Here’s a beginner’s guide on how and where to buy cryptocurrencies, and the best approach to start investing in them
Cryptocurrency is quickly becoming a major player in the trade and commerce industry. Some experts even went as far as to predict that cryptocurrencies will someday soon replace fiat money. While the technology behind today’s cryptocurrencies has its limitations, and with its value outrageously fluctuating every day, it’s still worth noting that cryptocurrencies have tremendous potential—and now is the best time to start investing.
With the worldwide adaptation of cryptocurrency, many people have been wondering how and where to acquire them, how to use them, and ultimately, how to invest. Here, we’ll walk you through how to get a digital wallet, how and where to buy cryptocurrencies, and tips on how to invest in cryptocurrencies. Please note that this is not financial advice. It’s important to do your own research before investing in anything. And be sure to never invest more than you’re willing to lose.
How to get a cryptocurrency wallet
Basically, the first step in participating in cryptocurrency commerce is to own a cryptocurrency wallet. A cryptocurrency wallet, or eWallet, functions like your regular bank account that allows you to store, send, and receive cryptocurrencies. There are different types of wallets:
– Online wallets These are web-based eWallets that you access through your web browser, and are the easiest and quickest type to set up. However, since they’re always online and are more accessible, they’re also the least safe. Examples: Green Address and Blockchain.info.
– Software wallets These are mobile-based eWallets that you download to your mobile device. It’s considered safer than an online wallet but could still be vulnerable to malicious attacks. Examples: Bitcoin Wallet and Mycelium.
– Hardware wallets These are portable devices similar to a USB flash drive device. Hardware wallets, also referred to as cold storage, are considered to be the safest option. Examples: Trezor and Ledger Wallet.
Before choosing an eWallet, you must consider which cryptocurrency you’re interested in buying. It is common for eWallets to only cater to a few of the more well-known cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. Storing altcoins in eWallets may be trickier, as some wallets don’t support lesser-known altcoins. CryptoCompare is a good resources for choosing a cryptocurrency wallet.
How and where to buy cryptocurrencies
Once you’ve acquired a digital wallet, you can start using cryptocurrencies for commerce. Before you can begin to trade and exchange cryptocurrencies, you need to acquire them either through buying or mining. As a side note, mining cryptocurrencies can be quite costly and requires some technical knowledge, which is why it may not the best option for beginners. In this article, we will only focus on how to buy cryptocurrencies through various methods and sources.
1. Cryptocurrency exchanges
A cryptocurrency exchange is a platform, usually an online website, that enables you to buy, sell, and exchange cryptocurrencies for fiat money (e.g., dollar for Bitcoin) or for other well-known cryptocurrencies (e.g., Bitcoin for Ethereum).
Purchasing from exchanges is the most popular way for buying cryptocurrencies, especially for beginners. Most exchanges have an intuitive platform that even newbies can easily navigate.
Coinbase remains to be the top choice being the most beginner-friendly exchange platform. Other popular cryptocurrency exchanges that are recommended for beginners are Coinmama and Bitpanda. For advanced users, GDAX, Bitfinex, and Binance are the popular choices.
How to buy cryptocurrencies from exchanges
1. Create an account on your chosen platform and provide the information needed (i.e., full name, email address, cell phone number, etc.).
2. Verify your identity by providing an ID (usually your passport or driver’s license)—this is necessary for anti-money laundering regulations in some countries. Be also sure to set up a two-step verification to keep your account as secure as possible.
3. Link your bank account or credit card. Some exchanges also accept Automated Clearing Houses (ACH).
4. Buy the cryptocurrencies of your choice by entering the amount you want and your mode of payment.
2. Decentralized (P2P) Platform
A person-to-person cryptocurrency platform is a place where you can buy and sell cryptocurrencies without a middle man. On this kind of platform, transactions occurs directly between persons, thus termed as a P2P exchange. You can interact directly with private sellers or through a platform with local traders, in exchange for fiat money or other cryptocurrencies.
Due to its decentralized nature, there is no central entity acting as a custodian. However, there is a great risk for fraud among direct sellers. LocalBitcoins is a popular online platform that serves as a community board for sellers and users to advertise cryptocurrencies for sale.
How to buy cryptocurrencies on a P2P platform
1. Create an account on your chosen P2P site and find a listing that appeals to you. The listing usually includes the name and location of the seller, the type of cryptocurrency sold, and the mode of payment accepted.
2. Enter the details for your trade request: the amount you wish to buy, chosen payment method, and in some cases, your ID.
3. Pay the seller and provide proof of payment (i.e., reference number, photo of receipt, etc.). 4. Once your payment has been verified by the seller, the cryptocurrency you bought will then be sent to your eWallet. You can also opt to meet in person with the trader. When meeting up, be sure to select a public location such as a café or mall to reduce any potential risks.
3. Bitcoin ATMs
Bitcoin ATMs are the newest methods for buying and selling Bitcoin. As the term suggests, these are automated machines at a physical location where you can either buy Bitcoin using fiat money and have the Bitcoin sent to your eWallet, or you can sell Bitcoin to the machine and withdraw fiat money.
Bitcoin ATMs make it more convenient for buyers and sellers to transact without having to deal with the trading part of cryptocurrency markets. However, as these devices are fairly new, they are not available in many countries. Being physically present, this also puts ATMs at great risks to scams and skimming.
