How to Buy Cryptocurrency?
This beginner's guide will define cryptocurrency as an asset class and take you through the basics of buying it. We will also provide a step-by-step guide to help beginners understand how to buy cryptocurrency and the common mistakes to avoid.
Table of Contents
- Understanding Cryptocurrency and Trading
- Buying Cryptocurrency
- Step-by-Step Guide to Buying Cryptocurrency
- Common Mistakes to Avoid in Buying Crypto
- Final thoughts
In the past decade, cryptocurrencies and the underlying blockchain technology have gained significant influence in financial and technological circles.
Cryptocurrencies refer to digital assets that leverage cryptography to secure and verify transactions and control the creation of new entities. This unique feature enables them to operate independently of central banks and governments. Cryptocurrencies serve various purposes, including acting as a medium of exchange, store of value, and speculative investment.
Understanding Cryptocurrency and Trading
Cryptocurrency is a virtual currency that can be used for purchasing goods and services and is also an investment instrument. Unlike traditional currencies, cryptocurrencies are decentralized and are not issued, backed, or regulated by a central authority. They are created digitally through a validation process that relies on blockchain, a powerful technology that can be used in various processes.
What Is Crypto Trading?
Crypto trading, short for cryptocurrency trading, refers to the practice of buying, selling, and exchanging cryptocurrencies. It involves speculating on the price movements of digital currencies such as Bitcoin, Ethereum, and other altcoins. Crypto trading can be conducted on various platforms, including cryptocurrency exchanges, brokerages, and online trading apps.
Here are the key aspects of crypto trading:
- Crypto Exchanges and Brokerages: Crypto trading is facilitated through cryptocurrency exchanges and brokerages. These platforms allow users to buy, sell, and trade a wide range of cryptocurrencies using fiat currency or other cryptocurrencies.
- Trading Process: The trading process involves placing orders to buy or sell cryptocurrencies on the chosen platform. Users can select the cryptocurrency pair they want to trade, enter the amount to trade, and choose the order type, such as market or limit orders.
- Investment Vehicles: Crypto trading provides various investment vehicles, including crypto CFDs (Contracts for Difference), which allow traders to speculate on the price movements of cryptocurrencies without owning the underlying assets.
- Risks and Considerations: Crypto trading involves market volatility and risks. Traders need to have a good understanding of market trends, conduct thorough research, and be aware of the associated risks and laws that may apply based on their jurisdiction.
- Security and Investor Protections: Traders must choose reputable and secure platforms for crypto trading. However, it's important to note that crypto trading is not subject to the same investor protections as traditional investments, and there are risks associated with storing assets on exchanges.
Crypto trading requires a good understanding of market trends, thorough research, and awareness of the associated risks.
How Does Crypto Trading Work?
First, we need to understand how crypto trading works. In the world of cryptocurrency trading, there are two sides to every trade: a buyer and a seller. However, since a trade involves a purchase and a sale, one party stands to gain more than the other. This makes trading a zero-sum game, with a winner and a loser.
When a buyer and a seller agree on a price, the trade is executed through an exchange, and the market valuation for the asset is established. Typically, buyers set orders at lower prices than sellers, which creates two sides of an order book. If there are more buy orders than sell orders for a particular cryptocurrency, the price will usually increase because there is more demand. Conversely, if more people are selling than buying, the price will decrease. Different exchange interfaces represent buys and sales using different colors to give traders a quick indication of the state of the market at any given moment.
In trading, the main saying is "Buy low, sell high." Essentially, you want to spend the least amount possible when buying and get the most out of a deal when selling. However, there's also the aspect of longing or shorting an asset. Longing means buying an asset and earning profit based on its upward price movement while shorting involves selling borrowed assets that are paid back later.
What Are the Main Crypto Trading Styles?
It is also an important issue in buying/selling crypto. Each trading style is aimed to help a particular market player with its own experience. To buy crypto you don’t need a lot of styles to know; it’ll be enough just to know the amount you need to sell and the amount of crypto you need to buy. That’s it. But, for the whole picture of crypto trading, we assume, it will be interesting to know what other crypto styles are involved in crypto trading.
There are several styles of trading in the cryptocurrency market, and each has its advantages and disadvantages. Here are some of the most common styles of trading in the crypto market:
- Scalping: This is a short-term trading strategy that involves making multiple trades in a day to profit from small price movements. Scalping requires a lot of time and attention, and it is suitable for experienced traders.
