The world of cryptocurrency can feel daunting to newbies. But buying digital assets is a good investment move. This process is not very different from purchasing traditional stocks and mutual funds. However, understanding the process thoroughly is crucial. In a nutshell, buying cryptocurrency involves choosing a specific option and place and executing a crypto purchase. It may seem simple, but there are many technicalities involved. In this post, we’ll explain how to buy cryptocurrency in simple steps.
How to Start Buying Cryptocurrency?
There are various steps in this process. Let’s learn the in greater detail.
1. Pick a suitable cryptocurrency to buy.
There are innumerable digital currencies. So, you must carefully assess the characteristics of each before investing. There are two major cryptocurrencies that most people invest in, Bitcoin and Ethereum. As a best practice, avoid investing in newer or smaller currencies.
Also, analyze your goals for investing in this digital currency. Then choose one that rightly aligns with them. Here are some ways to perform thorough research to buy a suitable cryptocurrency.
● Monitor a currency’s performance. It will help you determine its volatility over the course of months and years.
● Identify the Blockchain behind the Crypto. Some Blockchains are more secure, and you should buy cryptocurrencies from them.
● Find who created the digital asset. You should always choose a cryptocurrency that has the backing of trustworthy individuals or communities.
2. Buy the cryptocurrency
You can buy crypto through an exchange. There are three major exchanges:
● Centralized exchange – These exchanges sell virtual currency at market prices. They earn money for different parts of their services. It is best to search for pure-play crypto exchanges as they function only in the cryptocurrency market. Some examples include Gemini, Coinbase, and Kraken.
● All-in-one exchanges – These online brokers let you trade in cryptocurrencies and stocks. Some examples of these exchanges are Webbull, Robinhood, and TradeStation.
● Decentralized exchanges – These exchanges offer lower fees over centralized platforms. But you need to possess considerable specialized knowledge to use them. This is a great option for advanced investors.
3. Perform a crypto purchase.
In order to buy cryptocurrency, you must know how to make the payment. First, you need to deposit some cash into your account on the platform. The most common options are fiat currencies. First-time buyers would need regular money to kickstart the buying process.
So, after you’ve chosen a crypto and a platform, you can place the order. Note that in some exchanges, you can purchase cryptocurrency with a credit card. But you also need to pay cash advance fees, which can be as high as 5% of your purchase.
4. Look into suitable storage options.
Crypto is completely digital. So, storing them will also require a digital place. A good option is your investment platform. This platform should take care of the security and custody of your crypto. These well-regulated platforms equip buyers against cyber threats and hacking.
If this option does not appeal to you, go for a crypto wallet. But they have a private key for you to access your crypto. There’s a hot digital wallet and a cold digital wallet. The former is more convenient as you can access it through the Internet. The latter is a physical storage device. Your cryptocurrencies in a cold wallet are offline and more secure.
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How Much Should You Invest in Cryptocurrency?
Deciding the amount to invest is critical to yield desirable returns. There’s no single answer to this question, as it's dependent on several factors. These include the following:
● Your budget
● How much risk you can tolerate
● Your investing technique
● Transaction costs
● Minimum investment requirements
Fortunately, you can invest on a dollar basis today. It means that you don’t need to have thousands of dollars to start investing in some of the major cryptocurrencies. As a safe practice, don’t invest over 2% of your portfolio in a single crypto.
Tips to Safely Invest in Cryptocurrency
Many people, after learning how to buy cryptocurrency feel hesitant to take the first step. Concerns about the safety of the digital asset are common. Indeed, cryptos are volatile assets. They are also unregulated, which makes them prone to scamming attempts.
But there are various security benefits of cryptocurrencies as well. Here are some tips to safely buy cryptocurrencies as a beginner.
● Check whether the platform on which you will open your account asks you to prove your identity. These platforms follow the KYC and AML guidelines.
● Beginners must use an exchange or marketplace that prioritizes security.
● Store cryptocurrencies offline. It means using hardware or a cold wallet to store them. Although they are expensive, they are the safest option.
● Use cryptocurrencies with inherent security features. The most popular examples of safe cryptocurrencies are Bitcoin and Ethereum.
● Research a digital wallet deeply before investing. Invest only the amount that you can afford to lose.
● Beginners should especially invest only that much sum that they can safely lose. Otherwise, you will face many negative consequences.
Will You Benefit by Purchasing Cryptocurrency
The answer to this depends on many variables. How good an investment the digital currency is relies on your risk tolerance, your time horizon, and the diversification of your portfolio. Always remember that cryptocurrencies go up and down pretty quickly and dramatically.
Just because there’s a currency available for trading purposes does not also mean that it is suitable for you. Investing, whether big or small, comes with the risk of losing money.
Some Advantages of Investing in Cryptocurrencies
The leading advantages of buying cryptocurrencies include:
● Diversification: Cryptocurrencies worth cannot be correlated with asset classes like stocks and bonds.
● Strong returns: These digital assets have shown extremely strong results with the rising adoption.
● Utility: You can use cryptocurrencies to buy various goods and services. Through Bitcoin, you can purchase various services, while some tokens offer discounts on a project’s services.
Wrapping up
This guide on how to buy cryptocurrency must have proved to be insightful. You can now make a wise move rather than simply jumping into the trend of buying digital assets. Ensure that you only invest an amount that won’t affect you much if it is lost.