How To Buy Cryptocurrency: A Beginner’s Guide
According to CNBC, approximately one in every 10 people invest in a cryptocurrency. Most of these people are those who were interested in trading but who found traditional trade to be challenging. Cryptocurrency trading is significantly easier than many people think, which is why investors and traders alike are turning to this form of investment. In the survey conducted by CNBC, 10% of people stated that they had invested in cryptocurrency, which ranks this digital currency asset fourth after mutual funds, stocks, bonds, and real estate.
Before you can trade, you will need to buy a cryptocurrency of your choice, but it can be daunting to determine how to buy cryptocurrencies when you are a beginner. If you break down the buying process, you will see just how easy buying cryptocurrencies is. Each day exchanges are making the process easier, and to the delight of many more, exchanges and wallets are becoming legitimate.
In this guide on cryptocurrency buying for beginners, we will discuss the steps you need to follow to buy a digital currency. We will also explain a few tips you need to know beforehand, and we will advise on a few of the most popular cryptocurrencies beginners should consider investing in.
Cryptocurrency trading can be incredibly volatile, which is why you need to start with a reputable digital currency that has a strong market presence. Additionally, we will also mention the different platforms where you can buy a cryptocurrency of your choice so that you are ready to begin after reading this article.
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The Three Tips You Need To Know Before Buying Cryptocurrency
When you have decided to invest in a cryptocurrency, it’s best not to rush into things. You don’t want to be overly reckless and lose all your money during the first day of trading. That’s why you need to know the below tips. If you follow these tips before you buy cryptocurrency, you will have a higher likelihood of being successful or, at the very least, not losing all your money.
1. Don’t Spend All Your Money on One Cryptocurrency
Perhaps the most important cryptocurrency tip we can impart is not to spend all your money on a single cryptocurrency. By nature, cryptocurrencies are incredibly volatile. This means that the digital currency could be trading impressively well one day, only to crash the next day or only a few hours later. There have been instances in the past where people have lost their entire life savings during a cryptocurrency crash.
You want to try to avoid this happening to you at all costs, which is why it’s better to split up your investments and buy a variety of different cryptocurrencies. Do your research and choose three cryptocurrencies that you believe are offering the most stability and buy them. Splitting up your investments could maximize your returns or ensure you don’t lose too much.
2. Only Ever Use a Reputable and Trusted Cryptocurrency Exchange
During the early days of cryptocurrency trading, many exchanges were not reputable and reliable, which caused many people to lose their money. Although many exchanges are respected by traders and investors nowadays, there are still a few that you should avoid.
When you are ready to buy a cryptocurrency, don’t go for a lesser-known exchange simply because their fees are low or nonexistent. Instead, opt to buy cryptocurrency from a popular exchange such as PayPal or Coinbase. These exchanges have reliable security features that ensure they are less likely to be hacked.
3. Don’t Ever Give Someone Else Your Password or See Phrase
Would you give someone your password to your real-world bank account? Likely not, which is why you should never give someone else your cryptocurrency digital wallet password or seed phrase.
Hackers are a real concern for digital currency traders and investors as they are always on the lookout for beginners to steal their funds. Fortunately, virtual currency security is fairly impressive, with most utilizing strong passwords, seed phrases, and two-factor identification. Yet, don’t be complacent. Keep your passwords safe and secure.
The Best Cryptocurrencies To Buy for Beginners
If you are a beginner at buying cryptocurrency, you are likely overwhelmed by how many options there are. As of January 2021, there were approximately more than 4,000 cryptocurrencies available for purchase.
This figure is daunting, and researching each one to decide which to invest in could take you quite some time. That’s why we have somewhat narrowed down the list for you by providing the top six cyrptocurrencies you should consider buying if you’re a beginner.
- Bitcoin Cash
- Binance Coin
The Five Steps Detailing How To Buy Cryptocurrency
Now that we have looked at the tips you need to remember before you buy a cryptocurrency, we can dive into how to actually start buying. As we mentioned previously, the entire process is much simpler than you are probably expecting. Without further ado, let’s have a look below.
Step One: Select a Cryptocurrency Exchange or Broker
Before you can purchase a cryptocurrency, you need to decide between using an exchange or a broker. Although both of these options will let you buy your digital currency of choice, there are a few key differences.
In layman’s terms, a crypto exchange is a platform where buyers and sellers can meet to trade their cryptocurrencies. Although exchanges offer clients low fees, they often have confusing interfaces that can be challenging for beginners.
Fortunately, many of these exchanges offer user-friendly trading options. However, these options are usually significantly more expensive fees-wise. That’s why it could be best to try and learn the basics of cryptocurrency trading and buying before selecting an exchange so that you can use the standard trading options.
On the other hand, many first-time cryptocurrency buyers choose to use a broker. This is because a broker handles the cryptocurrency buying process for you. For a fee, they will take your money and buy the cryptocurrencies of your choice by interacting with the exchanges for you. If you’re interested in this option, you may want to consider SoFi or Robinhood as these are two of the most reputable. However, the catch with using a brokerage is that they often don’t allow you to move your digital currencies off their platform.
