A cryptocurrency, also known as crypto, is a form of virtual or digital currency, something like an online version of cash that can be exchanged online to buy products and services. Transactions involving cryptos eliminate the need for traditional intermediaries such as banks and government institutions, which is why Bitcoin has become so popular among users.
Many companies have issued their own cryptocurrencies, often called tokens, which can be traded specifically for the goods or services that the company offers. Just like arcade tokens and casino chips, you’ll need to exchange real currency for the cryptocurrency to access the goods or services.
A transaction involving a cryptocurrency gets recorded in a public log powered by an open-source code known as ‘blockchain.’ As the name suggests, blockchain comprises units called blocks containing information about each transaction. Each block is chained to the code in chronological order, which creates a permanent record of each transaction. Even though every Bitcoin transaction is recorded in a public log, names of buyers and sellers are never revealed – apart from their wallet IDs.
This allows Bitcoin users to buy or sell anything without easily tracing it back to them. Blockchain also greatly reduces the risk of fraudulent Bitcoin transactions, as these unique codes are painstakingly hard to duplicate. It’s the secure nature of this technology that appeals to everyone.
However, newbies to the world of cryptocurrency might find it confusing how to buy Bitcoin, Ethereum, and other cryptocurrencies. That said, it’s pretty simple to learn the process with the help of cryptorunner.com a crypto comparison site. In this article, we’ll guide you on how to buy and start investing in cryptocurrency.
Pick a Crypto Exchange or Broker
The first step to buy bitcoin or other cryptocurrencies requires choosing a broker or a crypto exchange. But before you decide which one to pick, there are a few key differences between them that you should know.
A cryptocurrency exchange works like any stock exchange. It’s a place where buyers and sellers meet up to trade cryptocurrencies. Some of the most popular cryptocurrency exchanges include Coinbase, Gemini, and Binance US.
Exchanges usually charge lower fees than brokers. That said, they also tend to have more complex trading interfaces that may intimidate and overwhelm beginners. These platforms charge substantially less compared to a cryptocurrency broker. Hence, we advise that you familiarize yourself with the world of crypto before you make your first crypto purchase to save on costs.
Though if you’re on the lookout for beginner-friendly options with easy-to-use interfaces, then go for a well-known crypto broker. Some of the most popular crypto brokers are SoFi, eToro, and Robinhood. Crypto brokers simplify the whole process of buying a cryptocurrency and make complex trading strategies accessible to inexperienced users.
Whether you decide to go for exchange or a broker, make sure they allow purchases made with US dollars and fiat currency transfers. Keep in mind that some exchanges only allow you to buy a cryptocurrency using another cryptocurrency, implying you’d have to find another exchange to buy the currency (often called tokens) your exchange accepts before you can start trading on that platform.
Create and Verify your account
Now that you’ve picked your preferred broker or a crypto exchange, it’s time to sign up and open an account. You’ll need to complete the verification process before you’re allowed to buy or sell cryptocurrencies. You may be asked to submit a copy of a passport or driver’s license along with a selfie. Verifying your account is also important to prevent fraud and meet regulatory requirements.
Fund your account
Once you’ve created and verified your account, you’ll need to deposit money into your crypto account by linking your bank account and authorizing a wire transfer. You can even use your debit or credit card to fund your account.
That said, using a credit card can be quite risky and expensive, as they’re subject to higher rates than regular purchases.
Place your first cryptocurrency order
Now that you’ve sufficiently funded your account, you’re all set to place your first cryptocurrency order. With over 10,000 different cryptocurrencies traded publicly, you’re not short on options. From established names such as Bitcoin and Ethereum to more discrete ones such as Holo or Fuel, you’re not short on options. Once you decide on a cryptocurrency to purchase, the next step involves entering its ticker symbol and how many tokens you’d want to purchase. For instance, the symbol for Ethereum is ETH and for Bitcoin its BTC.
Most exchanges and brokers allow you to buy fractional shares of cryptocurrency. For instance, you can buy high-value coins like Ethereum or Bitcoin that cost a lot.
Choose a storage method
It’s important to secure your crypto tokens in a safe place to prevent the risk of theft or hacking.
Once you’ve chosen a reliable crypto exchange, the next step involves obtaining a cryptocurrency wallet. As soon as you buy cryptocurrency, it gets stored in a so-called crypto wallet attached to the exchange. In case you think your provider isn’t a safe place to secure your crypto investments and you’re looking for enhanced security, you might transfer it to a separate crypto wallet.
A cryptocurrency wallet allows you to store and exchange cryptocurrencies. There are two kinds of wallets – Hot and Cold. In a Hot wallet, cryptocurrency is stored in the cloud on a trusted exchange or provider and accessed through a computer browser, desktop, or smartphone app. In a Cold wallet, an encrypted portable device like a thumb drive allows you to download and carry your bitcoins. When you’ve chosen the wallets you’d like to use, and you are all set and ready to start investing in cryptocurrencies.
Cryptocurrencies are highly volatile assets where prices can shoot up and down in just a few hours. Several events can lead to such price volatility, so one must constantly monitor the market and stay up to date with crypto-related news. The best way to do so is to follow major publications and blogs in the industry such as Coindesk, News Bitcoin, and Nerdwallet. You can also find additional tips on social media such as crypto-related subreddits, Telegram and Discord channels, as well as Quora threads.