How to Buy Cryptocurrency 0/0
How to Buy cryptocurrency
Wish to be a successful cryptocurrency trader? There are a lot of things to consider before you venture into the cryptocurrency market.
This course offers you a step-by-step guide on where and how to buy and sell cryptocurrencies, presenting you with the best strategy on how to become a succesful trader.
1 How to buy Cryptocurrency
The cryptocurrency space is growing larger everyday. Today, there are over a thousand marketplaces ( both online and offline) where traders can place buy or sell orders for cryptocurrencies.
However, with so many options available, it can be overly difficult to choose a suitable option for you. There are a list of factors you must consider before buying cryptocurrencies:
Location: Every Country should have a legislation that protects cryptocurrency investors and regulates the cryptocurrency market. In choosing a particular trading platform, you must ensure that they conform to your contry’s regulation.
Security: It is imperative to do research and guarantee you are choosing a legitimate and secure platform. With the increasing rate of cryptocurrency adoption across the globe, cybercriminals have set up numerous trading platforms with the intention of defrauding investors of their money.
Method of Purchase: The method of purchasing cryptocurrency varies between platforms. Some platforms require deposits by bank transfer, some use PayPal, some accept credit and debit cards, and some solely use cryptocurrency for purchases.
If you entering the cryptocurrency market for the first time, it is essential that you choose a platform that accepts fiat currencies (cash).
Supported Tokens: There is a significant variation in supported cryptocurrencies across different trading platforms. You will have to find a platform that sells the cryptocurrency that you are interested to purchase.
Fee Structure: Transaction fees differ across various exchanges, which is critical when choosing a trading platform. Some offer low transaction fees while some others charges very high transaction fee.
User Experience: Whether you are a seasoned cryptocurrency trader or buying bitcoin for the first time, an intuitive interface and good user experience aids user actions on the exchange to be more informed and more efficient.
In choosing a trading platform, it is important to note how long purchases take to complete. Some platforms process transactions nearly instantly while others can take days or weeks.
It is very essential you understand the above factors as it will be a guide for you in selecting a crypto trading platform that is most suitable for you. Now that you are aware of this, lets visit the various marketplaces where you can purchase cryptocurrencies.
2. Where to Buy Cryptocurrency
As noted earlier, there are a lot of marketplaces offering cryptocurrency trading (sell and purchase). They come in various platforms offering you different strategy that will suit your personality. Let’s look at the different places and ways you can get your crypto.
2.1 Cryptocurrency Exchanges (Centralized)
This is an online platform and the most common way of trading cryptocurrencies. This includes buying/selling cryptocurrencies with fiat currencies (fiat/crypto paring) as well as buying/selling cryptocurrencies with other cryptocurrencies (crypto/crypto pairing). They can be viewed as an online marketplace for the entire cryptocurrency network.
Just like a traditonal bank, crypto exchanges are mostly centralised. To be centralized means that there is a trusted middleman to handle whatever asset may be in a trade. In a bank, for example, a customer gives their money over to the bank to hold for them. This one institution is now in complete control of the customer’s money.
This tells that apart from the regular crypto trading service, exchanges can also store your cryptocurrency for you. In many cases, this is much safer than a person finding some way to manage themselves. Exchanges have many securities and a team to watch over their customers’ money. It can also offer a variety of services, such as loans, because the exchange holds a large amount of cryptocurrency and has created a trust relationship with the customer.
It is important to note the following points to see if the crypto exchange will suit your style of trade:
Does Cryptocurrency Exchanges Requires Individual Verification?
Most exchanges around the world require minimum verification to authenticate the account. The basic verification normally requires a picture of the user’s passport/ID, and 2 Factor Authentication enabled. 2FA is a secret password that regenerates every thirty seconds or so that is needed every time a user logs into their account. 2FA is normally kept on the user’s phone.
Do all centralized exchanges provide fiat/crypto pairings?
All exchanges have crypto/crypto pairing (i.e., trading one cryptocurrency for another), but not all have fiat/crypto pairings (i.e., trading your fiat cash for a cryptocurrency). The most popular exchanges that provide fiat/crypto pairings are:
⦁ Coinbase – most popular in the world, supports Bitcoin, Bitcoin Cash, Litecoin, and Ethereum.
⦁ Gemini – based in New York with high regulation standards for the US. Supports Bitcoin and Ethereum.
⦁ Kraken – has a variety of crypto/fiat pairings with more than just USD and EUR, which can be viewed on their site.
⦁ Robinhood – a popular trading app provides fiat pairings to Bitcoin and Ethereum.
Are centralized cryptocurrency exchanges safe?
No, centralized exchange is immune to hacks.
