How To Buy Cryptocurrency: A Beginner’s Guide

Cryptocurrency’s popularity continues to rise, despite negative coverage by news channels, its easy access has subdued its inherently volatile nature.  

However, in 2022, the rising interest rates triggered selloffs in Bitcoin. At this time, several cautious investors began to offload their speculative assets.  

Nevertheless, cryptocurrencies quickly became significant players in the global financial landscape. With considerable media attention, many important individual and institutional investors, along with strong regulators, have started contemplating crypto purchases in the upcoming financial year. 

With that said, new questions about how to buy cryptocurrency are being asked. Enthusiastic investors are looking for processes, platforms and newer techniques to help them plan solid investments in cryptocurrencies. 

Hence, we’re here to provide a comprehensive guide on the important tenets of buying cryptocurrencies where we’ll discuss the cryptocurrency buying processes, digital currency exchanges, risks and mitigation processes that investors need to follow to make the right choice and build a strong portfolio. Let’s develop a cryptocurrency investment strategy that works! 

Understanding Cryptocurrency  

Source: miro.medium.com

Before jumping to a digital asset management strategy, let us discuss what cryptocurrency really is and what it signifies for today’s investors. 

Cryptocurrencies, such as Bitcoin, are digital assets. What you must note in bold is that these digital assets need no tangible security backup. Moreover, you can directly exchange cryptocurrencies between parties without intermediaries.  

For crypto, the backup is a technology called the blockchain. This is a public ledger that records details of your transactions. The best part about this public ledger system is how it ensures transparency while keeping you anonymous. 

However, young investors in the crypto market cannot define this digital asset solely based on its benefits. While they offer high potential returns, this speculative investment is accompanied by significant risks.  

The crypto landscape is unregulated and extremely volatile where value derives from demand rather than central authority.  

Moreover, if you plan a futuristic investment, you must learn crypto beyond Bitcoin. This diverse crypto landscape necessitates thorough research. Understanding the underlying technologies for each cryptocurrency helps you navigate the complexities and inherent risks within this decentralized financial system. 

Preparing To Buy Cryptocurrency  

Navigating the market risks of any investment can be challenging. Due to media hype, this challenge becomes manifold for crypto investors.  

With social media as its centre of disruption, the crypto market fluctuates in the blink of an eye. It takes seconds for the prices to jump up or go down leaving investors on the hook forever. For cryptocurrency investments, the preparation is two-fold: 

(i) Mental Preparations 

If you’re interested in crypto, you must accept volatility as a given. Prepare your investment plans around it. For this, you must look at the brighter side— whatever happens in the crypto world, you get to know it in real-time. Hence, there is no speculation time. On the other hand, crypto investments need you to keep your calm.  

FOMO is one of crypto investors’ worst enemies and one of the major ideas driving the market. However, you will likely make mistakes if you fall prey to social media trends. 

Therefore, conduct a comprehensive evaluation of your investment strategy and align it with your objectives rather than trends. Also, remember, in the case of crypto, the price alone doesn’t reflect intrinsic value.  

(ii) Physical Preparations 

Yes, crypto investments require physical tasks. Choose and set up your crypto wallet. 

These wallets help secure your private keys, which prove ownership of your digital assets. They act as digital safes rather than storing coins themselves.  

Given the increasing complexity of blockchain networks, you must understand wallet functionality to make informed security decisions.  

Therefore, To Ensure Security, You Must Have Some Best Practices In Line: 

• Create strong passwords.

• Back up your recovery phrases.

• Stay updated on potential threats.

• Look for educational resources and community support.

Selecting A Cryptocurrency Exchange  

Source: miro.medium.com

A Crypto exchange is a platform where buyers and sellers exchange crypto-related valuable items. You can make ‘transactions’ like purchasing cryptocurrencies, depositing them into your wallets, or swapping them for other crypto coins on crypto exchanges. 

Now, cryptocurrency exchanges have three broad categories: 

1. Centralized Exchange 

A centralized crypto exchange (CEX) platform runs on a centralized server where you can connect with buyers or sellers to carry out transactions for a fee.  

CEXs are typically quite user-friendly making it a great option for those who are new to crypto.  

However, they do come with some drawbacks— 

• Susceptibility to hacks.  

• Higher fees due to liquidity issues. 

• Slower transaction times.  

Also, you might have to provide personal information to meet regulations like KYC and AML. This further makes centralized exchanges a doubtful option for investors. 

2. Decentralized Exchange 

A decentralized crypto exchange (DEX) operates without a central authority. Instead, it relies on automated systems and smart contracts to enable peer-to-peer trading.  

Unlike centralized exchanges, DEXs utilize blockchain technology for trade executions.  

While this benefits them with lower transaction fees and enhanced security, it also has limitations: 

• Lower liquidity and trading volumes. 

• Absence of a trusted intermediary. 

• Challenging platform navigation. 

3. Hybrid Exchange 

Hybrid crypto exchanges combine the features of CEX and DEX giving you the best of both the worlds.  

