- Cryptocurrencies are digital assets that can be transferred without third parties.
- There are generally three ways to buy crypto: crypto exchanges, brokerages, or payment services.
- Order types greatly influence how much you'll pay for different cryptocurrencies.
Cryptocurrencies are decentralized digital assets bought and sold using blockchain technology. Some of the most popular cryptocurrencies are Bitcoin, Ethereum, and Dogecoin. Only advanced investors with a high-risk tolerance and extra money to spend should consider investing in the best cryptocurrency exchanges.
"Cryptocurrency is a unit of measure. It is a digital token that can be transferred from one party to another, but not duplicated," explains Charles Allen, chief executive of BTCS, Inc.
Want to buy cryptocurrency? You can buy and trade cryptocurrencies through certain traditional brokers, crypto exchanges, and alternative investment platforms. However, as cryptocurrencies are extremely volatile assets, don't invest more than you are willing to lose.
Understanding cryptocurrency basics
Let's unpack the basics of cryptocurrencies and how decentralized networks use blockchain technology to trade Bitcoin, Dogecoin, and more.
What is cryptocurrency?
Cryptocurrencies are digital currencies secured using cryptography. As one of the newer investment opportunities on the market and traded separately from traditional stocks and bonds, cryptocurrencies are high-risk, decentralized assets with a controversial reputation.
While certain popular cryptocurrencies, like Bitcoin, have had periods of soaring value, many cryptocurrencies drop in value over the long term, making them less than ideal for growing and preserving wealth. While some traders may successfully accumulate wealth by investing in crypto, many lose most of their invested funds.
Crypto is best used as a diversification strategy and inflation hedge. However, it can also be used to build wealth or as a currency to purchase select goods and services.
How does cryptocurrency work?
Unlike physical fiat currencies (e.g., the US dollar), cryptocurrencies use decentralized networks, and their transactions are generally recorded on the blockchain, an immutable, decentralized ledger. Since the digital currency network began, every bitcoin transaction has been logged on the network's blockchain, which helps create greater transparency.
"If I own a bitcoin, I don't really own anything physical," Allen says. "I just own a key that allows me to move a record or a unit of measure from one person to another without a trusted third party." And that's really all the cryptocurrency is, he explains.
So if I own Bitcoins, he adds, I can move it from myself to someone else without a trusted third party in the middle. "And that transaction would be verified by this decentralized network of computers from nodes and miners."
Why invest in cryptocurrency?
Investing in cryptocurrencies comes with several benefits:
- Potentially high-returns: Investing in cryptocurrencies can potentially deliver substantial returns. According to CoinMarketCap figures, the price of bitcoin, for example, has gone from pennies during the first few years of its existence to more than $89,000 per unit at the time of this writing.
- Portfolio diversification: Cryptocurrencies can be used to diversify one's portfolio. The idea behind diversification is to include multiple assets (potentially from various asset types) so that if one portfolio component falls in value, the other components rise to maintain the portfolio's overall value.
However, there are several risks associated with cryptocurrencies. Stocks can certainly experience price fluctuations, but the volatility experienced by digital currencies like crypto is more extreme. As a result, individuals who put their money into digital currency face significant downside risks.
Past that, digital currencies are a very new asset class, at least compared to other more established asset classes like stocks and real estate. The first units of bitcoin came into existence in 2009.
no minimum purchase
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- Mobile-forward platform
- 50+ blockchains for access to thousands of cryptocurrencies
- Transparent and accessible approach to cryptocurrency education and services
- Encourages trading through gamification strategies
- Majority of advanced tools and features are unavailable
- No browser extension
- Limited customer support available
- No KYC Crypto Wallet that provides early access to new token launches
- Multi chain, multi wallet support, ability to buy crypto with fiat
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- Staking and airdrop rewards with the native $BEST token
Different ways to buy crypto
You can buy cryptocurrencies through top exchanges, some traditional brokers, payment apps, Bitcoin ATMs, and peer-to-peer marketplaces.
