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How to buy cryptocurrency?

This article is about how to buy cryptocurrency. It is a process, which includes six different steps. By reading this article, you’ll avoid the typical mistakes and won’t be surprised by the cryptocurrency market. This is a great guide for all newcomers who are thinking to buy cryptocurrency for the first time!

Step 1: To buy cryptocurrency is to ride a rollercoaster

The first thing you must understand is this: buying cryptocurrencies is not like buying stocks or bonds. The market is still young and relatively small. There are a few rules and regulations. Large “whales” dominate the market and cause sudden price movements in both directions.

The volatility increases when the market cap of the cryptocurrency decreases. However, you can’t say Bitcoin would be a low-volatility asset either. The price has moved many times more than 20% on one day.

Many altcoins saw price increases of 1000% to 10.000% in the bull run of 2016-2017. After the bear market of 2018, these coins had lost over 99% of their value. Easy come easy go.

If you want to dip your toe on the water and buy cryptocurrency, be mentally prepared for a rollercoaster ride. Price can make wild movements without any visible reason.

happy-bitcoiner

Image credit: Lina Seiche Twitter

Is your plan to double your investment and sell everything? Do you believe there will be a cryptocurrency revolution sometime in the next 10 years? It is very important to have a concrete plan for your crypto investment.

There is no one-size-fits-all plan in investing, whether we talk about stocks or cryptocurrencies. Each investor has a different risk profile and tolerance for volatility. You should only invest money you can afford to lose. This is 1% of your wealth to some, 20% to others.

We recommend learning about Dollar Cost Averaging (DCA). Many cryptocurrency exchanges support daily, weekly, or monthly purchases. This is an excellent way to invest in the crypto market. You can make additional purchases on market crashes if you have the stomach for it.

Step 2: Learn before you buy

This is probably the most important advice we can give. Always DYOR. Even if you’d read quality information like this, you should always Do Your Own Research as well. Don’t take anyone’s opinions for granted. You have to make up your own mind or else you won’t be successful.

If your crypto investment strategy is depending on a Youtuber or a blogger, it’s not going to work. Get educated, read all the guides at AboutBitcoin.io and build a plan fit for your risk profile.

Many investors have jumped on the crypto train without any knowledge of the asset they purchased. You can read messages like this every single day from Facebook groups. This is called FOMO – Fear Of Missing Out.

People want to buy because their friends are buying, or their family members are buying. Everyone is getting rich but you! This is the worst possible reason to buy any asset.

FOMO investors are the ones who pay the profits of the smart investors. This is the cold hard truth. The FOMO investors jump in at the market peak when smart investors are selling their earlier purchases. If you want to be on the receiving side of the profits, you must get smarter.

We recommend you get familiar with the following topics:

AboutBitcoin.io has excellent guides for the most popular cryptocurrencies. They are great ways to start learning about other coins as well. We recommend mastering Bitcoin first before moving to altcoins.

bitcoin-standard

You’d also invest 182 kr and buy The Bitcoin Standard from Adlibris. It’s like a bible for bitcoiners.

There is also one “dark side” of crypto investing you need to be aware of. Scams. There are so many scammers lurking online and trying to steal people’s coins by appealing to greed. Internet is full of investment plans promising eye-watering profits.

You’ll also get phishing e-mails and might lose your coins through exchange hacks or human errors. It’s simply a wild west out there. There are no guarantees and safety deposit boxes. If you want to become a crypto investor, you are on your own.

This is the reason why Bitcoin has gone up +200% per year by average. If there were no risks involved, everyone would be a “hodler” already. There is a high reward for those who manage the risks properly.

Step 3: Start with Bitcoin

A smart cryptocurrency investor begins with Bitcoin. This is the easiest route as well.

This whole cryptocurrency revolution started with Bitcoin. It is the oldest and best-known coin in the market. It’s the easiest one to buy and the easiest one to store. You can’t understand the cryptocurrency market as a whole until you have first learned about Bitcoin.

Indices are popular investment vehicles in the stock market. This is for a good reason. Most traders, even the smart ones, can’t beat the index. Their hand-picked stocks earn a smaller yield than an index does, which covers the whole market.

You can think of Bitcoin as a stock market index. Bitcoin is the reserve currency and the first-choice investment. If you go for altcoins, you make a claim that you’ll find better investments than Bitcoin. Did you know Bitcoin has increased in price by +200% per year on average? There aren’t many cryptocurrencies that can beat this.

When you are ready to buy Bitcoin, we recommend newbie-friendly exchanges. These have a simple interface, which makes purchasing easy. Coinbase, eToro, and Bitpanda are popular exchanges among newcomers.

coinbase sell

Coinbase has a simple form for buying & selling cryptos.

You can always start with small sums. Depositing money to an exchange is the first step. Start small, try it out, buy some bitcoin and see how you feel. Try to sell some. Try to make a transaction to your friend and get a Bitcoin wallet of your own.

If you think this technology is worth investing in, learn to use it!

Exchange Features Rating Open account
Operated since 2007
Also stocks & commodities
Popular social trading
SEPA bank transfers
Open account
Operated since 2011
Easy for newcomers
SEPA bank transfers
Coinbase Pro
Open account
Europe's top exchange
Commodities & stocks too!
SEPA bank transfers
Bitpanda Pro
Open account

eToro disclaimer: 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

After purchasing your first bitcoins, you should think about how to store them. When you have little experience and a small portfolio, feel free to store your coins in the exchange you bought them from. Over time, you should get familiar with Bitcoin wallet options.

Exodus and TrustWallet are popular picks. Exodus has an app for desktop and mobile while TrustWallet is mobile-only. Both are very easy to use. If you have ever used an internet bank, you can use these wallets. There are also dozens of Youtube guides available.

