How to Buy Cryptocurrency – A Step-by-Step Guide
In this guide, you will learn how to buy cryptocurrency. There are different ways you can buy cryptocurrency which we will go through on this page. However, the best and most popular way to buy cryptocurrency is by using a cryptocurrency exchange.
Exchanges are the best method to buy because it is more of a direct way of buying crypto. Which means you will own the physical digital asset. Additionally, you have the flexibility to take your crypto off the exchange whenever you want.
How to Buy Cryptocurrency Using a Crypto Exchange
Here is a step-by-step process on how to buy cryptocurrency using an exchange. The process is really easy and made up of the following steps. However, we will go through the steps in detail.
There are a number of resources that are provided in this guide. Including images to help you out.
It does take some time to set up an account with an exchange and figure out how to buy cryptocurrency. However, when you do it once, it will be easier the next time you want to buy or sell crypto.
Additionally, this guide contains recommendations and tips. Either for you to better understand the best practices or suggestions on how you can save money on fees. This way you know what you need to look out for before you buy.
Things You Should Know Before You Directly Buy Cryptocurrency
There are 10,000 + cryptocurrencies and counting. It shows that the space is increasing in popularity. Most people have heard about Bitcoin, perhaps Ethereum or privacy coins like Monero and maybe some others.
Cryptocurrencies are similar, but they have their differences. Most beginners buy bitcoin or the most popular coins to start with.
This is because Bitcoin is the most well-known cryptocurrency and is supported by all crypto exchanges. Additionally, it is the crypto with the most information available and enjoys wide-ranging support across different devices and products.
Details on How to Buy Cryptocurrency Using An Exchange
Now we will get into detail on how to buy cryptocurrency using an exchange.
1. Choose an Exchange
Firstly you will need to choose an exchange where you will buy your cryptocurrency. There are a lot of different cryptocurrency exchanges to choose from. To help you make this decision you can have a look through the list of recommended exchanges.
You should note that all recommended exchanges work in the same way. However, Coinmama is an exception. Since Coinmama does not hold your cryptocurrency funds you will need to have a wallet address. This enables you to transfer the crypto off the exchange once you purchase.
Ideally, a hardware wallet would be your best option for storing your crypto. We will go through this in the “Advice for Better Securing Your Cryptocurrency” section. However, you should note that storing your cryptocurrency on a hardware wallet is the best practice for securing your cryptocurrency.
2. Sign Up
Once you select the exchange you can move on to signing up. The first part is like signing up for any online website. As a result, you will need to provide your email and password which is standard for any platform.
Additionally, because the cryptocurrency exchanges we recommend are centralised and/or regulated exchanges, they will ask for more details.
They will ask for your country of residence. They may also ask to confirm you are 18 years or over. The details they ask for vary from one exchange to another. Here are a couple of example screenshots of what to expect.
After filling in your details the exchange will ask you to confirm your email address. You should make sure you confirm it before you proceed any further.
3. Verify your account
After confirming your email address, the exchanges will also ask you to submit identification to prove your identity. The exchange will let you know what documents you are able to submit.
You should make sure that the information you provide to the exchange can be cross-verified by the documents you supply. For example, if you are submitting a document with your address, then the address should be the same on all other documents. Otherwise, it will delay the application process.
Some exchanges will prompt you to verify your account, either via email or directly on the website. However, each exchange is different and you might need to do it manually for some. This is pretty easy to do.
To do it manually, you will need to navigate to your profile and verify your account. Usually, your profile has your name or profile icon at the top right.
Tiered System for Verification
Some exchanges have a form of a tiered system. This means that the number of documents you submit will depend on the amount of crypto you want to buy.
So if you plan to buy a small amount of crypto they will only ask for one document for identification. If you plan to buy a lot, then they will ask you to submit more documents as proof.
You could always submit the full amount of documents for practicalities sake. So that you will be ready to use the platform with any amount. However, not everyone can afford thousands worth of crypto so you might not need to do so anyway.
We just suggest you have a look at the different tiers and see what’s best for you. Additionally, you should give yourself some flexibility.
The exchanges make signing up and the verification process relatively straightforward. So all you need to do is follow the prompts the exchange provides.
Some people complain about having to go through the process, but these are money services. They have to comply with international laws and they cannot get around it.
4. Account Approval
After you sign up you may need to wait a while until your account gets approved by the exchange. Your account could be approved instantly, within hours or several days. It depends on the exchange you selected.
You should receive an email notification from the exchange to let you know your account has been approved.
Now that you are all set up, you can log in to the exchange platform. Usually, you will need to navigate and click on ‘deposit’. With some exchanges, you may need to press ‘buy’ or ‘exchange’ to get deposit options. Each exchange is different so they might not have the same options.
It is better to deposit and use bank transfer than credit cards or other payment methods. Credit cards are more instant which means you can jump straight into buying cryptocurrency. However, credit cards come with hefty fees. Usually, credit card fees are 3-5% which is quite high. You could put that money towards buying more crypto instead.
On the other hand, bank transfers have no fees or a small flat fee. The only drawback is that some bank transfers take some time. The duration of the transfer would depend on which country your bank is located in.
When you click to deposit into the exchange you will get the exchange’s details. Take the details and organise the bank transfer using your bank’s online banking portal.
After that, you will need to wait 3-5 working days until the transfer is completed. The exchange will notify you via email when you received the funds in your account.
6. Buy Cryptocurrency
Once your money is deposited into the exchange you can buy cryptocurrency. Log in to the exchange and find the exchange buying area. There could be an ‘exchange’ or ‘buy’ button. Usually, the button is close to the menu at the top or on it.
Here is what the Kraken exchange area looks like:
All you will need to do is select which cryptocurrency you want to buy from the drop-down menu. Then input the amount you want to purchase and click to buy. Your crypto will go into your account once you have purchased it.
