How to Buy Cryptocurrency | Where, How, and Why

At its core, cryptocurrency is typically a decentralized digital currency designed for use over the internet. 

Cryptocurrency is the first alternative to the traditional financial systems and has enormous advantages over the previous conventional payment method and asset class.

Cryptocurrencies are typically used to purchase goods and services as decentralized digital currencies, unlike the US dollar and other traditional physical fiat currencies. 

How to Buy Cryptocurrency

As a new crypto investor, buying bitcoin, Ethereum, Litecoin, and other cryptocurrencies can be confusing to figure out. It is, however, pretty simple. 

Cryptocurrency Pros and Cons

Pros

• massive returns potential
• International transactions, immediate settlement
• increased liquidity
• diversification
• Payment fraud protection
• Clear execution direction 
• No scam or fraud
• Private and secure

Cons

• Black market activity
• No refund
• Potential for significant losses and high volatility 
• Cyber hacking
• Unbacked and unregulated
• Potential network stall

You can buy and sell cryptocurrency with these easy steps. 

Step #1: Choose a Crypto Exchange or Brokers

There are different ways you can buy bitcoin and other cryptocurrencies, including traditional brokerage services, crypto exchanges, and even payment services.

Online Brokerages

Online brokerages are investment platforms that let investors buy digital assets like ETFs, stocks, mutual funds, and bonds. 

These brokerages also offer 529 college saving plans, IRAs, and trusts. A regular brokerage account allows retail investors to purchase bitcoin and other altcoins through the stock market.

A few online brokers offer ways to purchase cryptocurrency, in addition to other assets.

Traditional brokers remove the complexity of purchasing crypto, offering an easy-to-use interface that interacts with crypto currency exchanges for you.

Some online brokers charge higher fees than exchanges. Some claim to be free but make money by selling information about your cryptocurrency investments to large brokerages or not executing your trade at the best market price possible.

Online brokerages offer lower trading costs when you purchase bitcoin but significantly fewer crypto features. 

Robinhood was the first mainstream investment broker to offer customers ways to buy and sell bitcoin.

Crypto Exchanges

A cryptocurrency exchange is a crypto platform that allows sellers and buyers to trade cryptocurrency.

Cryptocurrency exchanges offer relatively low fees, although they have advanced performance charts and more complex interfaces with several trade types, which can be highly intimidating to new crypto investors.

Not all exchanges offer every cryptocurrency in circulation.

 You can buy Bitcoin (BTC) and other cryptocurrencies like Ethereum(ETH) and Litecoin (LTC) on most exchanges. 

Although it is relatively easy to use Centralized exchanges to buy crypto assets, the volume of crypto assets that flow through them makes them extremely attractive to hackers.

Decentralized exchanges are more suited to advanced investors because their fees are lower than centralized platforms.

It is essential to know that many exchanges impose geographical restrictions on users who want to buy crypto. Because of regulatory reasons, residents in certain states cannot use their platform.

With most exchanges, you’ll be able to connect a debit card or a traditional account to transfer fiat currency into your exchange account. The mode you use to fund your account attracts different fees; typically, card options cost more than bank transfers. 

Not all exchanges allow you to purchase bitcoin and other cryptocurrency investments with credit cards due to the risk of fraud.

This decision by the exchange may work in the customers’ best interest as credit card processing can add additional charges onto such transactions. Credit card companies process crypto purchases with credit cards as cash advances.

Some exchanges offer wallet options so you can quickly transfer digital assets from your exchange account to a more secure wallet.

These exchanges also charge fees based on a spread or margin on top of the market price.

Binance, Coinbase, and Kraken are popular cryptocurrency exchanges that offer trading options including Bitcoin, Bitcoin Cash, Litecoin, Ethereum, and Coinbase USD coin.

CoinStats does not offer advisory services, nor is this a recommendation to sell or buy particular stocks or other cryptocurrency holdings.

Step #2: Create Your Account

Once you have decided on the cryptocurrency exchanges or brokerage services you want to use, the next step is opening an account.

Depending on the platform and how much bitcoin or altcoin you want to buy, you might have to authenticate your identity; this is an essential step to meeting regulatory requirements and preventing fraud.

Buying or selling cryptocurrencies will be unavailable until you complete the verification process. 

Many exchanges require submitting a passport or driver’s license, and some may even ask you to upload a picture to prove you match the documents you’ve submitted.

