Last update: 28 May 2020
13 min read

How to Buy and Sell Cryptocurrencies in 2020 – Learn How to Invest in Crypto Safely

Learning how to buy cryptocurrency can feel overwhelming, especially if you’re not familiar with the way crypto brokers and exchanges work. With so many options available, it can be tricky to figure out exactly which cryptocurrencies you want to buy, where to buy them and what the benefits of doing so are.

Luckily, we’re here to provide clarity.

Our expert guide not only shows you the best ways to buy cryptocurrency but also gives you all the information you need to make an informed purchase. After reading our guide you will be able to:

  • Decide which method of purchasing cryptocurrencies is best for you
  • Safely invest in cryptocurrencies
  • Identify the risks of investing in cryptocurrency and turn them into advantages

 

Why should I buy cryptocurrencies?

Before you learn how to buy cryptocurrencies, you’ll probably want to know why you should do so. Buying cryptocurrencies is not only exciting but useful and profitable too.

The first reason to buy cryptocurrencies is for investment purposes. Cryptocurrencies are a finite asset, which means there’s only a limited supply of them. If you buy cryptocurrencies now, whilst they’re still available, you’ll almost definitely pay less for them that once they’re all in circulation.

The scarcity of cryptocurrencies directly relates to the demand for them. As more and more people learn of the benefits of using cryptocurrencies as a payment method, their demand goes up. As demand goes up, the price of cryptocurrencies also rises. Buy cryptocurrency now to get ahead of others and to secure a long term profit.

Finally, you may want to buy cryptocurrencies for practical uses. Major cryptocurrencies like bitcoin are now widely accepted by businesses across the globe. You can use them to purchase goods and services, play at online casinos and to fund trading accounts. Moreover, possessing an alternative form of purchasing power other than government-issued currencies gives you the freedom to acquire global goods you might not otherwise have access to.

 

How to buy cryptocurrencies

Before we discuss the actual methods of how to buy cryptocurrency, there are a few things you must take into consideration. Luckily for you, our experts have created a complete checklist for you to go over before deciding to buy cryptocurrency.

  • Location – Although buying cryptocurrencies is legal in most countries, there may be different restrictions and limits depending on where you’re based. Be sure to check your country’s cryptocurrency laws and regulations before going ahead and making a purchase.
  • Type of coin – You’ll first need to decide which cryptocurrency you want to buy. To do this, you should consider how each coin can be used and the benefits of buying it. For example, Bitcoin and altcoins such as Ethereum are more functional as they’re widely accepted by retailers. Stable coins, such as Tether and Ekon, offer safer long-term investments as their value is tied to an existing asset. You’ll also need to make sure that you can buy your chosen coin with your chosen purchasing method. In particular, some exchanges only offer a selection of cryptocurrencies to choose from.
  • How much you want to invest – As with all investments, you should buy cryptocurrency with funds you can afford to lose. If you are planning on making a large cryptocurrency purchase, we recommend that you speak to a financial advisor.
  • Payment method – Lastly, you’ll need to choose a payment method. Depending on which method you use to buy cryptocurrency, there may be different advantages and disadvantages to paying via bank transfer, credit or debit card, or e-wallet. For instance, credit/debit cards are often user-friendly, but they lack anonymity and may have high fees.

What else will you need?

In addition to considering the factors above, there are certain things you’ll need to acquire before learning how to buy cryptocurrency. These are:

A cryptocurrency wallet
Before you purchase any cryptocurrency, you’ll need a place to store it. Much like you store normal currencies in bank accounts, cryptocurrencies are kept in crypto wallets. The wallet you’ll need will depend on which cryptocurrency you want to buy. If you wish to buy Bitcoin, for example, you’ll need a wallet designed for storing this type of coin.

There are three different types of crypto wallets to choose from, each with different pros and cons:

  • Online crypto wallets – easy and quick to set up but the least secure.
  • Software crypto wallets – downloadable apps that are safer than online storage options.
  • Hardware crypto wallets – the safest choice but also the most expensive

ID and documentation
Depending on your location, you may need to provide documentation before you can buy cryptocurrency. In the United States, for example, the Securities and Exchange Commission requires you to verify your identity when you register for a digital wallet. To do this, you’ll need to supply your social security number alongside other documents such as a state ID and a utility bill.

