The question may arise how to safely buy cryptocurrency. This usually happens in three stages.
Step 1. Platform selection
The first step is to choose a platform to use. As a rule, one can choose between a traditional broker or a specialized cryptocurrency exchange.
- traditional brokers. These are online brokers offering the purchase and sale of cryptocurrencies, as well as other financial assets: stocks, bonds, ETFs. These platforms tend to offer lower trading fees but fewer crypto features.
- Cryptocurrency exchanges. There are many cryptocurrency exchanges, each offering different cryptocurrencies, wallet storage, interest-bearing account options, and more. Many exchanges charge fees based on the assets traded.
When comparing platforms, it is a good idea to look at the cryptocurrencies traded, fees, security features, storage and withdrawal options, and educational resources.
Step 2. Depositing funds to the account
The next step after choosing a platform is to fund your account so that you can start trading. Most cryptocurrency exchanges, depending on the platform, allow users to buy cryptocurrencies with fiduciary (government-issued) currencies such as the US dollar, British pound, euro, and when paying with debit or credit cards.
Cryptocurrency purchases with credit cards are considered risky and are therefore not supported by all exchanges. Some credit card companies also do not allow cryptocurrency transactions. This is due to the extremely high volatility of cryptocurrencies – when trading certain assets, it is not recommended to take risks by making transactions on credit or potentially paying high commissions for credit card transactions.
Some platforms also accept ACH transfers (automated clearing house transfers) and wire transfers. Accepted payment methods and deposit and withdrawal times vary by platform, while deposit clearing times vary by payment method.
An important factor to look out for is the size of the fees, which include potential fees for depositing and withdrawing funds, as well as trading fees. Fees vary by payment method and platform. This question is recommended to be studied at the platform selection stage.
Step 3: Placing an order
Orders can be placed through the website or mobile app of the selected broker or exchange. To buy cryptocurrency, you need to select the “Buy” option, the type of order, indicate the amount of the purchased cryptocurrency and confirm the order. A sell order is placed in the same way.
There are other ways to invest in cryptocurrencies. These include payment services such as PayPal, Cash App, and Venmo that allow you to buy, sell, and store cryptocurrencies. In addition, there are the following investment instruments:
- Bitcoin trusts. Bitcoin trust shares can be purchased with a regular brokerage account. Such instruments provide individual investors with access to cryptocurrencies through the stock market.
- Bitcoin mutual funds. There are Bitcoin-pegged ETFs, as well as Bitcoin mutual funds.
- Blockchain stocks and ETFs. You can indirectly invest in cryptocurrencies through blockchain companies that specialize in the technologies underlying cryptocurrency mining and cryptocurrency transactions. Alternatively, you can buy shares or ETFs of companies using blockchain technology.
The best option depends on investment goals and risk appetite.