Crypto-curious? The crypto world can feel complex to a beginner, but knowing how to execute your first trade and manage your investments can lift the veil.
Here’s how to buy crypto, from researching a specific cryptocurrency or asset to finalizing a purchase.
TL;DR
- Knowing how to buy crypto starts with knowing which asset you want to buy or invest in. Many beginner cryptocurrency investors start with established options like Bitcoin or Ether.
- The crypto broker or exchange you use to invest is just as important as the asset itself. Make sure the platform is user-friendly, transparent, and trustworthy.
- To buy crypto, fund your account with cash. Then, you can start buying full or fractional cryptos of your choosing.
- Avoid buying crypto with a credit card—at all costs. It’s risky and expensive, and ultimately not worth the leap.
- Take stock of what you’re trading, who you’re trading with, and who you’re listening to for crypto trading guidance. All of this and more can contribute to a safer crypto buying experience.
Research which crypto you want to buy
Much like blue-chip companies in the stock market, the crypto market has its own popular picks.
Ultimately, these blue-chip coins are Bitcoin (BTC) and Ether (ETH). Of course, there are thousands of alternative coins, or altcoins, to choose from. However, the more well-known options tend to be better for beginners who may be more risk-averse than seasoned crypto investors.
The best way to do your due diligence in the crypto market is:
- Track an asset’s performance from its chart. See how volatile it is over the course of weeks, months, and years.
- Find out the underlying blockchain of the crypto. Blockchain is the specific tech that enables a cryptocurrency to exist. Not all blockchains are created equal. For example, some are more secure than others or have a larger carbon footprint.
- Take a look at the community behind the asset. Who are the founders? Are any reputable people collaborating with the asset?
Related: Check out blockchain technology stocks in our themes section.
If you decide to explore beyond blue-chip coins, this due diligence process becomes increasingly important. The less well-known a digital asset is, the more you’ll want to scrutinize it. Because cryptocurrency is decentralized (a term you’ll get more familiar with the further you dive into crypto), there are limits on regulation.
Choose your cryptocurrency broker
For beginners, trading crypto with a broker tends to be easier than going through an exchange. Novice investors often find it to be worthwhile if the broker is user-friendly, transparent, trustworthy, and safe.
When researching brokers, you’ll also want to find out if you can transfer your coins to an external wallet. Some traders prefer to do this for added security. If it’s not a key concern for you as a beginner, don’t sweat it, but it’s good to be aware of your platform’s capabilities ahead of time.
It’s a good sign if a broker requires identity verification. This means they’re taking the necessary precautions to prevent fraud and maintain federal regulations—ultimately protecting your investment.
How to execute a crypto purchase
When it comes down to buying your first crypto (and all your purchases to follow), there are a few key steps involved:
- Whatever platform you use, you’ll need to deposit cash into the account. If it’s your first deposit with a broker, the transaction may not be instantaneous. Deposit the amount of money you’re willing to invest in crypto. You’ll be able to do so by linking your preferred bank account, authorizing a wire transfer, or paying with your debit card.
- Select your preferred crypto on the platform. You may search for the full crypto name or the symbol.
- Place the order. Now, you’ll have the crypto investment in your broker account, and you’ll be able to hold, sell, or add to it as you please.
Can you buy crypto with a credit card?
Some brokers and exchanges do technically allow users to purchase crypto with a credit card. But much like the risks associated with buying stocks on margin, buying crypto with a credit card is risky.
Paying for crypto with a credit card typically comes with cash advance fees (the kind that accompanies credit card ATM cash withdrawal). These set fees are as high as 5% of the crypto purchase in some cases.
On top of these fees, you’ll be subject to major interest rates if you don’t pay your bill off in full.
Both of these issues make buying crypto with a credit card a risky and expensive move. You should avoid it at all costs, instead deposit cash directly from your bank account or debit card to fund your investment. As with most all investments, a good rule of thumb is, “don’t put in what you cannot afford to lose.”
Can you buy fractional crypto?
Fractional investing goes beyond the stock market. In fact, the idea of fractionalized stock market investments was inspired by crypto. With crypto gaining ground in the mainstream—plus the ever-rising costs of certain high-priced coins—you can easily find a broker that offers the ability to get started with as little as $1.
At more than $63,000 per 1 Bitcoin at its peak in the first half of 2021, the concept of fractional crypto is a no-brainer.
Best practices for buying cryptocurrency safely
As people begin to talk more and more about cryptocurrency, it’s easy to become jaded to the risks of the crypto world. Fortunately, there are a handful of best practices that can keep you safe as you learn how to buy crypto:
- Research and scrutinize a digital asset before investing. Ideally, you’ll want it to have some history, and you’ll want to know who’s behind it. Ethereum founder Vitalik Buterin started the Ethereum Foundation (EF) as a non-profit organization dedicated to supporting Ethereum and related technologies. Know that this is not always the case. You’ll want to know who’s profiting, and whether or not they’re putting you at risk to achieve it.
- Go with a broker that’s secure, trusted, transparent, and overall safe. You’ll want to know who’s helping you execute your trades and keep your investments secure—without putting you in a compromising position.
- Invest only what you’re willing to lose. This is especially true for beginners, and it’s a borrowed mantra from the stock market itself.
- Trust your gut! As a beginner, crypto may still mystify you a bit, but following your instinct is better than blindly following the advice of others. Always do your own research.
Bottom line
Now that you have the first step to crypto trading down (aka buying crypto assets), you’re poised to be a real crypto investor. See? It wasn’t that hard. All it takes is a bit of cash, a healthy dose of due diligence, and a crypto trading platform that’s on your side.