Step #3: Fund Your Account

You will need to fund your account to start trading. Most crypto exchanges and payment services allow investors to fund their accounts and purchase cryptocurrencies with a debit or credit card; this differs by platform.

Bank Account/Crypto Account

Crypto accounts are not government-insured. The government is not obligated to step in or help you get your money back if you store your cryptocurrency with a third-party company and the company is hacked or goes out of business. 

Funds can be deposited into your cryptocurrency account by linking it with your traditional account, paying with a credit or debit card, or authorizing a wire transfer.

Buying bitcoin is often the first step investors take in the crypto world. Although you need a bank account to buy bitcoin, it is not the only method to buy and sell cryptocurrencies. 

If moving crypto holdings from your traditional account into a crypto account is something you’re considering, it is vital to understand the differences. Cryptocurrency accounts offer less consumer protection while also putting more.

Interest rates, FDIC insurance, protection against hacking and fraud, customer service, and the available currencies are some of the things you consider.

Funding your account is not the same as actually purchasing cryptocurrency. Like conventional investing, you do not want to leave uninvested money in your account. 

Once your account has been funded, you still need to exchange your dollars or euros for cryptocurrency.

Step #4: Place Your Crypto Order

You are ready to place your first crypto order and buy bitcoin once there is money in your account. This process differs depending on the crypto exchange you’re using.

On a platform like Coinbase, you can enter the dollar amount you want to trade for Bitcoin and buy bitcoin at its current rate.

When it comes to transactions, the type of order you select affects the price at which your order is executed. There are generally three types of orders: limit orders, Stop orders, and Market orders.

You can buy only a fraction of crypto shares on some brokerages and cryptocurrency exchanges.

Step #5: Choose a Storage Method

After you buy bitcoin, it is typically stored in the crypto wallet attached to the exchange. However, you might want other secure options; this is where cryptocurrency wallets come in. 

Investors can store assets on crypto wallets.

Crypto wallets are online software or physical devices that securely store the private keys to your assets. When choosing a bitcoin wallet, there are two kinds of digital wallets you can choose from:

Hot Wallets

Hot wallets, also known as online wallets, are stored online and run on internet devices such as phones or computers. 

Although a hot wallet is convenient, there is a higher risk of theft since they are internet-connected.

A hot wallet can be made secure as long as preventive methods such as two-factor authentication, safe Internet browsing, and strong passwords are employed.

Cold Wallets

Unlike a hot wallet, cold wallets, also known as hardware wallets, are small, portable encrypted devices that allow you to carry your bitcoin around.

Because a cold wallet isn’t connected to the internet, it is a more secure option for storing your cryptocurrencies.

You have to be careful with a cold wallet; If the device breaks or you lose the keycode associated with them, you may never recover your cryptocurrencies back. The same could happen with hot wallets, but the custodians who run them help get your account back if you’re locked out.

Transactions are generally faster with a hot wallet; though a cold wallet takes longer, it helps keep your assets safer.

Several different providers charge fees, whether hot or cold wallets.

Electrum, Blockchain, Mycelium, and the CoinStats Wallet are available options.

Crypto Assets

Since Bitcoin’s release, cryptocurrency usage has exploded.

Although the exact number of the functional currency fluctuates and the individual currencies’ values are incredibly volatile, the global market value of all active cryptocurrencies is generally upward trending.

Here are some of the more popular cryptocurrencies in circulation today:

Layer 0 Tokens

Layer 0 protocols are known as the ground floor of all blockchain protocols, some of which are: 

Cosmos (ATOM)

Cosmos intends to create a network of blockchains that communicate decentralized. ATOM is the native cryptocurrency of the Cosmos blockchain protocol.

To maintain the network, ATOM holders have to stake their tokens and get more tokens as a reward.

Cardano (ADA)

Built on a Proof-of-stake consensus protocol, Cardano is a blockchain-based platform that authorizes transactions without high energy costs. 

Named after the 19th-century mathematician Ada Lovelace, ADA is the native token of the blockchain protocol.

Layer 1 Tokens

A layer one protocol or an implementation in layer refers to a system associated with a blockchain network’s main or base architecture.

The entire network’s parameters and rules, such as transaction throughput, block time, and consensus algorithm, are set by a layer one protocol.

Some examples of layer one protocol tokens are.

Bitcoin (BTC)

Bitcoin is an innovation that empowered a group of software users to create and manage a supply of digital money outside the control of any bank or government.

Bitcoin is progressively viewed as a legitimate means of exchange. Several well-known companies accept payments in Bitcoin, although most partner with a cryptocurrency exchange to convert BTC into fiat currency before receiving their funds. 

