Cryptocurrency is unbelievably new. Money has been around for about 5,000 years, while the stock market was invented more than 400 years ago. Cryptocurrency traces its start to 2009, or somewhere around that time depending on who you ask and has since seen an explosive growth.
Lately, however, it has seen a commensurate decline. 2022 has not been kind to it, with many of the biggest currencies at a third of their value from the beginning of the year.
But anyone who has participated in a securities exchange will tell you that this is not the worst thing that could happen to a market. It’s a bad sign for a currency to lose 60% of its value, but it does mean it’s cheaper to buy.
We’re not teaching you how to time the market and “buy the dip”, as it were. What we are going to focus on today is much simpler: How to buy cryptocurrency in this sort of market.
Table of Contents:
Step One: Get a Crypto Wallet 👛️
Before you can buy any cryptocurrency, you need to make some preparations. The first step is a wallet, as that will allow you to store and secure your crypto holdings. Basically, a crypto wallet is a database of passwords. These passwords give you access to your cryptocurrency. The wallet stores these keys, not the crypto itself. But you might be wondering: What makes storing these keys so important?
These keys give you access to the cryptocurrency, meaning that whoever holds them holds authority over that currency. That’s why it’s called a wallet—if you find a wallet on the ground and take all the money out of it, then it would be hard to prove that those particular bills came from that wallet.
Much of the issue with fiat currencies that cryptocurrencies seek to solve is that whoever physically holds the paper money is the technical owner of it, even if that money is contractually obligated to someone else. A crypto wallet defends your entitlement to your cryptocurrency.
At the same time, it makes it easier to recover your keys and dispute their theft if they get stolen. Untold thousands, if not millions in cryptocurrency have been lost due to people forgetting or misplacing the keys to their holdings. A wallet helps you prevent that from happening.
Step Two: Get a Crypto Exchange App 📱️
Sometimes a crypto wallet will have its own exchange, but most times you will want to find a dedicated trading platform app to use as your method of actually buying the cryptocurrency. Whichever crypto trading app you end up choosing will determine a few things about your buying experience.
Choosing the right app is important, so let’s break down the process of finding one that works for you. There are three core things you will want to look for in a trading app: The right fees for trading, the right currencies for trading, and the right interface for trading.
The Right Fees for Trading
Trading rules can be broken down into two layers: The first is the fees involved in buying and trading cryptocurrencies. Almost any trading app is going to charge some sort of fee for both of these things.
Fees on trading are called “commission fees”, sometimes called “maker fees”, and they pay the platform for their services. If you expect to trade crypto a lot, you should find an app with low maker fees. If you are just looking to buy crypto, then you should look for an app with low “taker fees”. Taker fees are the fees charged when you buy the cryptocurrency directly from the trading platform.
The Right Currencies for Trading
When most people go looking for “how to buy cryptocurrency”, they are usually looking for “how to buy Bitcoin”, at least at first. Practically every crypto trading app out there is going to trade in Bitcoin, so that will not be hard to find at all. Though it might have special fees associated with it due to that popularity.
Beyond Bitcoin though, the rule generally is that the more currencies are on an app, the better. This is true even if you only plan to buy and sell Bitcoin and its derivative securities (options, futures, etc.).
The reason being that there are lots of ways to make a variety of different cryptocurrencies. There are online programming jobs that pay in crypto, online casinos that pay out winnings in crypto, and online gig work that pays in crypto. But the issue is that they do not always pay in exactly Bitcoin.
You can only cash these in (or buy more) if your app supports them. More diverse apps also have more diverse prices. That means it is easier to buy low and sell high no matter what currency you’re buying.
The Right Interface for Trading
Never underestimate the value of a good interface. An interface being fast and easy to use will do a lot more than just make you spend more money. It will also allow you to research your purchases more easily. Many apps have tools for reading up on a specific cryptocurrency, or the market at large.
And while it’s rare, there are even apps that will let you compare cryptocurrencies, set alerts for prices, and much more. But if there is one tool that you have to be sure you can use before you commit money to an app, it is their wallet and blockchain integration interface. If you can’t connect your wallet to an app, then it is basically not a cryptocurrency app. Which leads us to the next thing to look for.
Step Three: Get Familiar with the Rules of Crypto 📝️
You might be wondering, “Isn’t this important to do before we seek out a trading app?” No, and the reason why is simple: The trading app will help you build context around the rules of crypto. You see, most people assume that when they get a trading app, that it’s for trading. But that’s not the case here.
There are a lot of reasons to get a trading app. Like we said before, many of them will help you research crypto. They’ll help you understand the markets, compare currencies, and teach you about the blockchain applications that make crypto possible. In a way, you can’t learn the theory of crypto without an app that connects you to how it works in practice. But the core of what they offer is teaching context.
One of the most important rules you can learn as you are navigating your crypto app is how the crypto app integrates with your wallet, and the blockchain that the keys in the wallet unlock for you. Because truthfully, not all apps can connect to your wallet. The most popular example is PayPal. When you buy cryptocurrency from PayPal, it never goes to your wallet. It stays on PayPal. This is a huge red flag.
Remember how crypto wallets hold your keys, and how that’s like holding your money? PayPal holds your money “for you”. They actually have no legal obligation to actually let you use it. They are far from the only app that toys with your crypto like this, but they are certainly the most popular one.
Learn the rules of crypto before you actually commit any money at all to your app.
Step Four: Funding Your Account and Buying the Cryptocurrency 💰️
Once you have a wallet, an app, and a guarantee that you can trust that app, then you can start thinking about actually buying the cryptocurrency. And lucky for you, all the preparation you did in advance will help make this part of the process the easiest by far. The hardest part is getting money into the account.
You will need to actually connect your bank account to the crypto trading app. There are some platforms that allow you to use a credit card to purchase cryptocurrencies, but these purchases will come with some heavy transaction fees. They are also far more likely to be unsafe.
A bank account is always the safest and fastest way to add money to your account on the trading app, which you can then use to trade for the cryptocurrency of your choice. And of course, once you buy the cryptocurrency, you can then sell it right back to the app you bought it from whenever you want.
Ideally, you sell it back when it has appreciated in value, gaining a net profit.
If you are to take anything away from this article, let it be this: Buying cryptocurrency is a complex business. Even when it all boils down to clicking a few buttons, there are a lot of security concerns you should think about in order to keep your money safe before you spend a dime.
And that is on top of the ever-present question of which cryptocurrencies are the correct ones to buy. But don’t worry. As confusing as this world is, it is totally possible to navigate it at a profit.