It can be difficult to figure out how to acquire Dogecoin, Bitcoin, Ethereum, and other cryptocurrencies if you’re new to the crypto world. Thankfully, learning the ropes is rather simple. Following these five simple steps, you can finally learn how to start investing in cryptocurrency.
- Choose a Broker or Crypto Exchange
To purchase cryptocurrency, you must first choose a broker or a crypto exchange. While both allow you to buy cryptocurrency, there are a few major differences to be aware of.
What Is a Cryptocurrency Exchange?
A cryptocurrency exchange is a marketplace for buyers and sellers to trade digital currencies. Exchanges typically offer lower costs, but they can have more complicated interfaces with many transaction kinds and enhanced performance charts, which can be intimidating to beginning crypto investors.
Coinbase, Gemini, and Binance are three of the most well-known cryptocurrency exchanges. While the conventional trading interfaces of these organizations may be intimidating to newcomers, especially those with no prior experience in stock trading, they also provide user-friendly, easy buy options.
The convenience comes at a price, as the newcomer options are significantly more expensive than buying the same cryptocurrency through each platform’s conventional trading interface. To save money, you should learn how to use traditional trading platforms before making your first crypto purchase—or soon after.
Important note: If you’re new to crypto, check sure your preferred exchange or brokerage supports fiat money transfers and purchases in US dollars. Some exchanges only opt to buy cryptocurrency using another cryptocurrency, which means you’d have to go to a different exchange to buy the cryptocurrencies your chosen exchange allows before you could start trading cryptocurrency on that platform.
What Is a Cryptocurrency Broker?
Cryptocurrency brokers simplify the process of buying cryptocurrency by providing simple interfaces that connect with exchanges on your behalf. Some levy costs are higher than those charged by exchanges. Others claim to be “free” while earning money by selling data on your and other traders’ purchases and sales to huge brokerages or funds or by not completing your deal at the best available market price. Two of the most well-known cryptocurrency brokers are Robinhood and SoFi.
While brokers are unquestionably convenient, you should be aware that you may be restricted from moving your bitcoin assets off the platform if you utilize them. You can’t access your crypto assets out of your wallet at Robinhood or SoFi, for example. Although this may not appear to be a big concern, sophisticated crypto investors prefer to keep their money in crypto wallets for additional security. For even greater security, some people opt for physical crypto wallets that are not hooked up to the internet.
- Create and Verify Your Account
You may be asking about how to begin investing, but you will have to wait it out a bit more. You can open an account with a cryptocurrency brokerage or exchange once you’ve decided on one. You may be required to prove your identification depending on the platform and the quantity you intend to purchase. This is a necessary step in preventing fraud and complying with federal regulations.
You might not be able to buy or trade cryptocurrencies until the verification process is completed. You may be required to produce a copy of your driver’s license or passport, as well as a selfie, to verify that your look matches the documentation you submit.
- Deposit Cash to Invest
To purchase cryptocurrency, you must first ensure that you have money in the account. You can fund your cryptocurrency account by connecting your bank account, allowing a wire transfer, or even making a debit or credit card payment. You may have to wait a couple of days before you can utilize the money you deposit to acquire cryptocurrencies, depending on the marketplace or broker and your financing method.
Here’s one thing to keep in mind as a potential buyer: While some exchangers or brokers enable you to deposit funds with a credit card, this is a very risky—and expensive—option. Purchases of cryptocurrencies with credit cards are treated as cash advances by credit card companies. This implies you’ll have to pay greater interest rates than you would on regular purchases, as well as additional money advance fees. When you take out a cash advance, you may be required to pay 5% of the transaction value. This is in addition to any fees imposed by your crypto exchange or brokerage; they can be as high as 5%, implying that you may lose 10% of your cryptocurrency purchase to fees.
- Place Your Cryptocurrency Order
You’re ready to place your debut cryptocurrency order after you have money in your account. There are hundreds of cryptocurrencies to select from, including well-known names like Bitcoin as well as lesser-known coins like Theta Fuel and Holo.