Serious investors should learn about Ledger Nano X or Trezor Model T hardware wallets. They offer ultimate safety and should be considered after your portfolio grows to thousands of dollars.

Read more from our beginner’s guide: how to choose the right Bitcoin wallet?

Step 4: This is how to buy cryptocurrency in practice

In the previous chapter, we talked about buying Bitcoin for the first time. But how do you actually buy Bitcoin? Do you need to create a wallet first? How do you convert fiat to BTC? Let’s walk through that process next.

We mentioned previously newbie-friendly exchanges Coinbase and Bitpanda. A cryptocurrency exchange is a service, which offers a platform for buying and selling cryptocurrencies. It’s often regulated by the local financial institutions as well.

If you want a detailed guide on Coinbase or Bitpanda, click the reviews link from the top menu. This is just an overall description of the process. We’ll use Coinbase as an example.

coinbase review | coinbase experiences

  1. Opening an account. First, you must create a user account and fill in your personal information.
  2. Account verification. The second step is verifying your identity, also known as the KYC process. You need to upload a picture of your passport to verify your identity. It is a standard requirement every time you use a service with bank transfers enabled.
  3. Making a deposit. Once your account is verified, it’s possible to deposit money. Coinbase supports SEPA transfers, which are usually confirmed in a matter of hours. You can also make a deposit using a debit/credit card.
  4. You can convert euros (or other fiat currencies) to Bitcoin with a couple of clicks. There is a simple form available, which anyone can use.
  5. Once you have bought bitcoins, you can leave them in Coinbase or move them later on to your own wallet.

That’s it! Buying Bitcoin isn’t more difficult than using an internet bank or e-wallet. If you can make normal bank transfers, you can use Coinbase as well. Storing is not a problem either in the beginning. Just leave the crypto where you bought it. You can learn how to use wallets over time.

Exchanges like Coinbase and Bitpanda have excellent mobile versions as well.

Step 5: Buying altcoins

Bitcoin is enough for most investors. It’s the safest and the least volatile cryptocurrency as well. There is nothing wrong with investing only in Bitcoin.

Bitcoin is like one of those traditional companies in the stock market with a long history and reliable performance. It’s not going to be the best performer in the bull market, but Bitcoin will be the safest asset in a bear market.

Some investors want to explore the altcoin market too and diversify their portfolios. You could think of a portfolio like this: 50% Bitcoin, 20% Ethereum, 10% Chainlink, and 5-6 smaller positions after that. Some investors might have 50-100 crypto positions.

Before rushing into new coins, make sure you are familiar with them. Start by reading our cryptocurrency guides and continue your own research on Google and Youtube.

Exchange Features Rating Open account
Awesome selection
Futures with leverage
Flexible staking
SEPA bank transfers
Open account
Great selection
No KYC needed
KuCoin Shares pays dividends
No SEPA transfers
Open account
Built by traders, for traders
Also futures, stocks, etc.
No KYC needed
Limited spot selection
Open account

We recommend Binance as your number one altcoin exchange. It’s the leading exchange in the market and has everything an altcoin buyer wants. Binance supports also SEPA bank transfers. There is a detailed Binance beginner’s guide on our website.

Step 6: Follow the market

There are stock investors who look at their portfolios once or twice in a year. We don’t recommend such an approach in cryptocurrencies. More happens in one month in the crypto world than in one year in the normal world.

Even if you wouldn’t be a day trader, it’s good to stay up to date with current events. Even local regulations can change regarding taxation. Some of your wallets might get critical software updates. If you invest in early-stage projects, there might be token swaps due to a MainNet launch requiring action on your part.

Twitter is a great information resource. If you like Twitter, follow all crypto projects you are invested in. There is also a dedicated Youtube channel, a Reddit page, and a Telegram group for all the major projects.

News websites like Coindesk, Cointelegraph, and The Block deserve a follow as well.

How to buy cryptocurrency – to put it all together

This article gave you a path to buying cryptocurrencies. It’s just a scratch on the surface but it’ll certainly give you a good start. You’ll learn more from our other articles. Let’s put it all together.

  1. Be prepared for a mental rollercoaster. Plan for your actions: when to buy and when to sell. How much profit is enough for you?
  2. Take a good look at your risk profile. Think how big a percentage cryptocurrencies should be of your investment portfolio. Start small and learn to use the technology you invest in.
  3. Educate yourself before buying anything.
  4. Start by purchasing Bitcoin.
  5. If you are interested in altcoins, learn one currency at a time. Don’t be a FOMO trader.
  6. Follow the markets

One thing you should also know; cryptocurrencies are available on traditional trading platforms too. For example, services like eToro have had cryptos for years now. eToro is a very popular platform for crypto traders too.

Join eToro now!
eToro disclaimer: 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

eToro doesn’t only have cryptocurrencies, but it’s easy to invest in stocks and commodities too. Alec Baldwin shows you the key features of eToro in this funny commercial.

There is also a Bitcoin and Ethereum tracker on Nordnet. These are almost like ETF funds, which follow the prices 100 percent. This way you can get exposure to Bitcoin and Ethereum without holding the asset yourself.

Institutional investors and active traders are more and more into Bitcoin futures. The market leaders are FTX and Binance. The daily volumes on these exchanges are massive. Professional traders find derivates more exciting and profitable than traditional spot buying. Especially, when using leverage.

We recommend taking one step at a time. Learn the technology and make small purchases with Bitcoin first. See how it feels to hold such a volatile asset. Once you get more experience, it’s time to look into more advanced trading options. Derivatives and leveraged trading are not recommended for newcomers.

Image by WorldSpectrum from Pixabay

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