How to buy cryptocurrency?
The question may arise as to how to buy cryptocurrency safely. It usually happens in three steps.
Step 1: Choose a platform
The first step is to choose a platform to use. You can usually choose between a traditional broker or a specialized cryptocurrency exchange.
- Traditional brokers. These are online brokers that offer buying and selling of cryptocurrencies as well as other financial assets: stocks, bonds, ETFs. These platforms tend to offer lower trading commissions, but fewer cryptocurrency features.
- Cryptocurrency exchanges. There are many cryptocurrency exchanges, each offering different cryptocurrencies, wallet storage, interest-bearing account options and more. Many exchanges charge fees depending on the assets traded.
When comparing platforms, it is advisable to pay attention to the cryptocurrencies traded, commissions, security features, storage and withdrawal options, and educational resources.
Step 2: Depositing funds into your account
The next step after choosing a platform is to fund your account so that you can start trading. Most cryptocurrency exchanges, depending on the platform, allow users to buy cryptocurrency with fiduciary (government-issued) currencies such as the U.S. dollar, British pound, euro, and when paying with debit or credit cards.
Credit card purchases of cryptocurrency are considered risky, so not all exchanges support them. Some credit card companies also do not allow cryptocurrency transactions. This is due to the extremely high volatility of cryptocurrencies – when trading certain assets, it is not advisable to take the risk of making transactions on debt or potentially paying high credit card transaction fees.
Some platforms also accept ACH transfers (Automated Clearing House transfers) and bank transfers. Acceptable payment methods and deposit and withdrawal times vary by platform, and deposit clearing times vary by payment method.
An important factor to consider is the amount of commissions, which includes potential deposit and withdrawal fees and trading commissions. The amount of commissions varies depending on the payment method and platform. It is recommended that you research this issue at the platform selection stage.
Step 3: Placing Orders
Orders can be placed through the website or mobile app of the selected broker or exchange. To buy cryptocurrency, you need to select the “Buy” option, order type, specify the amount of cryptocurrency to be purchased and confirm the order. Similarly, an order to sell is placed.
There are other ways to invest in cryptocurrency. These include payment services such as PayPal, Cash App and Venmo, which allow you to buy, sell and store cryptocurrencies. In addition, there are the following investment tools:
- Bitcoin trusts. Bitcoin trust shares can be purchased into a regular brokerage account. Such instruments give individual investors access to cryptocurrency through the stock market.
- Bitcoin mutual funds. There are bitcoin-linked ETFs as well as bitcoin mutual funds.
- Blockchain stocks and ETFs. Indirectly investing in cryptocurrency can be done through blockchain companies that specialize in the technology behind cryptocurrency mining and cryptocurrency transactions. Alternatively, you can buy stocks or ETFs of companies that use blockchain technology.
The best option depends on your investment objectives and risk appetite.
How to store cryptocurrency?
After purchase, it is necessary to provide reliable storage of cryptocurrency, which guarantees protection from hacking and theft. Cryptocurrency is usually stored in cryptocurrency wallets. These are physical devices or online programs used to securely store private keys to cryptocurrencies. Some exchanges provide wallet services so that cryptocurrency funds are stored directly by the platform itself, but not all exchanges and brokers provide such services automatically.
There are also different wallet providers. There are two types of storage of funds: “hot wallet” and “cold wallet”.
- A hot wallet is a cryptographic storage facility that uses online software to protect the private keys to assets.
- A cold wallet (also called a hardware wallet), unlike a hot wallet, uses offline electronic devices to securely store private keys.
Generally, there is a fee for using cold wallets and no fee for using hot wallets.
