How to buy cryptocurrency – Forbes Consultant

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If you’re new to the world of cryptocurrencies, understanding how to buy Bitcoin, Dogecoin, Ethereum, and other cryptocurrencies can be confusing at first. Luckily, it’s quite simple to learn the ropes. You can start investing in cryptocurrency by following these five simple steps.

1. Choose a cryptocurrency broker or exchange

Buy cryptocurrency, first you need to choose a cryptocurrency broker or exchange. While both allow you to purchase cryptocurrencies, there are some key differences to keep in mind.

What is a cryptocurrency exchange?

A cryptocurrency exchange is a platform where buyers and sellers meet to trade cryptocurrencies. Exchanges often have relatively low fees, but tend to have more complex interfaces with more trade types and advanced performance charts, which can make them intimidating for new cryptocurrency investors.

Some of the best-known cryptocurrency exchanges are Coinbase, Gemini and Binance.US. While these companies’ standard trading interfaces can overwhelm beginners, especially those with no stock trading experience, they also offer easy and intuitive buying options.

The convenience, however, comes at a cost, as beginner-friendly options cost substantially more than it would cost to purchase the same cryptocurrency through each platform’s standard trading interface. To save costs, you might aim to learn enough to use standard trading platforms before making your first cryptocurrency purchase, or not long after.

An important note: As someone new to the world of cryptocurrencies, you will want to make sure that your favorite exchange or brokerage allows fiat currency transfers and purchases made with US dollars. Some exchanges only allow you to purchase cryptocurrencies using another cryptocurrency, meaning you would have to find another exchange to purchase tokens accepted by your preferred exchange before you can start trading cryptocurrencies on that platform.

What is a cryptocurrency broker?

Cryptocurrency brokers take the complexity out of buying cryptocurrencies, offering 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 large brokerages or funds or by not executing your trade at the best possible market price. Robin Hood and SoFi are two of the best-known cryptocurrency brokers.

While they are undeniably convenient, you need to be careful with brokers because you may face restrictions in moving your cryptocurrency holdings off the platform. On Robinhood and SoFi, for example, you cannot transfer your crypto holdings from your account. This may not seem like a big deal, but advanced cryptocurrency investors prefer to keep their coins in crypto wallets for added security. Some even choose non-internet-connected hardware crypto wallets for even greater security.

2. Create and verify your account

Once you have decided on a cryptocurrency broker or exchange, you can sign up to open an account. Depending on the platform and the amount you plan to purchase, you may need 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 complete the verification process. The platform may ask you to submit a copy of your driving license or passport, and you may also be asked to upload a selfie to demonstrate that your appearance matches the documents submitted.

3. Deposit cash to invest

To purchase cryptocurrencies, you will need to make sure you have funds in your account. You could deposit money into your crypto account by linking your bank account, authorizing to bank transfer or even make a payment by 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 your deposited money to purchase cryptocurrency.

Here’s a big warning for buyers: While some exchanges or brokers allow you to deposit money from a credit card, doing so is extremely risky and expensive. Process of credit card companies cryptocurrency purchases with credit cards as cash advances. This means they are subject to higher interest rates than regular purchases and you will also have to pay an additional amount cash advance fees. For example, you may have to pay 5% of the transaction amount when you make a cash advance. This is in addition to any fees your cryptocurrency exchange or brokerage may charge; these themselves can be as low as 5%, meaning you could lose 10% of your cryptocurrency purchase due to fees.

Related: Best Crypto Credit Cards

4. Place your cryptocurrency order

Once there is money in your account, you are ready to place your first cryptocurrency order. There are hundreds of cryptocurrencies to choose from, with well-known names such as Bitcoin AND Ethereum to more obscure cryptocurrencies like Theta Fuel or Holo.

When deciding which cryptocurrency to buy, you can enter its ticker symbol (Bitcoin, for example, is BTC) and how many coins you want to buy. With most exchanges and brokers, you can buy fractional shares of cryptocurrency, allowing you to purchase a sliver of expensive tokens like Bitcoin or Ethereum that would otherwise take thousands to own.

