Monday, October 3, 2022

How To Buy Cryptocurrency For Beginners

What Is Cryptocurrency Anyway

How to Buy Cryptocurrency for Beginners (Step By Step)

Before moving further along, it would be helpful to get on the same page. Simply put, cryptocurrency is a type of money that only exists electronicallydigital money, if you will. The technology behind it aims to solve some of the most significant pain points about traditional banknotes.

For one, blockchain technologies eliminate the need for having a governing body, such as a bank, to print and issue it. Transfers are done from person to person, not having to go through an intermediary. This also spells out instantaneous transactions that do not get imposed with high fees. Lets run through the different advantages of owning cryptocurrency below.

Remember The Past Is Past

A mistake that many new investors make is looking at the past and extrapolating that to the future. Yes, Bitcoin used to be worth pennies, but now is worth much more. The key question, however, is Will that growth continue into the future, even if its not at quite that meteoric rate?

Investors look to the future, not to what an asset has done in the past. What will drive future returns? Traders buying a cryptocurrency today need tomorrows gains, not yesterdays.

How To Get Started Trading Cryptocurrency With Coinbasecom

Below we will walk you through signing up for Coinbase. This process is very similar to the signup process for any exchange. The process requires you to trust sensitive information to a third party, and this is yet another reason why we are going with one of the more trusted exchanges out there, Coinbase.

First, to sign up for coinbase.com.

  • to create a digital currency wallet where you can securely store digital currency. NOTE: By using the following link youll get $5 free Bitcoin when you sign up for Coinbase coinbase-consumer.sjv.io/b3b0gk.
  • Connect your bank account, debit card, and/or credit card so that you can exchange digital currency into and out of your local currency .
  • After you are signed up, you can then:

  • Buy Bitcoin, Ethereum, Bitcoin Cash, Litecoin, etc .
  • Sell Bitcoin, Ethereum, Bitcoin Cash, Litecoin, etc .
  • Trade Cryptocurrency to Cryptocurrency . You can use the convert button on Coinbase or use Coinbase Pro for this.
  • NOTE: If you want to use Coinbase Pro, fund your account with dollars or USDC and then move your funds over to Coinbase Pro to trade.

    Recommended Reading: What Are The Best Bitcoins To Invest In

    How To Set Up Your Portfolio

    The first and most popular CryptoCurrency is Bitcoin, so it is not surprising that novice users will turn to this at first. The following steps are, however, not that straightforward, since it heavily depends on personal preferences and the inclination for taking risks.

    Taking risks

    According to our experience so far, the market undergoes a cyclical period of consolidation, horizontal positioning and then an explosion of exchange ratios, then a collapse. That is what has been happening since 2011, the first rising period, and we have no reason to presume that this will be anything different in the future. Therefore, the 70% drop at the beginning of 2018 is, however big it might seem, normal. Bitcoin hasn’t, since its 2009 launch, had any hacks or shutdowns, so it is evident, that it’s the most secure and least risky CryptoCurrency on the market.

    In the long run, however, it seems that Bitcoin and Ethereum are the “secure” investments from 2018 and onward as well. Additionally, multinational companies may even start issuing them. Generally, it is safe to say, that the “smaller” a given CryptoCurrency is, the most risky should it be considered.

    For beginners, the portfolio should consist of 45% BTC , and the rest should be divided among the 20 CryptoCurrencies with the largest capitalization. Here’s an example:

    • 45% BTC
    • 5% for “betting games”

    Altcoins

    Only the altcoins that conform to the above criteria will be able to survive the following years and bring profit.

    Revolut Finance App With Crypto Support

    How to Buy Cryptocurrency for Beginners

    Revolut is not a traditional cryptocurrency exchange. However, the personal finance app provides support for cryptocurrencieswhich is why it made our list. Based in London, Revolut allows users to send, receive, and exchange currencies all from the comfort of their phones.

    Revolut does not offer a trading platform, but it supports the exchange of over 30 cryptocurrencies in seconds. It also enables simple transactions allowing users to exchange their currencies without any hidden fees.

    Despite its generic business style, the London-based exchange service has over 15 million active users and is a preferred channel for international cross-border exchange of currencies. It also offers ticket and travel insurance on its Revolut app, and users can access loans. Revolut provides both physical and virtual cards.

    Pros

    Your Capital is at risk.

    Don’t Miss: Is Bitcoin Loss Tax Deductible

    Choose A Platform To Buy Cryptocurrencies

    One of the disadvantages of buying cryptocurrencies is that you can’t get them in all the usual financial places. Banks don’t offer them and neither do investment brokerage firms.

    For the most part, you’ll be limited to buying, holding, and selling cryptocurrencies on dedicated cryptocurrency exchanges.

    Some of the largest of these exchanges include:

    eToro

    Gemini

    Further Reading: our Gemini Review.

    Unifimoney

    Further Reading: our Robinhood Review

    Advertiser Disclosure

    Wealthfront

    If you want exposure to cryptocurrency without actually having to buy crypto, could be the answer. You can gain exposure through two distinct cryptocurrency funds: Grayscale Bitcoin Trust and Grayscale Ethereum Trust .