- Day Trading: Day trading involves buying and selling cryptocurrencies within a single day to profit from short-term price movements. Day traders use technical analysis to identify trends and make informed trading decisions.
- Swing Trading: Swing trading involves holding a cryptocurrency for a few days or weeks to profit from medium-term price movements. Swing traders use technical analysis to identify trends and make informed trading decisions.
- Position Trading: Position trading involves holding a cryptocurrency for an extended period, usually several months or years, to profit from long-term price movements. Position traders use fundamental analysis to identify undervalued cryptocurrencies and make informed investment decisions.
- Investing: Investing involves buying and holding a cryptocurrency for a long time, usually several years, with the expectation of significant long-term gains. Investors use fundamental analysis to identify undervalued cryptocurrencies and make informed investment decisions.
It's important to note that each trading style has its risks and rewards, and it's essential to choose a style that suits your investment goals, risk tolerance, and experience level.
Why People Buy Cryptocurrency?
People buy cryptocurrency for various reasons, including:
- Investment: Cryptocurrencies are a popular investment option due to their potential for high returns. Many people buy cryptocurrencies with the hope of selling them at a higher price in the future.
- Decentralization: Cryptocurrencies are decentralized, meaning they are not controlled by any central authority. This feature is attractive to people who value privacy and autonomy.
- Security: Cryptocurrencies use advanced encryption techniques to secure transactions and protect users' identities. This feature is attractive to people who are concerned about online security and privacy.
- Anonymity: Cryptocurrencies offer a degree of anonymity, as transactions are not linked to personal information. This feature is attractive to people who value privacy and want to keep their financial transactions private.
- Accessibility: Cryptocurrencies are accessible to anyone with an internet connection, making them a popular option for people who do not have access to traditional banking services.
While cryptocurrencies offer many benefits, they are also highly speculative and volatile, and it is important to conduct thorough research and understand the risks involved before investing.
Before buying cryptocurrency and taking other actions related to it, be attentive and research the law about crypto in your country. It is crucial to DYOR and think critically while investing and trading cryptocurrency because it is a highly volatile asset.
Researching and Choosing a Cryptocurrency
Over the last decade, since Bitcoin's launch, thousands of other cryptocurrencies have entered the market, while many others have disappeared as well. Choosing the right cryptocurrency to buy can be a challenge, and we do not offer investment advice. However, we can provide you with a brief overview of some popular instruments and concepts.
Bitcoin is the oldest and most popular cryptocurrency. Its value has grown significantly since 2009. At the beginning of 2023, its value was around €25,000, while at the end of 2021, it was almost €64,000. Cryptocurrencies like Bitcoin are similar to traditional fiat money.
Ethereum is a blockchain network that enables the creation of smart contracts and decentralized apps. It operates without a central authority, laying the foundation for the Web3 ecosystem. Ether is its cryptocurrency, with the second-largest market capitalization among cryptocurrencies, after bitcoin.
Altcoins are all cryptocurrencies besides bitcoin. They vary in applications and many have lofty goals, but few survive. New crypto traders should be careful.
NFT stands for Non-Fungible Token. It's unique and serves as proof of ownership and authenticity. NFTs have been used to tokenize digital artwork, ownership certificates, and even sneakers.
DeFi or Decentralized Finance enables traditional financial applications without a central party and allows for lending without a bank using crypto staking.
How to Choose Crypto for Purchase?
To understand what cryptocurrency or concept you need, determine your purchase goals. If you want to store capital, for example, choose those instruments that will help you store and increase it. If you want to buy something using cryptocurrency, choose Bitcoin or Ether.