Advice for Better Securing Your Cryptocurrency
Once you have purchased your crypto you should consider moving it off the exchange. To do this you will need a wallet, the best ones are hardware wallets.
Hardware wallets are a way of safely storing and securing your cryptocurrency in what is known as cold storage. This is a top-notch method for storing them. In fact, reputable crypto companies that are serious about security use cold storage methods for storing their crypto too.
Why Opt for Better Security
The reason for this added security is that there are a lot of hackers. These hackers have breached platforms that provide cryptocurrency for purchase and they have done so on multiple occasions. You can have a look at this list of hacks on crypto exchanges here to understand the extent of the problem.
If the platform you use to buy and store your crypto gets hacked you could lose your crypto for good. Some platforms have compensated their clients after a hack occurred, while others have declared bankruptcy. The reality is that it is not worth feeling uneasy or having that added concern at the back of your mind.
Which Hardware Wallets to Use
It is recommended to order and use a hardware wallet like Ledger or Trezor. If you want more information you can have a look at the Ledger review here and the Trezor review here.
There are other hardware wallets on the market, but they are still fairly new and untested. Ledger and Trezor are the first hardware wallets that are tried and tested and come highly recommended.
Only order your Ledger or Trezor directly from their online stores. This is because if you order elsewhere you could be at risk of receiving a wallet that criminals tampered with. You will lose your crypto if you use tampered wallets.
Different Ways to Buy Cryptocurrency
Here are some other ways on how to buy cryptocurrency apart from using exchanges. You can also buy cryptocurrency using:
- Crypto ATMs,
- Mutual Funds
- ETFs and
- Stocks connected to crypto
We shall go through all of these methods so you can get a good idea of each one.
There are two different types of Brokers you can use to buy crypto. Firstly there are those online like for example eToro and Robin Hood. In this case, you will have to sort out the trades yourself.
Secondly, you have the option to ask a traditional broker that has their own physical premises. However, most brokers still do not invest in crypto. Perhaps they might offer Bitcoin, but it will take some time until more offer Bitcoin and other cryptos.
The drawback with using online brokers is that unlike exchanges you cannot take your crypto off the platform. You have to sell it and move your money off the platform.
Dedicated crypto ATMs have sprung up across many different countries. However, you cannot buy all cryptocurrencies from crypto ATM machines. Some offer only Bitcoin while others have more of a range.
Here is a list of cryptos you can get from crypto ATMs:
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- Dash (DASH)
- Dogecoin (DOGE)
- Ether (ETH)
- Litecoin (LTC)
- Monero (XMR)
- Tether (USDT)
- Ripple (XRP)
- Zcash (ZEC)
You can find an ATM near you using CoinATMRadar. The nearest crypto ATM might be quite some distance away. So it may not be worth the trip.
You should note that using a cryptocurrency ATM can be one of the most expensive options to buy crypto. Usually, they charge approximately an 8.4% fee, but crypto ATM companies are not transparent with their fees. As a result, you could end up paying as much as 25%.
CoinFlip ATMs charge 6.99% plus a network mining fee. Usually, it is around $1, but it can fluctuate in price. However, this is still high and although it is another direct method to buy cryptocurrency it is not worth it. It is better to use a cryptocurrency exchange.
Mutual funds are essentially a fund made up of many investors that pool into the fund. They are actively managed by professional money managers. The Managers are responsible for generating gains or income for investors.
Fund managers do charge fees for managing the funds. So you have to minus the fees from any income generated by the fund.
There are a couple of Incrementum funds: The Incrementum Crypto Gold Fund and the Incrementum Digital and Physical Gold Fund. These funds are a mix of Crypto and Physical precious metals.
Additionally, there are mutual funds that are purely Bitcoin funds. They are the Bitcoin Strategy ProFund (BTCFX) and the Cboe Vest Bitcoin Strategy Managed Volatility Fund (BTCVX). These funds do not invest directly in Bitcoin. They deal with Bitcoin futures which is more complicated stuff for average investors. To clarify futures trading is trading the future price of Bitcoin.
We do not have an opinion on the last two funds. However, Incrementum AG has won many awards and are excellent asset managers.
ETFs (Exchange Traded Funds)
An ETF is a fund that is tied to the price of an index, sector, commodity or other asset. It can track one or many at once. It is essentially another type of financial instrument to invest in.
There aren’t any ETFs other than Bitcoin ETFs at this point. Here are some Bitcoin ETFs:
- ProShares Bitcoin Strategy ETF
- Valkyrie Bitcoin Strategy ETF
- VanEck Bitcoin Strategy ETF
- Global X Blockchain & Bitcoin Strategy ETF
Stocks Connected to Crypto
You could also invest in companies linked to crypto. Either exchanges or those that create components to support the crypto industry or crypto payments. This would be an indirect way of investing in cryptocurrency.
A couple of examples are:
- Coinbase (COIN) – a cryptocurrency exchange platform.
- Nvidia (NVDA) – which produces graphic processing units used in crypto mining technology systems.
- Square (SQ) – which is a payment provider that allows its clients to make payments in fiat. However, they also allow clients to buy, store and sell crypto.
If you want to actively trade instead of invest and do not know where to start we have some suggestions for you. They are simply a start to set you off in the right direction. You can easily go down the rabbit hole with these disciplines because there is a lot to learn.
You should get to know: Technical analysis including fundamental analysis and how to read chart patterns. However, you should note that trading is risky. You have no guarantee of future performance.
Frequently Asked Questions
How can I buy cryptocurrency?
1. A cryptocurrency exchange,
3. Crypto ATMs,
4. Mutual Funds,
5. ETFs and
6. Stocks connected to crypto