‘Cryptocurrency’ is a buzzword that has been around for a while now. For many, it is an extremely risky and volatile investment and for others, who seem interested in it, find it a bit sketchy. The truth is, there is a lack of information about cryptocurrencies and not many understand what it is!
So, what is a cryptocurrency?
In simple words, it is a digital currency that can be utilized to purchase services and products but uses strong cryptography (a form of secure communication) to safeguard online transactions.
If you’re someone interested in purchasing cryptocurrency and wondering how to go about it, this article has you covered.
How to buy cryptocurrencies in 2021?
Let us first clarify the most common confusion! Are Bitcoin and cryptocurrencies the same? Are these terms interchangeable? No! Bitcoin is a type of cryptocurrency and there are many others available.
Choosing the right cryptocurrency can be a tedious process. With so many options available, it only makes it more confusing. Also, there are different modes of payment and different channels (i.e. exchanges) through which you can make purchases.
Which one’s better suited for you? Which one is more reliable? Can you buy it using a credit card?
The list of questions is endless! But before you jump into the decision-making process, let us help you understand the basics.
Top 4 Factors you need to consider
In the initial days, when the word ‘cryptocurrency’ was relatively new, buying/ mining for them wasn’t easy. But now the process has been made a lot simpler than before. When purchasing cryptocurrency, there are four factors that you need to keep in mind:
- Location — It is important to know the regulations of your country before investing since there are some countries that ban cryptocurrency trading. The list includes five countries - China, Indonesia, Turkey, Egypt, and Bolivia.
- Payment mode — You will have all the three commonly used options like a credit card, bank transfer, and direct cash payments. You can also exchange some cryptocurrencies for others. Not every website will offer all modes of payments, so you will need to choose the website that offers your choice of payment option.
- Type of cryptocurrency —The most common examples are Bitcoin, Ethereum (ETH), Cardano, Tether, Solana amongst many others. Once you make up your mind about the type of currency you want to purchase, look for websites that sell them.
- Transaction fees — Just like most channels, every website that deals with cryptocurrency will also charge you transaction fees. Every website has different fees so choose the one that suits you. Generally, it ranges between 1 to 4% but can be higher for some exchanges.
How to store your cryptocurrency?
Before you go about looking for a website to make a purchase, let us tell you about cryptocurrency wallets.
What is a cryptocurrency wallet?
It is a safe place to store your cryptocurrencies. It is similar to a bank account that stores money. There are various options for you to choose from. Your choice will decide how secure your currency will be i.e. because once stolen, you cannot retrieve your cryptocurrency.
What are the different types of wallets?
Here are the different types of wallets where you can store your cryptocurrencies:
- Online wallets — These wallets are hassle-free and can be set up very fast, these are the least safe and can be easily hacked into.
- Software wallets — These wallets can be easily installed just like any other app on your phone. They are relatively safer than their online counterparts.
- Hardware wallets — These wallets are the safest. They can be plugged into your PC/laptops via USB mode.
The type of wallet you choose should be compatible with the type of cryptocurrency you wish to buy. There are many reliable options for software wallets like Coinbase, Trezor, Exodus, BitGo, and Trust among others. For hardware wallets, one of the most reputed is Ledger Nano S and it can store many types of cryptocurrencies.
Where can you buy cryptocurrency?
Source: Moonpay
Now that you know where you can store your cryptocurrency, let us learn about where you can buy them and how you can pay for it.
Cryptocurrency exchanges:
- These online websites enable you to exchange digital currency or fiat currency (read ‘traditional money’) for the cryptocurrency of your choice. They are like the ‘middle men’ between buyer and seller that benefit through commissions and transaction fees. These exchanges are the most popular way to purchase cryptocurrencies.
- These cryptocurrency exchanges can be either centralized or decentralized. Centralized crypto exchanges act as a third party between the buyer and seller while decentralized crypto exchanges eliminate the necessity of the third party and execute peer-to-peer transactions. The former accounts for 99% of crypto transactions and is considered to be highly reliable.
- Bank transfers and credit cards are easily accepted by these exchanges. Some exchanges also recognize PayPal as a mode of payment.
But how can you buy cryptocurrencies using exchange?