However, if you’re looking for a new altcoin or something that differs from the classic choice, or want to know how to define whether the cryptocurrency is suspicious or not, you need to be careful. Here are some ways to define whether a cryptocurrency is suspect and how to choose a reliable cryptocurrency project:
- Evaluating Cryptocurrency Projects: Check the project's website: A reputable cryptocurrency project should have an updated, engaging, and informative website. Look for information on the team members, partnerships, and the token's objective. The website should also offer a white paper
- Read the white paper: The white paper should clearly define the cryptocurrency's purpose and offer a practical solution to an existing problem. Look for coins that offer utility in the blockchain ecosystem
- Analyze the price performance: Analyze the price performance of the cryptocurrency in the past. The best coins can be chosen by looking at the coins that achieved the highest gains over a period. However, past performance does not guarantee future returns
- Evaluate the use case: Evaluate the use case of the cryptocurrency and its potential to solve real-world problems. Look for coins that offer practical solutions and have a clear use case
The next thing to take into consideration is a reliable project. In case you want to buy a token by certain guys from the tops and lists, but don’t know if they’re scammers or not, you may follow these steps:
- Look for established projects: Choose established cryptocurrency projects that have a proven track record and a strong community.
- Check the team members: Check the team members' credentials and experience in the cryptocurrency industry.
- Look for partnerships: Look for cryptocurrency projects that have partnerships with reputable companies and organizations.
- Check the community: Check the cryptocurrency project's community and social media presence. A strong and engaged community is a good sign of a reliable project.
What Are the Red Flags to Watch Out For When Choosing Crypto?
As with many things in the world, cryptocurrency purchases also can be full of unpleasant surprises. Whether to not you are caught in the arms of another scammer, you need to define the red flags that can be met:
- Lack of transparency: Avoid cryptocurrencies that lack transparency in their operations, team members, and partnerships.
- No clear use case: Avoid cryptocurrencies that do not offer a practical solution to an existing problem.
- No white paper: Avoid cryptocurrencies that do not offer a white paper or have a poorly written one.
- No clear roadmap: Avoid cryptocurrencies that do not have a clear roadmap for development and implementation.
- No team list: Avoid projects that do not share with clients and users their team or at least founders.
Selecting a Reputable Exchange
When choosing a reputable and user-friendly crypto exchange or brokerage, there are several factors to consider. Some of the key factors include:
- Security: Look for an exchange that has strong security measures in place to protect your funds and personal information.
- Liquidity: Choose an exchange with high trading volume and liquidity to ensure that you can buy and sell cryptocurrencies quickly and at a fair price.
- Ease of use: The exchange should have an intuitive, modern interface that is easy to navigate and understand.
- Supported coins: Check that the exchange supports the cryptocurrencies you want to trade.
- Jurisdiction: Make sure the exchange operates in your area and complies with local regulations.
- Fees: Consider the fee structure of the exchange, including trading fees and withdrawal fees.
It's important to DYOR and compare different options to find the one that best meets your needs and preferences.
Crypto Exchanges You May Be Interested in
Coinbase is a secure online platform that allows users to buy, sell, transfer, and store various cryptocurrencies. It is a reputable platform that prioritizes security, transparency, and user-friendliness, making it a popular choice for individuals and businesses looking to engage with cryptocurrencies.
Gemini is a full-reserve and highly regulated cryptocurrency exchange and custodian. It allows users to buy, sell, and trade over 70 coins on its platform. Founded in 2014, Gemini prioritizes strong security controls and compliance, making it suitable for both beginners and experienced traders.
Crypto.com is a cryptocurrency exchange company based in Singapore, with a reported 80 million customers as of summer 2023. The platform offers brokerage services, allowing users to buy and sell cryptocurrencies easily. It supports bank transfers, credit cards, debit cards, and cryptocurrency transfers for purchasing crypto, depending on the region.
eToro is a social trading and multi-asset investment company that provides financial services. It was founded in 2007 in Tel Aviv, Israel. The company offers a platform that allows to invest in stocks, digital assets, and trade CFDs. eToro is known for its CopyTrader feature, which enables investors to automatically copy the network's top traders. Recently we’ve made a guide on how to buy crypto on eToro.
Uphold is a cryptocurrency exchange and trading platform that allows users to buy, sell, and trade crypto. The platform is known for its user-friendly interface, support for a wide range of cryptocurrencies, and emphasis on transparency and security. Users can invest, transfer, and trade over 250 cryptocurrencies and 27 traditional currencies on the platform.
Step-by-Step Guide to Buying Cryptocurrency
Here is a step-by-step guide to buying crypto:
- Choose a cryptocurrency exchange: Select a reputable and user-friendly exchange such as Coinbase, Gemini, or others. Consider factors like security, fees, trading volume, and the types of cryptocurrencies available for purchase.
