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How to Buy Cryptocurrency In 2021

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Author: Ali Raza

The cryptocurrency space has been big for years now, ever since it exploded in 2017, thousands of digital coins have been created, striving to make improvements in every conceivable industry. The prices exploded anew in 2020, in the middle of a global pandemic no less. Prices of coins like Bitcoin, Ethereum, Cardano, Binance Coin, and many others have skyrocketed, most reaching new all-time highs.

Bitcoin itself, the first and largest cryptocurrency, already saw a price three times higher than its 2017 record by reaching $61,000 in early 2021. With that in mind, if you are interested in buying cryptocurrency, for investment or trading, we can tell you all you need to know about it before you commit to doing it.

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Why Trade Rather than Buy Cryptocurrency for Cheap and Fast Returns?

1

You Don’t Need a Wallet

You trade on the price movement of the coin without having to buy and store it.

2

You Can Use Standard Payment Methods

All regulated brokers accept popular methods of payment such as credit/debit card and bank transfers.

3

Trades Are Fast and Withdrawals Are Easy

Trades are executed within seconds and withdrawals will reflect instantly in your account.

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5 Things to Consider if you Want to Buy Cryptocurrency

Before you rush off to buy your preferred coin, there are first a few considerations that should be taken into account. It is nothing big or complicated, just a reminder of some things that you should do in preparation in order to do everything properly.

1. Carefully choose your preferred secure payment method

In order to buy cryptocurrency on a trading platform, you will first have to deposit some money, and to do that, you can choose from a variety of payment methods. Most platforms accept credit and debit cards, or wire transfers. Some also accept PayPal, Skrill, or some other payment method that you may prefer. 

Of course, there are things to consider there as well, such as transaction speed and fees. For example, wire transfers are the slowest — they can take up to a few days — but they are also the cheapest. Credit cards will deliver your money very quickly, but it may be expensive to use them. In the end, you will have to see which options are available, and then decide on your priorities — is speed more important than the cost of making a transaction, or is it the opposite?

2. Will you need to set up your own wallet?

The next thing to consider is setting up your own cryptocurrency wallet. You see, centralised trading platforms are custodial, which means that they have their own wallets in which you need to deposit cryptos you wish to trade on the platform, or coins that you purchased. Only after you have already placed the funds in the platform’s integrated wallet can you withdraw it to your own, private wallet, where you are the only one who holds the private keys.

For some people, leaving coins in the exchange’s wallet is fine. However, others feel that this is less safe. First of all, as long as the exchange holds the private key, it is no different than the bank, and once again, you are not the sole owner of your money. Not to mention that there were plenty of hacks that resulted in users’ money being stolen from the platforms. If you intend to hold on to your cryptocurrency investment for a long period of time, you are better off transferring those funds into your own wallet. 

3. Comparing costs

Of course, the costs are a big factor in the crypto industry. In fact, one of the reasons why the crypto industry is becoming more popular than banks is the low cost for making transactions and trading. However, even within the crypto industry, there are platforms and even networks that are considered expensive. Ethereum, for example, has an extremely expensive network, where transaction fees can go to $50. 

4. Safety and security

Naturally, security is and should be your top priority when trading cryptocurrencies. Hacking attacks are quite common, although their success rate may vary. Then, there are scammers, fake projects, and alike. In other words, you should always use all the security measures offered by exchanges and wallets, like 2FA, setting up strong and complex passwords, and alike. Remember — in the crypto industry, you are the only one responsible for the safety of your funds.

5. Can you understand and navigate the platform?

Lastly, you should also check out the complexity of the platform you decide to use. There are many different platforms, and they all have a unique feel in terms of functionality. Some were designed for professionals, and such platforms are filled with advanced and complex tools that a beginner is far more likely to find confusing and intimidating than helpful. On the other hand, there are also platforms specifically designed to be simple and to help you make your first steps into the crypto world.

Ultimate Beginner’s Guide to Trading Cryptocurrency

What is a Cryptocurrency Broker?

Let’s start this next segment by explaining what crypto brokers are. Brokers themselves are services that can help you with your trading. These are platforms that are connected to many different markets and let you experience all the different prices so that you can find the best one. The benefit of it all is that you only need to operate from a single platform — your broker’s platform. Furthermore, brokers can also be instructed to trade on your behalf, with specific rules on what to do in certain situations.

What is a cryptocurrency CFD?

CFDs are short for Contracts For Difference. These are derivatives contracts that don’t have their own value. Instead, their price derives from an underlying asset, hence the name. CFDs are only one type of derivatives, with the others being options and futures. They all have several things in common. For example, you get to bet on the underlying asset’s price movement without actually having to buy the asset itself. 

Let’s say that you are in traditional finance, and you wish to invest in gold. You would have to buy it from the seller, pay for transport, and even secure it properly so that it doesn’t get stolen. If, on the other hand, you go for gold CFDs, you only purchase contracts backed by gold, and not gold itself. It is the same in the crypto world — if you buy Bitcoin, you have to create a wallet, secure it, and alike. If you buy Bitcoin CFDs, you can simply own the contracts, and don’t have anything to do with BTC except for exploiting its price movements.

