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Guide: How to Buy Cryptocurrency
Updated May 3, 2020
Cryptocurrencies made big headlines in 2017 when prices literally skyrocketed. While the market has decreased substantially ever since, people are still buying crypto assets today. In this guide, we will take a look at different reasons why people invest in cryptocurrencies and digial assets such as Bitcoin and Ethereum, and also how you can buy cryptocurrencies from exchanges or with cash.
1. Why Invest in Cryptocurrencies?
There is a saying that says “Never put all of your eggs in one basket”. If there are any sort of people that understand this better than anyone else, it must be professional investors. Diversification is an important strategy that every investor should consider, and there are in fact a lot of different approaches that can be used to achieve this.
Today in 2019, more and more investors are looking at digital currencies such as Bitcoin as an asset class that can help them diversify their portfolio. One of the reasons for this is that crypto assets are very different than more traditional asset classes and markets. Including such assets in their portfolios could substantially increase the potential for growth and return on investment.
Even though the global cryptocurrency market has been in a bear market throughout 2018, investors and traders have regained their interest during 2019 as the market has started to turn around again. It is especially the high volatility and potential for massive gains, even as much as 100% or more, that is the reason why many people are attracted to this asset class.
Easier than Ever Before
Buying cryptocurrency today has never been that easy. As prices skyrocketed in 2017, a lot of companies saw the market potential for cryptocurrency exchanges and mobile applications, and today there is a wide variety of options for buying cryptocurrencies.
You can buy cryptocurrencies today using your credit card, debit card, gift cards, or even with cash through physical Bitcoin ATMs that can be found in many countries.
It should be noted that many of today’s cryptocurrency exchanges are charging significant commission and transaction fees. It is always recommended to compare fees between different exchanges before you decide to make a purchase on one of the platforms.
Adoption is Coming
It is no doubt that the cryptocurrency market is still in its infant stage. The total market cap is just a tiny fraction of other global markets such as stocks, bonds, currencies, commodities and real estate. There are approximately 6,000 Bitcoin ATMs around the world today, which is a very low number compared to traditional ATMs.
We should also consider the fact that cryptocurrencies are a very new asset class that has not been around very long. The first Bitcoin was mined in early 2009, and has only become popular in recent years.
There has been a lot of interest around crypto assets and the underlying technology from big international banks, countries and governments the last couple of years, so it is pretty safe to say that the asset class will be around for the foreseeable future.
2. The Most Popular Cryptocurrencies
There exists more than 2,000 cryptocurrencies today, some of which fluctuates significantly in value from day-to-day. For people that are new to cryptocurrencies it is not always easy to understand what the differences are between all of them. There are also many different ways to buy these digital assets.
The most popular cryptocurrencies today are generally also having the largest market cap. It is also more likely that a popular cryptocurrency with a relative high market cap will be around in the future as well. Some of the most popular cryptocurrencies today in addition to Bitcoin are XRP (XRP), Ethereum (ETH), Stellar (XLM), EOS (EOS), Litecoin (LTC), Monero (XMR) and Cardano (ADA).
3. How to Buy Cryptocurrency on Coinbase
Coinbase has been around since 2012 and is currently the largest and most popular US-based cryptocurrency exchange today. Their headquarters are in San Francisco, and have so far served more than 30 million users.
It is quite simple to buy cryptocurrency on Coinbase. The first thing you need to do is to create an account on their website. From your account you will have a place to convert your fiat money such as USD into different crypto assets, in addition to a place where you can safely store your own cryptocurrency.
When your account is created and have been verified, you must connect your bank account before you can purchase your first cryptocurrency. You can also connect your credit or debit card. Coinbase also requires you to verify your account before you can take advantage of all their buying options.
The platform lets you also store your cryptocurrency after you have bought it, so you don’t necessarily need to create another wallet elsewhere. You can view real-time exchange rates of several crypto assets against both USD and EUR from their website.
4. How to Buy Cryptocurrency on Binance
Binance launched in 2017 and has already become one of the most popular cryptocurrency exchanges. In terms of traded volume, Binance is in fact the largest exchange as of today, and has taken quite a lot of market share from other exchanges such as Coinbase.
Binance lets you trade a lot of different cryptocurrencies, and to get started you will need to first make a deposit to your cryptocurrency wallet. The exchange focuses mostly on crypto-to-crypto trading, but has quite recently also rolled out support for buying cryptocurrency with fiat money in selected regions.
If you are not able to buy cryptocurrency with fiat from Binance yet, you can always withdraw either Bitcoin or Ethereum from your Coinbase account and deposit to your Binance wallet, and then trade any of the supported assets they offer.
For example, if you want to buy XRP on Binance, you can do so with Bitcoin, Ethereum or Binance Coin. On the Exchange page you will have full overview of current exchange rates, and you can buy cryptocurrencies using different types of buy orders.
