Crypto Basics Crypto Knowledge

How to Buy Bitcoin 

Bitcoin

Intro

The rise of Bitcoin, blockchain technology and the crypto space over recent years has shifted the framework of how we think about money. In doing so, it has also provided some considerable returns for investors. However, looking at an exchange for the first time can seem somewhat intimidating if you want to take your first steps toward buying crypto. We’ll highlight all the aspects you need to consider and walk you through each step of the process. 

Getting Started

Whilst there are many ways to buy Bitcoin, Ethereum, and other cryptocurrencies, one of the easiest and most tried and trusted is through a centralized exchange. 

What Is a Crypto Exchange?

An exchange platform is used to buy, sell and trade cryptocurrencies. They offer an on-ramp for investors looking to purchase with fiat currency and an off-ramp for those looking to cash out. You can also use them for trading your current crypto assets. If you hold Bitcoin, for example, and want to sell a portion for Ethereum, an exchange will allow you to do so at the cost of a small fee.

How to Choose a Crypto Exchange

There is an abundance of crypto exchanges to choose from, so taking some time to figure out which fits your needs is an important thing to think out. With many aspects to consider, three valuable components to optimize for are security, low fees and ease of use. 

Here are some other important factors to look into: 

Accessibility 

Due to state or national regulations, your location may prevent you from buying and selling crypto on certain exchanges. Some countries, like China, have banned citizens from accessing crypto exchanges. 

Depending on your device, you may want to look at which exchanges offer mobile and desktop apps and websites. Being able to access your holdings quickly can be very useful, and mobile apps make this easier. 

Fees

Exchanges vary in fees; some charge a deposit fee, others a transactional fee that applies for any swaps, purchases or sells. Nearly all exchanges will charge a withdrawal fee; if you’re planning on buying crypto to store in your own wallet, then a tiny amount of research here could save you a considerable amount.

Security 

If security is a big concern, it is worth looking into the history of the exchange and how each one holds its funds. Hacks are a common event in crypto, and you don’t want to rely on a platform that has been heavily exploited. The size of an exchange’s user base is a good indicator of how widely trusted the platform is; in other words, the big hitters aren’t the worst place to start. It would help if you also looked for security features such as 2FA (two-factor authentication) to help ensure your account is safe. 

Liquidity

If you plan on utilizing the exchange for trading, it’s essential to ensure the one you’ve chosen has good trade volume, so your assets are liquid. Again, this points in favour of the more prominent exchanges as it often has more users and, as a result, higher trade volumes.

An exchange with a more significant trade volume benefits your chances of buying and selling your crypto at the best price. Tools like CoinGecko provide charts that rank exchanges regarding their trade volumes to learn more about this. 

What Coins Do They Offer? 

Whilst most exchanges offer BTC and ETH, you may want to utilize the fact that they provide multiple cryptocurrencies such as Cardano, litecoin, bitcoin cash or dogecoin. Despite this, there could be instances where you find yourself looking to invest in some altcoins that are yet to be listed. 

When you’re researching a token, CoinMarketCap conveniently lists each exchange that you’re able to buy it on. It also ranks them in order of trading volume so you can confidently invest, knowing your digital assets are liquid should you want to sell them.

Customer Support

Although it may seem a smaller factor compared to the others, a good customer support service can help give you peace of mind if you ever run into any trouble. If you want to find more information, reviews of the exchange are a good place to start.

Verifying Your Account

Once you have chosen an exchange, the next step will be verification. It is important to note that you will need to provide some personal information to the platform that will then need to be verified. To verify your identity, the likely requirements, alongside a verified email address and phone number, are a photo of your ID (passport or driver’s license) and a proof of address. 

Buying Crypto With Fiat

If the above steps are completed, you should be in place to deposit money into your exchange account. It’s worth researching if your chosen platform accepts your local fiat currency to avoid extra exchange fees.

Once your deposit has been made, you’re in a position to be able to place your first order for Bitcoin. These next steps will differ depending on what platform you‘re using. However, platforms like  Binance, Coinbase and Kraken typically allow you to purchase Bitcoin through a direct visa payment using the current exchange rate. You will have to check that your local fiat currency is accepted, although most exchanges accept USD and offer different payment methods such as bank transfer or Paypal. 

Using a cryptocurrency exchange also offers the option of placing market orders and limit orders. A market order is used to purchase at that exact moment at the given price. A limit order is placed at a set price that you want to buy at. Your order will automatically be filled if the price of that coin reaches the one you’ve set.

Although it may be minimal, exchange rates vary from exchange to exchange and can depend on several factors. As they aren’t connected, each individual exchange calculates the price of Bitcoin based on the supply, demand and trading volume on its platform. With this in mind, more comprehensive exchanges tend to offer a more market-relevant price.

Now What?

Now that the hard part is done, you need to consider where and how you want to store your crypto. Leaving it on the exchange has some risk, so you may want to consider setting up a cold storage/hardware wallet. Our guide on ‘How to Get a Crypto Wallet’ is a great place to start for a full breakdown of cryptocurrency wallets. 

Important Things to Remember: 

Research

Always research the key components of the exchange you wish to use. Platforms that are not reputable can carry extreme risk when used to invest. Not putting in the time to learn can lead to losing funds.

Invest With Caution

Now that you know how to invest in Bitcoin, it is essential to remember that cryptocurrency is an asset class with high volatility. It can be easy to get caught up in the hype when the market is going well, so only invest in amounts you can afford. 

Having an investment plan laid out from the start can be a preventative measure to ensure your emotions don’t get the better of you. 

Was this post helpful?

Related posts

blue brick blocks
Buy and Sell Walls
Support and Resistance are key price levels that act as speed bumps Support and Resistance levels are used...