How to buy cryptocurrency online
This is an introductory guide on cryptocurrency and how to buy it. You can get to grips with how it all works, why different platforms use different coins, and find out the best places to buy it.
Compare where to buy cryptocurrency, and open an account
If you just want to buy some coins right away, you can find the top brokers in the table below. We reviewed all the leading options to give you some pointers on how to choose one that suits you. Not ready to buy yet? Read on to learn more about how it all works.
What is cryptocurrency?
Cryptocurrency is digital money that can be sent directly to another person without the need for a financial institution. Rather than a bank, cryptocurrencies use digital signatures and online public ledgers (blockchains) to track and verify every transaction. As well as being used to buy and sell goods, cryptocurrencies are also assets that can be traded like stocks and shares.
The first and most popular cryptocurrency is Bitcoin. It was created in 2009 by the pseudonymous Satoshi Nakamoto, who explained the concept in his white paper Bitcoin: A Peer-to-Peer Electronic Cash System. Now, there are hundreds of different cryptos available to buy and sell online.
How does cryptocurrency work?
Cryptocurrency works by using a blockchain to store and verify transactions. A blockchain is like a public database and includes a history of all transactions. Every new transaction is added to the end of the chain and once it’s there, it cannot be changed.
In this way the blockchain is irreversible proof of who owns what. The best way to understand it is to start with how Bitcoin works, but the technology has developed a lot in the decade since that was first established.
Now there are platforms like Ethereum that use a different, less energy-intensive system to create something more like an alternative internet. Even that technology has been taken a step further, to create whole systems of things like decentralised finance, all of which use a version of ‘the blockchain’ but in a variety of ways.
How to buy cryptocurrency online – a step-by-step guide
Step 1. Find an exchange to buy cryptocurrency
If you want to find a place to buy cryptocurrencies, exchanges are the best place to start. There are many different types of exchange; centralised and decentralised, ones that let you buy in fiat currency and some that only accept crypto, and ones that stick to the top cryptos while others offer a variety of altcoins.
Two of the top exchanges around are:
- Binance: The most popular crypto exchange around, Binance can handle millions of transactions per second and lets you trade hundreds of different coins. Join Binance today >
- ChangeNOW: An exchange that supports nearly 200 crypto coins, there are nearly 30,000 trading pairs that lets you trade one crypto token for another, and the platform is also integrated with other prominent trading platforms. Sign up with ChangeNOW >
Step 2. Sign up and fund your account
Before you start buying you need to create an account. You need to provide some contact details to do this and most require a form of photo ID as well. The biggest exchanges, like Binance, let you fund your account with fiat currency, but many only accept deposits in Bitcoin or Ethereum.
Step 3. Buy cryptocurrency
To buy a coin you need to search for its ticker symbol on your chosen exchange. If you were trying to buy Bitcoin, for example, you’d search for the BTC symbol and look for the USD/BTC or GBP/BTC pair. Then you can execute your trade.
Many altcoins can only be bought with another cryptocurrency. Again, Bitcoin and Ethereum are usually the best cryptos to use for this, but there are others, like Binance Coin (BNB) and Tether (USDT) that work just as well.
Step 4. (Optional) Get a suitable wallet
A wallet is the most secure place to store cryptocurrency. It’s not a must: you can leave your coins in an exchange account and feel confident they’ll be safe. But the best place to take control of them and add an extra layer of security is a wallet. They come in different forms, from wallet apps to full-blown hardware wallets that store coins offline.
Take a look at the options to see which one is best for you. Here are a couple of leading wallet providers to start with:
- CoolWallet: CoolWallet is a hardware wallet that keeps your coins in ‘cold storage’, safe from an internet connection. It also has an app that lets you access your coins via a bluetooth connection. Sign up with CoolWallet >
- StrongCoin: StrongCoin is a ‘hybrid’ wallet, combining the functionality of an online option with additional security. It stores your private keys on your browser and encrypts it before it’s stored on StrongCoin’s servers. Get StrongCoin now >
How to trade cryptocurrency – a step-by-step guide
Step 1. Find a broker
Trading crypto means making lots of trades to try to profit from price swings. To do this you want to find a broker that charges low trading fees, so you don’t see your money eaten away by fees. More brokers now offer completely free trading and it can make a big difference to your bottom line.
