Posted on Tutorials
How to Buy Crypto: Steps for Beginners
If you need a simple step-by-step instruction on where and how to buy cryptocurrency safely at a profitable rate, then you've come to the right page! Take 5-7 minutes of your time to read the article, and you will learn:
- 4 ways to buy cryptocurrency
- Pros and cons of each method
- Safety rules when buying cryptocurrency
Why buy cryptocurrency
In today's world, bitcoin and other cryptocurrencies is not a toy in the hands of technical geniuses and nerds any more. Today, cryptocurrency is used for trading and investing, it can be also used to pay for goods and services, and to make transfers anywhere in the world. In addition, many innovative projects and initiatives in the financial sector are launched on blockchain technology and use cryptocurrency as an internal means of payment. This allows such communities to remain independent, eliminate the need for intermediaries in the form of banks, and maintain transparency and accountability to users. An example of such initiatives is the FORSAGE global decentralized community. So, no matter what you are going to buy cryptocurrency for, you need to know how to do it quickly, safely and cost-effectively. That's what our article will focus on.
Disclaimer: We aim to educate and inform the audience. We do not give investment advice or recommendations. All information is unbiased and based on our personal experience and freely available information. Before making any decisions related to investing, buying cryptocurrency or other actions, assess the risks and take responsibility for your actions. We wish you success!
How to get started
The first step for many will be overcoming fear and uncertainty. If you've never dealt with cryptocurrency before, you may think that it's complicated, dangerous, time consuming... In fact, at the current stage of development of the crypto industry, the buying process has simplified to the maximum and became user-friendly. You have a number of options to choose from, and the interfaces of all websites and apps are intuitive. When it comes to security, progress is noticeable here as well.
Cryptoexchangers and other services are constantly improving security measures, and many of them cooperate with regulatory authorities to ensure the legality of all transactions in the given jurisdiction. The bottom line is that if you don't get started, you will never get over your fears. Join the millions of people in the world who use cryptocurrency freely.
We put this exchange method at the top of our list because it's available to everyone from anywhere in the world. It's also fast, secure, and flexible, meaning it adjusts to your needs.
So, cryptocurrency exchanges are online resources that allow private and institutional investors to buy, sell, exchange and store cryptocurrency. You can also withdraw funds from your account at this service to your personal wallet. By the way, this is what is usually recommended to do, and later we will tell you why.
Types of cryptocurrency exchanges
Centralized exchanges (CEX) are services that have one governing body, store users' money and emphasize compliance with the best practices in the field of financial legislation. By their operating mechanism, they are intermediaries between users. Both you and the other party of the transaction give funds to the exchange, and it distributes them further.
To meet the requirements of anti-money laundering (AML) and counter-terrorist financing laws, which in one form or another are present in the legislation of most countries, these exchanges introduce a user identification procedure. It is also known as KYC (Know Your Client) and means that you have to prove your identity to access the service functionality. Usually, it requires a scan or photo of your passport, driver's license or other documents that can prove your identity in your jurisdiction. Some countries also require you to state your employer or other source of income.
Decentralized exchanges (DEX) are services that do not have a single governing body and are essentially just a medium for direct transactions between users. These exchanges do not store users' money - they just help them make transactions through smart contracts (self-executing programs). The money from your wallet goes directly to the person who sells you the cryptocurrency, without any intermediaries. Such exchanges allow the parties of the transaction to remain anonymous. To buy cryptocurrency from a DEX exchanger, you do not need to confirm your identity.
How to choose an exchange
Exchanges vary not only by type (CEX and DEX), but also by other important features:
- How much does the registration process take
- List of cryptocurrencies offered for exchange
- Volume of transactions
- Liquidity (this parameter indicates how quickly and easily you can perform the exchange)
- Number of users
- The license and compliance with the laws of the jurisdiction in which the exchange is registered
- Methods of depositing to the account (from a bank account, from a debit/credit card, from an e-wallet, from a cryptocurrency wallet)
- Withdrawal methods (to a bank account, an e-wallet, a debit/credit card, a cryptocurrency wallet)
- Exchange fees, withdrawal fees, and other obvious and hidden fees
- Exchange rates for the cryptocurrency you are interested in
- Additional options: long-term automated execution of deals, pending and limiting orders, using borrowed funds to buy cryptocurrencies (these functions are useful for professional traders)
- Users' reviews
Choose the exchange that best matches your current needs. It is most convenient to compare different exchangers at aggregator services. Their data is updated in real time, and you can sort exchangers by the parameters that are important to you: rate, currency pair, withdrawal methods, the number of positive reviews. An example of such aggregators is Coinmarketcap service.
