)
  7. XRP (XRP)
  8. Dollar coin (USDC)
  9. Polkadot (DOT)
  10. Uniswap (UNI)

*Based on market value as of June 28, 2021

5. Select the storage method

Cryptocurrency exchanges are not backed by protections like Federal Deposit Insurance Corp. (FDIC), which is at risk of theft or hacking. You can even lose your investment if you forget or lose the tokens to access your account, as millions of Bitcoins have already been made. That is why it is so important to have a secure storage place for your cryptocurrency.

As mentioned above, if you are buying cryptocurrency through a broker, you may have little or no choice in how you store your cryptocurrency. If you buy cryptocurrency through an exchange, you have more options:

  • Leave the cryptocurrency on the exchange. When you buy cryptocurrency, it is usually stored in a so-called crypto wallet linked to an exchange. If you do not like the provider that your exchange partners work with or if you want to move it to a more secure location, you can move it from the exchange to a separate hot or cold wallet. Depending on the exchange and the size of your transfer, you may have to pay a small fee to do so.
  • Hot wallets. These are crypto wallets that are stored online and run on devices connected to the internet, such as tablets, computers or phones. Hot wallets are convenient, but there is a higher risk of theft because they are still connected to the Internet.
  • Cool wallets. Cold crypto wallets are offline, making them the most secure option for holding cryptocurrencies. They take the form of external devices, such as a USB drive or a hard drive. You have to be careful with cold wallets – if you lose the key token associated with them, or the device crashes or fails, you may never be able to get your crypto back. While the same can happen with some hot wallets, some are managed by custodians who can help you get back into your account if it gets locked out.

Alternative ways to buy cryptocurrency

While buying cryptocurrency is a major trend at the moment, it is a volatile and risky investment option. If investing in cryptocurrencies on an exchange or via a broker does not seem to be the right choice for you, here are some options for indirect investment in Bitcoin and other cryptocurrencies:

1. Wait for ETFs

ETFs are very popular investment vehicles that allow you to buy exposure to hundreds of individual investments in one fell swoop. This means that they provide instant diversification and are less risky than investing in individual investments.

Cryptocurrency ETFs are very popular, allowing you to invest in several cryptocurrencies at once. Crypto ETFs aren’t available to every day investors yet, but there may be some soon. As of June 2021, the US Securities and Exchange Commission (SEC) is reviewing three crypto ETF applications from Kryptcoin, VanEck and WisdomTree.

2. Investing in crypto-related companies

If you prefer investing in companies with tangible products or services that are subject to regulatory oversight – but still want exposure to the cryptocurrency market – you can buy shares of companies that use or own the cryptocurrencies and the blockchain that operates them. You will need an online brokerage account to purchase shares of public companies such as:

  • Nvidia (NVDA). This technology company designs and sells graphics processing units, which are at the heart of the systems used to mine cryptocurrency.
  • PayPal (PYPL). Already a popular choice for people who buy items online or transfer money to family and friends, this payment platform has recently expanded to allow customers to buy and sell select digital currencies using their PayPal and Venmo accounts.
  • square (SQ). The small business payment services provider has purchased more than $220 million in bitcoin since October 2020. In February 2021, the company revealed that bitcoin made up about 5% of cash on its balance sheet. In addition, Square’s Cash app allows people to buy, sell and store cryptocurrency.

As with any investment, be sure to consider your investment objectives and current financial situation before investing in cryptocurrencies or individual companies with a significant stake in them. Cryptocurrency can be extremely volatile – a single tweet can make its price drop – and still is a highly speculative investment. This means that you should invest carefully and cautiously.

About the author

publisher team