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Blockchain technology is undoubtedly awesome: It has the potential to change the way we think about money, energy, time and digital space. After doing some research on it (or seeing your friends’ 2017 capital gains), you may want to go all in on Bitcoin or one of the other cryptocurrencies that made headlines last year like IOTA, Litecoin, or Ripple. Either way, investing in cryptocurrencies is a cool way to take part in the historic digital currency revolution currently sweeping the globe. If you want to know how to buy cryptocurrency, here’s everything to help you start building a crypfolio, one decimal place at a time.
How to buy cryptocurrency: Getting started
First, ask yourself why you want to invest in cryptocurrency. There are no right answers, but there is one wrong one: Do not buy crypto to “get rich quick.” Starting any investment with this kind of “fast and loose” attitude is a recipe for disaster. Ideally, you want to be part of the crypto community for totally unemotional reasons: You’re experimenting with small investments; you’re into the technology; or you just want to.
Let me dust off this broken record and play it again: Do not invest what you can’t afford to lose. Cryptocurrency is more volatile than the stock market, and it’s subject to wild price fluctuations. While many of these gains and losses are often seen as “price corrections” as more large companies invest and regulate in crypto, it’s something to be aware of. Crypto’s sensitive nature leads to dips and surges based on bad press, good press, new laws affecting buying, and security breaches.
Since I’m not your investment broker, I can’t make any promises or predictions about what the “best” coins will be in 2018. But a great place to start your research is on CoinMarketCap. Not only does the site display detailed data about the most popular coins, it weeds out coins that have been deemed scams. Yes, fake coins, exchanges and wallets exist, so it’s important to investigate any new currency you’re going in for.
Now that you’ve made these vital decisions, you’re ready to actually buy some crypto.
How to buy cryptocurrency
Step 1. Find a legit exchange
An exchange is a website that you can use to convert your fiat money to cryptocurrency online. Many of them also serve as “wallets,” or clouds to keep your currency. Which exchange you use depends on a variety of factors, including where you are physically located, what coins you’d like to buy, and if you care about submitting identity verification.
For U.S. buyers, the most popular and “safest” exchange has traditionally been Coinbase. But, recent allegations of insider trading, countless reports of buyers having money caught in limbo, and receiving several push alerts last month announcing holds on buying and selling gives me pause. In good faith, I can’t actually recommend anyone use Coinbase until it works out its issues.
Rating site, BestBitcoinExchange, scores exchanges on their trust ratings. These three were the most recommended exchanges overall for 2018:
- LocalBitcoins: Accepts all currencies and does p2p transactions
- CEX.io: Easy to use for beginners and accepts credit and debit card deposits
- Kraken: Accepts Japanese Yen in addition to North American and European currencies
These three exchanges trade the big three coins: Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC). If you’re looking for alternative coins (altcoins), such as IOTA or Ripple, you will need to find a different exchange to purchase these currencies. It’s also important to note that various exchanges will have wildly different fee structures that will be taken out when you purchase or trade crypto. 99Bitcoins has a great comparison chart for these fees.
Step 2: Create an account and get verified
Most exchanges will require some form of verification. Sometimes this means providing personal info, such as billing details. Sometimes this means scanning an ID card. Depending on the site, verification can take between 1-5 business days, so don’t expect to buy your coins the moment you create an account.
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Step 3: Add banking info and deposit fiat
Some sites will allow you to use Paypal to deposit IRL currency to their sites, but many require bank accounts or credit and debit cards to be connected in order to buy crypto. Once an account is connected, deposit your desired amount onto their site. Again, this step could take a couple business days depending on the site.
Step 4: Buy cryptocurrency
Crazy as it sounds, this is actually the easy part. You can either use your whole fiat deposit to invest in one type of coin or spread it out over several on the exchange. Within minutes or hours, you should have some shiny, newly converted cryptocurrency! (Here’s a specific guide for how to invest in Bitcoin.)
Step 5: Move your crypto off that exchange and into a wallet
You should never store your bitcoins, Ethereum, or any other crypto on an exchange. These exchanges are not strong, historically stable financial institutions like the New York Stock Exchange. They’re startups, and many of them are less than five years old. If an exchange goes bankrupt, it may liquidate assets, including your coins. This happened in 2014, when Japanese crypto exchange, Mt. Gox, declared bankruptcy and lost over 650,000 customers’ bitcoins. Similarly, when allegations of insider trading at Coinbase broke, withdrawals and trading were halted for a period of time.
Cryptowallets store your public and private keys that allow you to access coins stored on the blockchain. Wallets come in four categories:
- Web wallets: They’re convenient and more secure than storing on an exchange with two-factor authentication. Blockchain.info is currently the most trusted, though many are not due to hacking vulnerabilities.
- Offline software wallets: Even if every exchange in the world and the internet went down, you’d still have access to your coins, downloaded to your desktop. Though still susceptible to hacking, Exodus and Electrum are industry favorites.
- Hardware wallets: For those seeking high-security, these wallets store keys on a physical drive. Just don’t lose it. Trezor and Ledger Nano are popular, but be prepared to shell out nearly $100 each.
- Paper wallets: Equally as secure, the paper wallet offers a cheap alternative to hardware wallets. If you can avoid accidentally throwing them in the trash, sites like BitcoinPaperWallet are user-friendly.
Congratulations! You’re now part of the crypto revolution!
Claire Downs is a tech reporter who covers the intersection of the internet and pop culture. A third-generation worker in the Chicago futures industry, she specializes in cryptocurrencies and altcoins. Her work can also be seen in Cosmopolitan, Vice Motherboard, VH1.com, and Merry Jane.