The world of cryptocurrency is a rollercoaster ride of highs and lows, yet these digital assets have surged in popularity in recent years. With increasing adoption, investors now have a plethora of options when it comes to purchasing cryptocurrencies.
If you’re considering diving into the world of crypto, here’s a guide to help you navigate the process.
4 steps to purchasing crypto
Before delving into buying crypto, it’s essential to review your overall financial situation and ensure you have an emergency fund, manageable debt, and a diversified investment portfolio in place first.
Given the volatility of cryptocurrencies, any investments made should be part of a broader investment strategy to mitigate potential losses. It’s advisable to invest only what you can afford to lose.
If you’re ready to take the plunge into crypto, here are four steps to kickstart your journey.
1. Choose where to buy crypto
The first step is to select a platform to purchase your coins. The most common option is a crypto exchange.
- Crypto exchanges offer a wide range of cryptocurrencies and typically have competitive prices. Popular exchanges include Coinbase, Kraken, and Binance, among others.
- Peer-to-peer payment apps like Cash App or PayPal also allow for crypto purchases, with fees varying across platforms. For example, Cash App may charge a 2.25 percent fee on Bitcoin purchases ranging from $10 to $100.
- Traditional brokers are another avenue for buying crypto. Online brokers provide the convenience of managing both cryptocurrency and other assets within the same platform.
2. Set up and fund an account
Once you’ve chosen your platform, it’s time to create an account. Most online brokers and exchanges require basic personal information for identity verification.
After completing your profile, fund your account by linking a payment method, such as a credit/debit card or bank account.
3. Determine which crypto to purchase
After funding your account, it’s crucial to decide which cryptocurrency to buy. With thousands of options available, research the coins you’re interested in and understand their distinctions.
Bitcoin and Ethereum are among the most popular cryptocurrencies, with Bitcoin holding a market capitalization of nearly $1.15 trillion and Ethereum known for its smart contract functionality.
While coins with a large market cap tend to be more stable, smaller altcoins offer growth potential but come with higher volatility. Beginners may opt for well-known, high-liquidity coins, while experienced investors may explore newer projects.
Regardless of the coin type or your experience level, remember that crypto investments are speculative, and it’s wise to invest only what you can afford to lose.
4. Select a crypto wallet
A crypto wallet is essential for any crypto transactions. Some exchanges provide digital wallets for storing purchased coins, while others require an external wallet for offline storage.
Exchanged-based wallets offer convenience and accessibility, while external wallets provide enhanced security and control.
Understanding the different wallet types will help you make an informed decision on where to store your crypto assets post-purchase.
- Software wallet
- Software wallets, also known as hot wallets, enable you to manage and secure your crypto holdings through software on your desktop, browser extension, or mobile app connected to a blockchain for transactions.
- Hardware wallet
- Hardware wallets, or cold wallets, store private access keys offline on a USB drive or other device. They are only connected to the internet when making a transaction, reducing the risk of electronic theft.
The choice of wallet depends on your preferred level of security and accessibility. For instance, a mobile app wallet like Robinhood may be more convenient for quick access compared to a USB wallet. Ultimately, the decision is personal.
Is buying crypto a good investment?
Investing in cryptocurrency comes with significant risks and volatility. Crypto prices are driven by speculation and sentiment rather than tangible assets or cash flow. It’s crucial to invest only what you can afford to lose.
Crypto is a high-risk asset with additional vulnerabilities, such as cybersecurity threats and regulatory uncertainties.
Bottom line
Prior to purchasing crypto, ensure your financial house is in order. Remember that crypto investments should be part of a comprehensive investment strategy, and prices are dictated by investor demand. When you’re prepared, explore crypto exchanges, peer-to-peer platforms, or brokers to start your crypto journey. Have your personal details and payment methods ready for a seamless buying experience.
Editorial Disclaimer: It’s recommended that all investors conduct independent research on investment strategies before making decisions. Additionally, past performance of investment products does not guarantee future price appreciation.