Let us explain this using an example:
- Firstly you need to register yourself on the exchange using your full name, complete postal address, and e-mail address
- The next step involves verifying your identity using a passport or driving license. This will be followed by a 2 step verification to secure your account and keep fraudsters at bay.
- Once signed in, you can buy ETH using a bank transfer or credit card
- The payment can be done via the designated payment providers. For instance, when you buy ETH, one of the designated payment providers is MoonPay. MoonPay accepts all major payment methods like credit/ debit cards (Visa and Mastercard), bank transfers, Apple Pay, Google Pay, and Samsung Pay.
- Enter the payment details and the transaction is complete within minutes.
Broker Exchanges
Source: Fortune
These are just like the currency exchange shops that you find at the airport. The only difference is that instead of exchanging one currency with the other you will be exchanging your local currency for the cryptocurrency of your choice.
- Coinbase — The biggest and most popular one by far! This exchange is very secure and accepts bank transfers, credit and debit cards, and PayPal too! The amount you pay as transaction fees depends on the mode of payment you choose and is highest for credit/ debit cards - 3.75%. You can only use this exchange in Australia, Europe, and North America. You can buy Bitcoin, Bitcoin Cash, Ether, and Litecoin on Coinbase.
- Coinmama — Easy to use, highly reliable, this option will let you trade cryptocurrency from almost every country in the world. The accepted mode of payment is via credit cards. The transaction fee is 6% which is much higher than Coinbase and you can only buy Bitcoin or Ether on Coinmama.
- CEX.io —This currency exchange is also a trading exchange platform i.e. you can trade your crypto for others by buying or selling it to other users on CEX.i.o. The transaction fee for debit and credit cards is 3.5% + $0.20. Bitcoin, Ethereum, and DASH can be purchased here.
- Bitstamp — This is one of the oldest currency exchanges founded in 2013. You can buy more types of cryptocurrencies here than on any other currency exchange. This isn’t as easy to use as the first two and it is better to avoid this exchange if you’re a beginner. Also, the transaction fees for credit and debit cards depend on the amount you’re spending. It is 2% if you spend more than $1,000 but $10 if you spend less than that.
Cryptocurrencies you can purchase here - Bitcoin, Bitcoin Cash, Ether, Litecoin, and Ripple. - Kriptomat — Based in Estonia, this exchange is the most recent in the cryptocurrency business. Kriptomat has acquired operating licenses by the Financial Intelligence Unit (Estonian Anti Money Laundering authority) and aims to be the most secure fiat gateway. The transaction fee is as low as 1.45% and the platform supports 21 languages. You can only purchase Bitcoin or Ether on Kriptomat.
Bitcoin ATMs
Bitcoin ATMs are relatively new to the crypto world and are similar to the ATMs that we use to withdraw our local currencies. The main difference is instead of withdrawing, you deposit your cash here.
Bitcoin ATMs are the quickest way to purchase/invest in cryptocurrencies. However, since these are very new, not many ATMs are available. No need to register or create an account. Simply deposit your cash and the Bitcoins will be sent to your cryptocurrency wallet. If you don’t have a wallet already, the ATM will create one for you.
Peer-to-peer exchanges (P2P)
P2P is known to be the preferred way to buy cryptocurrency if you want to avoid sharing your identity or wish to dodge the transaction fee! Simply by eliminating the intermediary, you can directly purchase cryptocurrencies hence, avoiding transaction fees and any registration processes needed. Though the process is simpler (requires no transaction fees), there are certain things you need to keep in mind about P2P -
- Not as simple to use as cryptocurrency exchanges
- Finding a buyer or seller will need time since not many trust or deal with P2P
- You need to be careful so as to avoid fraudulent transactions
Conclusion
So, what’s the best way to buy cryptocurrency? Well, it all depends on your location and the type of cryptocurrency you want to invest in.
With this guide on buying cryptocurrency, we now believe that you have a better understanding of the subject.
Have you made your decision yet? Let us know in the comments below!
Author bio
Atreyee Chowdhury works full-time as a Content Manager with a Fortune 1 retail giant. She is passionate about writing and helped many small and medium-scale businesses achieve their content marketing goals with her compelling content. She loves to read, travel, and experiment with different cuisines in her free time.