Ethereum (ETH)

Launched in 2015, Ethereum itself is a blockchain technology platform that supports a wide range of cryptocurrencies, including decentralized applications (dApps). Ether is the second most popular and the second-largest virtual currency by market cap after Bitcoin.

Although the ETH coin is commonly called Ethereum, the distinction remains that Ethereum is a blockchain-powered platform, and ETH (Ether) is its native cryptocurrency.

Litecoin (LTC)

Founded two years after Bitcoin in 2011 by former Google engineer Charlie Lee and based on an open-source global payment network, Litecoin is not controlled by any central authority.

Holders can also use LTC to pay for goods and services using payment processors that accept bitcoin and other cryptocurrencies on behalf of merchants.

Dogecoin (DOGE)

Dogecoin is a variation on Litecoin, and its casual presentation suited the mood of the burgeoning crypto community.

Like any digital currency, DOGE has a floating exchange rate and can be traded, exchanged, or bought for physical goods or cash.

Basic Attention Token (BAT)

The co-founder of Firefox and Mozilla, Brendan Rich, created the Basic Attention Token (BAT) to improve fairness, efficiency, and security through blockchain technology.

BAT is the native token of Brave, used to obtain several different services. 

MakerDao (DAI)

Created and regulated by Maker DAO (Decentralised Autonomous Organisation), DAI is a fully collateralized stablecoin seeking to tackle the instability of digital currencies by keeping its worth fixed to one U.S. dollar.

Instead of a cycle where a bank or monetary organization assesses their credit, DAI clients can essentially set up Ether and get DAI.

Stellar (XLM)

Stellar is is a decentralized international payment network aiming to connect people, payments systems, and financial institutions through blockchain technology and drastically reduce the time and transactional costs needed for cross-border transfers.

XLM is the native asset of the Stellar Development Foundation. A stellar lumen (XLM) is a liquid cash cryptographic equivalent for nearly instant remittance and ultra low-fee global payments.

Fantom (FTM)

Fantom is a decentralized, permissionless, open-source smart contract platform for decentralized applications (dApps) and digital assets, and it is one of many blockchain networks designed to compete with Ethereum. The Fantom blockchain ecosystem is powered by FTM, Fantom’s native utility token. FTM tokens are utilized on the network for staking, governance, payments, and fees.

Terra Luna

Terra is a blockchain network that specialises in stablecoin development and was created with the Cosmos SDK. Instead of using fiat or over-collateralized crypto as reserves, each Terra stablecoin is convertible into LUNA, the network’s native asset.

Holders of LUNA can pay network fees, vote on governance, participate in the Tendermint Delegated Proof of Stake consensus method, and peg stablecoins.

Disclaimer: Terra is no longer available in most of the exchanges, and you shouldn’t buy it since May 2022.

OSMOSIS (OSMO)

OSMO is the native rewards and governance token for Osmosis, a decentralized peer-to-peer blockchain network and automated market maker (AMM) decentralized exchange (DEX) platform based on the Cosmos SDK that allows users to construct liquidity pools and AMMs, give LP to existing pools to receive yield farming benefits, and trade across Inter Blockchain Communication (IBC) protocol supported token assets. OSMO stakeholders can vote on plans to adopt new protocol features like front-running protection, validator-backed oracles, and other ideas.

Ankr (ANKR)

Ankr was first launched in 2017 as a Distributed Cloud Computing Network to apply excess capacity for cloud computing from a network of machines other than relying on one computing provider.

ANKR is the native cryptocurrency that serves as a payment method across the Ankr network for API services and node deployment, insurance for network participants, and participating in on-chain governance.

Tether (USDT)

Tether is a blockchain-based digital currency, a stablecoin endorsed by the U.S. dollar. Most cryptocurrencies generally fluctuate in value based on market demand and supply. 

USDT tokens by design are always worth one USD. So, Tether is an excellent option to evade the risks associated with stock market investments.

Quant (QNT)

Launched in June 2018, the quant project aimed to guarantee seamless interoperability between numerous blockchains and link networks on an international scale without lessening the network’s efficiency.

QNT, the native token of the quant project, provides digital access to a specific application (MApp) or service.

Shiba Inu (SHIB)

Shiba Inu (SHIB) is a decentralized and completely secure meme token released as an ERC-20 token on the Ethereum Blockchain.

The name SHIB correlates to the Japanese dog breed Shiba Inu; as an essential pet trait, loyalty is guaranteed for its investors.

