Planning to invest in crypto? Looking for a detailed guide to get started in the crypto space? If so, you’re on the correct page. Cryptocurrencies are virtual currencies that leverage blockchain networks and cryptography to secure, verify, and record transactions. Bitcoin is the pioneer cryptocurrency and the largest by market cap, while all other cryptocurrencies are collectively known as altcoins.
From choosing a trustworthy platform to storing your crypto securely, our guide provides a step-by-step breakdown of the buying process. We’ll also run you through different payment methods and common mistakes to avoid while purchasing virtual currencies.
How to Buy Crypto: A Step-by-Step Guide
Step 1: Choose a Crypto Exchange
Based on your preferences, select an appropriate platform for buying, selling, and trading crypto. As exchanges differ widely in their features, fees, security, and rewards, comparing multiple platforms is key to making informed choices. Traders can choose from three types of platforms for buying cryptocurrencies.
Centralized exchanges
They’re crypto platforms that enable users to buy and sell digital currencies. They serve as third-party intermediaries, facilitating cryptocurrency transactions between buyers and sellers.
Apart from a quick buy/sell crypto functionality, popular CEXs, like Binance, Bybit, and MEXC, enable derivatives trading as well. Additionally, they offer advanced tools, staking products, and early access to new cryptocurrencies.
Moreover, they have a transparent fee structure, clearly stating the maker and taker charges across VIP tiers.
Regarding security, most CEXs have implemented robust safety features like two-factor authentication (2FA), withdrawal whitelists, cold storage, and anti-phishing codes.
In general, choose a reputable platform that features among the top 20 centralized exchanges by trading volumes.
Decentralized exchanges
They’re permissionless platforms that facilitate peer-to-peer trading of crypto in a non-custodial and decentralized manner. They utilize smart contracts to determine cryptocurrency prices and execute transactions, eliminating the need for order books and intermediaries.
However, DEXs are more conducive for advanced traders as they require in-depth technical knowledge and understanding of decentralized protocols. Examples of well-known decentralized platforms include PancakeSwap, Uniswap, and Orca.
Brokerage services
If you want to build a diversified portfolio, comprising a good mix of traditional and crypto assets, consider online brokers. They enable you to buy/sell cryptocurrencies and a diverse range of conventional instruments like stocks, ETFs, and index options. However, they provide a limited coin selection and lack advanced features like automated bots, making them less suitable for seasoned traders. Robinhood, Webull, and eToro are examples of top crypto brokers.
Step 2: Set Up a Crypto Wallet
Whether you choose a CEX, DEX, or brokerage firm, you must set up a best crypto wallet to transact and store cryptocurrencies. Blockchain wallets can be categorized into the following types:
Hot wallets
They’re device-agnostic online wallets that help you send, receive, transfer, store, and manage your digital assets in a single place. However, since these wallets are connected to the internet, they’re susceptible to cyber threats. Hence, you should keep only minimal amounts of cryptocurrency required for immediate transactions in hot wallets. Examples of popular hot wallets include Metamask, Phantom, and Trust Wallet.
Cold wallets
They’re offline wallets or physical hardware that aren’t connected to the internet. As they aren’t exposed to online hacking risks, they offer enhanced security. Therefore, cold wallets are ideal for storing private keys. However, they can’t be used for conducting transactions and are prone to physical damage or mutilation. The most sought-after hardware wallets for storing crypto are Trezor and Ledger.
Step 3: Fund Your Account
Once you register on an exchange and complete the identity verification process, you need to deposit funds to start trading. If you already own cryptocurrencies, you can transfer them to your exchange account from an external digital wallet.
If you’re a first-time crypto buyer, you can deposit fiat currencies in your exchange wallet. Many platforms support fiat on-ramps, enabling you to buy crypto using traditional currencies like the US Dollar and the Euro.
To make fiat or crypto deposits, you can choose any of the supported payment methods. These include wire transfers, debit/credit cards, Google/Apple/Samsung Pay, and third-party channels like Skrill, Neteller, Wise, MoonPay, etc.
But before signing up, ensure the chosen platform offers the fiat-to-crypto or crypto-to-crypto pairs you’re seeking. Not all fiat or digital currencies can be traded for one another on all online platforms.
Step 4: Place Your Order and Buy Crypto
After funding your account, you can place a buy order for any cryptocurrency of your choice.
Most platforms offer a quick buy/sell feature, where you simply need to enter the spending and receiving currencies. You must also specify the quantity you want to buy and the payment option. Once you fill up these details, click the “Buy” button.
