Learn Where & How to Buy Cryptocurrency - A Beginner's Guide
Many new investors are considering a move to buy cryptocurrency in 2021. There are different reasons why you should think about this opportunity. Some individuals want to support the decentralised nature of cryptocurrency, hoping that this nascent technology will herald a shift in our current financial paradigm.
Others are excited about the volatility of the cryptocurrency market, which can earn investors truly impressive returns if the market moves favourably.
Some believe that they may have missed the boat now that Bitcoin and other leading cryptocurrencies are already highly valued. However, several experts openly declare that we are only at the beginning of what is to come within the crypto sphere.
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3 Things to Consider Before Buying Cryptocurrency
One of the most important considerations to make when investing in any asset is market trends. As you may have noticed, buying cryptocurrency has become increasingly popular in recent years, especially among those who are new to investing. This is due to relatively steady market growth over the last ten years, with an ever-expanding list of cryptocurrencies being created. Numerous experts claim the value of these digital assets will soar in the future. If these predictions prove accurate, now would be a great time to buy cryptocurrency at a relatively low price.
Like all assets, cryptocurrency's value is determined by demand and available supply. Some crypto coins are designed to be deflationary by their very nature, perpetually increasing in value so long as the demand remains. As some proof of work-based cryptocurrencies approaches their maximum level of supply, their rate of mining rewards halves, slowing the rate at which new coins are brought into circulation. Still, these cryptocurrencies are estimated to be minable at least until 2140, and it should be considered that many new promising coins are increasing their presence day by day.
Considering the enormous presence that cryptocurrency is gaining in our everyday life, it is likely that it will gain institutional relevance in the near future. Financial institutions have tried to avoid this topic for a long time, but they are slowly coming to realize that cryptocurrency is here to stay, and provides viable solutions to the challenges facing our current financial systems. For this reason, many banks and organizations started buying cryptocurrency and are also beginning to consider accepting payments with them.
Where to Buy Cryptocurrency in 2021?
If you are really interested in getting involved in cryptocurrency investment for the first time, you may be wondering, where can I buy Cryptocurrency in 2021?
Nowadays, you can buy cryptocurrency on numerous platforms, both websites and apps. Most offer integrated wallets, which is the best choice if you only intend to keep your funds for a short period. Otherwise, you can choose to store your investment in a separate wallet that can be either hardware or software.
These platforms are usually centralised systems that require KYC (Know-Your-Customer). This standard in the investment industry is a safety protocol that requires the platform or the investment advisor to have knowledge about their clients, specifically about their identity and financial status. This process is necessary to ensure the client's safety, and that the platform is aware of the true identity of their users, lowering the risk of bad actors trading fraudulently.
Beginner investors who want to buy cryptocurrency should also consider the critical difference between buying cryptocurrency and trading from its price movements. The option that best suits your case depends on the strategy you plan to use as an investor.
When you buy cryptocurrency, you become the actual owner of that asset, which is different from what happens with entering into a CFD (contract for difference). CFDs are derivative financial products with which two parties can agree to exchange value based on the underlying asset, in this case, cryptocurrency. The agreement set between the buyer and the seller is to pay any difference between the rises and falls of the value. This type of deal is often used in short-term strategies, where the investors take advantage of market volatility in a bid to make a profit.
It is important to remember that it takes extensive knowledge to take advantage of such trends.
If you are not an expert trader, the best choice may be to buy the cryptocurrency. Why? Trying to profit from quick rises and falls requires a consistent amount of time, energy and study. What you can do, instead, is take advantage of the overall market growth that is taking place over a longer period.
Our Tutorial to Buy Cryptocurrency in 5 Steps
In the following section, we will analyse ways to buy cryptocurrency, starting from the platform to choose up to the final transaction.
Step 1: Find an appropriate platform to buy cryptocurrency
The first step to buying cryptocurrency is to understand which platform may better fit your needs. The differences between these platforms include commissions, allowed services, integrated wallets, security systems and the possibility to withdraw cryptocurrency.
Furthermore, you should consider that some platforms’ focus on a particular type of clients and offers specific services these users may find useful. Before starting your trading experience, make sure to be aware of your knowledge limits and financial possibilities to choose the platform with which you can make the best use of your investments.