How to buy cryptocurrencies from Bitcoin ATMs
1. Go to your nearest Bitcoin ATM. You can find Bitcoin ATMs in your area through Coin ATM Radar.
2. Depending on the manufacturer of the machine, there are several ways to verify your identity. In most cases, you only need to scan the QR code of your eWallet address. In other cases, you are asked for your phone number where a code or OTP (one-time password) will be sent to you.
3. Enter the amount of the cryptocurrency you wish to buy, and then put your fiat cash into the ATM.
4. The ATM will then send the cryptocurrency you bought to your eWallet.
How to trade/exchange cryptocurrencies
Once you’ve properly set up your account on your chosen exchange platform and have bought your first cryptocurrency, you can begin trading/exchanging with it. The mechanism of investing in cryptocurrencies is basically the same as buying and selling them:
1. Specify the amount of cryptocurrency you want to buy or sell.
2. Choose whether to use a market or limit order:
– Market order The simplest and most straightforward type of trading order, where you buy or sell at the current market price at the current time of transaction. For example, if the lowest buy offer is $10,000.00 per BTC and you choose a market order, you will buy the exact market price, which is $10,000.00 per BTC.
– Limit order A type of trading order where you buy or sell at a price you specify. In a buy limit order, you can either buy at the limit price or lower. In a sell limit order, you can sell at the limit price or higher. For example, if the highest sell offer is $10,000.00 per BTC but you want to sell your coins for $10,050.00, then you can do a limit order and sell your coins for $10,050.00.
3. Confirm and verify the order request.
In cryptocurrency trading, you need to also consider whether you’re investing for the long-term or just short-term:
– Long-term investment Also termed as HODL, this is considered the easiest investment strategy which requires the least amount of effort. In a HODL investment strategy, you invest in one-off amounts of cryptocurrency and hold those investments long-term (for example, 6 months to 1 year). It should be noted, however, that the cryptocurrency market is highly volatile and therefore a long-term investment strategy may not provide you with the greatest gains, especially with some of the lesser-known altcoins. Storing cryptocurrencies long-term in an online or mobile wallet may also put you at higher risks of theft and fraud; thus, cold storage through hardware wallets is recommended.
– Short-term investment This is the type of strategy that embraces the volatility of the marketplace, which provides the highest potential for price gains over a short period. Short-term investments are usually held for a day, and some even hold it between mere minutes to hours. Knowledge in making quick technical analysis is recommended in practicing short-term investments, and close attention to the movements and behavior of the market is required; thus, such strategy requires the most effort.
Practical tips on how to invest in cryptocurrencies
While there are no hard-and-fast rules on how to successfully invest in cryptocurrencies, here are some tips to help you get started:
1. The cryptocurrency market is highly speculative
The first thing cryptocurrency investors should understand is that the market is highly volatile and depends largely on speculation. On any given day, it’s normal for prices to fluctuate from single to low double-digit percentages. Therefore, investing in cryptocurrencies is a high-risk investment and is not meant as a get-rich-quick scheme.
2. It’s best to begin with established cryptocurrencies first
The entire cryptocurrency market is anchored to Bitcoin—the first ever and most established cryptocurrency—the same way that the stock market is anchored to the US dollar. For beginners, it’s best to start investing in established cryptocurrencies such as Bitcoin and Ethereum. Don’t be tempted with altcoins yet. They are usually more volatile than Bitcoin, and their value almost always tend to react to the value of Bitcoin itself too.
3. Market cap matters more than the coin price
One of the most common mistakes beginners make when trading in cryptocurrencies is to put more value on the coin price rather than the coin’s market cap. The coin price is only relevant after the circulating supply is taken into account. The market cap is calculated by multiplying the circulating supply by the coin price; therefore, it matters more. When buying a coin, consider the percentage of the total market cap of the coin instead of the price.
4. Always be wary of cryptocurrency scams
With blockchain technology being considerably new and still poorly understood by many, a number of malicious groups have taken advantage of this. In the investment market, scammers spoof some of the popular exchange sites and make them look similar to the original. Fake cryptocurrency wallets that are made somewhat identical to genuine wallets are also rampant, as with fraudulent ICOs and other investment scams. Be wary and vigilant of these and learn more about common cryptocurrency scams to avoid falling victim to any of them.
5. Don’t invest more than you can afford to lose
This all boils down to practicality and common sense. Only invest an amount that you are willing to lose. However disruptive and innovative cryptocurrencies are, its high volatility remains to be its greatest disadvantage. Have a conservative approach to your investment strategy and consider diversifying your portfolio with a mix of prominent cryptocurrencies and some altcoins—don’t put all your eggs in one basket, or you could lose everything when the price drops to an all-time low, or if the exchange platform is hacked.
Participating in cryptocurrency commerce has become easier and more convenient now that its application and adaptation is more widespread compared to previous years. While not all countries have positively accepted cryptocurrencies as a legal medium of exchange, with the continuing development of the blockchain, the time may be near that cryptocurrencies will play a larger role not only in the financial industry but also in other economical aspects.
– Article written by Tinny
Tags: bitcoin atm, cryptocurrency exchanges, cryptocurrency wallets, decentralized platform, ewallet, hardware wallet, how to buy cryptocurrencies, how to invest in cryptocurrencies, long-term investment, short-term investment, software wallet