You also need to ensure that the exchange or brokerage you choose doesn’t only allow cryptocurrency purchases and allows for flat currency transfers and purchases with U.S. dollars. You need to ensure that this is the case because, as a beginner, you don’t want the hassle of needing to use another exchange to buy a cryptocurrency before you can trade on your platform of choice.
Step Two: Initiate an Account on the Exchange or Broker Platform and Verify It
Once you have chosen either a cryptocurrency exchange or brokerage, you must sign up and open an account with them. Some exchanges and brokerage platforms will require you to verify your identity, so if this is something you don’t want to do, you need to find a different place to buy your cryptocurrency. However, it’s best to participate in this step, as verifying your identification will help prevent fraud and allow you to meet federal regulatory requirements.
Additionally, if you don’t complete this verification step, you might not be able to buy cryptocurrency on your exchange or brokerage platform of choice. Usually, to perform the identification process, the exchange or broker will ask you for a driver’s license or passport. Some will even want you to upload an image of yourself to ensure it matches the identification you provided.
Step Three: Deposit Money Into the Account
After you have an account, you will be ready to transfer funds into it. You can either make a deposit with a debit or credit card, or you can opt to link your bank account and authorize wire transfers. This real-world money you deposit will be used to buy your cryptocurrency of choice. However, you need to note that depending on which payment method you choose and which exchange or broker you are using, you might have to wait a couple of days for it to reflect.
We mentioned above that you could use a credit card to deposit money into your account, but you need to beware of using this option. Using your credit card to deposit funds to buy cryptocurrency can be incredibly expensive and dangerous.
Credit card companies classify cryptocurrency purchases as cash advances which means you will have to pay higher interest rates and cash advance fees. These fees are over and above the cryptocurrency purchase fees you need to pay when using an exchange or broker platform.
Step Four: Determine How You Will Store Your Cryptocurrency
Before taking the step to physically buying a cryptocurrency, you need to determine how you will store your digital funds. It’s vital to have a safe place to store your cryptocurrencies as cryptocurrency exchanges are not supported by protections like the Federal Deposit Insurance Corp. Due to this fact, they are at risk of hackers and thieves.
Additionally, if you don’t have a secure location to store your digital currencies and you lose your platform passwords or codes, you could lose all your money with no way of retrieving it. Unfortunately, if you opt to use a broker, you could have very little choice in how your cryptocurrency is stored, but if you use an exchange, there are a few options available.
- A cryptocurrency cold wallet: If you opt to use a cold wallet to store your cryptocurrency, it won’t be connected to the internet. This means that they are the most secure method to store your funds. Usually, a hot wallet takes the form of an external device like a hard drive. Although they are the safest storage method, you are still at risk of losing your funds if you lose your keycode or if your device breaks.
- A cryptocurrency hot wallet: A hot wallet is a cryptocurrency wallet that is connected to the internet. These types of wallets are stored on internet devices like iPads, mobile phones, tablets, and computers. Although these wallets are convenient, they carry risks as hackers can access them easier than cold wallets.
- Keep your digital currency on the exchange: If you don’t want the hassle of using a wallet separate from the exchange you are with, you can use the cryptocurrency wallet attached to the exchange you are using. These wallets also carry the risks of being more easily hacked.
Step Five: Order Your Cryptocurrency
Once you have selected an exchange, created an account, placed money into the account, and decided where you will store your cryptocurrency, you can proceed to buy it. You can place your first digital currency order when you have money in your exchange or broker platform account.
At this step, you can choose the currencies that interest you from the range available on your exchange or platform. When you buy the currency, you only need to enter its ticker symbol and enter the amount you wish to buy. For example, the ticker symbol for Bitcoin is BTC. If you don’t have enough money to purchase a cryptocurrency in its entirety, you can choose to buy a fractional share of it. Once you have selected buy, you can begin trading or store the cryptocurrency in your wallet for later use.
The Different Platforms Where You Can Buy Cryptocurrency
Interestingly, there are approximately 500 cryptocurrency exchanges that are in operation. This gives you a wide variety to choose from but can also complicate matters if you are unsure of who to choose.
It’s crucial to remember that some cryptocurrency exchanges are not reputable or reliable. If you don’t want to lose your money, you might have to choose a crypto exchange that has fees and extra security measures. To help make your cryptocurrency buying journey easier, we have listed a few of the best exchanges below.
Now You Know How To Buy Cryptocurrency!
After reading this cryptocurrency buying guide, you hopefully have a better understanding of how to purchase your cryptocurrency of choice. However, before taking the leap into the crypto market, you need to be sure to carefully examine your financial situation. Cryptocurrency trading is often more volatile than traditional trading and, as such, carries a higher risk.
If you don’t know what you are doing or are too hasty in your decisions, you could lose all your money. That’s why it’s usually best to evaluate the best market entry and exit points and determine the current trends to analyze when would be the best time for you to buy and invest in a cryptocurrency.
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