Many hacks have occurred throughout the course of cryptocurrency history, but in a lot of cases, the exchange went out-of-pocket to pay customers back for the stolen money. Popular centralized exchanges are safe in the way that banks are safe.
Is volume important for exchanges?
The more volume there is on an exchange, the less volatility and market manipulation there will be.
If Alice is trying to buy 1 BTC for the exchange’s current price of $10,000 and the volume on the site is extremely high, chances are she will buy the 1 BTC almost instantly. If the market price is $10,000 on a very low volume site, she may eat up all of the sell orders that are at $10,000 before she can buy her whole Bitcoin. Then Alice would need to buy the higher sell orders to satisfy her order, losing money and also making the price of Bitcoin go up on that exchange.
While exchanges are still new and growing more and more popular each day, there have been some over the past 2017 year that have stood out in volume and amount of coins to trade. Some of these exhanges include;
⦁ Binance – Launched in 2017 and based out in China. It trades the highest volume of any cryptocurrency exchange.
⦁ Bittrex – Bittrex has been a long-standing cryptocurrency exchange based out of the United States.
⦁ Bitfinex – Located in Hong Kong, Bitfinex is another long-standing cryptocurrency exchange which still lies in the top ten for trade volume.
⦁ Upbit – Based in South Korea, Upbit have stayed on top and even broke a record back in January of 2018 for highest trading volume ever.
⦁ GDAX – The Global Digital Asset Exchange is an extension of CoinBase, one of the most popular exchanges in the world. GDAX is not very suitable for beginners but is very useful for margin trading as well as trading crypto/fiat and crypto/crypto.
There are many other cryptocurrency exchanges with reliable daily trade volume. To see more of them, visit Coinmarketcap.com.
Note: Endeavor to check user reviews related to the exchange you have chosen! This will give you important information about the exchange. After registration, do join the exchange’s social media community to keep up with the latest update.
2.2 Peer-to-Peer (Decentralized) Exchanges
The P2P or decentralized exchanges cuts out the middleman by creating a highly intelligent “trustless environment.” In this trading platform, deals are made through smart contracts and atomic swaps so that currency never passes through the hands of an escrow service – it’s just peer-to-peer.
P2P exchanges connect buyers and sellers to interact directly, relying on both parties to agree to any given transaction. Unlike a centralized exchange, a P2P platform does not require your identification and charges zero transaction fee.
As Cryptocurrencies and blockchain are decentralized by nature, this allows for the exchanges to also be decentralized. However, the P2P trading platforms are still in its infancy and not very popular yet.
How does a Peer-to-Peer Exchange Operate?
In a P2P platform, trades can be executed using various payment method just like in a centralized exchange. However, it is solely between you and the second trader. A buyer may choose whichever payment method is most suitable to him/her.
The first step to purchase cryptocurrencies through a P2P platform is to enter your “Buy Order”, that is after you must have registered with any of the available P2P platforms that suits you.
After your Buy Order is sucessfully entered, the exchange will pair you with any available seller of the currency you want to purchase (There are sellers that have a set price for any cryptocurrency, and there are buyers that also have a set price for each cryptocurrency).
When this is done, the trade is executed between you and the seller without going through a verification process and neither of the traders is charged any fees for the transactions.
There are only a few decentralized exchanges available today, some of the most popular ones include:
⦁ Altcoin Exchange
⦁ Radar Relay
⦁ CryptoBridge Dex
⦁ OpenLedger Dex
⦁ Waves Dex
There are some more decentralized exchanges out of which few are still being develped and few others still have very low liquidity or are facing security difficulties.
Note: Decentralized exchanges should only be used by those with experience in cryptocurrency trading due to its anonymity and potential risk. People who are completely new to cryptocurrency trading should check out a more mainstream and centralized service.
2.3 Cryptocurrency ATM
A bitcoin ATM is an internet machine that allows a person to exchange bitcoins and cash. Some Bitcoin ATMs offer bi-directional functionality enabling both the purchase of Bitcoin as well as the redemption of Bitcoin for cash.
They look like traditional ATMs, but Bitcoin kiosks do not connect to a bank account and instead connect the user directly to a Bitcoin exchange. In some cases, Bitcoin ATM providers require users to have an existing account to transact on the machine.
The establisment of Bitcoin ATM is on the rise, though, it is not available everywhere yet. If you live in a big city, you might have one near you. You can use this map to find out where your nearest Bitcoin ATM is.
How does a Bitcoin ATM work?
Bitcoin ATM’s can be more expensive than online transactions as the infrastructure cost is higher – i.e. building an actual ATM and the steps that are actually needed to transfer the money and Bitcoins. Some ATM providers charges transaction fees of about 5-10%. The following steps will guide you to purchase your bitcoin from an ATM:
⦁ Go to the ATM, scan your identification which the ATM then validates.