Cryptocurrency exchanges
A crypto exchange is a platform dedicated to facilitating the trading of cryptocurrency. Depending on the crypto exchange, you can trade one cryptocurrency for another, exchange fiat money (like the U.S. dollar) for cryptocurrency, or vice versa. Prices are usually based on daily market rates.
Each crypto exchange has its own rules for buying, selling, and trading cryptocurrency. The top crypto exchanges worth considering are:
The best exchange for you depends on your needs. Still, those new to crypto trading should look for exchanges that offer simple web and mobile interfaces, educational resources, and readily available customer support.
Traditional brokers
You may be able to purchase cryptocurrencies through certain traditional brokers, including some of the best online brokerages. Online brokerages usually don't offer as many cryptocurrencies as crypto exchanges (nor do they provide interest-earning account perks like staking).
Buying cryptocurrencies through traditional brokers allows you to invest in other asset classes, such as stocks, bonds, mutual funds, and ETFs, alongside alternative digital coins and tokens.
Traditional brokers offering cryptocurrency and stocks include:
Payment apps
Several payment apps give their users the ability to purchase cryptocurrencies. These software programs can offer easy access to digital assets.
Payment apps offering crypto include:
- Cash App Investing
- PayPal
- Venmo
- BitPay
- Zelle
- Google Pay
In recent years, these payment apps have expanded their accepted payment options, allowing users to buy, sell, or hold cryptocurrencies like Bitcoin.
Bitcoin ATMs
Bitcoin ATMs provide a straightforward way to purchase bitcoin using traditional payment methods like cash and bank cards. These machines frequently leverage two-factor authentication, which requires multiple steps to verify a user, to help ensure the security of transactions.
According to Statista figures, more than 34,000 of these machines were operating worldwide as of January 1, 2024. Bitcoin ATMs decreased by 10% in 2024 compared to 2023.
Users should keep in mind that the fees associated with bitcoin ATMs can be high, according to figures provided by the Federal Reserve Bank of Kansas City. Interested parties often pay total fees of 20%.
Peer-to-peer (P2P) marketplaces
Peer-to-peer (P2P) marketplaces are decentralized exchanges where investors can buy and sell cryptocurrency using smart contracts. These platforms depend on smart contracts to make sure that transactions take place.
The benefit of P2P marketplaces is that investors don't have to disclose their private keys like they would using a centralized exchange. Since decentralized exchanges don't hold investors' funds, they are less appealing to hackers. Further, decentralized exchanges often charge low fees.
Popular peer-to-peer marketplaces to buy crypto are:
- SecureShift
- Bybit
- Zapit
- OpenPeer
- 1inch
- EMCD
Choosing the right crypto platform
When choosing the right crypto platform for you, consider features like fees, security, and reputation..
Fees and commissions
Remember that crypto trading platforms' total fees and commissions vary quite a bit. Many exchanges charge not only trading fees but also deposits and withdrawal fees. Fortunately, you can use many different exchanges, platforms, and apps to purchase cryptocurrency. This competition may place downward pressure on total fees.
Security
Security is a major consideration when evaluating different platforms. Two-factor authentication is common. Some exchanges put their cryptocurrency into cold storage, meaning it is held offline, helping eliminate much of the risk of hacking.
In addition, some exchanges pay for insurance to help safeguard their users. Coinbase, for example, has crime insurance. "Coinbase carries crime insurance that protects a portion of digital currencies held across our storage systems against losses from theft, including cybersecurity breaches," the Coinbase website states.
"However, our policy does not cover any losses resulting from unauthorized access to your personal Coinbase or Coinbase Pro account(s) due to a breach or loss of your credentials," it adds.
Cryptocurrency exchanges are not insured by the Federal Deposit Insurance Corporation, which provides bank insurance.