Some of the most popular platforms are Coinbase, Binance, eToro, and Coinmama. Each of them has its strength and weaknesses on which you should focus to decide the one that best fits your need. For example, eToro is a great option if you are just starting trading. You are allowed to put your account in "copy mode" and automatically follow your favourite traders' decisions.
Step 2: Registration / Create a New Account
When you have decided on the platform you want to use to buy cryptocurrency, you can go ahead with your registration. During this process, you will be asked to share some personal information, such as your full name and birth date. Each platform may require different levels of verification, but all will almost certainly include KYC. The choice you will have to make is between more regulated platforms that need full disclosure of your personal information or more discrete ones that are likely to be unregulated.
Step 3: Deposit Funds
At this point, you will be able to make your first deposit. You will choose your favourite payment method, but keep in mind that accepted payments may change based on the platform you are using. Minimum deposit amounts may vary as well: for example, eToro requires a minimum fund of $200 to start making operations. Other platforms may as well not have a lower limit for deposits, like Pepperstone.
Step 4: Start Trading or Buying Cryptocurrency
Your funds should become available very quickly, depending on the method you chose to fund your account.
You will now be able to trade or buy cryptocurrency, but the operations available to you may depend on the account type you have. If the platform you chose is a crypto broker, it will most likely offer you CFD and futures contracts. A cryptocurrency exchange will allow you to buy cryptocurrency and provide a wallet service that comes along with your account.
There are some exceptions to these cases: Binance and BitMEX, for example, offer tools like margin trading, leverage tokens, crypto loans and future contracts to their users. These instruments are quite complex to use if you do not have the necessary experience, so you should be careful and do your due diligence before considering those options.
Step 5: Optional Steps
Now that you started using your platforms, you will be able to apply the strategy you prefer to start making a profit with your investment. Some of the actions you may take from here are the following:
- Moving funds to a wallet
If you plan to keep your investment for a more extended period, the best choice is to put your funds in a separate cryptocurrency wallet, preferably a hardware device. This will prevent possible hacker attacks against you.
- Sell high, rebuy low
Another option may be to profit from the trend of the market, trying to anticipate its oscillations, selling when the price is high and buying again when it lowers. This will give you the chance to profit from the difference.
Available Payment Methods for Buying Cryptocurrency
You can find that some payment methods work better than others, based on availability and personal preferences. Below we will outline some of the most popular methods people use.
- Buy Cryptocurrency with Cash
Like any other goods or services, paying with cash is becoming more complex with time, especially for this kind of financial services. You can buy cryptocurrency with cash in person or through a cryptocurrency ATM.
- Buy Cryptocurrency with Credit / Debit Card
Buying cryptocurrency with credit or debit cards is undoubtedly the most common payment method. Most platforms allow this type of transaction, but it still requires some waiting for the payment to be delivered depending on your service provider.
- Buy Cryptocurrency with Bank Transfer
Every platform allows users to pay for their services with bank transfers. Some of them ask you to insert an identification code when you place the order on your bank portal, so make sure to remember this detail. The provider may have trouble identifying your payment if that number is missing.
- Buy Cryptocurrency with other Cryptocurrency
Another popular way to buy cryptocurrency is to exchange it with another crypto coin. Many platforms nowadays allow these operations.
- Buy Cryptocurrency with PayPal
Users have widely asked for this payment method, as it is one of the easiest and quickest to use. Several platforms are now looking to integrate PayPal payments into their services.
What are the Fees for Buying Cryptocurrency?
Cryptocurrency exchange and brokers are financial intermediaries and, as such, they make their money from transactions that take place on their platforms. This is why it is necessary for them to apply some fees to be able to keep running their service.
This fee can be expressed as a flat tax that gets applied to any service or as a percentage of the transaction that is being executed. You should carefully evaluate what type of fees your platform applies depending on the strategy you will be using. If you plan to keep your funds in the long-term, maintenance fees will have more relevance compared to transaction fees. Conversely, if you exchange your investment daily, transaction fees or withdrawal fees will make more of a difference for you.