(Bitcoin ATM’s are essentially money transmitting tools and as such the businesses come under FinCEN rulings and have to comply with Know Your Client and Anti Money Laundering procedures, or AML and KYC. Registering for money transmitter status can be costly and this means ATM providers have to knudge up fees.)
⦁ Enter mobile number
⦁ Receive the validation code and enter it
⦁ Select “Buy Bitcoins”
⦁ Choose whether you already have a Bitcoin wallet (yes – scan it later, no – generate and print new one)
⦁ Scan QR code (a QR code being a large square of black and white pixels)
⦁ Insert cash bills
⦁ Click “I’m done”
⦁ Bitcoins are sent and you receive confirmation SMS
⦁ Optionally you can print a receipt as well
Note: If you generated a new Bitcoin wallet through the ATM machine, your cryptocurrency wallet details (public key and private key) will be on your receipt. These details are important and MUST be kept safe!
2.4 Offline Trading Platforms
These are physical offices where you can directly purchase cryptocurrencies. These platforms are usually connected to online cryptocurrency exchanges enabling people to buy cryptocurrency in-store just as easily as they buy a lottery ticket.
Since, the concept is still new, offline platforms are not everywhere yet as most of them are still being built. Many of the existing platforms are found in South Korea and the US.
Some platforms offers a customer service center where traders can seek investment advice and good trading strategy.
That will be all for where and how purchase cryptocurrencies. Now you have this information, have you thought about how you can be able to store them?
I am sure you know that crypocurrencies are digital currencies and you cannot keep them in your physical wallets. Since they are digital assets, cryptocurrencies can only be stored and accessed from a digital wallet.
Do you know what a digital wallet mean? Let’s look at some of the available digital wallets.
3. What is Cryptocurrency Wallet?
A cryptocurrency wallet is a software program that enables users to store and access their digital currency. If you want to use Bitcoin or any other cryptocurrency, you will need to have a digital wallet.
There are different types of wallet for every cryptocurrency. However, there are some wallets that enable users to store multiple cryptocurrencies. Wallets can be broken down into three distinct categories – software, hardware, and paper.
Software wallet – this can be a desktop, mobile or online wallet. The desktop and mobile wallet are installed as an app on your PC or mobile phone. They are only accessible from the devices in which they are downloaded. Online wallets on the other hand run on the cloud and are accessible from any computing device in any location. While they are more convenient to access, online wallets store your private keys online and are controlled by a third party which makes them more vulnerable to hacking attacks and theft.
Hardware wallet – this differ from software wallets in that they store a user’s private keys on a hardware device like a USB. Although hardware wallets make transactions online when connected, they are stored offline which delivers increased security.
Paper wallet – this is simply a public and private key printed together. It is an offline wallet, and is usually regarded as a type of “cold storage” (extra-secure storage that does not make contact with the hackable internet). Paper wallets are considered the safest way to protect your cryptocurrencies from cyber-attacks, malware etc.
3.1 Which Cryptocurrency Wallet is best to Use?
Wallets are secure to varying degrees. The level of security depends on the type of wallet you use (desktop, mobile, online, paper, hardware) and the service provider.
There is an ever-growing list of crypto wallets available in the industry. However, Before selecting a wallet, you should, consider how you intend to use it.
⦁ Do you need a wallet for everyday purchases or just buying and holding digital currency for an investment?
⦁ Do you plan to use several currencies or one single currency?
⦁ Do you require access to your digital wallet from anywhere or only from home?
⦁ Take some time to assess your requirements and then choose the most suitable wallet for you.
Some of the most familiar cryptocurrency wallets include;
⦁ Ledger Nano
⦁ Blockchain (dot) info
⦁ Bread Wallet
⦁ Green Address
Note: Paper wallets are recommended for emerging traders as it easy to use and provide a very high level of security.
Now that you have gone through this guide, i believe you have been able to identify which is the best way for you to trade cryptocurrencies and the suitable wallet to access them.
As you move to purchase your first crypocurrency, do have the following in mind;
One of the main characteristics of cryptocurrency trading platforms is the volatility of the products traded on it. That is, changes in cryptocurrencies values are constant and sometimes, on the same day, a significant variation can occur. High volatility makes the cryptocurrency trade an area that presents challenges and requires knowledge. This means that the chances of loss are real almost in the same proportion as the chances of gain. So, the persons who participate have to put a limit on how much they can invest. In other words, the user from cryptocurrency trading platforms must invest with awareness: use a value that is available for risk, and do it after a market analysis. And, of course, you also need to know when to stop so you will not increase your losses and make future holdings unfeasible.
I hope you found our instructions easy and simple to follow. If you find this information useful and wish to know more, do gives us a feedback.