Bitcoin S.V. (BSV)

Standing for Satoshi Vision and stemming from bitcoin cash, Bitcoin S.V. declares itself to be the “original Bitcoin,” which represents the purest form of the original version of the bitcoin protocol by Satoshi Nakamoto.

BSV is focused on security, scalability, safe instant transactions, and stability.

Uniswap (UNI)

Uniswap is an Ethereum based decentralized exchange protocol that aims to solve the liquidity problem of decentralized exchanges by allowing the platform to trade tokens without relying on sellers and buyers creating liquidity.

UNI is the governance token for Uniswap; its holders can participate in policies and network upgrades.

Tron (TRX)

Tron is a decentralized blockchain protocol that creates a free digital entertainment platform for cost-effective and easy digital content sharing. With more than 50 million accounts, the Tron blockchain has achieved global status.

TRX or Tronix tokens is the native cryptocurrency used to pay content creators for access to their applications. Tron does not require a transaction fee from content creators.

USD Coin (USDC)

The USD Coin is a dollar-denominated currency and stablecoin running on the Ethereum blockchain. One U.S. dollar backs each USDC and is held in a bank account.

USDC, unlike other USD stablecoins, is governed by Centre, which is a membership-based consortium that sets financial, policy, and technical standards for stablecoins.

Stratis (STRAX)

Stratis is a blockchain-as-a-service (BaaS) consultancy and platform that enables enterprise businesses to test, create and deploy blockchain-based applications without utilizing their networks.

The Stratus network is powered by the STRAX token, which users can use to make purchases and get staking rewards.

Chiliz (CHZ)

CHZ is the cryptocurrency of the Socios platform, a blockchain-based sports engagement platform, where fans can buy branded NFTs to show their favorite artists, athletes, and teams’ support.

Near (NEAR)

NEAR is the Near protocol’s utility token, a smart contract-capable blockchain aimed at addressing the limitations of competing systems, such as poor cross-compatibility, low transaction speeds, and limited transaction throughput.

VeThor (VTHO)

The VeChain Thor blockchain has a dual-based token system; VeChain Thor energy tokens (VTHO) and VeChain Token (VET). The VeChain Thor network is a blockchain-as-a-Service platform that makes data transparent and facilitates enterprise users utilizing smart chips.

Frax (Frax Share)

Frax Share is the native governance token of the Frax Protocol. This first fractional algorithmic stablecoin system was designed to provide decentralized and scalable algorithmic money in place of fixed-supply crypto assets. 

Compound (COMP)

Compound is a decentralized lending platform running on the Ethereum network. COMP, its native currency, is an ERC-20 token designed as a reward for users of the protocol for their participation.

Chainlink (LINK)

Chainlink is a decentralized oracle network that lets smart contracts platforms and public blockchains bring off-chain, external data sources to on-chain operators. LINK is native token Chainlinks uses to pay oracle’s or the network’s node operators for providing secure data feeds.

Ren (REN)

REN is the Ethereum token powering the Ren protocol and allowing for contract execution and rapid communication. Ren emphasizes faster transfers and scalability; this prompted several investors to add the REN coin to their portfolio.

Gala (GALA)

Gala is an NFT platform and game aimed at building an ecosystem dedicated to games on the blockchain. 

Users can use the functional token on the platform GALA to participate in the governance of the network, purchase NFTs and in-game items in the gala store, and reward node operators.

Decentraland (MANA)

MANA is the governance token and cryptocurrency users of Decentraland, a completely decentralized virtual world used to purchase and own virtual items like goods, services, and land.

Sandbox (SAND)

The Sandbox is a play-to-earn game on the blockchain, similar to the decentralized finance version of Roblox and Minecraft. SAND is the native token Sandbox utilizes.

Enjin Coin(ENJ)

ENJ is the native token of the Enjin platform, which has empowered its users to create their own F.T.s and NFTs since 2017.

Prometheus Coin(PROM)

PROM is the utility token of the Prometheus network. The Prometheus network is a completely decentralized project to solve data brokerage problems.

Qredo (QRDO)

The QRDO token is a governance token and utility to the Qredo network. It drives the network’s user adoption by rewarding users with its user-centric incentive structure.

Plex (PLEX)

PLEX is the native token of Mineplex, a new generation mobile crypto bank with its mobile app, liquid token, and blockchain.