The crypto will be credited to your exchange wallet within no time, provided the transaction is completed successfully. If you buy cryptocurrencies on a DEX, it’ll be credited to your linked wallet directly.
Additionally, users need to incur transaction fees while buying and selling cryptocurrencies in the spot market. You must pay maker fees when you place a limit order. Your buy order will be filled only if the cryptocurrency’s price reaches your desired price or lower. Conversely, you must pay taker fees when you place a market order. Your buy order will be filled at the best available price, which could be higher/lower than your specified price.
Generally, as your trade volumes increase, your transaction fees decrease. Plus, the greater the liquidity of a platform, the faster your market orders are filled at competitive prices, and vice versa. Even if you submit a limit order, your transaction will be executed promptly at specific prices on highly liquid platforms.
Step 5: Store Your Crypto Safely
While many CEXs like Coinbase offer custodial and transfer services, storing your crypto on an exchange has some disadvantages. If the platform is hacked or someone gets hold of your login credentials, your crypto may be stolen. On-platform storage is ideal only for users who want to participate in reward programs or stake/trade their cryptocurrencies immediately.
For all other purposes, crypto wallets are a more secure option for storing cryptocurrencies. Moreover, they’re self-custody wallets, meaning you’ve full control over your private keys and assets.
Private keys prove ownership of crypto assets and are necessary for conducting transactions. If they’re lost/compromised, you’ll lose access to your crypto. Therefore, preserve your seed phrases and private keys in cold storage/wallets, as they’re less prone to online hacks.
If you aren’t confident of managing assets yourself or have minimal knowledge of cybersecurity, choose brokerage firms for storing/trading crypto. Additionally, instead of storing your cryptocurrencies, you can stake/lend them to earn attractive APRs. However, both staking and lending entail significant risks. If the platform closes or crashes, you’ll lose your locked-up assets.
Different Methods to Buy Cryptocurrency
1. Buying Crypto with Credit Card or Debit Card
Major crypto exchanges and third-party providers like MoonPay allow you to buy cryptocurrencies using a Visa/Mastercard debit or credit card. It is a faster and more convenient method than bank/wire transfers for purchasing digital assets. You can also save your card details in payment settings for future transactions once you complete KYC verification.
However, card transactions may entail hidden costs such as chargebacks, conversion fees, and processing fees. If you use a credit card, you’ll incur higher fees as cash advances are treated as debt, triggering interest.
Additionally, you should understand your credit or debit card’s terms, conditions, and policies regarding crypto transactions. While some issuing banks block or flag crypto buys outright, others impose stricter limits and excessive fees.
You also need to select a crypto platform that accepts your card. The availability of a payment option also varies across locations. Once you finish the necessary checks, enter the crypto you want to buy and specify the amount in fiat. Select a credit/debit card as the payment method and click the “Buy” button. The crypto will reflect in your exchange account within minutes. From there, you can transfer your assets to your crypto wallet.
2. Buying Crypto with Bank Transfer
To purchase crypto via bank transfers, you must first complete ID verification and link your bank account. Then, you need to deposit a supported fiat currency into your exchange account using local/international methods like SEPA, SWIFT, FAST, etc. Once done, you can use the funds to buy digital assets. Fee-wise, bank transfers are usually cheaper than other payment methods.
3. Peer-to-Peer Crypto Exchanges
Peer-to-peer platforms enable you to buy cryptocurrencies directly from other traders. Typically, they’re decentralized, permissionless, non-custodial, and non-KYC platforms, where assets are directly credited to your connected wallet.
At no point in time, P2P platforms hold your assets. To ensure transaction security, they lock crypto in escrow accounts till both parties confirm payment. They’re best suited for experienced traders looking for enhanced anonymity and privacy. Bisq is a top-notch P2P network for trading Bitcoin, while LocalCoinSwap is an excellent peer-to-peer marketplace for buying/selling Ethereum.
Many CEXs, like Bitget and BingX, also offer P2P marketplaces. Unlike standalone peer-to-peer platforms, they mandate identity verification and have powerful security features. They provide deeper liquidity and a larger number of payment options, minimizing risks.
However, P2P transactions carry inherent risks, regardless of the type of platform you choose. They’re highly prone to security threats such as phishing scams, chargeback fraud, fake payment proofs, or man-in-the-middle attacks.
