Last Updated: January 4, 2022
Cryptocurrency is in the process of disrupting the financial system.
Crypto is slowly (but surely) getting mainstream acceptance. Public companies such as MicroStrategy and Tesla and institutional investors like BlackRock made Bitcoin popular.
The number of crypto wallet users is growing by the millions. And it’s only a matter of time until this figure crosses the one-billion mark.
If you want to know how to buy cryptocurrency, you’ve come to the right place.
What Is a Cryptocurrency?
According to most governments, cryptocurrency is an asset class. It’s a group of investments that share similar qualities. They are subject to the same laws and regulations.
The simplest crypto explanation would be:
Crypto is a way to process financial transactions in an open, private, secure, fast, and borderless manner. You will have access to electronic money the authorities can’t manipulate.
Wise traders may define cryptocurrency as a lucrative “get rich quick” scheme. Unsuccessful ones may describe it as a sure route to wipe out your savings.
Cryptocurrency is all of the above.
How To Buy Cryptocurrency?
Here’s a short guide on how to invest in cryptocurrency:
1. Decide Whether You Want to Hold or Trade
Managing your crypto holdings passively requires less dedication. Find the assets you firmly believe are going to yield high returns over the long term. Buy them, hold them, and wait for their value to rise without monitoring their prices daily.
If you’re willing to manage your holdings more actively, prepare to spend tens or hundreds of hours learning the ins and outs of cryptocurrency.
You don’t need to be a serious day trader to play the crypto market successfully.
If you hope to make a fortune on crypto derivatives, such as options and futures, you’ll have to work much harder.
2. Know What Makes a Crypto Asset Valuable
Pro tip: stay away from cryptocurrencies that you don’t understand. This advice applies even to the crypto assets with the highest market valuations.
How come? The largest cryptos must be a safe bet, right?
The crypto market has lots of irrational participants. Many of them don’t have any clue about the use cases of the coins or tokens they invest in. They simply follow the hype and park their cash in trending assets, which may be overvalued or garbage.
Speculation is part and parcel of investing in cryptocurrency. But buying cryptocurrency and holding assets randomly is foolish and very risky.
To reduce your chances of taking a loss, invest only in cryptocurrencies that you’re familiar with. The more you know about the practicality of your prospective crypto assets, the more you can trade them with confidence.
3. Find Out the Best Place to Buy Cryptocurrency
Most people buy their first cryptocurrencies through brokers. But there are other ways to build up your holdings. You’ll learn how to buy bitcoin and altcoins outside crypto brokerage platforms shortly.
4. Choose a Secure Wallet
If you open an account on a crypto exchange, you’ll automatically get multiple wallets for different crypto assets.
However, leaving your holdings on exchange-based wallets isn’t safe. It may even go against the very essence of cryptocurrency itself.
So, what’s the better way of storing crypto assets? We’ll talk about how to get a bitcoin wallet more securely in the next section.
5. Have an Exit Strategy
If you want to know how to invest in cryptocurrency just for the money, you’ll have to figure out precisely when to convert your holdings into fiat money or other crypto assets.
6. Stay Updated on Crypto News
Regardless of your personal goals for investing in cryptocurrency, you should be aware of all the happenings surrounding the space.
Ultimately, you may rake in some profits when you buy a relatively safe crypto investment, without paying attention to current affairs. But some events could diminish the profitability of your investments. Crypto tax announcements are an excellent case in point. We also often post news on crypto to keep you up to date.
Before you make any cryptocurrency purchase, make sure that you have the proper mindset to time your transactions.
When to Buy Cryptocurrency
The golden rule of investing is to buy low and sell high. The problem is that it’s impossible to predict the price trajectory of an asset.
There’s no way to tell when crypto that has been in a downward trend is going to bottom out. The same notion applies to the peak of one that has been gaining value with little interruption for a while.
If you buy cryptocurrencies whose prices are rising, you’ll risk making purchases near the end of their momentum. But if you make a purchase too late, you may never get the chance to buy hot assets at lower prices.
To maximize your profits, learn how to buy bitcoin and altcoins using historical data to anticipate future crypto valuations. Understanding what common patterns in price charts mean helps too.