What is the benefit of cryptocurrency regulation?

Cryptocurrency regulation is important because it brings security and coverage. If you lose money on an unregulated exchange, there is no guarantee that you will ever get your money back. Regulated brokers and platforms, on the other hand, can be held responsible, and they are obligated to compensate you for any losses you may have suffered due to faulty mechanics, bugs, or similar situations where the fault lies with the platform itself. 

What is the best payment method for buying cryptocurrency?

We already discussed this briefly, but there are multiple payment methods that you can use to purchase cryptocurrency. Some are better than others in terms of cost, while others, even though more expensive, can be faster, which is better for those who are in a hurry to use a newly-emerging opportunity. For example, you can use:

Credit/Debit cards

Credit and debit cards are easily the fastest way to deliver money to your broker/exchange of choice. However, they also have the highest fees, so they are the best option for those who are not on a tight budget. If you are, then every dollar counts, and each USD you use to pay for fees is one less for investing.

Bank transfer

Bank transfers are very cheap, and a good choice for those who don’t wish to waste money on expensive fees. The trouble is — they are slow, and can sometimes take a few days to deliver the money. This is usually not the option meant for professional investors who aim to quickly exploit price changes, but it can be a decent option for beginners who are not in any rush and only getting started with cryptocurrencies. Don’t misunderstand — you should also look for opportunities and ways to profit. 

PayPal

Until recently, PayPal did not want anything to do with the cryptocurrency space. As such, it did not provide its services for depositing or withdrawing money to and from any platform. However, there was still a way to use PayPal for buying coins almost immediately, and that is to use P2P platforms. On these platforms, the seller would offer their coins and ask for a specific price. The interested buyer would then contact them, and they would make a deal where the buyer sends funds to the seller’s PayPal. After the seller received the money, they would release the coins to the buyer.

The verification process for trading cryptocurrencies

When you go to an exchange or broker platform in order to trade coins, you will first have to register and verify your account. This means uploading certain documents that confirm your identity to prove that it is really you behind your name and data. This is necessary to protect you from identity theft, as hackers and scammers often steal this information and trade in someone else’s name. 

Cryptocurrency: Long vs short term investment

Another thing that you need to decide is whether you wish to invest in cryptocurrencies for longer or shorter periods. There is a big difference to this approach, but if you do both of them right, you will get similar results in the end.

Long-term investments, for example, require you to buy coins, lock them up in your wallet, and forget about them for years. Hopefully, in a few-year time, the coin’s price will surge, and when you sell them, you will have made a nice little profit.

Short-term investments, on the other hand, require regular purchases, sales, and trades. This is, obviously, a much busier option where you have to keep track of the market and price movements, exploit new opportunities, and alike. This can be difficult and bothersome, but the benefit is that you get to make a small bit of profit over time. 

Why buy cryptocurrency rather than trade

Depending on which coin you wish to use, it might be better to buy it and own it instead of just holding it for a short amount of time before you can trade it away. The thing is that most cryptocurrencies are still undervalued. When you look at their white papers and see their plans for the future, it becomes clear that they have this great vision on how to change and revolutionize some aspect of the world. Meanwhile, their price ends up being extremely cheap, and so it is clear that it doesn’t match the importance of the project. 

What Fees are Involved in Buying Cryptocurrency?

Cryptocurrencies are much cheaper to handle and use than traditional money, as they don’t go through numerous intermediaries that all wish to be paid. With that said, there are still certain fees that you need to pay, and while they are typically quite low, they are still there, and you need to be aware of them.

Deposit fees

Some platforms will charge you for depositing money, which is usually the case with brokers. The fees may vary from coin to coin and between platforms, so each case will be different.

Withdrawal fees

Withdrawal fees, just like deposit fees, exist on some platforms, while others may not necessarily have them. They are usually not that high, but you must pay them in order to get your money.

Transaction fees

Lastly, there are transaction fees, and these are typically very small, although they can go high during busy periods. That is, the average transaction fee can be high if you want your transaction to be among the first to get processed. 

Safely Storing your Cryptocurrency

We mentioned the need to store your cryptocurrency safely and protect it from hackers, scammers, and other bad agents. We also mentioned that digital currencies are being stored in private wallets. What we have yet to explain is the different types of wallets, and their strengths and weaknesses.

Web Wallet

Web wallets are a kind of wallet that is kept perpetually online, also known as hot wallets. Their biggest advantage is that they are always on the internet, which makes them easily accessible via browsers on computers or mobile devices. As such, they can be quickly used to withdraw money on the go or while you are at home, whenever a new opportunity to invest arises. 

Mobile Wallet

Next, there are mobile wallets, which can be used as a hot, or cold storage solution. The thing about mobile wallets is that you can simply store coins and disconnect them from the internet. As such, they are perfectly hack-free, unless someone steals your phone directly. But, even then, you likely have a lock that will protect the wallet, plus the password for entry, and alike. And, if you spot a new opportunity, you can just connect to the internet and immediately start trading. As such, mobile wallets can be both safe and convenient simultaneously.

