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Given the recent ecosystem and political developments, cryptocurrencies are gaining rapid mainstream attention. Many individuals are beginning to understand and learn about cryptocurrencies like Bitcoin and are seeking to learn how to get involved. This short guide will give you all the information necessary to invest in cryptocurrency, giving you the tools and knowledge to do so safely and efficiently.
How to Buy Cryptocurrency
Even though cryptocurrency is continuing to gain popularity, it is still a relatively new asset class spawning from Bitcoin’s inception in 2009. The rapid innovation and influx of new cryptocurrencies and their applications have led to a $2.3 trillion market cap asset class. Centralized exchanges, brokers, and peer-to-peer platforms are the most common methods to gain a piece of the action.
How to Buy Crypto Through Centralized Crypto Exchange
Centralized exchanges (CEXs) are platforms that manage and facilitate order books and manage and secure user accounts. They are intermediaries that connect users to the crypto world in a simple format.
The popularity of centralized exchanges is mainly due to the ease of purchasing cryptocurrency on them. Let's walk through the five steps to buy cryptocurrency on a CEX.
- Firstly, you must select the platform you would like to use. There are a plethora of options, but some of the most reputable CEXs include Coinbase, Robinhood, Kraken, and Etoro. Purchasing cryptocurrencies on these platforms is relatively similar, but let's use Coinbase as an example.
- After selecting your platform, you will sign up for an account. Coinbase will require you to input personal information and verify your identity. After confirming your identity, which can take 12 to 48 hours, you will be notified that your account is ready.
- Go to the search bar and type the cryptocurrency you want to purchase. For instance, if you want to buy Bitcoin, type in BTC or the full name and select it when it pops up. After choosing the coin, you will see price charts, trading volume, circulating supply, and all-time highs (ATH).
- Once you are on the page, you will see a few buttons: buy, sell, convert, send, and receive. Since we are purchasing cryptocurrency, you will be prompted to buy. You will be prompted to enter the cryptocurrency amount you want to purchase and pay using your preferred payment method. Coinbase supports various payment methods, such as Apple and Google Pay, debit cards, and bank transfers.
- After connecting your payment method, purchase the desired amount of cryptocurrency, which will appear in your home and assets section.
How to Buy Crypto Using a Crypto Broker
Brokers operate as financial intermediaries for people looking to exchange cryptocurrency. Centralized exchanges are the most popular format under the broker umbrella.
One of the most popular brokers is Etoro, a multi-asset social trading platform that allows you to track other individuals' trading and trade on your own.
- Firstly, you will create an account if you do not already have one. You will be prompted to input personal information, which will be used to verify your identity. After Etoro verifies your information, you will be ready to begin.
- Simply navigate to the search bar and type the desired cryptocurrency ticker or name you want to purchase. After it pops up, select it.
- On the cryptocurrency’s page, you will see a variety of pertinent information such as market cap, charts, volume and other indicators to aid your decision-making process.
- After you are ready to purchase simply select the amount of cryptocurrency you want to buy and use your preferred payment method to purchase. Etoro supports payments like debit cards, bank transfers and PayPal.
- After purchasing your crypto will show up in your assets section and you are free to do what you choose with it.
How to Buy Crypto Using P2P Platforms
Peer-to-peer platforms are also referenced as Decentralized Exchanges (DEXs). Decentralized exchanges are peer-to-peer marketplaces where users can exchange cryptocurrency without the need for an intermediary to facilitate. To purchase cryptocurrency on DEXs is a little more complex than CEXs however many prefer it due to the increased control and security of their assets.
- To begin using a DEX you will first need a wallet. Wallets can be digital or physical and serve a variety of purposes. A digital wallet will be needed to use a DEX. Some popular options include Coinbase Wallet, Metamask and Phantom.
- After setting up your wallet you will need to add assets to the wallet. You can do this easily through a centralized exchange by sending your holdings to the wallet address.