Available cryptocurrencies
The world's most well-known cryptocurrency, Bitcoin, can be purchased through various mediums. Many exchanges offer far more than Bitcoin, with some marketplaces trading hundreds of popular and emerging cryptocurrencies. Most traditional brokers and payment apps may only offer a few cryptocurrencies.
Reputation and user experience
As always, investors should perform thorough due diligence before using any platform, exploring its reputation and reviews left by users. Fortunately, there is a wealth of information on different exchanges that interested parties can access online.
Coinbase, in particular, has a reputation for being a safe exchange, although this organization is not without security breaches. In 2021, this platform suffered a hack that resulted in at least 6,000 users losing funds.
Setting up your crypto wallet
Here's how to set up your crypto wallet to secure digital assets. Many crypto exchanges include a digital wallet. Otherwise, you can open one of the best Bitcoin wallets.
Types of wallets
Cryptocurrency users frequently use wallets to hold the private keys they need to access their digital assets. These wallets can take many forms, from software wallets (cold wallets) to hardware devices (hot wallets) specifically designed to retain this information.
When evaluating different crypto wallets, remember that the amount of cryptocurrency you have plays a key role. Paying for expensive hardware doesn't make sense if you only have a small amount invested. However, paying for more elaborate security measures may seem perfectly reasonable if you have a significant amount of money in cryptocurrency.
Importance of security
Investors who want to keep their cryptocurrency secure can benefit from using strong passwords. For example, a user might want to craft a password with many characters, including letters, numbers, and symbols.
Two-factor authentication can go a long way toward safeguarding one's digital currency assets. While it may seem inconvenient to take more time, using multiple steps to verify your identity may be well worth it in the grand scheme of things.
Transferring your crypto
Another strategy many investors use to safeguard their cryptocurrency is buying it on exchanges and transferring it to one or more wallets. Exchanges can hold substantial amounts of cryptocurrency, making them compelling targets for hackers.
By moving their digital currency from exchanges to digital wallets, investors can transfer these assets to a far less visible place. Further, by sending cryptocurrencies to a hardware wallet, investors can take their assets offline and make them far more secure.
Making your first crypto purchase: Step-by-step instructions
1. Choose a crypto provider
Start by setting up an account through a platform that allows you to purchase cryptocurrencies, whether that be an exchange, traditional broker, payment app, or P2P platform.
To initiate this process, you will need to:
- be at least 18 years of age
- have access to a valid government ID to confirm your identity
- have access to a computer or smartphone with updated software
2. Set up a crypto-trading account
Once you have put these resources together, you can set up an account. Setting up an account requires you to enter some basic information, such as:
- Legal name
- Date of birth
- The state where you reside
- Email address
- Social Security number
3. Fund your crypto account
You can fund your account with a bank account, a debit card, or an online payment platform like Google Pay or PayPal.
4. Purchase cryptocurrencies
Once you have funded your account, you can purchase a cryptocurrency by signing in, selecting a digital currency, specifying the amount of the cryptocurrency you want to purchase, singling out a payment method, and verifying the transaction details.
Buying crypto FAQs
Yes, it is safe to buy cryptocurrency, but investors should evaluate any platform where they are considering making a purchase and follow best practices to ensure the security of their transactions.
Yes, you can buy a fraction of a cryptocurrency. Most cryptocurrencies are divisible, meaning you can purchase just a fraction if you want. Make sure the platform you use to buy cryptocurrencies offers fractional shares.
Yes, you need to pay taxes on cryptocurrencies. You can benefit from speaking with an accountant or tax professional to ensure you have all the necessary details.
Yes, some platforms will allow you to buy cryptocurrencies with a credit card, but the associated fees may be higher than if you used other payment methods.
Before investing in cryptocurrency, consider the risks associated with it. You may want to start small when first getting your feet wet. Any portfolio can benefit from diversification, which involves incorporating many different assets. Don't invest more than you are willing to lose.