How to buy cryptocurrency from an exchange
1. Make sure that your Internet connection is secure. Do not use public networks at internet cafes or public wi-fi. Set up two-factor authentication (i.e. login not just by password, but by password and an additional factor, such as a single-use code from a push notification. Use complex passwords that include uppercase letters, %:?* characters, and numbers.
2. Create an account on the exchange. If it is a CEX-exchange, complete the KYC procedure, confirm your identity and wait for the approval to come.
3. Choose currency pair (which currency you give and which you get in return). You can exchange fiat money (dollars, euros, rubles, rupees) to cryptocurrency (bitcoins, ethers, tron, Binance coins). Sometimes it is not possible to create a pair, especially if the coin you buy is quite rare and there is no direct exchange for your currency. Then you can make the exchange in two steps. First, exchange your currency for bitcoins or ethers, and then exchange the received cryptocurrency for the coins you need. However, in this case you will have to pay commission twice, if your exchange charges it.
4. Choose a payment method. We will talk more about this later.
5. Make an exchange and check that the funds are credited to your account.
6. If you used a decentralized exchange, the cryptocurrency is already in your personal wallet. If you have a CEX exchange, the funds are in the exchange's internal wallet. It is recommended to withdraw them to your personal wallet so that only you have access to them.
7. Yay! Now you can use your cryptocurrency to buy goods and services, to participate in different projects, to transfer funds anywhere in the world.
Methods of payment, their pros and cons
Transfer from your bank account
+ This is usually the fastest, easiest and most profitable way to buy cryptocurrency. The commission will be minimal.
- Not all exchanges support this method of payment.
SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. It is an international interbank system for transferring information and making payments.
+ It's a convenient and secure system of payments.
- Transfer can take several days, the fee can be higher than that of a transfer from a bank account.
Transfer from an e-wallet or other third-party service (Paypal, Webmoney, Skrill)
+ Easy, fast and convenient if you already have an account with this service.
- If you don't have an account with the service, you will need to create one. If you plan to withdraw funds from the intermediary wallet to your credit card, you may be charged a fee.
Transfer from a credit card
+ Fast and convenient way since most people have credit cards.
- The most expensive way since commissions for transfers and withdrawal from/to cards can reach 4-5% of the sum. As a rule, there is a limit on the amount, that is, when exchanging a large sum of money you will have to do it in a few runs.
Cryptocurrency ATMs (cryptomats) are the easiest way to buy cryptocurrency. But we put them in the second position on the list because they aren't widespread yet, and in some regions there are no Crypto ATMs at all. But if you're lucky and there's a crypto ATM in your city, you can use it.
How it works
1. You deposit cash into a cryptomat
2. You enter number of your wallet, where you want to deposit the cryptocurrency
3. The cryptocurrency is deposited to your wallet
This is convenient because there is no need to create an account and confirm your identity. The disadvantages of cryptomats are their scarcity and high fees - usually from 4 to 10% of the sum.
The principle of P2P (peer to peer) means that the interaction goes directly between users, bypassing intermediaries. This is somewhat similar to the decentralized exchanges, but the interaction takes place in manual mode. P2P exchangers are like bulletin board services: you place an announcement that you want to buy a certain amount of cryptocurrency and pay in a certain way. If someone is interested in your offer, he will contact you. At the same time, you can monitor other users' announcements that match your needs.
+ No fees. You can choose any payment method that suits both parties, including cash. If the other side of the transaction is OK with that, you can keep your identity private. There are user ratings and reviews of sellers and buyers.
- The exchange process is more complicated and time-consuming. There are only so many users, therefore you will have to search for an offer that is interesting to you. All interaction with the selected seller is your responsibility, and the service offers no guarantees.
An example of a P2P exchange is LocalBitcoins.
1. Cryptocurrency is steadily entering our world, and the skill of buying it is an obligatory skill for those who want to keep up with the times.
2. The four best ways to buy cryptocurrency are centralized and decentralized exchanges, crypto ATMs, P2P services.
3. Each of them has its pros and cons. The choice of the exact way depends on many variables, including the method of payment, rate, security, anonymity, acceptable size of the fee, etc.
4. Just like with any other online payment, you have to be very careful about security: use strong passwords and two-factor authentication, use a secure connection to access the Internet, be alert and assess the risks.