When buying bitcoin, consult different price models to make an informed decision. This crypto asset has been notoriously volatile. Many experts, however, have developed useful metrics to make fairly accurate price predictions.
The most popular one is the stock-to-flow (S2F) model by PlanB, the pseudonym of a quant (a mathematical genius in the domain of investment management) from Amsterdam. This model illustrates the probable movement of the bitcoin price based on the steady increase in its circulating supply over time.
Since the amount of newly minted bitcoin entering the market daily is fixed and predictable, the S2F model has been widely regarded as the most reliable metric.
Other than technical analysis, pay attention to the news and rumors surrounding your prospective crypto assets too. True or not, these stories generate interest and may influence current and future crypto prices.
When to Sell Cryptocurrency
Planning an exit strategy can help keep your greed (or fear) in check. This way you can enjoy a satisfactory return on your altcoin or bitcoin investment.
There are no hard and fast rules about exit strategies. As long as you set your objectives, like price or profit targets, early on and stick to them, you can secure your profits or cut your losses.
Moreover, you should consider selling some of your holdings when the value of your crypto assets is on the rise without any intent of exiting.
The rationale behind this strategy is to have enough funds to buy the dip, which is a significant price decrease that may follow a significant price increase. Crypto prices can dip because some holders like to take profits along the way.
“Buying the dip” is a common practice among day traders. But taking a page out of their book as an ordinary investor can translate to decent additional gains.
If you execute it properly, you can grow your holdings without buying more out of pocket.
What Is a Cryptocurrency Wallet?
A crypto wallet is a software program used for generating and storing private and public keys. They are necessary for initiating transactions.
In other words, it’s more of a keychain than a wallet. It’s what you need to send, receive, and convert certain crypto assets into other or fiat currencies.
Having crypto wallets is one thing, but controlling them is another. If the custodian of your crypto wallets doesn’t take the necessary precautions to keep hackers at bay, you may lose the keys.
That’s why proper private key management is the next thing you need to learn after understanding how to buy cryptocurrency. For starters, crypto wallets fall into two categories:
Hot wallets are those connected to the internet. Therefore, they can get hacked anytime.
The first wallets most crypto investors get to use are hot, for they’re exchange-based. Statistically, entrusting private keys to cryptocurrency exchanges is an unsafe proposition.
Apart from hackers, the people behind exchanges aren’t always reputable custodians of crypto assets. They could run away with your money.
Software wallets are also hot wallets. You can install them on desktop computers and mobile devices and use them via web browsers.
They’re non-custodial, so they’re safer than the wallets controlled by crypto trading platforms. Software wallets present unique security concerns, however.
Hackers could control your private keys remotely and heist your entire coin investment portfolio in an instant. Sneaky apps can infect your device with cryptomining malware too.
Also, other people may also see or hear your passcode or recovery phrase in public. If not hacked, devices that contain software wallets can break down or get stolen.
Cold wallets are crypto wallets that don’t expose private keys online. They generally come in the form of specialized hardware. It should be your long-term storage solution after making an altcoin or bitcoin purchase.
The design of hardware wallets usually draws inspiration from everyday objects like flash drives, car keys, or calculators. Perhaps to help them hide in plain sight.
Most products have to talk to another device via Bluetooth or USB ports while processing transactions. The most secure hardware wallets use air gapping, a measure that completely isolates a device from an unsecured network.
Ways to Buy Cryptocurrency
Buying bitcoin and altcoins is easier than ever. The 2022 crypto bull market has been characterized by institutional adoption, swelling the space’s overall market capitalization with smart money.
Stats from May 2021 show that hundreds of US banks would begin offering crypto services before the year ends. If this happens, a significant portion of the American public will have the opportunity to invest in cryptocurrency.
In other news, MoneyGram would start allowing customers to buy and sell bitcoin in no less than 12,000 of its US locations.
If you want to buy cryptocurrencies now, as follows are the best ways to do so.
Crypto brokerage platforms are intermediaries between buyers and exchanges. They’re perfect for beginners because brokers simplify the investing process.
Many of these firms place orders on exchanges on behalf of investors immediately after the payment is made. Some brokers hold large quantities of different cryptocurrency types and make them readily available for sale on their platforms.