Secure internet connection
You should always conduct all cryptocurrency transactions over a secured internet connection. Never make a purchase via a public Wi-Fi network, as a compromised internet connection could leave you vulnerable to cryptocurrency hackers.

If you are using any hardware or software wallets, it’s also advised to ensure your computer is protected with a reliable anti-virus program to prevent the loss of any of your assets or data.

The 3 main ways of buying cryptocurrencies

Now that you’ve examined our checklist above it’s time to answer the question of how to buy cryptocurrency. Below you will find a summary of the three best ways to buy cryptocurrency:

Crypto exchanges – Exchanges are marketplaces that allow you to buy and sell cryptocurrency online. They are a very comfortable option, as they accept a wide range of payment methods and offer user-friendly and efficient interfaces. Crypto exchanges generally have a large supply of digital currency available for purchase and top crypto exchanges may even offer a debit/credit card that can be tied to your wallet.

Peer to peer transactions P2P transactions are the direct transfer of cryptocurrencies from one wallet to another. The entire transfer takes place without the use of an intermediary institution such as an exchange. The main advantage of peer to peer transactions is that, as they don’t require an intermediary to perform the transaction, they are completely anonymous and free. However, whilst this is a simple solution if you are wishing to buy cryptocurrency from friends or trusted sources, this method offers no protection and relies on the honesty of both individuals involved.

Cryptocurrency ATMs – These machines look much like normal ATMs, allowing you to either purchase cryptocurrencies at the machine with cash, or withdraw cash from a cryptocurrency wallet. If you do not already have a wallet these machines will provide you with one through a printable ticket containing the wallet details. Like peer to peer transactions, bitcoin ATMs are beneficial as they allow you to buy cryptocurrency without a third-party. However, they often charge a fee and in countries like the US, they will require ID. Cryptocurrency ATMs are also only available in certain locations, like major cities, and often only work with bitcoin deposits.

Which is the best method?

When deciding how you will buy cryptocurrency, it is important to choose a method of purchasing cryptocurrency that is right for you. Our experts recommend cryptocurrency exchanges, over P2P transactions and crypto ATMs. When comparing the most popular ways of buying cryptocurrency, crypto exchanges offer the most flexibility, protection, reliability, and ease of use. This means they are perfect for beginner buyers.

 

Buy cryptocurrencies with Coinbase – Our expert pick


Coinbase

Coinbase


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Coinbase is one of the most popular and reliable Bitcoin exchanges in the world. It is completely secure, backed by trusted investors and used by millions of clients in over 55 countries. With over eight years of experience, Coinbase has evolved to bring its customers the best service available. This includes offering an extensive range of cryptocurrencies, instant transfers between Coinbase users, and two-factor security storage.

How to use Coinbase

Coinbase has made the registration process quick and easy for its users. Simply follow this step-by-step guide to create an account today:

  1. Visit the Coinbase website and click on the ‘Sign Up’ button
  2. Fill in a form with your name, email, location, and password
  3. Verify your email through the link sent to you
  4. Identify which country you are registering from and provide a phone number
  5. Verify your phone number through a code sent by text message
  6. Verify your documents (optional in some locations). Provide proof of ID and proof of address

While not all locations require document verification as part of the account creation process, we recommend that you do so anyway. Having full account verification will allow you greater access to Coinbase’s services, including unlimited investment amounts, wire funds, and the ability to send and receive digital currencies.

Depositing at Coinbase

Coinbase accepts a variety of deposit methods from clients. Depending on your location you will be able to use debit/credit cards, bank transfers, and localized transfer options for larger sums such as ACH and SEPA. While some methods of deposit can take up to 5 business days to process, Coinbase offers instant purchases through credit and debit cards.

Coinbase offers beginner-friendly service

Coinbase is a fantastic option for beginners asking the question of how to buy cryptocurrency. Their services include providing a wallet, offering vault protection with insurance, and an iOS and Android compatible mobile app for access anywhere.

The app allows for cryptocurrency filtering, so new buyers can add different currencies over time and develop experience with the market without being overwhelmed. Coinbase even offers a convenient portfolio for you to keep track of all your digital currencies in one location.