Binance has also issued their own cryptocurrency called Binance Coin (BNB) during their ICO in 2017. By holding this token in your wallet you will be eligible for discount of up to 50% on trading fees.
5. How to Buy Cryptocurrency on Kraken
Kraken is another popular cryptocurrency exchange that was launched in 2011. Kraken separates itself from other exchanges by allowing funding of your account with fiat currencies like USD and EUR. To get started you will first need to create an account.
After creating your account you can make a deposit of fiat currency from the Funding page. You can deposit either USD or EUR by using wire transfer. The actual process of wiring money to your Kraken account depends on the bank that you are using, but in general you will need to provide the displayed information about the wire transfer details on your Kraken deposit page to your bank.
The wire transfer might take 2-3 days to complete, and after this you will be able to buy or sell cryptocurrencies such as Bitcoin and Ethereum on the platform. The process of buying and selling is very similar to Coinbase and Binance explained above.
6. How to Buy Cryptocurrency with Cash
Buying cryptocurrency with cash is different than buying on an exchange for a few different reasons. First of all, buying crypto with cash is a lot more private since you in most cases don’t need to reveal any personal information such as your name. Exchanges, however, often require the user to verify their account by submitting personal documents like their driving license or passport.
Secondly, buying with cash can be a lot faster since you don’t need to wire money which can take up to several days to complete. Getting your account verified can take up to several weeks on some exchanges as well, which might be a concern to you because of the extreme volatility of crypto markets.
Cash transactions, or OTC (over-the-counter) trades, can be done in a few different ways.
If you have a good friend or family member that have previously transacted with cryptocurrencies, you might be able to purchase cryptocurrencies such as Bitcoin directly from them, and avoiding setting up an exchange account all together.
In this case you would typically first agree upon the price before you pay the person by cash or send it from your bank account, and then receive the cryptocurrency to your own crypto wallet. The other person can also scan the QR code on your wallet and transfer the crypto assets directly if you meet in person.
Another way of peer-to-peer transactions is through LocalBitcoins. This platform has been around since 2012 and has become very popular for connecting potential buyers and sellers.
You can get started with LocalBitcoins by visiting their website, select your region and the amount of Bitcoin you want to purchase, and then browse through the search results of people selling Bitcoin for cash in your local area. All further details, such as payment methods, are discussed between the buyer and seller through their messaging service.
7. How to Buy Crypto from a Bitcoin ATM
As previously mentioned, it is also possible to buy Bitcoin and other cryptocurrencies from a Bitcoin ATM. These machines have become increasingly popular over the last few years, and today there are more than 6,000 ATMs worldwide.
The step-by-step process of buying Bitcoin through such an ATM is pretty simple in fact. You can choose to pay with either cash, debit card or credit card, and you will need to provide the QR code of your own wallet for the device to scan. For first time buyers this can be an easy entry into the world of cryptocurrencies.
Some countries are more forward thinking than others. In Switzerland for example, you can find Bitcoin ATMs at most of the railway stations in the country. It is likely that the number of such machines will increase rapidly worldwide in the coming years.
8. How to Buy Cryptocurrency with Square Cash App
The Square Cash App has become very popular and one of the most downloaded applications for mobile devices the last year. It is also possible to buy Bitcoin directly from the app which might be one of the most easy and convenient ways of buying Bitcoin today for US citizens. First step to buy Bitcoin with the Cash App is to have some money deposited in your account. After this is done, you should select “Cash Card”, swipe to the left, and you should see the Bitcoin symbol. You should also see a “Buy” button which will guide you through the buying process.
9. How to Buy Cryptocurrency Anonymously
If you want to remain anonymous while buying cryptocurrency there are a few ways to go about this.
As already mentioned in Section 6, LocalBitcoins is a very popular website to find potential sellers of Bitcoin that accept cash payments. You can search for sellers in your local area and agree to meet in person if accepted by both parties.
You can also stay completely anonymous by using an alias email address, but note that most sellers don’t accept transactions with anonymous buyers unless you are meeting in person and paying with cash.
2. Bitcoin ATM
In Section 7 we explained how you can buy Bitcoin and other cryptocurrency through a Bitcoin ATM. Since these machines in most cases accept cash payments, you can stay completely anonymous and don’t need to reveal either your name, address or telephone number.
3. Prepaid cards
A third option would be to buy a prepaid card from a supermarket where you don’t need to provide any personal information. Some exchanges accept prepaid cards which lets you buy cryptocurrency while remaining completely anonymous.
It has become much easier to buy Bitcoin and cryptocurrency today than in the past. In this article we explained different payment methods you can use, but there are still a few considerations to make before you select which method is most suitable for you.
If you decide to buy cryptocurrency from an exchange, you should consider factors such as transaction and commission fees, support for payment cards, privacy, security, and support for different digital asset.
As you should know by now, buying cryptocurrency is just the first step. You also need a secure place to store your assets you have bought. There are many wallet solutions that exist today, and you should take into consideration the level of security required before you make your choice.
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