Compared to cryptocurrency exchanges, brokers are safer for many reasons. Regulated brokerage firms are subject to regular audits, participate in investor compensation schemes, and store funds in bank accounts.
Convenience is another huge advantage brokers have over exchanges. Typically, crypto brokerage platforms accept a wide range of means for depositing cash and offer solid customer support.
It costs more to trade in crypto on brokerage platforms than on exchanges, but you can expect to pay little to no withdrawal fees.
Cryptocurrency exchanges are platforms that enable you to trade directly with other market participants 24/7.
Since they’re built for traders, they generally have more advanced features than brokerage platforms.
Trading cryptocurrency on exchanges also gives you access to more assets since they deal with crypto miners directly. More choice is handy when you want to speculate on less popular altcoins and diversify your portfolio.
Other than higher costs, another downside to cryptocurrency exchanges is security. These platforms are usually sitting ducks for hackers.
Crypto marketplaces facilitate direct trades between bitcoin cryptocurrency buyers and sellers. To keep both parties honest, these platforms use escrow.
Fiat-to-crypto transactions are common, but many peer-to-peer marketplaces go a step further. Some of them are auctioneers that allow people to sell anything of value in exchange for crypto.
Bitcoin Automated Teller Machines (ATMs)
Bitcoin ATMs are kiosks that let you buy crypto with cash or a debit card. Some machines also support ether, litecoin, Bitcoin Cash, and Dash.
By February 2021, there had only been 14,915 machines across the world, most of which were in North America. But this figure had increased by nearly 135% since January 2020. You can use coinatmradar.com to locate all of them.
Most Bitcoin ATMs support one-way transactions only, which means you can either sell or purchase cryptocurrency only.
Identity verification isn’t always mandatory. But some jurisdictions require users to present IDs for anti-money-laundering and know-your-customer purposes.
This payment solution provider for small and mid-sized enterprises is one of the largest public bitcoin holders.
Square acts as a user-friendly cryptocurrency exchange and custodian for Cash users.
With this app, you can easily buy and sell cryptocurrency and send the crypto as payment to other users. After going through some verification, you may also withdraw your holding to an external wallet for self-custody.
PayPal allows its users in the US (soon in the UK) to buy, hold, and sell bitcoin, ether, and litecoin—and that’s it. You won’t be able to move your crypto assets to external wallets.
In other words, PayPal only lets you invest in cryptocurrency. But it won’t hand over the private key. Despite the dangers of custodial platforms, at least you can speculate on crypto until you get a handle on the space.
If you have a PayPal Cash or Cash Plus account, you can exchange crypto for as low as $1 and enjoy the option of holding Bitcoin Cash.
PayPal charges transaction fees.
Investing in cryptocurrency on Venmo is no different from doing it on PayPal.
You can buy bitcoin, ether, litecoin, and Bitcoin Cash in $1 increments, hold your investments and convert them back to fiat money. But you won’t be able to transfer your crypto assets elsewhere either. Crypto and transaction fees apply too.
Although it would be unwise to do so, you’ll be able to broadcast your purchases on your Venmo feed.
As on PayPal and Venmo, you can purchase, hold, and sell at least 7 crypto assets, including bitcoin and ether, for as little as $1 and track the prices of 10 other coins and tokens on Robinhood Crypto.
If you already use Robinhood Financial, you’ll need to sign up for Robinhood Crypto separately.
It’s a bummer that the service doesn’t support external transfers yet. But at least it keeps all of the crypto assets in its custody in cold storage and insures them against theft.
Investing in cryptocurrency using this service lets you avoid any fees completely. Robinhood hopes to attract more people into its network and sign more users up for its premium products.
Initial Coin Offerings (ICO)
Want to know how to invest in cryptocurrency before an asset becomes available to the public? Participate in an ICO.
An ICO is a crowdfunding model that enables you to own the native coins or tokens to upcoming blockchain projects before they get listed on trading platforms.
This route isn’t advisable for beginners in the crypto space, though. The U.S. Securities and Exchange Commission (SEC) itself has said that ICOs are not widely regulated. Pumping capital into unproven cryptocurrencies is extremely risky.