Bitcoin Gold (BTG)

BTG or bitcoin gold was created from Bitcoin, splitting from the bitcoin blockchain in October 2017. BTGs purpose was to restore the original decentralized mining of bitcoin.

Bitcoin Cash(BCH)

Bitcoin cash aimed to outperform the transaction speed of the original bitcoin but accommodate a larger block size. Developers created the cryptocurrency BCH in August 2017.

Pancake Swap (CAKE)

CAKE is the utility token of PancakeSwap used for several purposes within its landscape like staking, yield farming, and voting on or making governance proposals through the community governance Portal of the platform.

Solana (SOL)

SOL, a relatively new cryptocurrency, is the native token of the Solana network. When interacting with smart contracts or transferring funds, users pay gas or transaction fees in SOL.

Algorand (ALGO)

ALGO is the cryptocurrency of the decentralized, open-source blockchain network Algorand.  Algorand combines decentralized and traditional finance to provide instant transaction finality by leveraging a unique variation of the POS consensus mechanism.

Uma(UMA)

UMA or Universal Market Access is a decentralized contracts platform built to create, maintain and settle financial contracts on coins that have been listed on several crypto exchanges. Unlike most cryptocurrencies, UMA cannot be purchased directly with fiat money; you’ll need to buy crypto and transfer it to an exchange that offers UMA for trade.

Aave(AAVE)

Holders of the AAVE token have governance rights over the network. The Aave protocol allows real-time Interest earning because deposits are issued at a 1:1 ratio upon deposits and tokenized as aTokens.

SafeMoon

SafeMoon was launched in March 2021 and now has an impressive investor and user count of over two million. Owners of safemoon are rewarded uniquely; a hefty exit fee of 10% is required from investors who sell their safemoon token reserves.

Amp

Amp is a cryptocurrency that gained massive popularity in 2021. Amp is an ERC-20 token that implements Ethereums newest technologies and offers unprecedented capabilities through its collateral management interface.

Binance Coin (BNB)

BNB or Binance coin is the token the Binance Cryptocurrency Exchange uses. It is native to the Binance Smart Chain, although it initially ran on the Ethereum blockchain. Binance coin, with the trading symbol BNB, is issued on the Binance cryptocurrency exchange.

Layer 2 Tokens

Also known as off-chain blockchain protocols or second-layer solutions, layer two protocols sit on top of another to provide scalability, features, or even interoperability.

These are some layer two protocol tokens:

Polygon (MATIC)

Originally known as MATIC, Polygon is a scaling- solution that improves the efficiency and speed of the Ethereum network by using Layer 2 sidechains. The polygons network’s transaction processing speed is enhanced, which reduces the gas fee.

Bancor Network Token (BNT)

The bancor network token, a virtual reserve currency, is an automatic exchange mechanism where trading volumes and prices are automatically controlled through the platform. BNT is the reserve currency for all tokens created on the Bancor Network.

Harmony (ONE)

Harmony is a layer-2 blockchain built on top of the Ethereum network, using sharding and Effective Proof of Stake mechanism to achieve scalability, security, and decentralization. The network was launched in 2019 and features trustless cross-chain bridges and four shards, which process transactions in parallel. Effective Proof of Stake encourages decentralization of validators, and sharding shares the network’s load among validators, delegators, and users. Its native token ONE is used for transaction fees, governance, and staking.

ERC-20 Standard Token

Monero (XMR)

Monero (XMR)  is a decentralized and privacy-focused cryptocurrency that protects its users’ anonymity by obscuring information about senders, receivers, and transaction amounts. To make transactions untraceable, Monero utilizes encryption such as ring signatures and stealth addresses.

Wrapped Ether (wETH)

Wrapped Ether (WETH) is a token that is linked to Ether (ETH). WETH is utilized in a number of sites and DApps that use ERC-20 tokens. While ETH is used to pay network transaction fees, it lacks the functionality of ERC-20 tokens.

Wrapping is a simple technique that allows you to convert ETH to WETH. You can also exchange WETH for ETH at any moment. Wrapping and unwrapping have a 1:1 ratio, which means there are no additional expenditures aside from transaction fees.

Conclusion

Cryptocurrencies are speculative and highly volatile compared to other investments, such as mutual funds, bonds, and stocks. 

If you’re new to investing, it is a good rule of thumb to invest no more than 10% of your portfolio in risky assets like Bitcoin or individual stocks.

According to Andy Rosen of the Boston Globe, one needs to consider if he’s in an excellent position to buy crypto and market research before he ventures into investing in cryptocurrencies.