Best Way to Buy Crypto
If you are new to the world of cryptocurrencies, figuring out how to buy Bitcoin, Dogecoin, Ethereum, and other cryptocurrencies can be confusing in the first place. Thankfully, learning the ropes is fairly easy. You can start investing in cryptocurrencies by following these five simple steps.
1. Choose a broker or cryptocurrency exchange
To buy cryptocurrencies, you must first choose a broker or cryptocurrency exchange. While you can buy both cryptocurrencies at the same time, you should be aware of some key differences between them.
What is a cryptocurrency exchange?
Cryptocurrency exchanges are platforms where buyers and sellers meet to trade cryptocurrencies. Fees on exchanges are generally relatively low, but they tend to have more complex interfaces with multiple transaction types and advanced performance charts, which can be daunting for new crypto investors.
Some of the most prominent cryptocurrency exchanges are Coinbase, Gemini, and Binance.US. While the standard trading interfaces of these companies can be overwhelming for beginners, especially those with no background in stock trading, they also offer user-friendly simple buying options.
Convenience comes at a price, however, as beginner-friendly options charge far higher fees than buying the same cryptocurrency through each platform’s standard trading interface. To save costs, you may need to learn enough to use a standard trading platform before or shortly after your first cryptocurrency purchase.
One important note: As a newbie to cryptocurrencies, you should make sure that the exchange or broker you choose allows fiat currency transfers and purchases with USD. Some exchanges only allow you to buy cryptocurrencies with another cryptocurrency, which means you need to find another exchange to buy coins that your favorite exchange accepts before you can start trading cryptocurrencies on that platform.
What is a cryptocurrency broker?
Cryptocurrency brokers make it easy to buy cryptocurrencies and provide you with a user-friendly interface to interact with the exchange. Some charge higher fees than exchanges. Others claim to be "free" while making money by selling information to prime brokers or funds about what you and other traders are buying and selling or not executing your trades at the best possible market price. Robinhood and SoFi are two of the most prominent cryptocurrency brokers.
While they are undeniably convenient, you need to be careful with brokers as they may restrict moving your crypto assets off the platform. For example, Robinhood and SoFi do not allow you to transfer your crypto assets from your account. This may not seem like a big deal, but advanced crypto investors prefer to store their coins in crypto wallets for added security. Some even opt for hardware encrypted wallets that are not connected to the internet for even more security.
2. Create and verify your account
Once you have decided on a cryptocurrency broker or exchange, you can sign up to open an account. Depending on the platform and the quantity you want to purchase, you may need to verify your identity. This is an important step in preventing fraud and meeting federal legal requirements.
You may not be able to buy or sell cryptocurrencies until you complete the verification process. The platform may ask you to submit a copy of your driver's license or passport, and may even ask you to upload a selfie to prove your appearance matches the documents you submitted.
3. Deposit cash to invest
To buy cryptocurrencies, you need to make sure you have funds in your account. You can fund your crypto account by linking your bank accounts, authorizing wire transfers, or even paying with a debit or credit card. Depending on the exchange or broker and your financing method, you may have to wait a few days before using your deposited funds to buy cryptocurrencies.
Here's a big buyer to watch out for: While some exchanges or brokers allow you to deposit funds from your credit card, it's extremely risky -- and expensive. Credit card companies use credit cards to process cryptocurrency purchases as cash advances. This means they earn higher interest than regular purchases, and you also have to pay an extra cash advance fee. For example, you may be required to pay 5% of the transaction amount when making a cash advance. This is in addition to any fees your cryptocurrency exchange or brokerage may charge; these themselves can be as high as 5%, meaning you could lose 10% of your cryptocurrency purchases.
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