Expert Tip to Buy and Sell Cryptocurrency“ Beginners can have as much success as expert traders when it comes to trading cryptocurrency. The secret lies in the strategy you decide to stick to. On the one side, long-term strategies could be extremely lucrative, especially if the crypto sphere continues with the momentum it is on. There is also some great short-term opportunities as well due to volatility. Just be sure to learn all you can about the project you plan to invest in. Learning about developments the community have planned can inform you on whether your investment will be successful. ”
How to Find the Best Time to Buy Cryptocurrency
The cryptocurrency market is influenced by almost anything you can think of. World news events, stock market fluctuations, elections and even social media, to name but a few, have the power to affect the value of cryptocurrencies. If you are new to investing in crypto, you should dedicate enough time to researching and reading as much as you can about news, politics, recent developments and technical analysis before you actually buy cryptocurrency. Your work will pay off - the most informed investors are always better positioned to make the most out of the opportunities available to them.
What drives cryptocurrency's price?
As mentioned above, many factors can influence cryptocurrency's price. Main influencers include world news events, national regulatory changes, technological developments, business partnerships and collaborations, elections, even celebrity endorsements and social media.
Another large influencer on the price of cryptocurrency can be economic uncertainty, as recently proven by the COVID-19 pandemic. During this time, cryptocurrencies demonstrated remarkable resilience to the financial strain. This, with other factors, caused a new bull run, with many investors being able to recoup losses caused by the lockdown, like loss of employment for instance.
How to Sell Cryptocurrency
There are a few different ways to sell cryptocurrency. You may do this through an exchange, a direct deal, or a peer-to-peer transaction. Exchanges are the most natural choice since they were developed primarily to purchase and sell cryptocurrencies more safely and simply. However, if you want to sell to an individual directly rather than through the platform, you can do so either by meeting in person or online through a P2P network. It should be noted, however, that brokerage and exchange platforms facilitate transactions within a regulated environment, offering protection from bad actors.
You may also choose to simply enter into a CFD. A brokerage platform would be the best choice for this approach. A CFD trade allows you to capitalise on market opportunities without having to actually take ownership of the underlying asset.
Frequently Asked Questions
The high volatility of the market and its constant growth allow for great opportunities for investors who put in the research. If the adoption of these digital assets continues to increase, their value is very likely to increase many times over.
The best moment to buy cryptocurrency is when you see a reasonably low price. The all-time-high and all-time-low are two indicators you should keep in consideration. Many short-term investors keep a close eye on the market, waiting for a dip that will allow them to buy low before a rebound occurs. However, if you are planning a more long-term strategy and the coin continues to gain ground, right now may be a relatively low price.
Using a regulated exchange or broker that offers more protection than those that are unregulated. This is simply because they will be held accountable for any loss of funds in their custody and will be required to reimburse their users. Even this is only recommended for short to mid-term investments though. If you plan to hold on to your cryptocurrency for several months, or even years, then a hardware wallet is advisable.
It is almost impossible to imagine a scenario where all cryptocurrencies become completely worthless. A thing only has value as long as we assign it, and trust is a huge factor. Cryptocurrencies offer the most secure means of transacting and transferring funds the world has ever known.
This is a question that only you can answer. It is advisable to get yourself up to date with all the recent cryptocurrency news, and then take a closer look at the cryptocurrency you feel appeals to you. Fonder involvement, planned upgrades, future relevance, and a dedicated community are all good indicators.
Depending on your needs and plans, both options can be a good fit potentially. CFD trading usually comes with the option to apply leverage to your trades, allowing you to boost any profits earned. However, these practices also carry greater risk, and it is vitally important that you learn all you can about CFDs before committing any of your money.
This depends on several factors. How much you spent on your initial investment, market movements, widespread adoption, and global events can all dictate how much you can hope to make. The best advice is to learn all you can and stay up to date with the latest developments.
Yes, you will need a compatible wallet to store your cryptocurrency. Most exchanges offer all users a non-custodial wallet free of charge, and if the exchange is regulated, these are reasonably safe. However, if you are planning to purchase a lot of cryptocurrencies, or hold them over a long period of time, we would recommend you have your own private wallet. There are many to choose from, but a hardware option that stores your investment offline is by far the safest option.