- Once there are assets in your wallet you are ready to select a DEX. Some popular choices include Uniswap, OKX, Uniswap and Matcha. Selecting an exchange is based on a few factors such as assets offered, swap rates and fees associated. Do your research to select the best exchange for you.
- After choosing an exchange connect your wallet.
- Then navigate to the asset pool you want to swap with. DEXs operate through other users providing assets into pools for traders to swap with. Different assets are in different pools. A popular pool is WETH and USDC. For instance, if you were looking to purchase WETH you would use your USDC to swap into WETH.
- After selecting your desired pool, enter the amount of the asset you want to trade and click swap.
- After swapping your assets, the cryptocurrency you purchased will appear in your wallet and you can do what you wish with it.
What Are the Fees for Buying Crypto?
The fees for buying cryptocurrency differ depending on the platform. Centralized exchanges like coinbase charge fees on trades. These fees range from 0.5% - 4.5%, depending on market conditions and payment method. On peer-to-peer exchanges (DEXs), the transaction fee depends widely on the pool you are using to swap. These fees are volatile so using a DEX aggregator will help you get the most value on your trades.
Where to Store Your Crypto
Wallets are the most efficient way to store cryptocurrency securely. There are two types, each with its benefits and drawbacks. Hardware wallets are the most secure option, with assets stored offline. Investors tend to use these for long-term storage because of the lack of asset mobility. Software wallets are necessary to interact with decentralized exchanges, making them better choices for higher-frequency transactions, while still providing ample security and control over assets.
- Best hardware wallet: Ledger offers excellent hardware wallets that keep crypto safe and secure offline. This wallet provides a simple and smooth user experience for all levels of investors. A popular choice among investors is the Ledger Nano X.
- Best software wallet: ZenGo allows you to bulletproof the security of your cryptocurrency, without needing to take it offline. With an unparalleled user experience and secure recovery features, ZenGo is one of the best mobile wallets in the market right now.
Alternatives Ways to Buy Cryptocurrency
One of the most popular alternative ways to purchase crypto is through Electronic Traded Funds (ETFs). ETFs are a financial product that allows investors to gain exposure to assets, in this case, cryptocurrency. With the Bitcoin ETFs successfully rolling out earlier this year, many can gain exposure to crypto since they can get involved with the most popular cryptocurrency, BTC, through their existing accounts like Fidelity, and Charles Schwab. This has had a huge impact increasing awareness and adoption of Bitcoin and other cryptocurrencies. Given the massive success of the Bitcoin ETFs, Ether (ETH) ETFs are in the works and awaiting regulatory approval. ETFs will continue to be a large part of the crypto market as they continue to bridge a massive gap in accessibility.
Buying Crypto is Easy
Cryptocurrencies are touted as elusive and complicated assets that are hard to understand and purchase. In reality, cryptocurrencies are simply a technological innovation that is still in its early stages. Alike mobile phones, and the internet, not everyone will know immediately how to navigate this new frontier. However as the technology continues to grow, so does awareness and access. Buying cryptocurrency is very simple thanks to a host of platforms and resources online. Whether you choose to use brokers or decentralized exchanges it is incredibly important to always do your research before taking any financial action. Like every asset, crypto does have its risks and there are countless reputable and non-reputable places to purchase crypto. Understanding what crypto is and how to buy it will help you capitalize on its potential and make the best decisions you can in the future.
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About Gianluca Miller
Gianluca Miller’s crypto journey started in 2019 when he sought alternative assets to diversify his investment portfolio. With a keen interest in innovative technologies, he became increasingly involved in Web3 through trading crypto and participating in DeFi protocols. Over the last few years, he has become a blockchain evangelist, fascinated with the tech’s utility and impactability. Gianluca contributes to Benzinga, is working on a Defi research project through Blockchain UCSB, and continues to expand his Web3 acumen daily. He loves learning, analyzing new projects and market conditions, and building relationships with industry leaders.