For those who don’t know the process of buying cryptocurrencies, investing in them might be a hassle. Even if you’re an expert, entering the cryptocurrency world requires knowledge about new technologies, strange & unfamiliar terms, and companies that you might have never heard of them before.
That’s why it’s important to educate yourself about cryptocurrency before diving into this subject.
If you think investing in cryptocurrency is a great option for you, you’ll need to consider both on the process of buying cryptocurrency and how to store it once you own one.
Buying cryptocurrency for novices
It’s necessary to know these four basic steps for buying cryptocurrencies:
1. Decide where to buy it
There are a lot of methods for safely investing in cryptocurrency, however, the most accessible way for those who want to start investing seems to be a centralized exchange. Centralized exchanges are like a mediator that oversees transactions to give confidence to customers that they are really gaining what they pay for. Centralized exchanges usually sell crypto at market rates, making money on fees for different aspects of their services.
If you’re an investor that can adapt more to classic brokerage accounts, there are a couple of brokers online that give access to cryptocurrencies along with stocks. Some online brokers include Webull, Robinhood, TradeStation, and SoFi Active Investing. If you are searching for an exchange that functions only within the world of cryptocurrency, make sure to seek genuine crypto exchanges. These platforms, such as Gemini, Kraken, and Coinbase, will not offer you access to core assets such as bonds and stocks, but they normally have a much better option for cryptocurrencies and more choices for storing them on the platforms.
Although using centralized exchanges is reasonably convenient, they can be an appealing target for hackers as well, according to the volume of crypto that flows through them.
There are also decentralized exchanges for those who have more experience regarding investment in cryptocurrencies. Fees may be lower for these people compared to those charged by centralized platforms. Decentralized exchanges can be harder to use and require a more technical understanding, but they might provide some security benefits as well because there is no single target for a cyberattack. Cryptocurrencies can be traded by means of peer-to-peer transactions as well.
2. Choose how you will pay
There are obviously thousands of cryptocurrencies being traded around the globe, but you will see that the most favored choices are extensively available for purchase in fiat currencies like the U.S. dollar. If you’re buying cryptocurrency for the first time, you’ll highly likely need to use regular money to purchase cryptocurrency.
If you are a veteran investor, you may be willing to trade some of your existing crypto holdings for another kind of cryptocurrency, for instance, Ethereum for Bitcoin.
3. Add some value to your account
Depending on your payment option, you might need to fund your account before buying any cryptocurrency. If you have fiat currency with you, most exchanges permit debit and bank transfers. Some let you fund a purchase with your credit card as well, however, this may be a risky action with an unpredictable asset like cryptocurrency due to interest costs deepening your losses if the value of your investments declines.
You can transfer your cryptocurrency, if you already own one, into your account from a digital wallet or other platforms, then eventually use it to trade. Just remember to check that your cryptocurrency exchange permits trading between the assets you are seeking. Keep in mind that not all cryptocurrencies can be traded directly for one another, some platforms even have more trading pairs than other platforms.
Another thing worth noting is that the fees of exchanges differ depending on what you are purchasing and how you are buying it, so make sure to check these details with care.
4. Choose a cryptocurrency
There are a lot of choices to choose from for cryptocurrency investors, although not all of them may be suitable for everyone. Before thinking about buying a cryptocurrency, ask yourself why you are investing in it and whether you have specified goals for it or not. Are you hoping the value of it would increase? Do you like to carry out transactions with cryptocurrency? Do you like using the underlying technology through decentralized apps? These questions may help you make your decision easier.
Where to store your cryptocurrency
When you finally decide to buy your desired cryptocurrency and have specified which cryptocurrencies you like to invest in, your next decision will be how you are willing to store it in a safe way.
This is definitely an important decision. Crypto assets need a private key, proving ownership of cryptocurrencies, and are essential for doing transactions. If you happen to lose your private keys, you will lose your cryptocurrency, unfortunately. If a person gets your private keys somehow, they might abuse your cryptocurrencies however they desire.
Owners of cryptocurrencies use digital wallets to securely store their funds. There are numerous options to think about when it comes to digital wallets.
On-platform storage
Some may choose to keep their cryptocurrency on the platform or exchange where they have received it. There are some advantages to this action. It outsources the intricacies to a third party that brings some skills to the table. You don’t really need to always monitor your own private keys; all information is provided when you log in. The downside of this is that your cryptocurrency could be at risk if the provider experiences a security breach outside of your control, or if a person hacks your individual credentials. On-platform storage is generally used by those who are considering trading their crypto soon, or who desire to partake in rewards programs and staking of exchanges.
Noncustodial wallets
It may be risky to leave large funds on crypto trades for longer than necessary due to the threat of hacking. If you’re prepared to dive into the subject of storing your own crypto, there are enough options available for you on the market. Generally, they are split into two categories, cold wallets, and hot wallets. Hot wallets have some online connectivity, making them simpler to use but it may expose you to vulnerabilities related to security. Cold wallets, on the other hand, are physical and offline devices that would be not accessible to anyone who doesn’t have them in possession physically.
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Essential Things You Should Know About Buying Cryptocurrencies
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For those who don’t know the process of buying cryptocurrencies, investing in them might be a hassle. That’s why we are going to make it easier for you to understand the process.
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