How to Buy Cryptocurrency

Crypto investing is becoming more popular each year and now with the rise of institutional investors and Bitcoin EFTs, the door will be open for everyone. If you are also the one who is diving into this thrilling world then you must know how to buy cryptocurrency.

There is more than one platform through which you can purchase cryptocurrencies like crypto funds, or crypto exchanges. You can even invest in a crypto company.

If you are a new bee then buying Cryptocurrency can be confusing. But as long as you are aware of the risks of this lucrative world, then here is a detailed guide that will help you kick-start your journey in the crypto world.

Step 1: Understand What are Cryptocurrencies

Cryptocurrencies work with the help of blockchain technology that can be transferred without central banks or government. Cryptocurrencies have greatly impacted both technology and the financial world immensely.

Cryptocurrencies are your digital assets by which you can do transactions online easily. They can function independently because of cryptography that verifies transactions and makes them secure.

It is noted that there are various uses for this currency including as a medium of exchange, a digital asset, or as a lucrative investment. 

Step 2: Choosing Between A Crypto Exchange Or A Broker 

You have two options in order to buy or sell cryptocurrencies; an exchange or a broker. Read below to know the difference between both to make a wise decision.

  • Crypto Exchange 

It is a place where buyers and sellers actually exchange their currencies. However, they charge some fees for the exchange. But their standard interface might intimidate a newcomer because there will be many complex charts and tables for the investors. However, many come with a beginner-friendly interface where you can trade easily, but the drawback is that they charge more fees for this interface.

In these exchanges, you can exchange between cryptocurrencies and different other centralised currencies like euros or dollars. You can also trade between different crypto coins as well.

Binance and Coinbase exchanges are among many other exchanges that are most popular.

  • Crypto Broker

As it is mentioned above crypto exchanges have a somewhat complex interface, especially for newcomers hence come the crypto brokers. These brokers are the person who takes the complexity out of the equation by mediating between the seller and buyer and by determining the rates themselves.

However, they do not offer many choices for trading pairs. And, in return for taking the complexity out, they often charge higher fees than crypto exchanges.

Step 3: Account Creation and Verification

No matter the platform you are trading with, it will take only a few minutes to create and verify your crypto account.

To open a crypto account, you have to provide the necessary information like your full name, email, phone number, and address. In addition to these requirements, you also have to verify your identity by providing a copy of your passport or driving license.

This verification is necessary as a guarantee that you are not a fraud and will not disobey anti-money laundering requirements.

These platforms may also require you to upload a fresh selfie of yourself so that they know that the face meets the documents.

Step 4: Deposit Cash to Start Investing

To start investing in crypto, one needs to make sure that he has funds in their crypto account. You can deposit money in your crypto account by either making a payment with your card or by linking your account itself.

But, beware of the extra fees that you will be paying through your card because most credit card companies see purchasing crypto as cash advances and subject them to higher interest rates. 

It means that you first have to pay fees to the exchanger or broker and then to your card company as well.

Also, it may take a few days before you start investing in crypto and the waiting period depends upon the funding method of the broker or exchange.

Step 5: Placing The First Order

Once the waiting time is over, you can then start investing in cryptocurrencies by entering the ticker symbol for your preferred coin. As for Bitcoin, you have to enter BTC.

You can experience the benefit of using an exchange here because they let you purchase even a tiny piece of these highly-priced coins. Because it’s a famous saying in this world that goes’ Only Invest What You Can Afford To Lose’

There are also some order types that you can make use of. Below is a glance at the most important order types.

Market Order

If you want to quickly buy or sell cryptocurrency at the current price then you can make a market order which is quickly executed.

Limit Order

If you are willing to buy or sell a crypto at a lower price then you can make use of a Limit order where you can set the lowest limit you want for your order to be executed. Once the price gets to or lower your limit it will then execute your order.

Stop Order

The opposite of a Limit Order is the Stop Order where you can buy or sell cryptocurrency at a higher price. Here you set the maximum limit and when the price becomes equal to or greater than your limit, then only it will execute your order.

Step 6: The Waiting Time

The time when your order will be executed depends on certain factors. Limit orders or Stop orders, are typically the conditions you made or the limits you set.

However, the waiting time for Market order depends upon the liquidity of the chosen coin. For example, BTC is very liquid because it is traded thousands of times a day. Therefore if your chosen coin is BTC and others like it then your Market order will be executed in a few seconds or minutes the most.

But with less liquid coins like low market cap altcoins, you may have to wait a few hours for your order to be executed. Note that, by the time your market order is executed, the price of the coin may have changed a lot.

Step 8: Storing Method 

Cryptocurrency exchanges are always at risk of getting hacked therefore having a secure place to store them is very necessary.

However, if you are dealing via a broker then you have no choice but if you are trading through an exchange then you can either leave it on the exchange in their selected wallet. Or if you wish to change the storage to a more secure place then you can choose either a hot or cold wallet against a fee that will be dependent upon the exchange and the amount you are going to transfer.

Hot Wallets are quickly accessible because they are connected to the devices that run on the internet. However, they are not as secure as cold wallets because cold wallets are not automatically connected to the internet. They come in the form of external devices like flash drives. However, they do require handling with care because if you break it then you will lose all your currency for good.

Things To Consider Before Buying Cryptocurrencies

If you are going to buy cryptocurrencies then there are certain factors that you have to keep in mind which are stated below.

  • Security

It is established now even for a newcomer in the Crypto world that cryptocurrencies are not protected or secured by any Central or financial system or banks. It is therefore very important to choose a crypto exchange that you can trust and a trusted crypto wallet to store your coins afterward.

  • Fees

Everything you do financially you have to pay tax for it and Crypto World is no exception. If you are going to buy, sell, or send cryptocurrency, then you have to keep in mind that you have to pay some tax for it.

  • Volatility

The crypto world is the most volatile world, where the rates of cryptos go up and down very quickly in a matter of time. If you are going to invest in it then you must be aware of its volatility.

  • Taxes

Trading cryptocurrency is usually a tax-free entity, although in some countries it is taxable. However, the exchanges will not deduct any tax therefore you are going to have to declare the trading in your annual income tax return.

Alternative Ways to Buy Cryptocurrency

If you do not want to buy cryptocurrency directly then you can opt for these alternative ways to invest in cryptocurrency.

  • Crypto ETFs

If you want to invest in cryptocurrency without owning the underlying asset then you can deal in Crypto ETFs (exchange-traded funds). Public exchanges also trade crypto ETFs where you can buy and sell them like traditional stocks.

These ETFs may require minimum investment but they do charge some management fee.

  • Crypto Trusts

Just like a mutual fund, a crypto trust is where cryptocurrency is being held on behalf of investors. Since they hold and manage all the crypto-related things they also charge some management fees.

Investors can then purchase the shares of funds to trade. You can also trade these shares on public exchanges. 

Crypto Mutual Funds

Another platform that requires management fees but little investment, a crypto mutual fund takes money from investors in cryptocurrencies and invests in other cryptocurrencies and digital assets to generate returns

Blockchain companies

You can also invest in Blockchain companies, many of which are traded on public exchanges. Here you can buy or sell shares just like you would do for traditional stocks.

Bottom Line

With proper guidance, even newcomers can make their first crypto trade in no time. But before diving into this world it is essential to have proper knowledge of the chosen coin, exchange, or broker, the wallet, taxes, and most importantly the risks involved.

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