Once you’ve learned the lingo, accepted the risk, and met your other financial priorities, the next step in investing in cryptocurrencies is to buy.
There are thousands of different cryptocurrencies, but experts say you should ignore most of them, at least to start with. crypto values fluctuate hourly, and this can be especially true for lesser-known coins. even more established cryptocurrencies like ethereum and bitcoin experience their share of volatility, but at least they have a better track record of increasing in value over time.
Reading: How do i buy bitcoin?
Bitcoin is the most valuable and widely used crypto on the market, and with prices reeling in the crypto and stock markets, now might be a good time to buy if you’re comfortable with the risks and interested in investing. .
This is how to buy it:
1. choose an exchange
You can’t buy bitcoin through your bank or investment firm yet, though some organizations are working to make that possible in the future. For now, you will have to go through a cryptocurrency trading platform to exchange your US currency. uu. dollars for bitcoin or other digital currencies.
There are hundreds of cryptocurrency exchanges that you can use to buy crypto online, but some of the most popular ones are coinbase, gemini, and kraken. these exchanges are online platforms where you can buy and sell cryptocurrencies.
You can narrow your search for the right platform based on a few factors:
security
Cryptocurrency investments are not backed by a central institution like fdic insured bank accounts. If your account is compromised or the platform where you store your coins is hacked, you could be at risk of losing your investment.
If you plan to keep your crypto in your account with an exchange (as opposed to moving it to your own crypto wallet), make sure you choose an exchange that uses offline cold storage and has strong theft protections. Some exchanges also have separate insurance policies to help protect investors from potential attacks.
fees
Exchange fees can vary widely and may be applied as a flat fee up front or as a percentage of your transactions. fees can be based on price volatility and many are charged per transaction.
While fees should definitely be a consideration, experts say you also get what you pay for, especially when you stick with larger, more established exchanges like coinbase. if an exchange has more protections, better security, or other features important to you, it may be worth slightly higher fees.
Some exchanges charge fees based on a spread or margin above the market price. others base fees on a flat fee or percentage of your total purchase, which can vary based on your location, payment method, and other factors.
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Exchanges with more active trading functions often use a fee model determined by fluctuations in market prices, known as maker fees. if you buy at the current market price, you will be charged a (usually higher) “taker” fee. Or, you can set a price at which you want to buy and wait for the market to reach that point. that is known as a limit order and incurs a “maker” fee.
Make sure you know what fees you will be charged, which you can find on the exchange’s website, before you sign up. The fee structure should be clearly stated when you make your purchase, but it can be helpful to factor in that cost beforehand so you don’t spend more than you bargained for.
currencies available
Not all exchanges offer all the cryptocurrencies out there.
Popular coins like bitcoin (btc) and ethereum (eth) are available on most cryptocurrency exchanges, while more niche altcoins may be available only on certain exchanges. Given that experts recommend sticking with these two big cryptos and more mainstream exchanges like Coinbase, this shouldn’t be a problem for most new investors.
2. fund your account
Depending on the exchange you choose, you may be required to provide information such as your social security number, identification, and your source of income when you create your account.
With most exchanges, you will be able to connect your bank account or a debit card to transfer u.s. dollars in your exchange account. there may be different fees depending on the method you use to fund your account; Bank transfers will generally cost less than card options.
Remember, funding your account is not the same as buying cryptocurrencies. Just like with traditional investing, you never want to leave money uninvested in your account. once you fund your account, you will still need to exchange your dollars for bitcoins.
3. place an order
once you have connected a payment method, you will be able to place your bitcoin order. this process may differ depending on the exchange you use.
Usually, if you’re using a platform like coinbase or paypal, you can simply enter the dollar amount you’d like to exchange for bitcoin and buy at the current exchange rate (after taking fees into account).
If you use an exchange designed for more active trading, like coinbase pro, you may have the option to place market and limit orders. a market order means that you buy the cryptocurrency at that moment, for the current market price. a limit order means that you will set a price that you want to pay for the cryptocurrency. once the coin reaches that point, it will be purchased automatically.