    And of course, you still have access to a large selection of ETFs, such as those for specific industries like self-driving cars and cannabis. When combined with cryptocurrency opportunities, you have access to more investments than ever before. Visit our Wealthfront review for further reading.

    You can think of these platforms as brokerage firms specifically designed for cryptocurrencies. Each offers trading in the most popular cryptos, and of course, you should expect to pay a fee for both buying and selling.

    How We Make Money

    The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.

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    Coinbase And Other Crypto Exchanges

    One solution for all the above is Coinbase/Coinbase Pro.

    Coinbase is a good choice because it acts as a wallet, exchange, and place to trade dollars for crypto and crypto to crypto. In other words, Coinbase is an all-in-one solution for everything noted above!

    What Coinbase looks like.

    With that said, Coinbase has a limited amount of altcoins , and thus many traders also use popular crypto-to-crypto focused exchanges like Binance, Bittrex, and Kraken to access a wider array of crypto assets.

    To get access to a wider range of coins, a trader or investor may use more than one exchange, doing something like buying Bitcoin on Coinbase using USD, and then sending their Bitcoin to Binance to trade Bitcoin for other cryptos .

    : If you want to get into DeFi and decentralized trading, youll take a slightly different route. For example with Ethereum, youll want to buy ETH on Coinbase or another exchange and then use a web3 wallet like MetaMask for your wallet and a decentralized DEX exchange like Uniswap for your exchange to start. Watch out for transaction fees though! Gas prices can be expensive. The process is fairly similar for other networks like Binance Smart Chain.

    Why You Can Trust Bankrate

    How to Buy Cryptocurrency for Beginners (Ultimate Step-by-Step Guide) Pt 1

    Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

    Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.

    Our investing reporters and editors focus on the points consumers care about most how to get started, the best brokers, types of investment accounts, how to choose investments and more so you can feel confident when investing your money.

    Investing disclosure:

    The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal.

    Recommended Reading: How To Buy Bitcoin For Free

    Understand What Youre Investing In

    As you would for any investment, understand exactly what youre investing in. If youre buying stocks, its important to read the prospectus and analyze the companies thoroughly. Plan to do the same with any cryptocurrencies, since there are literally thousands of them, they all function differently and new ones are being created every day. You need to understand the investment case for each trade.

    In the case of many cryptocurrencies, theyre backed by nothing at all, neither hard assets nor cash flow. Thats the case for Bitcoin, for example, where investors rely exclusively on someone paying more for the asset than they paid for it. In other words, unlike stock, where a company can grow its profits and drive returns for you that way, many crypto assets must rely on the market becoming more optimistic and bullish for you to profit.

    Some of the most popular coins include Ethereum, Dogecoin, Cardano and XRP. Newcomer Internet Computer recently burst onto the scene, too. So before investing, understand the potential upside and downside. If your financial investment is not backed by an asset or cash flow, it could end up being worth nothing.

    How It All Started

    Digital currencies have been around for more than a couple of decades in different experimental forms, but the first one to be successfully implemented was Bitcoin.

    Bitcoin was created by Satoshi Nakamoto , who released its whitepaper called Bitcoin: A Peer-to-Peer Electronic Cash System in October 2008 and launched the network in January 2009.

    Bitcoin has spurred a whole new digital coin class that can now be bought and traded on cryptocurrency exchanges worldwide.

    Other than Bitcoin, there are other well-known and recognized cryptocurrencies like Ethereum which is currently trailing Bitcoin in terms of network value and Tether which is the leading stablecoin also in terms of network value.

    A stablecoin is a digital asset whose value is pegged to the value of a fiat currency in order to avoid the wild price volatility that is common with other virtual currencies. The majority of successful and professional cryptocurrency traders use stablecoins while mitigating their trading plans.

    Currently, there are more than 13,000 cryptocurrencies listed on CoinMarketCap, a leading data aggregator for the cryptocurrency market.

    Recommended Reading: How To Buy Crypto With Fiat

    How Do You Find A Reliable Exchange

    You can exchange CryptoCurrencies on pages specialized for such transactions. There are traditional ones where you can buy using fiat currencies , and others that only accept CryptoCurrencies. All of them are referred to as exchanges, but there are basically three types of sites where you can buy and sell CryptoCurrencies.

    Exchanges

    Exchanges in the classic sense of the word. They connect prospective buyers and sellers and charge commissions.

    Brokers

    You can buy for a certain set of prices on pages, just like you would at a currency exchange place on the street.

    Sites giving access to direct trading:

    In this case, there are no set prices – it completely depends on the agreement between buyer and seller. One example for this is LocalBitcoins.

    Viewpoints Of Choosing An Exchange

    What is Cryptocurrency? A Complete Beginners Guide

    Registration, anonymity

    Some exchanges employ stricter rules when registering new members. These are primarily ones where you can use traditional money to deposit, since there are different rules and regulations for such enterprises that serve to hinder money laundering and they also have check their clients’ identity.

    This process usually involves you having to upload a scanned image of one of your picture IDs. In most places the process is automated and gets approved almost immediately, but there are exchanges where you need to wait multiple days, too.