When you’ve decided which cryptocurrency to buy, type in its ticker symbol (Bitcoin’s is BTC) and the number of coins you want to buy. You can buy fractional shares of cryptocurrency on most exchanges and brokers, permitting you to buy a sliver of high-priced cryptocurrencies like Bitcoin or Ethereum that would otherwise cost thousands of dollars.
- Select a Storage Method
Cryptocurrency exchanges are not insured by the Federal Deposit Insurance Corporation (FDIC). Therefore they are vulnerable to theft and hacking. If you overlook or lose the codes to confirm your identity, you risk losing your entire investment, as vast amounts of money in Bitcoin have already been lost. This is why having a safe place to store your cryptocurrencies is very important.
If you buy bitcoin through a broker, you may have next to no control over how your cryptocurrency is stored, as previously stated. You have more possibilities if you buy cryptocurrency through an exchange:
Keep your cryptocurrency on the exchange. When you purchase bitcoin, it is usually stored in a crypto wallet linked to the exchange. You can take your cryptocurrency off of the exchange to a private hot or cold wallet if you don’t like the supplier your exchange works with or want to relocate it to a safer place. You may have to pay a fee depending on the currency rate and the size of your transfer.
Hot wallets: These are online crypto wallets that run on internet-connected platforms, including tablets, PCs, and phones. Hot wallets are convenient, but because they’re still connected to the internet, they’re more vulnerable to theft.
Cold wallets: Because cold crypto wallets aren’t hooked up to the internet, they’re the safest way to store cryptocurrency. External devices, such as a USB drive or a hard drive, are used. Cold wallets, on the other hand, must be used with caution: if you lose the key code connected with them, or if the device malfunctions or fails, you may never be able to recover your bitcoin. While this could occur with certain hot wallets, some are maintained by custodians who can assist you in regaining access to your account if you become locked out.
Alternatives Ways to Buy Crypto
While purchasing cryptocurrencies is currently a popular trend, it is an unpredictable and risky investment. If investing in cryptocurrency on an exchange or through a broker isn’t for you, there are a few additional ways to indirectly invest in Cryptos:
- Wait for Crypto Exchange-Traded Funds (ETFs)
ETFs are popular financial vehicles that allow you to get exposure to numerous different investments in one go. As a result, they offer immediate diversity and are less hazardous than individual investments.
Cryptocurrency ETFs, which allow you to invest in many currencies at once, are in high demand. There are currently no cryptocurrency ETFs available for regular investors, but this may change shortly. The Securities and Exchange Commission (SEC) is currently considering three cryptocurrency ETF proposals from Kryptcoin, VanEck, and WisdomTree as of June 2021.
- Invest in Companies Connected to Cryptocurrency
You can buy stocks of firms that utilize or own currencies and the blockchain that enables them if you’d rather invest in companies that have actual products or services and are subject to regulatory control but still want access to the cryptocurrency industry. To purchase shares of publicly traded firms, you’ll need an online brokerage account.
Nvidia (NVDA): This technological firm creates and distributes graphics processing elements, which are at the core of bitcoin mining equipment.
PayPal (PYPL): This payment technology, which is already popular for individuals buying things online and sending money to friends and family, has just expanded to allow clients to purchase and sell chosen cryptocurrencies using their PayPal & Venmo accounts.
Square (SQ): Since October 2020, this payment services company for smaller companies has purchased nearly $220 million in Bitcoin. In February 2021, the company revealed that Bitcoin accounted for almost 5% of its cash on hand. Square’s Cash App also allows users to purchase, sell, and store cryptocurrencies.
Many people ask if “is now a good time to invest.” The simple answer is yes!
Before investing in cryptocurrencies or specific companies with a large interest in them, as with any investment, make sure you analyze your investment goals and present financial circumstances. Cryptocurrency prices can be incredibly volatile—a single tweet from Elon Musk can send them plummeting—and it’s still a very risky investment. This indicates you should invest with prudence and care.
Do you want to learn more about investing? Check our other blogs.