Common Mistakes to Avoid When Buying Crypto
- Lack of research: Never follow the recommendations of fellow traders or experts blindly. You should also avoid investing in trending coins without doing your own research. Analyze every project thoroughly. Understand its vision, mission, core features, pros, cons, technology, team, and community strength before putting your money into it. Investing without researching is akin to gambling and can lead to significant losses.
- Falling for hypes, fake news, and scams: Social media platforms are inundated with news, messages, or discussions, projecting numerous low-quality tokens as the next big thing. Many of these cryptocurrencies carry no real worth or may be a pump-and-dump scheme in disguise. Hence, stick to well-established cryptocurrencies like Bitcoin, Solana, or Ethereum, especially if you’re a newbie. Avoid suspicious links, shady websites, and unverified news sources.
- Keeping funds in exchange wallets: Crypto exchanges aren’t hack-proof. Many leading platforms, including Binance, have fallen prey to major security breaches that resulted in significant losses. Hence, you should never leave your crypto holdings on exchanges and transfer them preferably into a cold storage/wallet.
- Emotional investments: Avoid buying crypto during market upturns due to fear of missing out (FOMO). Similarly, don’t panic-sell during pullbacks. Emotional decisions without in-depth market research often result in substantial losses.
- No or limited learning: Before you invest in crypto, you should have a good grasp of how smart contracts, encryption mechanisms, and blockchain technology work. You should also understand at least the basics of cryptocurrencies, decentralized finance, and trading strategies. Constant learning is the key to making gains from cryptocurrency investments.
- Assuming excessive risk: Overextending yourself financially by investing more than you can afford to lose is a big NO-NO. Additionally, you must use leverage prudently, preferably not more than 5x, especially if you’re a newcomer. Besides, you should avoid taking loans and always set stop losses when trading.
Should You Invest in Cryptocurrency?
Crypto investing involves risks as cryptocurrencies are a highly volatile asset class. They’re vulnerable to price manipulations, scams, and cyber threats.
Moreover, the global crypto market is plagued by regulatory uncertainties. While some countries, like El Salvador, have adopted Bitcoin as legal tender, others, such as China, have imposed bans or restrictions on its use. Also, crypto tax policies are ambiguous across regions. Many crypto platforms are also facing regulatory compliance issues in multiple jurisdictions.
Overall, crypto investments are not backed by central banks or government authorities like the Federal Deposit Insurance Corporation. You’ll also have no legal recourse in the event of any mishap. Hence, only those who have a high risk tolerance should trade crypto. Beginners must invest a minor portion of their total savings and refrain from transacting large amounts till they gain expertise.
Conclusion
Cryptocurrency markets are highly volatile. Hence, thorough research and understanding of crypto concepts and market volatilities are essential. You must always compare the fees, features, and reward rates offered by different platforms while prioritizing security and regulatory compliance. You should also use reliable payment methods and safeguard your confidential data.
If you’re a beginner, start with small amounts as you hone your investing skills. For enhanced efficiency, you can even use virtual assistants to conduct in-depth research and compile reports.
In essence, by staying abreast of crypto market events, learning continuously, and evaluating risks, you can maximize your earnings.
FAQs
There is no single best way to buy cryptocurrencies. However, it is better to make purchases via reputable and licensed platforms like Binance, Coinbase, KuCoin, and OKX. They possess robust security features like 2FA, cold storage, withdrawal whitelists, proof-of-reserves, and a protection fund to safeguard user assets. They also have a transparent fee structure, multiple payment options, a long track record, and advanced features. Thus, they’re suitable for both beginners and professional traders alike.
Yes. Popular exchanges like Bitget, MEXC, and Kraken allow you to buy Bitcoin and other cryptocurrencies using bank accounts. However, you must check whether the chosen platform offers this payment option in your jurisdiction.
Choose renowned platforms with potent security measures like withdrawal allowlisting, multi-factor authentication, and an insurance fund to buy/sell cryptocurrencies. Also, access the exchange from the official website or mobile app only to minimize fraud and phishing risks. Once cryptocurrencies are credited to your exchange account, move them into secure offline wallets to protect them from cyber attacks.
You can purchase crypto via online brokers licensed by reputable organizations like the New York State Department of Financial Services. You can also buy cryptocurrencies using your credit/debit card from Bitcoin automated teller machines (ATMs). Additionally, you can explore P2P platforms like Peach Bitcoin. If you want to make cryptocurrency transfers or purchases in just a few taps, consider mobile payment services like Cash App.