The symbols for the The 10 largest cryptocurrencies based on market capitalization* are as follows:

1. Bitcoin (BTC)
2. Ethereum (ETH)
3. Tether (USDT)
4. Binance Coin (BNB)
5. Cardana (ADA)
6. Dogemoneta (DOGE)
7. XRP (XRP)
8. USD Coin (USDC)
9. Polka dot (DOT)
10. Uniswap (UNI)

*Based on market capitalization as of June 28, 2021

5. Select a storage method

Cryptocurrency exchanges are not backed by safeguards like the Federal Deposit Insurance Corp. (FDIC) and are at risk of theft or hacking. You may also lose your investment if you forget or lose the codes to access your account, such as Millions of dollars of Bitcoin has already been. That’s why it’s so important to have a secure storage location for your cryptocurrencies.

As noted above, if you purchase cryptocurrency through a broker, you may have little or no choice in how your cryptocurrency is stored. If you buy cryptocurrency through an exchange, you have more options:

• Leave the cryptocurrency in the exchange. When you buy cryptocurrency, it is typically stored in a so-called crypto wallet attached to the exchange. If you don’t like the provider you have exchange partners with or want to move it to a safer location, you could move it from the exchange to a separate hot or cold wallet. Depending on the exchange and the size of the transfer, you may have to pay a small fee to do so.
• Warm wallets. These are crypto wallets stored online and run on internet-connected devices, such as tablets, computers, or phones. Hot wallets are convenient, but the risk of theft is higher since they are still connected to the internet.
• Cool wallets. Cold crypto wallets are not connected to the internet, making them the safest option for holding cryptocurrency. They take the form of external devices, such as a USB drive or hard drive. You have to be careful with cold wallets, though: if you lose the passcode associated with them or the device breaks or malfunctions, you may never be able to recover your cryptocurrency. While the same might happen with some hot wallets, some are operated by custodians who can help you get back into your account if you get stuck.

Alternative ways to buy cryptocurrency

While buying cryptocurrency is a big trend right now, it is a volatile and risky investment choice. If investing in cryptocurrencies on an exchange or through a broker doesn’t seem like the right choice for you, here are some options for doing so indirectly invest in Bitcoin and other cryptocurrencies:

1. Wait for Crypto Exchange-Traded Funds (ETFs)

ETFs they are extremely popular investment tools that allow you to gain exposure to hundreds of individual investments in one fell swoop. This means they deliver immediate diversification and are less risky than investing in individual investments.

There is a huge appetite for cryptocurrency ETFs, which would allow you to invest in many cryptocurrencies at once. No cryptocurrency ETFs are available to everyday investors yet, but there may be some soon. As of June 2021, the U.S. Securities and Exchange Commission (SEC) is reviewing three cryptocurrency ETF applications from Kryptcoin, VanEck, and WisdomTree.

2. Invest in cryptocurrency-related companies

If you prefer to invest 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 cryptocurrencies and the blockchain that powers them. You will need a online brokerage account buy shares of public companies such as:

• Nvidia (NVDA). This technology company designs and sells graphics processing units, which are the heart of the systems used to mine cryptocurrency.
• PayPal (PYPL). Already a popular choice for people purchasing items online or transferring money to family and friends, this payment platform has recently expanded to allow customers to buy and sell select cryptocurrencies with their PayPal and Venmo accounts.
• Square (m2). This small business payment provider has purchased over $220 million in Bitcoin since October 2020. In February 2021, the company revealed that Bitcoin made up about 5% of the liquidity on its balance sheet. Additionally, Square’s Cash App allows people to buy, sell, and store cryptocurrency.

As with any investment, be sure to consider your investment goals and current financial situation before investing in cryptocurrency or individual companies that have a large stake in it. Cryptocurrency can be extremely volatile – a single tweet can cause its price to plummet – and is still a very speculative investment. This means that you should invest carefully and cautiously.

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