How to buy Cryptocurrency online
Ignited by the emergence of Bitcoin a little over a decade ago, the rise of cryptocurrency in recent years has been nothing short of spectacular. More and more investors are considering the merits of the ever-expanding crypto market and there’s never been a better time to learn how to buy bitcoin, and the basics of crypto investing.
Compare where to buy Cryptocurrency, and open an account
Read on to find out more about buying cryptocurrency in 2020 or skip ahead to our step-by-step guide if you’re up to speed and ready to invest.
What is cryptocurrency?
It’s probably a good idea to start with the cryptocurrency that kicked off the whole phenomenon, Bitcoin. Perhaps you’ve heard of it? Although cryptocurrency wasn’t an entirely new idea at the time, it’s fair to say that Bitcoin became the first decentralised cryptocurrency when it emerged in 2009.
Developed by a shadowy group going by the pseudonym Satoshi Nakamoto, Bitcoin is a radical electronic payment system designed to offer an open, decentralised alternative to traditional government-issued fiat currencies. In essence, this remains a good, if broad, definition of cryptocurrency.
How does cryptocurrency work?
Cryptocurrency is so called because it uses cryptography to secure transactions. This is typically achieved with the use of a distributed ledger – normally a blockchain – that is synchronously shared across a decentralised network of ‘nodes’.
Bitcoin again offers a helpful example of how this decentralised model can work. It depends on a network of ‘miners’ who collectively grant the Bitcoin network its authority to verify online transactions by utilising high-powered computers to solve extremely complex mathematical problems and, in so doing, add blocks of transactions (in the form of digital information) to the blockchain.
Peer-to-peer networks like this create payment systems that function without the need for centralised, authoritative oversight.
The wonderful world of cryptocurrency has expanded far beyond this narrow outline to encompass all manner of decentralised networks and other altcoins, many of which don’t share Bitcoin’s objectives, but the concept of decentralisation remains a defining characteristic of all crypto projects and blockchains are typically central to this endeavour.
How and where to buy cryptocurrency online – step-by-step guide
Step 1. Get a suitable wallet
A wallet allows you to store your crypto securely. Once you’ve established the best altcoin to buy, it’s a good idea to have a wallet ready before you buy anything – it’s a far safer way to store crypto than leaving it on the cryptocurrency exchange. There are plenty of good options, including:
- Ledger Nano X: Ledger Nano X is a hardware wallet, which means you can store a multitude of cryptos offline on a super-secure wireless device. It’s not the cheapest option but if you take security seriously it’s worth the money.
- Exodus: Combining smart, feature-packed functionality with a stylish, intuitive interface, Exodus is a desktop wallet that should suit both newbies and experienced users.
- Coinomi Wallet: If you want a crypto wallet that will work on your phone, look no further than the Coinomi Wallet. This multi-coin wallet supports iOS, Andriod phones and there’s also a Mac/Windows/Linux desktop client.
Step 2. Find a cryptocurrency exchange
There are plenty of cryptocurrency exchanges on offer for buying cryptocurrencies of all types. Each has advantages and disadvantages, so it’s a good idea to do a bit of research. To get you started, here are two of our favourite exchanges:
- Binance: If you’re wondering where to buy altcoins, Binance is definitely worth a look. It is widely considered to be the best, most dependable place to buy, sell, and exchange crypto. Binance is the world’s biggest cryptocurrency exchange. It offers a huge marketplace and fees that compare favourably with its main competitors, plus a well-designed mobile app.
- Bittrex: Boasting a slick, easy to navigate interface and speedy transaction times, this US-based exchange supports over 200 currencies and direct purchases using major fiat currencies. A Bittrex mobile app has recently been launched, making it even easier to buy crypto. If you’ve been wondering how to buy altcoins with USD, Bittrex is a great place to start.
Step 3. Withdraw your cryptocurrency
In the interests of securing your funds, it’s a good idea to move your crypto out of the exchange and into your wallet as soon as possible. To withdraw your currency to your wallet you need to generate an address then paste it in the relevant field of your exchange account.
How to trade cryptocurrency – step-by-step guide
If you’re only interested in trading cryptocurrency you needn’t worry about getting a suitable wallet because trading involves taking a position on a currency rather than acquiring it. This means you can potentially make a profit from a crypto without the hassle and security risk of owning it.
Step 1. Find a broker
You’ll find that not all cryptocurrencies are available to trade – it’s a relatively new market – but the all the biggest currencies, like Bitcoin, Ethereum, Ripple and Litecoin, can be traded on platforms like Plus500 and eToro.
Step 2. Deposit money
Most trading platforms will allow you to deposit Fiat money (USD, GBP, EUR etc.) using various payment methods such as credit cards and bank account deposits. It’s worth noting that trading platforms offer leveraged trading, which means you don’t have to put down the full value of a trade. Instead you can pay a deposit, known as a ‘margin’. This means you can potentially make bigger profits and, of course, bigger losses.
Step 3. Decide how you’d like to trade
There are two methods to trade cryptocurrencies: CFDs (contracts for difference) and Spread Betting. Both methods essentially entail speculating on the price movements of your chosen currency. If you aren’t sure which option to go for, we recommend researching the differences between spreads and CFDs.
Step 4. Start trading
If you’re a complete novice we recommend starting with a demo account and familiarising yourself with the process and the platform. Cryptocurrency trading is extremely volatile, which means you can make and lose money very quickly. Crypto is prone to fluctuation, which makes it an intriguing prospect for traders who look to exploit volatility.
As a crypto trader you’re speculating on the currency’s price movements by taking a short (sell) or long (buy) position. If you think Litecoin will fall in value you should take a short position, if you think it will rise in value you should take a long position.
You may choose to incorporate leverage into your trading strategy. Leveraged trading allows you to put up a fraction of the trade’s value as a deposit or ‘margin’. This can be risky, though, so make sure you have a stop loss in place for damage limitation.
- The upside potential is huge. Many investors have made enormous gains after buying cryptocurrencies
- The volatility of the crypto market may be off-putting for some investors, but many traders will see the potential for quick profits
- Plenty of alt coins to invest in 2020 and an opportunity to make passive income
- The crypto market is extremely volatile, so investment is risky
- Many cryptocurrencies have fundamental scalability issues
- Liquidity is questionable across the crypto market