How To Buy Cryptocurrency

In this detailed walkthrough, you’ll learn the precise steps and platforms for acquiring cryptocurrency in 2024.

Key Insights:

• Cryptocurrencies function akin to traditional currency, yet their utilization requires an initial purchase.
• For beginners, acquiring crypto often involves utilizing a cryptocurrency exchange, similar to a conventional stock brokerage account.
• There are two primary methods for purchasing crypto: centralized exchanges and decentralized exchanges, each with its distinct process; we’ll delve into both options.”

Understanding the Process of “Buying” Crypto

If you’re familiar with purchasing stocks, the concept of acquiring cryptocurrency follows a similar trajectory. Instead of using traditional brokers, cryptocurrency transactions occur on exchanges. Here’s a concise overview of the steps involved in buying crypto:

Select a Cryptocurrency:

Choose the cryptocurrency you wish to purchase. While there are numerous options available, starting with popular choices like Bitcoin or Ethereum are often recommended, as they constitute a significant portion of the market.

Pick a Platform:

Decide where to conduct your crypto purchase. Many beginners opt for centralized exchanges such as Coinbase. Later, we’ll delve into centralized exchanges versus decentralized exchanges. For newcomers, centralized platforms are favored for their ease in converting cash to crypto and vice versa.

Payment Method:

Determine the payment method for your crypto acquisition. Most exchanges facilitate linking your bank account or debit card. Some platforms, like Coinbase and Gemini, also allow PayPal integration. Credit card-funded purchases are generally not available due to concerns related to chargebacks and fraud.

Storage Options:

Once the crypto purchase is complete, you must decide where to store your digital assets. You have two primary options: the exchange where you made the purchase, similar to an online stock brokerage, or a self-controlled crypto wallet. While exchange-based storage is convenient, using a personal wallet is considered safer, offering protection against risks associated with exchange-related issues like bankruptcy. However, managing your crypto in a personal wallet entails responsibilities, including safeguarding the recovery phrase.

Pros and Cons of Cryptocurrency Investment:

Pros:

• Diverse Applications: Cryptocurrency and blockchain are used in various projects.
• Anonymity: Transactions linked to wallet addresses, enhancing privacy.
• Portfolio Diversification: Introduces dynamic asset class for risk management.
• Potential Returns: Offers potential for significant, albeit not guaranteed, returns.

Cons:

• Tax Implications: Treated as property, subject to capital gains tax in the US.
• Security Risks: Vulnerable to theft if wallet keys or exchange accounts are compromised.
• Volatility Challenges: Values can be highly volatile, posing risks, and some may decline to zero.
• Valuation Complexity: Difficult to assess the true value compared to traditional investments.

Who Should Consider Investing in Crypto?

Cryptocurrency often deemed a “risk asset” due to its volatile nature, can be part of various investment strategies suitable for:

Inflation-Concerned Individuals:

Despite price fluctuations, key cryptocurrencies like Bitcoin have shown remarkable long-term performance compared to traditional fiat currencies.

Over 2018–2021, Bitcoin yielded over a 1,000% return on investment in terms of dollars.

Tech-Savvy Individuals:

Crypto platforms are becoming more user-friendly, but navigating crypto transactions and storage requires some technical understanding.

A tech-savvy mindset helps in comprehending the workings of different cryptocurrencies and choosing suitable options for a portfolio.

Freedom-Minded Investors:

Cryptocurrency is a disruptive technology challenging established industries like banking, providing individuals with greater control over their finances.

Future-Oriented Investors:

Many investors anticipate cryptocurrency’s transformative impact on various industries, positioning it as a vital component of a forward-looking investment portfolio.

A Simple Guide to Purchasing Crypto in 5 Easy Steps

Buying cryptocurrency has evolved beyond obscure platforms and complex procedures. The process is now straightforward, often involving basic credit card or bank transactions. Here’s a step-by-step guide to help you navigate through the process:

Step 1: Choose Cryptocurrency and Purchase Amount

• Conduct research before diving in, focusing on well-known options like Bitcoin or Ethereum.
• Consider your investment goals and explore the top 20 crypto projects for a safer start.
• Evaluate live prices and use crypto research tools for decision-making.

Step 2: Pick a Crypto Exchange

• Select a centralized exchange (CEX) like Coinbase for beginners, facilitating easy conversion of fiat money to crypto.
• Understand proof of reserves, exchange location, insurance, and customer support when choosing an exchange.
• Optionally, explore decentralized exchanges (DEX) for crypto-to-crypto swaps.

Step 3: Verify Your Identity

• Complete Know Your Customer (KYC) verification by submitting a copy of your license or passport.
• KYC usually takes a few minutes but may extend to days for manual verification.

Step 4: Connect Your Funding Source to the Exchange

• Link your bank account, debit card, or PayPal to the exchange for your initial cash purchase.
• Few exchanges support credit card-funded purchases due to fraud risks.
• Wire transfers are an option for larger amounts, though they may incur fees.

Step 5: Transfer Your Crypto to a Self-Custody Wallet

• Decide how to store your crypto: on the exchange (custodial storage), in a software wallet (hot wallet), or on a hardware wallet (cold storage).
• Consider the safety aspects of each storage option before making a choice.
• Explore pairing a hot wallet with a cold wallet for added security.

To Sum It Up

Purchasing cryptocurrency doesn’t need to feel overwhelming. There are accessible options designed to simplify the process for newcomers or those with limited experience, whether you’re interested in coins (used as money) or tokens (offering additional functionalities) on an exchange. Consider your goals and level of crypto expertise — these answers will steer you towards the most suitable option for your needs.