In recent years cryptocurrencies have expanded into the mainstream, with more and more people wanting to get their hands on this new asset class. However, investing in the world of cryptos is not as easy as it seems. There are countless examples of people losing their way or falling victim to scams.
We want to to give you some peace of mind by easing you into the purchasing of cryptocurrencies. So, we address the basics…
What is the safest and simplest way for you to acquire any cryptocurrency?
Undoubtedly, the safest and most reliable way to buy cryptos is through one of our recommended crypto trading platforms, better known as cryptocurrency exchanges.
Finding an Exchange
Anyone wanting to make a start with cryptocurrencies is spoilt for choice when it comes to exchanges. Globally there are over 500 active crypto exchanges that act as trading platforms for countless cryptocurrencies. You must select among these many options based on the suitability of an exchange to your requirements.
What are the Limitations of Exchanges?
There are 4 main limitations to keep in mind when choosing an exchange:
- There is no single exchange which allows you to trade every single cryptocurrency as there are over 1,500 such cryptocurrencies in existence. While almost all exchanges feature Bitcoin and many have other major coins such as Ethereum, the more obscure and low-volume coins are featured only on certain exchanges.
- Many exchanges do not accept regular government or “fiat” money but only cryptocurrencies. This is especially true of those exchanges which feature many of the smaller cryptocurrencies.
- Following from point 2, you will have to search for an exchange according to your national currency (for example, US Dollars or Japanese Yen) and your preferred payment method (most exchanges accept bank wires and some take credit cards).
- Another fact to consider is that exchanges have specific regions which they cater for. For example, the popular exchange, Kraken is only available in Northern America and Europe.
How to Find the Right Exchange for You?
When searching, we recommend the following 2 approaches:
1. Go to the official site of your selected cryptocurrency.
- For example, if I want to buy Ripple you can go to their official site and select the XRP tab and scroll down to XRP Buying guide.
- Once there, the Ripple Buying Guide offers a selection of exchanges where Ripple is being traded.
2.Search through CoinMarketCap.com
- Once on this site, which lists the market stats of all trading cryptocurrencies, start a search for your preferred cryptocurrency. You may enter either its name or ticker symbol in the search box at the top right. Then select the relevant result which comes up. As an example, we are using Ripple again.
- Once on the appropriate page for your cryptocurrency of interest, select the markets tab and all available exchanges will be listed.
So, with either method, you will have found one or more suitable exchanges which cater to your chosen cryptocurrency and fiat currency. You will have to do some further investigation of the relevant exchange(s) to ensure it will meet any further requirements.
Exchange Registration and Verification
In order to use most exchange - and all of those which accept fiat money - you have to first register and verify yourself as a client. Exchanges are required to register you on their system by law, specifically the Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. Under normal circumstances, all such information is kept private and is only seen by the exchange’s staff. It may however be shared with tax authorities.
Each exchange will require slightly different information from you in order to complete the registration and verification process. However, they all require the same basic info, such as name, address, etc. As a standard example, we have included Kraken’s registration and verification requirements.
- Before you can do anything, you will need a PC or a Laptop, an internet connection, and a working email address.
- Kraken requires you to first register an account with your email address, and a user ID and password of your choice. Using password management software is recommended. Re-using a password from another website is very unsafe.
- Kraken has a tiered verification system, similar to many other exchanges.
- Tier 1 requires you to provide full name, date of birth, country, and phone number.
- Tier 2 requires your full address, city, and postal code.
- The next two tiers are more advanced and require you to prove the above information by submitting scans of a government issued ID and some form of proof of residence, such as a utility bill.
You should also compare the price and volume of your chosen crypto between all suitable exchanges. Also compare the exchange fees, as well as any deposit or withdrawal fees. All else being equal, it makes economic sense to choose the exchange with the lowest price, highest volume, and lowest fees.
It is wise to read the terms and conditions before you register at any exchange. Therefore, it is always best to compare exchanges before you go ahead with the registration.
Buying on an Exchange
When buying on an exchange, you sacrifice privacy for convenience. This does not mean to say that exchanges are unsafe as they do have security functions in place such as Two-Factor Authentication. It just means that an exchange can see what you are buying and selling and has your personally-identifying information and possibly banking details too.
So, if it‘s convenience you’re looking for, here are the basic steps to buying cryptocurrency on an exchange:
1.Send money to the exchange
- Depending on which region you are in and which fiat currencies the exchange supports, use that particular fiat currency to load your exchange account.
- Your exchange will require your bank account or other payment method details. You may then send your money to the exchange. Some exchanges will require you to use a special code in the reference field, so that they can identify a payment as coming from you.
- Some exchanges allow for a credit card to be used.
- Once the transaction is successfully completely, the money is then credited to your exchange account.
2.Place an order
- Some exchanges have a Quick Buy option. This provides a simplified interface which usually allows you to purchase cryptocurrency in set amounts (eg. $100 or $500). This is the best option when buying for your first time.
- If Quick Buy isn’t available, navigate to the exchange’s order book. The link may be termed something like “exchange” or “trade.”
- Ensure that the “Buy” option is selected, then put in an order for your desired amount of coins and the price you wish to pay. Note that fractional amounts of coin may be purchased, for example: 0.005 bitcoins.
- Unless you placed a “market buy” order, which will buy at the best available price, you will place a “limit order.” This means you will have to wait until this order is matched by a seller. Once that happens, you will have purchased your coins
3.Withdraw your coins from the exchange
- It is recommended to withdraw your cryptocurrency to a personal or a hardware wallet.
- Exchanges are not the safest place to store your coins. The exchange could get hacked or go rogue, leading to your coins being lost.
Using an exchange to buy your cryptocurrency is still the most efficient and convenient option, especially if you intend to trade regularly. Finding other options can be a bit tricky, especially for more obscure cryptocurrencies and ICO’s. These cryptos have yet to find a large enough support base for many alternative options to be available.
However, for the bigger cryptocurrencies such as Bitcoin, many exchange alternatives are available. This includes decentralized trading platform, called LocalBitcoins or cash options such as Bitcoin ATMs. For more information on alternative bitcoin trading click here.
As time progresses and the crypto community grows, more options will become available for altcoins.
Hopefully this guide has allowed you to see just how easily you can purchase your very own cryptocurrency.
Remember to always double-check that you are on the official cryptocurrency or exchange website, and not a phishing site.