This offer the perks of centralized trading, such as high liquidity and low fees. However, unlike decentralized exchange platforms, they prioritize security and control over funds.  

Moreover, they offer access to a diverse selection of currency pairs with a quick transaction speed. If you want to improve the governance standards for your crypto investments, go for hybrid exchange!

Which Direction To Head? 

Now, that you know the  three exchanges, you may have some clarity on what you should choose. However, when it comes to investment, the collective experiences of your trusted individuals also come into play. 

If your priorities go beyond factors like fees, security and UI, we believe you have strong reasons to trust your preferences. 

Nevertheless, educate yourself about the technologies behind these platforms and make the right decision. 

Buying Cryptocurrency 

Source: management.org

Finally, coming to the main objective, let us tell you how to buy cryptocurrencies! 

 Assuming that you’ve selected your crypto exchange platform, let us take you on a step-by-step progression of crypto purchase: 

Step 1: Funding your Account 

To activate USD fiat transfers: 

• Go to the Wallet or Bank Transfer pages.

• Select Deposit under the USD row.

• Choose Bank Transfer.

• Accept the Terms and Conditions.

• Complete KYC if required.

To deposit USD via SWIFT: 

• Initiate a transfer from your bank.

• Put your account details.

• Enter your Reference Code. 

Always check that the bank account name matches your crypto account to avoid rejections. Even if some exchanges charge zero deposit fees for a limited time, your bank may charge a fee.  

Note: The minimum deposit is US$1 with no maximum, and first deposits from new accounts may take longer due to verification. 

Step 2: Placing An Order 

When you go to an asset’s page on most exchange platforms, the first thing you’ll notice is the basic trading interface. This setup makes buying crypto super easy—you just enter the amount you want and hit the Buy button, and it’ll carry out the purchase automatically. Selling from your portfolio works in a similar way.  

At the bottom of the screen, you’ll see buttons for Buy and Sell. Click on the Buy button, and then you’ll be taken to the Buy order form. Make sure you’re on the Invest tab, and then just fill in the order details in that section. 

Step 3: Storing Your Cryptocurrency 

You have several secure wallet options for storing crypto— 

• Exchanges. 

• Cold storage wallets. 

• Paper wallets. 

• Hot wallets.  

For quick access to your crypto, it’s best to go with a crypto exchange or a hot wallet. If you’re looking for the safest option, though, self-custody cold storage wallets—like hardware or paper wallets—are the way to go.  

Just keep in mind that keeping all your funds in cold storage might not be the best fit for everyone. Also, remember that crypto wallets don’t directly hold your coins.  

Your actual holdings are on the blockchain, and you can access them with a private key, which proves you own them and lets you make transactions. 

Tips For Beginners

Asset education has always stood as the most important factor for any investment. In the case of cryptocurrencies, learning about them is the easiest part. From videos and reels to online articles and news, everything about them is right out there on your smartphone. 

However, the catch is what to follow and what to let go. Here are some tips that can help young crypto investors make the right decisions: 

1. Evaluate your Affordability before Investing 

• Cryptocurrencies are volatile, hence, invest a maximum of 5% of your portfolio. 

• Ensure emergency savings are in place before investing. 

2. Use Dollar-Cost Averaging 

• Make small, recurring purchases on a regular schedule. 

• Automate purchases to avoid timing the market. 

• Consider extra purchases during market dips. 

3. Research and Stick to Fundamentals 

• Assess real-world adoption potential and technical specs. 

• Favour time-tested projects with strong fundamentals. 

• Research about:  

• Utility of the token 

• Transaction speed 

• Network security 

• Team transparency 

• Competitive advantages 

4. Stick to Major Cryptocurrencies 

• Focus on established assets like Bitcoin and Ethereum. 

• Rebalance profits into promising new projects when appropriate. 

• Avoid overexposure to major cryptocurrencies. 

5. Use Safe Storage 

• Store significant holdings in hardware wallets (e.g., Trezor, Ledger). 

• Keep recovery phrases secure, avoiding electronic storage. 

• Use complex passwords and secure backups. 

6. Be Objective! 

• Avoid FOMO and speculative investments. 

• Maintain a balanced portfolio across asset classes. 

• Consult financial advisors for tailored guidance. 

7. Understand the Technology 

• Learn about the related technologies:  

• Blockchain 

• Consensus mechanisms 

• Smart contracts 

• Educate yourself about industry developments through credible publications. 

Conclusion

We’re at a critical crossroads in the crypto world. The rapid development of technology, especially blockchain, has already significantly reshaped the cryptocurrency market. However, we’re still only in the transition phase.  

Therefore, the systems and currencies have yet to mature fully. Crypto investors must stay alert as this transition creates a disconnect between innovation and regulation.  

Also, you will often find it tricky to navigate the highly volatile nature of cryptocurrencies.  

Hence, it’s really important to do your homework before jumping in. Understand what drives you to invest. Then, get acquainted with both cryptocurrencies and blockchain technology. This way, you can determine if this investment aligns with your goals.