    Headquarters of the exchange

    If you are registering from certain countries, your registration attempts may not be approved due to rules and regulations specific to that country.

    Commissions

    Almost all exchanges will charge you commission for their services. These commissions can range from depositing and withdrawing from the exchange to trading itself. You can get more information about these commissions on their websites.

    Choice

    Most CryptocurrenCies are available on most of the exchanges however, if you wish to widen your portfolio, you’ll need to register to multiple exchanges.

    Liquidity

    Read Also: What Blockchain Company To Invest In

    Remove Your Cell Phone Number From All Public Websites

    Next, you need to remove your phone number from any public website and social media, and try to never publish your cell phone number or cell phone provider publicly or to people you dont know or trust.

    I know this very difficult to do in our social media driven world, but its an imperative step to take to ensure the security of your investments while learning how to buy cryptocurrency.

    Cell phone numbers are used to access a myriad of sensitive data, including banking, crypto, and two-factor authentication applications we will be setting up later on in this article.

    Using your cell phone provider and cell phone number, there are hackers out there who conduct something called SIM theft. This is where hackers steal your phones identity by calling your cell phone provider and requesting a new SIM card.

    If they steal your cell phones SIM card, they can easily hack into your investment accounts and drain your funds.

    What Are The Steps To Purchase Bitcoin

    The process to purchase bitcoin consists of four steps: choosing a venue or exchange to place your order, selecting a payment method, and ensuring safe storage for your purchased cryptocurrency. Depending on the type of venue chosen in the first step, there might be additional steps involved in the process. For example, you might need to factor additional costs for an online wallet and custody of your bitcoin, if you purchase the cryptocurrency through Robinhood because it does not offer these services.

    Read Also: Where Can I Buy With Bitcoin

    Cryptocurrency Trading Vs Stock Trading

    Cryptocurrency trading is often seen as more high risk than stock trading, but it depends on what stocks or cryptocurrency youre trading and how youre trading it. Trading penny stocks or trading options can be equally, if not more, risky than trading cryptocurrency.

    Before trading cryptocurrency, you should be aware that you risk losing your money to the market. If you really believe in the future of cryptocurrency, holding your crypto assets for the long term may be more beneficial than trying to time the markets.

    Why Pick Coinbase As Your First Exchange

    How to Buy Cryptocurrency for Beginners (#1 Ultimate Guide 2022!) Step-by-Step (Updated!)

    As you can tell already, even though we have presented a range of choices, this guide is suggesting that Coinbase is a good starting place. That is because in general when picking a first exchange the following is true:

    • A beginner should start by choosing a company with a good reputation that offers an exchange and wallet .
    • A beginner should also start by trading prominent coins. Currently, in 2020, we are referring to coins like Bitcoin and Ethereum . In the future, this could change.

    Since the above is the case, a good start for anyone wishing to trade cryptocurrency is starting with Coinbase.com .

    After you master Coinbase, then you are ready for say Coinbase Pro and other exchanges like Bittrex, Binance, or Kraken. After that, you might want to check out derivatives trading if your region allows it and you really have some trading chops. For now though, lets learn to walk before we run and get Coinbase set up. The next section will walk you through setting up Coinbase.

    An example of trading on Coinbase. Fees are lowering on proper exchanges than they are with brokers like Cash App and Coinbase Consumer.

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    Make A Cryptocurrency Brokerage Account

    Unless you already own cryptocurrency, youll need to make an account with a crypto brokerage. Coinbase, Gemini and eToro are among the best crypto brokerages on the market. All 3 of these options offer a simple user interface and a variety of altcoins to choose from.

    To make an account, youll need to provide your crypto brokerage with personal identification information, similar to opening an account with a stock brokerage. Some common information you need to provide when setting up your account includes your Social Security number, address, date of birth and email address.

    Choose A Cryptocurrency Exchange

    First, you need to pick an exchange to buy fromlike choosing a broker for stocks. After selecting which exchange you want to start investing in cryptocurrency with, you will be able to make an account with them. There are many options open to you, but the most popular crypto exchanges are:

      Also Check: How To Earn Crypto On Brave Browser

      Second Cryptocurrency Is Highly Risky Only Invest What You Can Afford To Lose

      The second thing you need to know before we go any further is the golden rule of investing:

      NEVER invest more than you can afford to lose.

      High risk can lead high reward and we humans have a natural tendency to want to overreach.

      But you need to figure out an amount you are comfortable investing and, more importantly, an amount you can truly afford to invest

      Then you need to stick with that amount and be patient in the process.

      Cryptocurrency is a lot more volatile and unpredictable than the stock market.

      Unlike the 9-to-5 New York Stock Exchange, cryptocurrency is traded around the world 24/7.

      So if you want to get a good nights sleep as a crypto investor, you need to budget the amount of money you are going to invest and stick to it.

      Now if you understand everything I just went through and you are completely comfortable with everything:

      Lets learn how to buy cryptocurrency!

      Ive broken this down into 9 easy steps.

      And since youre not dealing with any banks and other third party financial institutions

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