How to buy cryptocurrency; A Guide for New Crypto Investors

What is Cryptocurrency?

Cryptocurrencies are digital assets created using computer networking software that enables secure trading and ownership.

Bitcoin and most other cryptocurrencies are supported by a technology known as the blockchain, which maintains a tamper-resistant record of transactions and keeps track of who owns what. Public blockchains are usually decentralized, which means they operate without a central authority such as a bank or government.

The easiest way to get cryptocurrency is to buy it, either from an exchange or another user.

How to buy cryptocurrency?

1. Choose a Broker or Crypto Exchange

To know How to buy cryptocurrency, first, you need to pick a broker or a crypto exchange. While either let you buy crypto, there are a few key differences between them 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 they tend to have more complex interfaces with multiple trade types and advanced performance charts, all of which can make them intimidating for new crypto investors.

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What Is a Cryptocurrency Broker?

Cryptocurrency brokers take the complexity out of purchasing crypto, 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 not executing your trade at the best possible market price. Robinhood and SoFi are two of the most well-known crypto brokers.

2. Create and Verify Your Account

Once you decide on a cryptocurrency broker or exchange, you can sign up to open an account. Depending on the platform and the amount you plan to buy, you may have 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 driver’s license or passport, and you may even be asked to upload a selfie to prove your appearance matches the documents you submit.

3. Add value to your account

Depending on how you choose to pay, you may have to fund your account before purchasing any crypto. If you’re using fiat currency, most exchanges allow debit and bank transfers. Some also allow you to fund a purchase with your credit card, though this can be a risky move with a volatile asset like cryptocurrency because interest costs can deepen your losses if your investments decline in value.

If you already own cryptocurrency, you can transfer it into your account from a digital wallet or another platform, then use it to trade. Just be sure to verify that your crypto exchange allows trading between the assets you’re looking at. Not all cryptocurrencies can be directly traded for one another, and some platforms have more trading pairs than others.

Another thing to note is that exchanges’ fees vary depending on what you’re buying and how you’re buying it, so review these details carefully.

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4. Select a cryptocurrency

Once there is money in your account, you’re ready to place your first crypto currency order. There are hundreds of cryptocurrencies to choose from, ranging from well-known names like Bitcoin and Ethereum to more obscure cryptos like Theta Fuel or Holo.

There are many options for cryptocurrency investors, though there are none that are likely to be right for everyone. Before you buy, ask yourself what your goals are for this investment. Are you hoping it will increase in value? Are you interested in carrying out transactions using cryptocurrency? Are you interested in using the underlying technology via decentralized apps? These may help you make your decision.

These are the 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap.

Data current as of Feb. 18, 2022.

5. Select a Storage Method

In contrast to the FDIC, cryptocurrency exchanges are not protected from being hacked or stolen.

As millions of dollars of Bitcoin already have been lost due to forgetting or losing their access codes, you could even lose your investment. Keeping cryptocurrencies in a secure location is important for this reason.

The storage mechanism for your cryptocurrency is out of your hands if you buy it through a broker.

You have more options if you buy cryptocurrency on an exchange:

Cryptocurrency should remain on the exchange.

Cryptocurrency is typically stored on an exchange in a crypto wallet. A wallet or hot address should be used if your bitcoins aren’t happy with the bitcoin exchange’s provider.

In some cases, depending on the exchange rate and the transfer size, a small fee may be incurred.

Hot wallets

Computers, tablets, and smartphones can access crypto wallets online. Although hot wallets are convenient due to the fact that they are still connected to the internet, they are also more vulnerable to theft.

Cold wallets

Your most secure cryptocurrency storage option is a cold crypto wallet, which is not connected to the internet. Among the various types of external storage devices are hard drives, USB drives, and other flash drives.

You cannot retrieve your cryptocurrency if you lose the keycode or the device breaks in most cases. Custodians typically host hot wallets, so if you get locked out they can assist you in regaining access

Risk factor

Having a clear idea about norms and regulations, global economic developments, and the crypto trend is very important for investment in this field. Crypto is a volatile investment instrument and gain or loss can be huge if one does not understand the sector well.

To mitigate the risks, following crypto news and articles regularly is important. The Indian government is also trying to regulate the large concurrency market in India, through a crypto bill. However, analysts are having mixed opinions about the bill. Having a good risk appetite is important to invest in cryptocurrencies like Bitcoin.

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