With bitcoin, you are likely to buy a fractional share of a coin – a single coin has traded for around $20,000 in recent weeks after a massive crypto market crash in June. any amount you put in will be reflected on the exchange as a percentage of a total bitcoin. (Example: If you invested $1,000 at the early July value of bitcoin of approximately $34,000, it would show you own 0.029 bitcoin.)
4. practice safe storage
Many exchanges allow you to leave your investment within your account, which is easier for most beginners. but if you want to further protect your digital assets, you can transfer them to a cryptocurrency wallet.
(read more: a crypto wallet can help keep your coins safe. here’s how to decide if you need one)
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A cryptocurrency wallet is a place to store digital currency. There are various types of cryptocurrency wallets available, and they all have different levels of security associated with them.
The exchange you use may offer a wallet option, so you can easily transfer your coins from your exchange account to a more secure wallet. You can also use third-party software or opt for cold storage on an offline hardware device.
Some platforms you can use to buy cryptocurrencies, including paypal and venmo, do not allow you to move your coins to your own storage device. consider if that’s an option you want before you buy, either for the offline security of your assets or because you may want to trade using another platform in the future.
alternative ways to buy bitcoin
You can now also buy crypto through some digital payment platforms where you already have accounts, such as Venmo, PayPal, and the Cash app, as well as the Robinhood investment app. but may not be suitable for all investors.
paypal and venmo do not allow you to transfer your holdings to your own crypto wallet, meaning your private keys remain on the platform. robinhood recently announced that it is creating a crypto wallet offering for customers to move their coins off the platform. But for crypto enthusiasts who believe in the common crypto mantra “not your keys, not your coins”, these platforms without the option to move your holding off the platform fall short. They can also charge high fees for buying and selling cryptocurrencies (and usually only offer a few coins, or just bitcoin), so it’s worth comparing the prices you’ll pay with more traditional exchanges.
However, these applications can be an easy solution to buy bitcoins. For beginners, using your Venmo or Cash app account to buy bitcoins can be more affordable than an exchange like Coinbase or Gemini, and allows you to shop while learning more about investing in cryptocurrencies. just be aware that if you ever got to a point where you had a larger crypto position, these apps might limit your ability to transfer it to another platform.7
how to buy other cryptocurrencies
You must follow the same steps to buy other cryptocurrencies as to buy bitcoin. however, keep in mind that investment experts recommend sticking with the two largest cryptocurrencies, bitcoin and ethereum, if your goal is to invest in cryptocurrencies as a long-term store of value.
You can find ethereum to buy on many of the same exchanges and platforms that you can find bitcoin on. If you’re looking for a very specific altcoin (one that experts generally don’t recommend investing in), you may need to consider it on the exchange of your choice. while some large exchanges have more than 50 different coins, some platforms offer only a small number of altcoins (on venmo, for example, you can only choose between four different cryptocurrencies).
Whether you choose to add bitcoin or an altcoin to your portfolio, always make sure you are comfortable with the risk of investing in such a speculative asset in the first place. never invest more than you feel comfortable losing, and don’t invest at the cost of missing other financial goals.
does it make sense to invest in bitcoin?
As with any investment, it’s important to do your research first and understand what you’re getting into. Make sure the crypto investments you make don’t get in the way of other goals, like funding your retirement accounts and paying off high-interest debt. experts recommend keeping your crypto investments to less than 5% of your portfolio.
Bitcoin is a good starting point for beginning crypto investors, according to experts we’ve spoken to. As the first cryptocurrency, bitcoin has the longest track record for investors to consider. Since its inception in 2009, bitcoin has exponentially increased in value over the past decade. many experts compare it to “digital gold” as a long-term store of value.
While bitcoin’s recent massive price fluctuations highlight its volatility, many experts say that a small number of cryptocurrencies like bitcoin can be a healthy (albeit speculative) diversifier in your overall investment strategy.
according to nextadvisor’s investability score, bitcoin and ethereum are considered better investments due to their longer track records and long-term value growth, among other key factors. Here’s how our score shakes up for 10 cryptocurrencies that are consistently among the best by market cap, excluding stablecoins, for reference:
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