Bitcoin skyrocketed from just pennies in 2010 to an incredible $68,789 per coin in about a decade, and recently to $109,071 on inauguration day when Trump was sworn-in as the 47th U.S. President, which Crypto Buying Guide represents a huge importance for these investors.
Buying cryptocurrency can feel overwhelming for newcomers. Thousands of digital assets exist, and the risk of getting things wrong can get pricey. Many first-time investors struggle with their starting point. The ‘Fear of Missing Out’ (FOMO) mindset often results in poor investment decisions.
We created this detailed buying guide to help you explore the cryptocurrency world safely. You’ll learn everything – from picking crypto exchanges to setting up secure crypto wallets and making your first purchase. We’ll also show you how to avoid common mistakes that new investors make.
Want to learn the smart way to invest in crypto? Let’s get started!
Understanding Cryptocurrency Basics
Cryptocurrency represents digital money that exists only in electronic form. Traditional currencies come from governments, but cryptocurrency works on a decentralized system called blockchain – a public, digital ledger that records all transactions across computer networks.
Blockchain technology serves two significant functions. The system validates and records every transaction without banks or intermediaries. The technology’s design makes transaction records permanent once they join the blockchain.
Each cryptocurrency type serves a different purpose:
- Bitcoin: The first and most widely recognized cryptocurrency
- Ethereum: Powers smart contracts and decentralized applications
- Stablecoins: Digital currencies pegged to real-life assets like the US dollar
Gartner’s research shows that 20% of large enterprises will use digital currencies for payments, stored value, or collateral by 2024. Anyone wanting to join this growing ecosystem needs two basic tools: Crypto Wallets to store digital assets securely, and Crypto Exchanges to buy and sell cryptocurrencies.
Cryptocurrencies’ fixed supply makes them unique. Most cryptocurrencies have a predetermined maximum supply, while governments can print traditional money whenever needed. This feature combined with their decentralized nature creates an interesting alternative to traditional financial systems.
Choosing the Right Crypto Exchange
Your first vital step into cryptocurrency investment starts with picking a secure crypto exchange. We focused on exchanges that offer reliable security measures to protect your digital assets. These should include:
- Two-factor authentication (2FA)
- Cold storage for majority of user funds
- Regular security audits
- Encryption protocols
- Multi-signature wallets
It also helps to think over the fee structures at the time you evaluate crypto exchanges. Most exchanges use a tiered system based on your 30-day trading volume. Higher trading volumes lead to lower fees, so you need to arrange your trading strategy with the exchange’s fee schedule.
You should look closely at the exchange’s reputation and track record. Research user reviews and community feedback while understanding any history of security breaches. A platform’s positive reviews from traders and industry experts show you’re dealing with a secure trading environment.
A platform’s transparency is vital. The most secure exchanges share regular reports on trading volumes and go through frequent audits. These platforms stay compliant with relevant regulatory standards and provide insurance coverage for digital assets in hot wallets.
Notwithstanding that, note that even the safest exchanges face security challenges. That’s why platforms that store at least 90% of users’ funds in cold storage are your best bet. This approach substantially cuts down cyber threat risks while keeping enough liquidity for daily trading.
Setting Up Your First Crypto Wallet
Your crypto wallet setup is a vital milestone in your cryptocurrency trip. You’ll need to choose between two main wallet types: custodial and non-custodial. Custodial wallets from Crypto Exchanges manage your private keys for you. These wallets make things convenient but need you to trust a third party with your assets.
Non-custodial wallets give you full control of your private keys and assets. They come as either hot wallets (connected to the internet) or cold wallets (offline storage). New users should start with a software wallet that works well for smaller amounts and daily transactions.
Your first Crypto Wallet needs these vital security steps:
- Enable strong password protection and two-factor authentication
- Store your seed phrase offline in a secure location
- Back up your wallet regularly
- Use hardware wallets for large amounts
- Never share your private keys
Hardware wallets are a great way to get better security by keeping private keys offline, and they cost between $100-$200. These devices sign cryptocurrency transactions automatically without exposing your keys, which makes them tough against cyber threats.
Modern wallets create a twelve-word mnemonic seed phrase. This phrase helps you back up and recover your wallet – keep it safe because anyone who knows these words can access your Cryptocurrency. The best security comes from moving your keys to cold storage, which makes unauthorized access harder.
Which are the methods that people used to Buy Bitcoin?
There are many ways to buy Bitcoin and different pros and cons for each:
Cryptocurrency Exchanges:
How it works: These are online marketplaces where you can buy, sell and, in some cases, exchange Bitcoin and other cryptocurrencies. Popular examples include: Coinbase, Binance, Kraken, and Gemini.
Pros: Typically have more features, though not always, such as different order types, customizable charting tools, and sometimes even educational resources.
Pros: Can have a range of fees and some exchanges and can have a more confusing interface that beginners might find it harder to figure out. Security is another issue, so pick a reputable exchange at hand.
Brokerages:
How it works: Traditional stockbrokers such as Robinhood, Fidelity and Charles Schwab have been offering Bitcoin alongside stocks.
Pros: Easy to use for people who already use these platforms for their other investments.
Pros: Educate yourself on crypto exchanges and investing while learning the ropes of crypto trading. Cons: Features may be limited compared to dedicated crypto exchanges, and may not offer as many cryptocurrency options.
Bitcoin ATMs:
How it works: These devices enable you to buy Bitcoin with cash or a debit card.
Pros: Good for quick purchases, especially if you don’t want to go through the online setup process.
Over-the-counter pros: Can offer higher volume than other methods, and sometimes the fastest way to get crypto Cons: Generally charges higher fees than other bitcoin purchasing methods, and may limit how much bitcoin you can buy
Peer-to-Peer (P2P) Platforms:
How it works: Everyone said directly with buyers and sellers in the form of these platforms, both trade directly with each other bitcoin.
Pros: May have more competitive pricing than exchanges at times.
Cons: Greater risk of scams, since you’re dealing with individuals, not companies.
Bitcoin ETFs:
How it works: They are investment funds that mirror the price of Bitcoin and trade on stock exchanges.
Pros: Provide a more conventional approach to investing in Bitcoin, available through all standard brokerage accounts.
Pros: You don’t actually own the Bitcoin, only shares in the fund.
Payment Apps:
How it works: Some payment apps — including PayPal, Venmo and Cash App — let you buy and sell Bitcoin directly within the app.
Pros: Handy for those who already use these apps for other transactions.
Cons: Fewer features and higher fees than a dedicated crypto exchange.
Directly from Individuals:
How it works: You buy Bitcoin directly from someone (like a friend), or from various online marketplaces or forums.
Pros: Can occasionally negotiate lower prices.
Pros: Ultra-low fees and transfer times, especially for cross-border transactions Cons: Extremely high risk of scams, because there’s no middleman to confirm whether the transaction is real.
Conclusion about Buying Guide
You just need to think about security measures and understand the basics when investing in cryptocurrency. A safe trading foundation starts with choosing trusted Crypto Exchanges and setting up secure Crypto Wallets.
Start small and build your knowledge step by step while implementing reliable security practices. Your private keys need protection. Use strong authentication methods and never invest money you can’t afford to lose.
The Cryptocurrency market never sleeps. You must stay updated about market trends and security alerts. Patience, research, and a balanced approach to risk management lead to success in crypto trading.
Your experience with cryptocurrency is just beginning. Keep learning and stay alert about security. Base your decisions on solid research rather than market hype or FOMO.