 

How to store your cryptocurrency

After you have decided how to buy cryptocurrency, the next step is figuring out how you will store your coins, If you’ve set up an account on an exchange like Coinbase, you may decide to store your cryptocurrencies directly on the platform. The main advantage of this is that it’s incredibly convenient, as it allows you to resell or exchange your crypto without further steps. You’ll also benefit from the exchange’s security protocols and storage servers. That said, storing your cryptocurrencies in this way is risky. The exchange itself could be hacked, putting your coins in jeopardy, or your own internet connection may be compromised at some point.

To avoid this risk, we recommend that if you’re considering buying cryptocurrency you also look at offline storage options. Below you can learn more about what types of storage are available.

Software wallets

Software cryptocurrency wallets are programs you download to your computer to house your crypto assets. Rather than have a virtual address holding this information, everything is stored on the device of your choice. You can create backups of your software wallet, and set a personal encryption password.

Software wallets are widely accessible. They aren’t too expensive and there’s plenty of trusted options. The main issue with this type of storage, however, is that it’s still susceptible to attacks. Unless your computer is always disconnected from the internet, malware or viruses could make their way on to your device and steal your coins. Cryptocurrency buyers who use software wallets should also invest in high-quality antivirus software.

Hardware wallets

Hardware wallets are our preferred option for storing cryptocurrencies. Also known as ‘cold storage’, a hardware wallet is a physical device, like a USB drive.  This is the most secure storage method there is because they aren’t connected to the internet. What’s more, if someone did steal your hardware device, they wouldn’t be able to access it without your passcodes.

One downside of hardware wallets is that they can be pricey. The best cryptocurrency hardware wallets can cost upwards of $100.

 

The best times to buy and sell cryptocurrencies

Deciding when is the right time to buy cryptocurrencies can be tricky. The markets are extremely volatile, and several factors influence price movements. To make things easier for you, we’ve provided a few expert tips.

  1. Consider historical data – Price graphs and charts are a great place to start when you’re trying to decide whether or not it is a good time to buy cryptocurrency. Identifying previous trends can indicate how future prices may change.
  2. Keep up with the news – Any good investor knows that they need to be switched on. Whilst it seems obvious to say that you need to be watching our for cryptocurrency news, like new legislation, you should also stay on top of what else is happening in the world. Global events impact both traditional and cryptocurrency markets.
  3. Consider ICOs – An ICO or initial coin offer is the starting stage of a cryptocurrency’s value. If you are trying to decide what cryptocurrency to buy, this is important. The price of a coin is often at its lowest during an ICO and, if it is well designed, it could pick up value in the future. If you’re considering how to buy a cryptocurrency, an ICO might be the best time for you.
  4. Decide on your long term aims – Most cryptocurrency buyers are in it for the long haul. In contrast to trading cryptocurrencies, investors should always look at the bigger picture and hold on to their coins for a longer period. Small depreciations in a coin’s value don’t mean it’s time to sell.

Should you trade cryptocurrencies instead of buying them?

There is another important factor to consider when deciding how to buy a cryptocurrency. Rather than investing, some people prefer to use top online brokers to trade instead. In this circumstance you don’t own the digital asset, rather you are entering a buy or sell position based on how you estimate the future price levels of a cryptocurrency will perform.

The advantage of trading cryptocurrencies is that it negates some of the risks associated with storing and managing them yourself. It’s also perfect if you’re looking to make a quick profit, rather than a long term investment.

If you think you’d prefer to trade cryptocurrencies rather instead of buying them, sign up with one of our recommended cryptocurrency brokers listed below.

Broker
Summary
Min Deposit
Rating
XTB
Summary:Trade 16 crypto pairs and 6 crypto coin CFDs Award-winning proprietary trading platform
Min Deposit: $250
98
Points
Plus500
Summary:Enjoy leveraged cryptocurrency trading, 24/7 Explore 14 crypto trading options
Min Deposit: $100
96
Points
eToro
Summary:Trade 17 crypto coin CFDs, crypto currency pairs and crypto/currency pairs eToro CopyTrader social trading platform
Min Deposit: $50
94
Points

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Frequently asked questions (FAQs)

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