Cryptocurrency has opened up a unique opportunity for trading and investing for people all over the world. If you are unfamiliar with this product or are new to the concept of cryptocurrencies, you may be wondering how they work, whether or not they are beneficial, and if they are, how to purchase them to start your portfolio. Here is a concise guide to understanding crypto and how to purchase them.
What is Cryptocurrency?
Cryptocurrency or crypto is a type of virtual or digital currency that may be used to purchase goods and services or for trade. All transactions involving crypto are done online. Transactions are stored using an online ledger that is secured by cryptography to prevent counterfeiting and other problematic processes including double spending.
Many people want to know how to purchase cryptocurrency mainly as a means to trade for profit. Cryptocurrency is unregulated, which allows speculations to drive prices up. By far the most popular crypto is Bitcoin but other companies have also issued currencies of their own which are also receiving much support and attention. Cryptocurrencies are sometimes referred to as tokens. Put simply, they work in much the same way as the tokens or chips used in casinos and game arcades in that they are purchased using real money or currency before they can be used.
Is It Safe?
Cryptocurrencies utilize what is known as blockchain, a type of decentralized technology that is distributed among different computers where transactions are recorded and managed. This technology is ultra-secure, which is part of the appeal of crypto.
How to Buy Cryptocurrency?
Learning how to buy crypto may seem intimidating at first but once you understand the process, you can begin investing right away. Here are the ways you can consider using to buy crypto:
Work Through a Crypto Exchange
Cryptocurrency exchanges are platforms that allow buyers and sellers to exchange cryptocurrencies. The advantage of buying through a crypto exchange is that they generally charge lower fees. Some of the more popular exchanges include Binance, Coinbase, and Gemini. The challenge is that these platforms use rather complex interfaces that involve several types of trade. New investors might find these platforms a bit confusing or intimidating, so it is best to understand how these exchanges work to be able to utilize them more effectively.
Buy Through a Crypto Broker
If you are completely lost when it comes to buying crypto, consider making the purchase through a cryptocurrency broker. Brokers are very well versed with the process of buying and trading and can provide you with an interface that is easy to use. They do charge higher fees compared to crypto exchanges, however. There are some brokers who do not charge upfront fees. They earn by other means, such as working with large funds and brokerages, providing them with information about what traders buy and sell. They may also earn by trading your crypto at a price lower than the current market figure.
A caveat: many brokers do not allow you to move your holdings from your account. If you want to transfer your cryptocurrency to hold it in a more secure location, you may not be allowed by your broker.
Create a Digital Wallet
A digital wallet is an online app that allows you to buy and hold cryptocurrency. Your wallet allows you to transfer cash to purchase crypto from a platform. You could do this separately or just simply work with a crypto exchange that already offers a digital wallet as part of its service.
Create Your Account
After choosing a crypto exchange or a broker, you can then create your own account. Some, if not most, platforms require their traders to verify their identities. This is mainly to meet the requirements of the federal regulatory body and to prevent fraudulent transactions. The verification process is integral to the transaction rules of these platforms, which means you will not be allowed to buy or sell unless you are verified. Verification generally requires you to provide proof of your identity using government-issued IDs such as a passport or a driver’s license.
Fund Your Wallet
Once your account has been created, verified, and approved, you can then begin funding your account. You can do so by paying through a credit or debit card or through wire transfer. You could also link a bank account to your crypto account and simply transfer money. Once your money has been transferred, you may be asked to wait for several days before you are allowed to begin purchasing crypto. The length of time will depend on the type of funding processes and exchange platforms you use.
Note that if you use credit cards to transfer funds, you may have to pay a higher fee. Many credit card companies consider crypto currencies as cash advances, so you should expect higher interest rates and additional fees.
Place Your Order
When your account has sufficient funds, you can begin placing your order and buying cryptocurrencies. Remember that Bitcoin is not the only platform you can purchase from. There are hundreds of crypto you can choose from, including Ethereum, Tether, Cardano, Binance Coin, XRP, Dogecoin, USD Coin, Holo, and Theta Fuel, to name a few.
Even with a limited budget, you may still purchase high-value crypto such as Bitcoin and Ethereum using fractional shares. With these, you only purchase a fraction or sliver of the token for a few hundred dollars. The share may be small but they still increase in value with the value of the whole share. You could also build on these smaller shares to boost your investment.
Choose Your Crypto Storage
Since cryptocurrencies are not physical currencies, they are not protected by the FDIC (Federal Deposit Insurance Corp.) If they are hacked or stolen, or if you lose the access codes or simply forget these codes, you will not be able to rely on any form of insurance to recoup some of your losses. This is why you need secure storage.\r\n\r\nIf you purchase from a broker, he/she will choose the storage method on your behalf. If you have through a crypto exchange, you have a number of options, including using the exchange itself or opting for either hot or cold wallets. Make sure you understand the advantages and limitations of these options so you can make a better decision.
When to Buy Cryptocurrency?
It is generally best to buy your investment during a downturn so you can take advantage of low prices. However, hitting the perfect timing in the market is next to impossible due to the volatility of crypto. The best trick is to buy a strong and reliable cryptocurrency with the intention of holding it for the long term. Because these are good investments, their value is more likely to increase over time