Desktop wallet

Desktop wallets are similar to mobile wallets in a way that you can turn them into hot or cold storages simply by connecting them or disconnecting them to the internet. They can be even safer than mobile wallets since there are many anti-virus and anti-malware apps that can prevent hackers from invading and compromising your computer. 

Hardware wallet

Hardware wallets are known as cold storages, and they are deemed the safest form of crypto wallet out there. Usually, in the form of a small, USB stick-like device, they are only available on the internet while being plugged into your computer. This makes periods of exposure very rare and brief, and they are the best type of wallet to hold the majority of your crypto funds. 

Wallet Combinations

There is also a possibility to interlink different kinds of wallets with one another and benefit from increased security or simply greater convenience.

What’s the Smallest and Largest Amount of Cryptocurrency I Can Buy?

Depending on the cryptocurrency you wish to buy, the purchasable amount can be extremely small — only a fraction of a cent. However, the amount that you can actually buy — whether the lower or upper limit — depends on the platform’s rules. Most platforms will have no upper limit provided that you are registered and verified, although some platforms let you trade unregistered to a certain amount — $2,000, for example — and not go further than that until you verify.

Cryptocurrency purchases are legal in most places around the world. There are a handful of countries where it might not be legal to use cryptos as a means of payment, not even if both parties are in agreement, such as China. However, even in China, you can legally buy and own digital coins. As for purchasing it anonymously, there are still places to do that, such as P2P exchanges, or platforms that allow you to buy small amounts, such as $2,000, as mentioned above.

Will Buying Cryptocurrency Make Me Money?

Buying crypto with the intention of earning money is most people’s motivation to get into crypto. However, for some, it doesn’t work out that well, which leaves them disappointed. The reason why this happens is that a lot of traders drawn to the crypto industry by the promise of money don’t actually bother to learn much about crypto, or crypto trading, for that matter. They understand the basic concept — buy low, sell high — and they think that’s all there is to it. This is, of course, wrong. Cryptocurrencies are extremely volatile, and there is some studying involved if you want to understand their future relevance, their prices, analysing price performance, looking into different events and news and how they impacted the prices, plus the historic price behaviour, and many other factors in order to know what to expect. 

In short, yes, it is very possible to make money from buying crypto, but only if you are willing to learn about the project you plan to invest in.

How to spend your cryptocurrency?

Once you buy your cryptocurrency, what exactly can you do with it? Obviously, you can choose to hold it, or you can simply spend it. Only a few years ago, this would have been easier said than done, as not many merchants accepted cryptocurrencies. These days, however, there are many companies that have issued crypto debit cards in partnership with Visa and MasterCard, which makes it possible to load your card with coins, and then use it for online or offline purchases, anywhere in the world where Visa and/or MasterCard are accepted.

How to Sell your Cryptocurrency?

There is also a third option, besides HODLing or spending coins, and that is to simply sell them. You can do it on P2P platforms, centralised exchanges, decentralised exchanges, brokerages, and more. All you need to do is deposit your coins to the platform, and offer to sell the amount you wish to sell. That’s all there is to it.

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Frequently Asked Questions

  1. That is entirely your choice. You should research the crypto market and see which coins are there, which ones are popular, and what the project behind them is trying to achieve. After you do your research, you can decide whether or not you believe it has a future.

  2. That is also a decision that you need to make yourself. Usually, people who buy coins do it to make a profit when their price rises. With that in mind, you can make a forecast and try to predict how high the price will go, and when it will happen. Once it does rise, and you are satisfied with the increase, you can either sell, or keep holding your coins and wait for a better opportunity.

  3. Yes, cryptocurrencies are not regulated in most parts of the world, but they are subjected to taxation. How much you have to pay and under what form depends on your country. Learn about the taxation laws from your official government website.

  4. Cryptocurrencies are not tied to any real-world asset that would give them value, apart from a group of coins known as stablecoins, which are typically pegged to fiat currencies. Most other coins are only worth as much as people believe them to be worth, so their price tends to shift with the market sentiment.

  5. Bitcoin was created by an unknown individual or group known only as Satoshi Nakamoto. As for other coins, most have their creators known, and those are either individual developers, small groups of a few developers co-creating a coin together, or entire teams. Some coins are created by companies or even governments, such as China’s digital yuan.

  6. This depends on many factors, such as the coin in question, the cost of electricity, the mining difficulty, and more. For example, you cannot mine Bitcoin on your own with a regular CPU. This was possible a decade ago, but it is not anymore due to advances in technology and increased competition. These days, anyone mining BTC is doing it with ASIC miners, which can cost thousands of dollars.

  7. Cryptocurrencies offer pseudonymous, instant payments. They offer cashless payments, which is very much appreciated these days when COVID-19 is still spreading. They are easy to handle and send to anyone in the world, instantly. Transactions don’t go from bank to bank, but instead move from one user to another, directly.

  8. Yes, most crypto payments can be traced, except for a handful of coins known as privacy coins, or if you use crypto mixers to mix up your coins with other people’s and hide the trail of your transaction. People usually use these services so that nobody would know which wallet belongs to them.

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