- Create and verify your account: Sign up on the chosen exchange and complete the required identity verification process. You may need to submit a copy of your driver's license or passport and even upload a selfie to prove your appearance matches the documents you submit.
- Deposit cash to invest: Deposit money into your crypto account by linking your bank account, authorizing a wire transfer, or using a cryptocurrency transfer from another wallet or exchange.
- Decide on a payment option: Choose the appropriate order type and the conditions under which you want to buy or sell the cryptocurrency. It can be fiat currency, cash, debit or credit cards, another cryptocurrency, or something else. It is important to remember that you may buy crypto on the money that you are ready to give/lose/leave. Do not use savings or money that were left for serious purposes.
- Place your cryptocurrency order: Once your account is verified and you have funds available, you can place an order to buy or sell a specific cryptocurrency. The process may vary depending on the exchange you choose, but generally, you can purchase or sell cryptocurrencies by pressing an "Acquire" or "Sell" button and entering the amount you want to buy (or sell).
- Store your cryptocurrency: After purchasing your cryptocurrency, you will need to store it in a secure digital wallet or crypto exchange. Research and choose a trusted wallet or exchange that suits your needs and preferences.
Remember that investing in cryptocurrencies carries risks, so it's essential to do your research, understand the market, and have a clear investment strategy in place before making your first purchase.
What Is the Best Way to Buy Crypto for Beginners?
The best way to buy cryptocurrency for beginners is through a reputable and user-friendly crypto exchange or broker. Here are some key points:
- Crypto Exchanges: Using a crypto exchange is the most straightforward way to buy cryptocurrency. There are different types of exchanges, including centralized exchanges, decentralized exchanges, and peer-to-peer exchanges. Centralized exchanges are often recommended for beginners due to their user-friendly interfaces and customer support.
- Traditional Trading Platforms: Some traditional trading platforms also offer the ability to buy and sell cryptocurrencies. These platforms operate similarly to stock trading platforms, allowing investors to enter the market at a specific price using limit orders or quickly using market orders.
- Credit/Debit Card Purchase: Some online platforms allow users to buy cryptocurrency with a credit or debit card. While this method is convenient, it often involves higher fees, and it's important to be aware of the potential price fluctuations in the cryptocurrency market.
- Crypto Exchange-Traded Funds (ETFs): Exchange-traded funds are another way to gain exposure to cryptocurrencies. ETFs allow investors to gain exposure to a basket of cryptocurrencies through a single investment vehicle.
How to Store and Secure Your Crypto?
Storing and securing cryptocurrency is crucial to protect your digital assets from theft, loss, or damage. Here is the list of things that may help you to secure your crypto:
- Wallets and Keys: Crypto assets are stored in digital wallets, which are secured by private keys. It's important to choose a reputable wallet provider and keep your private keys safe and secure.
- Security Measures: Crypto hacks and thefts usually occur when a bad actor gains illegitimate access to a person's private key. To prevent this, use two-factor authentication, avoid sharing your private keys, and keep your computer and software up to date with the latest security patches.
- Cold Storage: Cold storage wallets are the most secure option for storing large amounts of cryptocurrency. They are offline wallets that are not connected to the internet, making them less vulnerable to hacking attempts.
- Hot Storage: Hot wallets are online wallets that are connected to the internet, making them more vulnerable to hacking attempts. They are suitable for smaller amounts of cryptocurrency that you want to use for trading or transactions.
- Recovery Phrases: It's important to record and store your recovery phrases in a secure location that only you can access. Recovery phrases are used to restore access to your wallet if you lose your private keys or forget your password.
Storing and securing cryptocurrency requires a different set of challenges than traditional investments. It's important to choose a reputable wallet provider, use security measures like two-factor authentication, and store your cryptocurrency in cold storage wallets for maximum security.
Common Mistakes to Avoid in Buying Crypto
Here are some common mistakes to avoid when buying cryptocurrency:
- Buying just because the price is low: Low prices do not always represent bargains. Sometimes prices are low for a reason! Watch out for cryptocurrencies with falling user rates. Often, too, developers leave a project and it stops getting properly updated, making the cryptocurrency insecure.
- Going all-in: Investing all your money in one cryptocurrency is risky. Diversify your portfolio by investing in multiple cryptocurrencies to spread your risk.
- Thinking crypto is easy money: Cryptocurrency trading is not a get-rich-quick scheme. It requires research, strategy, and patience. Don't invest more than you can afford to lose.