Brokers are adding crypto trading to their platforms all the time. You probably won’t get as broad a range of coins with a broker compared to an exchange but all the top options like Bitcoin, Ethereum, and Litecoin are usually available. If you’re looking for a broker, here are two of the best options to start with:
- eToro: eToro was one of the first brokerages to allow CFD trading on cryptocurrencies and has become one of the most popular online brokers around. You can trade assets like stocks and commodities as well as crypto. Join eToro now >
- Plus500: Another broker leading the charge on CFD trading, Plus500 lets you trade CFDs with many other assets and securities, such as commodities, forex, indices, stocks, and ETFs. Sign up with Plus500 today >
Step 2. Deposit money
You have to fund your broker account with fiat currency. As some brokers charge for deposits and others for withdrawals as well, it’s a good idea to check the fee structure carefully before you start.
Step 3. Decide how you’d like to trade
The most common way of trading cryptocurrency is with CFDs. Generally, if you see people talking about trading regularly, this is what they mean. Rather than buying and holding a coin, CFDs let you speculate on its price without owning it at all.
Step 4. Start trading
If you’re new to crypto, the best way to start trading is with a demo account. Virtually every broker offers a variation of this and it’s a way of trading with pretend money to get used to the way everything works. Making your early mistakes with a fake budget is a lot better than putting your own money at risk.
In terms of the trading itself, you have to decide whether you think a coin is going to go up or down in value. If you think it’s going up, then you should buy it – known as taking a ‘long’ position – while if you think it’s going down, you can sell it – known as a ‘short’ position.
As you get more experienced, there are other trading strategies you can use. Another popular option is using leverage, which lets you make bigger trades by only putting up a small portion of the overall value as a deposit. Treat this with caution: losses can escalate just as fast as gains.
It’s always a good idea to take your time over something new and cryptocurrency is no different. Below is a quick summary of the pros and cons of investing in crypto, followed by some final questions for you to think about.
- There’s the potential for big gains, coins have been known to gain over 100% in value during bull runs
- It’s becoming more mainstream and established institutions have already started to invest
- It’s now a realistic alternative to putting your money in a bank or investing it in stocks and shares
- Some blockchain platforms offer improvements to real-world issues and the widespread introduction of this technology is possible
- The market is volatile, not everyone is happy to see their investments fluctuate in value on a near-daily basis
- You have very little protection if a coin or platform fails
- It’s a largely unregulated industry at the moment
Now, here are three more questions to help you decide whether to invest in cryptocurrency.
1. Is it a good time to buy cryptocurrency?
This is a varied question that depends on a few factors, namely; the coin you’re interested in, the state of the overall market, and what your time frame is for seeing returns. Many coins offer benefits for owning them, in the form of interest, dividends, or voting rights, that should also factor into your decision.
The crypto market has been known to experience swings in both directions, and long term investors in particular should keep this in mind. If you’re in it to trade, you can try to predict short term changes using your own indicators regardless, but either way our analysis can help you:
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2. What problem does cryptocurrency solve, and what are its investment prospects?
Cryptocurrency solves the problem of trusting a third party to act as an intermediary for your money. Instead, every transaction is publicly available and it uses digital signatures along with a blockchain to prove who owns what and prevent double-spending.
It’s difficult to predict the future and some coins are bound to fail, but generally the prospects for cryptocurrency look good. The crypto ‘ecosystem’ has become much more popular in recent years. It has achieved institutional acceptance in many places, with plenty of investment funds already including coins in their portfolios.
One of the challenges is that Bitcoin heavily influences the market as a whole. It generally has the most volume, so it’s very important to know how it’s doing before you invest in anything. Crypto changes fast and tracking the latest news is also crucial to being a successful investor:
WWE enters NFT craze with Undertaker themed token
XRP price hit $1 after a surge in its futures open interest
VeChain (VET) surges as Salesforce partners with blockchain
3. Do you want to hold cryptocurrency for the long term?
Again it depends on what your goals are. If you research a coin and like its prospects or want to participate in the platform, then you probably do want to hold it for a while. Otherwise, many traders choose to get in and out of positions quickly to try to benefit from price fluctuations. Here are a couple of final points to consider, whatever your chosen time frame.
Considerations for a long term investment strategy
If you’re in it for the long term and only expect the price to go up, find an exchange and buy some coins straight away. Then it can be best to find a wallet to store them, with many platforms offering their own native wallets with unique rewards for investing coins in the success of their work.
Considerations for a short term trading strategy
Short term traders need low fees and flexible trading options. Pick a broker with cheap – or no – trading fees and brush up on how to use tools and charts to predict the market.