Buying cryptocurrency is much like purchasing a home — it’s an intricate process that demands a lot of research before you go through with it.
From where to buy cryptocurrency to learning about taxation laws, there’s a lot to consider. Below, you can read our comprehensive guide on how to purchase digital assets responsibly.
Beginners Guide to Buy Cryptocurrency
Buying digital money is a pretty standard process. Check out how you can purchase some for yourself:
1. Pick the Best Exchange
You must begin by searching for the best place to buy cryptocurrency. There are hundreds of exchanges from which you can make your selection. Some are decentralized, meaning you have complete control over your digital assets. Others are centralized, meaning a third party retains control over your account.
The best crypto exchanges will vary from investor to investor. Some exchanges focus on providing the optimal mobile experience, while others diversify their asset offerings. You must determine what is important to you as an investor to select the best exchange.
2. Connect a Payment Option to Your Exchange
After you discover the best platform to buy cryptocurrency, you’ll need to sign up for an account and set up your preferred payment option:
Buy Cryptocurrency with PayPal
Make purchases with PayPal if you’re trying to buy in a hurry. However, you should be ready for higher-than-average fees and low limits.
Buy Cryptocurrency with Credit Card
Buying digital assets lets you invest money you don’t have currently, but you need to be careful. You may rack up debt quickly if you trade irresponsibly.
Buy Cryptocurrency with USD
Some people prefer to buy digital money with cash (USD). You can do so by using an exchange that offers cash deposits as payment options.
Buy Cryptocurrency with Debit Card
If you buy assets using your debit card, you can limit yourself to funds you own. However, you need to ensure you use a trustworthy exchange, as you’ll have to provide sensitive personal information to use your debit card.
3. Place an Order
Once you set up your payment method, you can buy and sell your favorite crypto assets as you see fit. You can buy or sell an asset immediately using a “Market” order, or you can set a “Limit” order to buy or sell an asset at a predetermined price.
If you have more experience and confidence in your investing abilities, you can try more complex order types like:
- Stop orders
- Stop limit orders
- Trailing stop orders
Not all investing platforms support these more complex order types for cryptocurrency. If you’re interested in these order types, you’ll need to look for a platform that offers them.
4. Store Your Cryptocurrency
After completing a “buy” transaction, you need a place to store your digital money. Some investors choose to leave their assets on the exchanges they use, but this isn’t the most secure option. Instead, you can store your purchases in a separate wallet.
How to Buy Crypto in the USA
If you’re stateside, you might be wondering, how do I buy cryptocurrency if I live in the USA?
Our best advice is to visit a Bitcoin ATM near you or use a US-friendly exchange like Coinbase or CEX.io.
How to Buy Crypto in the UK
If you live in the UK, you can also visit a local Bitcoin ATM or use a UK-friendly exchange like AvaTrade or CoinJar. Once you find an exchange you like, you can open an account, connect to a payment method, and start trading. However, you might have to wait a couple of days for the identity verification process to take effect.
Buying the Most Common Cryptocurrencies
Some of the most common cryptocurrencies you can buy include:
- Bitcoin Cash
However, you can also try your hand at some lesser-known ones, including Avalanche and The Graph.
Alternative Ways of Buying Crypto
Using an exchange can be a surefire way to buy crypto, but it’s not the only method available. Explore some alternative ways to purchase digital money:
Best App to Buy Cryptocurrency
When you think of crypto trading, you may picture an investor on their desktop computer. However, the crypto-trading realm isn’t limited to a stationary computer. You can buy or sell on the go via a reliable mobile app, such as eToro or Robinhood.
Bitcoin ATMs are much like traditional ATMs in that you must go to a physical location. A Bitcoin ATM lets you deposit cash and sends you Bitcoins (or, in some cases, altcoins like Doge and Litecoin) to your crypto address.
You’ll have to visit a Bitcoin ATM site in person. They are growing in popularity, but it might be challenging to find one. There are only around 15,000 Bitcoin ATMs worldwide, so locating one in your area may be challenging — especially if you live in a rural location.
A couple of less common ways to buy Bitcoin and other altcoins include:
- Using a gift card or voucher from a local store and redeeming it online (ideal for small-scale purchases)
- Using Venmo, CashApp, or another peer-to-peer payment platform that offers crypto capabilities
Legality & Taxation
Profiting from cryptocurrency is undoubtedly an exciting venture. However, digital currency comes with a unique set of legal guidelines and taxation procedures compared to other kinds of investing. Read on for an idea of what to expect:
Countries Where Cryptocurrencies Are Banned
Investing in digital money is entirely illegal in the following countries:
Taxes When Buying Cryptocurrencies
You’ll have to understand your region’s tax codes before you start trading crypto. Some countries treat cryptocurrency differently for tax purposes. For example:
- In the UK: individuals pay capital gains tax.
- In Bulgaria: digital money is taxed as a financial asset.
- In Argentina & Spain: digital money is subject to income tax.
- In Denmark: digital money is subject to income tax (and you can deduct losses).
You’ll only pay taxes when you profit from a crypto sale. Therefore, you don’t have to worry about paying taxes when you buy assets.
However, some exchanges only accept specific pairings. For example, you may have to buy Bitcoin on your preferred exchange, sell it for USD/EUR, and then buy your asset of choice using USD/EUR. This kind of transaction can incur a taxable event, even if you ultimately plan on holding your main asset for years to come.
Safety When Buying
Buying digital money is, generally speaking, a safe process, as long as you use a reliable exchange. However, there are a couple of safety precautions you can use to protect yourself further:
A VPN (a virtual private network) grants you privacy online by letting you create your own private network from a public internet connection.
You should use a VPN while trading money because it:
- Secures each transaction through encryption
- Hides your location and identity, affirming crypto as a more private asset
- Lets you feel more confident in your purchases
Using a Cold Wallet
Storing your digital assets on the exchange you bought them on is acceptable, but it might not be the wisest decision. Centralized exchanges are vulnerable to hacks, and you might lose all your assets with a low chance of recovering them.
Instead of risking this occurrence, you can transfer your crypto assets to a cold wallet.
A cold wallet is an offline storage method that works with compatible software on your computer. It keeps your address and private key safe from unauthorized access.
A cold wallet is often a safer alternative to a hot wallet, which stores your assets online.
Buy Cryptocurrency FAQs
What is the best way to buy cryptocurrency?
The best way to buy digital money is through a reputable centralized or decentralized exchange. We recommend Coinbase for beginners.
What is the best cryptocurrency to buy in 2021?
The best way to buy cryptocurrency in 2021 is to use a trustworthy, mainstream exchange like Robinhood, Coinbase, or CEX.io. Once you buy your assets, your best bet is to transfer them to a cold wallet for safekeeping.
Is buying cryptocurrency legal?
In most countries, yes — buying cryptocurrency is legal. However, some countries place specific restrictions or ban them altogether. You should check with your area’s regulations before trading assets or signing up for an exchange.
What is the minimum amount I can buy?
The minimum amount will depend on the exchange. Some exchanges allow users to purchase as little as £1/$1 of a digital asset like Bitcoin, Doge, or Litecoin. However, exchanges geared toward larger investors may require higher minimum investments.
When to buy cryptocurrency?
Some investors attempt to “time the market” to make the most lucrative trading decisions. While you can use market research to predict crypto prices, you cannot tell the future with certainty. Therefore, it’s best to buy crypto using a concept called “dollar-cost averaging.” This strategy lets you make fixed-cost investments regardless of the crypto asset’s current price. It lets you buy inconsistently and minimizes your risk exposure.