The ICO market is abundant in projects with immense profit potential, but it has plenty of sleazy characters too. If you can’t sniff scams, ICOs can be a fast way to shrink your net worth.
Best Places To Buy Cryptocurrency
The prospect of cyberattacks isn’t the only reason why centralized crypto trading platforms are unsafe to some degree. The fact that single entities control them is another cause for concern.
Having to trust one party hasn’t always gone well.
In early 2019, QuadrigaCX, once the largest cryptocurrency exchange in Canada, collapsed after the alleged death of its co-founder and CEO Gerald Cotten in India. But the company had been in financial difficulty even before that. The platform’s users had also struggled to withdraw their money.
Rumor has it that Cotten faked his death and stole investor funds. QuadrigaCX’s Board of Directors claimed that they had no access to the private keys to the crypto assets held on the exchange.
Turkey’s Thodex is a more recent example. In April 2021, the exchange’s founder Faruk Fatih Ozer halted trading activity on the platform to investigate a suspicious coin investment.
Later on, he was apprehended at Istanbul Airport while fleeing the country with $2 billion worth of investors’ assets. The police have detained at least 61 other suspects in connection with the fraud.
Centralized cryptocurrency exchanges can be highly risky, which is why we can only vouch for a couple of platforms.
If you want to know how to buy bitcoin and altcoins safely, we strongly recommend:
Listed in Nasdaq, Coinbase is the first public cryptocurrency exchange in the US.
Since it answers to shareholders, it has the obligation to report its financial health and business information to the public on a regular basis. Its SEC registration alone makes it undoubtedly legit.
As a crypto exchange, it offers multiple security features for users. To deter cyberattacks and protect investors’ assets, Coinbase holds 98% of user funds in cold storage. And the remaining 2% is insured.
In terms of 24-hour volume, Binance is the largest cryptocurrency exchange on the planet.
Although US-based traders can’t use the company’s main platform, Binance. The US is specifically created to serve American users in states that allow it.
The Federal Deposit Insurance Corporation covers deposits in US dollars on the platform.
Trading cryptocurrency on Binance inspires confidence. On the security front, it:
- supports two-factor authentication
- enables users to withdraw funds to specified wallet addresses only
- allows device restrictions
- leverages cold storage
Kraken is among the first cryptocurrency exchanges to agree to proof of reserves audit to provide investors peace of mind.
In addition, this San Francisco–based company keeps 95% of all the assets on its platform offline. It protects its servers in cages with 24/7 video surveillance and armed guards.
On Kraken, two-factor authentication is mandatory and a multi-tiered verification system is in place. Likewise, the company requires email confirmation for withdrawals and doesn’t allow SMS- or phone-based account recovery.
The cryptocurrency market eats starry-eyed investors alive.
Since 2009, crypto has made countless individuals millionaires and some billionaires—and probably a few trillionaires sooner than most of us expect. But you can’t get life-altering altcoin and bitcoin investment returns without taking every step to safeguard yourself.
In a “high-risk, high-reward” environment like crypto, being reckless can heighten the risk and lower the reward.
Learning how to buy cryptocurrency in 2022 is getting easier by the day. But mastering how to manage your assets properly will always be painstaking. As you try to be a successful investor, put the same effort into being a good crypto custodian.
You can receive crypto from a loved one or a friend or earn some as payment for your work. Or you can make a purchase out of pocket in a variety of ways instead.
You can use:
- brokerage platforms
- cryptocurrency exchanges
- peer-to-peer marketplaces
- crypto auction sites
- bitcoin ATMs
- fintech (financial technology) apps.
Crypto brokers are your safest bets.
Fintech apps are also a good call.
But Square Cash seems to be the most viable option. This service supports transfers to external wallets. That means you can take the private keys to your investment out of the platform and be the custodian of your crypto assets.
Crypto platforms have different minimum deposit requirements. But you can find a reputable one that doesn’t dictate how much money you can put on your account.
PayPal US, Venmo, and Robinhood Crypto are some of the platforms that allow you to purchase bitcoin and other popular altcoins in $1 increments.
To find out how to buy cryptocurrency, read the article above.