Crypto buying basics: all you need to know before becoming a trader
You’ve likely heard of crypto with increasing frequency these days. After all, it seems like digital currency is on everyone’s minds these days, and when you’re not part of the investments yourself, it can feel like you’re missing out on the fun. However, when you’re a beginner, crypto can be a bit of a challenge. After all, you’d understandably be worried about making a mistake and jeopardizing all your chances for success. And while you shouldn’t expect stellar success from the very beginning, since as with all trades you’ll become better with time and as you obtain more experience, learning the basics is not difficult at all.
Here are some of the key things you should know when you begin investing in cryptocurrency.
Choose an exchange
If you’re wondering how to buy cryptocurrency, then you need to know that the first step is to settle on an exchange you want to use. These platforms are the place where traders gather to buy and sell digital money. For this reason, if you want to get into the world of e-coin, you need to make an account on one of the networks.
Exchanges typically have low fees, but they can be intimidating due to the complicated interface. This is due to the fact they display several types of trades as well as multiple performance charts, and these can leave you feeling confused. But there’s no reason to despair. All you have to do is take it slowly and you’re guaranteed to get to the bottom of it. Your best bet is to focus on the user-friendly easy purchase options that help you complete transactions in a simpler way. Until you become more adept at navigating the platforms, stick to this safer mode.
Making an account on an exchange website will usually involve a verification process as well. Depending on the platform, the information required for confirmation can vary. For example, you may be asked to provide proof of your name, address, birthdate and nationality, as well as pictures of an ID such as your identification card, passport and even driver’s license. To the more advanced steps you may be requested proof address documentation based on bank statements.
One of the important things as a beginner however, is to make sure the exchange you’re creating an account on allows the use of fiat money to purchase crypto. Some stock exchanges only allow the use of e-money to buy e-money, and that’s a situation you obviously want to avoid. In this case you’d have to open an account on another exchange and perform some trades there, and only afterward return to your initial account. This complicates things unnecessarily, so it’s better to get things right in the first try.
Deposit cash
After your account has been verified, an action which may take anything from a few hours to a few days, it’s time to make sure you have enough funds in your account. If not, you must deposit enough fiat currency before you start. This is fairly easy to do as you can simply link your bank account, authorize a wire transfer or make a direct payment with your credit or debit card. However, depending on the exchange you’re using you may have to wait a few days before you can deposit any money and start purchasing digital coins. If this happens, don’t panic. It’s simply company policy and usually nothing to worry about.
A word of warning, however, if you’re thinking about using your card to make a purchase. This can be extremely expensive, and depending on your budget, you’ll want to avoid it and choose the alternative methods. Banks and other credit companies tend to process virtual currency purchases as cash advances, which means they’re subjected to higher interest rates. This means you’ll have to pay an additional cash advance fee. For instance, you might have to pay 5% of the transaction when you make an advance. And with the exchange or brokerage fees running at roughly 5% as well you risk losing up to 10% of your purchase to fees. Although you can rely on this technique once or twice, as a general rule you should avoid it given the amount it takes out of your transactions.
Place and store your order
After you’ve finished the deposit step, it’s time to place your crypto order. For this step you may have to do some prior research in order to decide which currency works best for you. As a general rule, when you’re a novice trader you should try and stick to the well-known, established names in the industry just to steer on the safe side of things. While there are hundreds of crypto to choose from, there are also several scams, and when you’re untrained it can be hard to tell them apart.
The popular digital currencies are also easier to navigate because their values are less likely to be subject to abrupt and extreme variations which can be scary for newcomers. Therefore, sticking to the better-known options such as Bitcoin or Ethereum is better in the beginning. After you’ve gained sufficient expertise, you can move on to more obscure crypto.
After you’ve bought the e-coins you’ve set your eyes on, it’s time to store them. Sometimes you can simply leave your crypto in the exchange, but be sure that you’re aware of the fees this entails. Generally speaking, however, they’re rather small. You can also choose between hot and cold wallets. The former are connected to the internet and run on internet-connected devices, whether computers or phones. The latter aren’t connected to a network and resemble external gadgets such as USB or hard drives. While hot wallets are more likely to be hacked given the internet connection, cold wallets are not 100% immune to breaks and fails. Should the device be affected or damaged in any way, it can cause you to lose access to your crypto all the same. For this reason, it’s important to take all the necessary precautions to ensure your transactions are safe and sound.
When you enter the world of crypto it can be daunting. But just as in the case of all other investments, perseverance is key.