- Forgetting your crypto keyphrase: Your private key is the only way to access your cryptocurrency wallet. Losing it means losing access to your funds. Keep your keyphrase safe and secure.
- Ignoring fees: Transaction fees can add up quickly, especially if you're making frequent trades. Be aware of the fees charged by your exchange and factor them into your trading strategy.
- Lack of research: Conducting thorough research is crucial before investing in any cryptocurrency. Lack of research can lead to investing in scams or poorly performing cryptocurrencies.
- FOMO buying: Fear of missing out (FOMO) can lead to impulsive buying decisions. Don't let emotions drive your investment decisions.
- Short-term thinking: Cryptocurrency prices can be volatile, and short-term thinking can lead to panic selling or buying. Have a long-term investment strategy in place.
- Ignoring risk management: Diversify your portfolio, set stop-loss orders, and maintain a proper risk-to-reward ratio to manage your risk effectively.
- Overconfidence: Overestimating your abilities and making large investments without proper diversification or risk management is not advised. Always practice proper portfolio management for stable returns.
Crypto trading can be exciting and profitable, but it's important to avoid common mistakes that can lead to losses. Conduct thorough research, diversify your portfolio, manage your risk, and have a long-term investment strategy in place to maximize your chances of success.
Investing in cryptocurrency can be an exciting opportunity, but it's essential to conduct thorough research, understand the risks involved, and use reputable and secure platforms for buying and storing digital assets.
For beginner traders looking to buy cryptocurrency, it's important to approach the market with caution and a solid understanding of the potential risks and rewards. Here are some final thoughts based on our guide:
- Choose the Right Exchange: Selecting a reputable and user-friendly crypto exchange is crucial. Research different exchanges, consider factors like security, fees, and available cryptocurrencies, and choose a platform that aligns with your needs and preferences.
- Avoid Common Mistakes: Learn from the mistakes of others to minimize losses and maximize profits. Common mistakes to avoid include not choosing the right exchange, believing everything you read, and not setting clear goals and limits for your trades.
- Start Small: For beginners, it's advisable to start small and only use money that you can afford to lose. Cryptocurrency trading can be highly speculative and volatile, so it's important to approach it with caution.
- Educate Yourself: Understand the cryptocurrency market, blockchain technology, and different trading strategies. Take the time to research and educate yourself before making any investment decisions.
- Security and Fees: Prioritize security and be mindful of fees. Choose a trusted crypto exchange and a secure wallet to store your cryptocurrencies. Additionally, understand the fees associated with buying, selling, and storing cryptocurrencies to avoid unnecessary costs.
In conclusion, for beginner traders, it's essential to choose the right exchange, avoid common mistakes, start small, educate yourself, prioritize security, and be mindful of fees. By taking a cautious and informed approach, beginner traders can navigate the cryptocurrency market more effectively and minimize potential risks.
By following these steps and being aware of common mistakes, beginners can start their journey into the world of cryptocurrency investment with confidence. It's important to note that the information provided is based on publicly available sources and may be subject to change over time.
How do beginners buy cryptocurrency?
To buy cryptocurrency, the beginner needs to choose a crypto exchange or brokerage, create and verify the account, deposit cash to make an order, choose the cryptocurrency, place the crypto order, and store the crypto for the future.
Can I buy $100 worth of cryptocurrency?
Yes, you can buy $100 worth of cryptocurrency. You can invest as little as you'd like, as you don't have to buy 1 whole BTC. Most cryptocurrency exchanges will allow you to buy very small amounts of Bitcoin, even just a few dollars’ worth.
What's the best way to buy crypto?
The best way for beginners to buy cryptocurrency is through a reputable and user-friendly crypto exchange or broker. It's important to choose a platform that aligns with your investment goals, risk tolerance, and level of experience. It's also advisable to conduct thorough research and understand the fees associated with buying, selling, and storing cryptocurrencies to ensure a smooth and secure buying experience.
Is crypto still a good investment?
While cryptocurrency can offer high returns, it's essential to approach it as a speculative investment and consider the high volatility and risks involved. Cryptocurrency can be a good investment, but it comes with significant risks and volatility. It's important to DYOR, understand the risks, and consider your investment goals and risk tolerance before investing in cryptocurrencies.