TheMillionDollarBrain

How to Buy Cryptocurrency Successfully

If you’ve ever wondered how to buy cryptocurrency, you’re not alone. Cryptocurrency is one of the most promising new technologies that have a bright future, but it can be a bit intimidating to get involved with the world of cryptocurrency.  Many people don’t completely understand it or don’t know where to start. This guide will show you how to buy cryptocurrency in simple terms.

What is Cryptocurrency?

Cryptocurrency is a digital type of currency where encryption techniques are used to control the generation of currency. Encryption is used to verify the transfer of funds, so it operates independently of a central bank. A feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority. This protects it against government interference or manipulation.

An example of cryptocurrency that you might be familiar with is Bitcoin, a type of cryptocurrency formed in 2009 by a person using the alias Satoshi Nakamoto. It started a revolution, a way of carrying out transactions without a bank or other middleman and without transaction fees. Rather than operating through a central bank, transactions occur between users and are verified through network nodes. Once carried out, the transaction is recorded in blockchain, a public ledger.

Since Bitcoin and other cryptocurrencies are regulated by the government or a bank, transactions are anonymous and there’s no printing of money. Instead, transactions are carried out by lines of computer code that are signed during each step of the transaction. Transactions are encrypted or converted to a form that is readable only by those who understand cryptology, showing the anonymous nature of the transactions. Many experts believe this decentralized and anonymous system of generating currency is the future of money.

How to Buy Cryptocurrency

How can you get in on the action and buy cryptocurrency? The simplest and most popular way to buy cryptocurrency is through a cryptocurrency exchange. Choosing a cryptocurrency exchange is one of the most important decisions you’ll make when starting in digital currencies. A poorly chosen exchange could cost you time, money, or both.

What should you look for when choosing one? The first priority is to make sure the exchange you sign up with has strong security and measures to protect your money against hackers. Your funds could be at risk should the exchange be hacked. There are more than 200 cryptocurrency exchanges, but not all of them are worth your time. When choosing an exchange, look for a high level of security, good customer support, and a supportive trading environment. Read reviews on the various exchanges you’re considering to get an inside peek at the experience of others who have used that exchange.

Also, be aware of the types of cryptocurrency you can buy with each exchange and what type of payments they accept for cryptocurrency purchases. Things have evolved since Bitcoin arrived on the scene. There are now more than 1,000 different types of cryptocurrencies you can purchase and not every exchange offers all of them.

How much will it cost? The exchanges have to have a way to make money too. With a transaction, expect to pay a commission of 1 to 4% for each transaction. Most people opt for the exchange that has the lowest transaction fees but don’t focus only on the transaction fee. Also, consider how secure the exchange is and how prompt they are with responding to you. That matters too!

If you’ve chosen a good cryptocurrency exchange, the set-up process should be easy and hassle-free. After registering, you’ll need to verify that you are who you say you are with a driver’s license or passport. Once verified, you can use a credit card, bank transfer, and, sometimes, online payment sites like Paypal for funding. You’ll also have to set up 2-step verification to protect your account.

Buying Cryptocurrency Through a CFD Broker

Other than signing up with an exchange, there are two other ways to buy cryptocurrency: from a CFD broker or from another individual directly.  CFD stands for contract-for-difference and is a trade carried out over-the-counter rather than through an exchange.

Buying bitcoin with a CFD broker is the fastest way to purchase cryptocurrency. It costs more than buying from an exchange, but you are buying derivatives rather than the actual asset. With this method, you’re not buying the currency itself but speculating on its price movements.

When you buy a derivative, it’s an agreement between you and another individual to exchange the difference in value between the opening and closing prices of the asset. Therefore, it’s a contract on future price movement. As a derivative buyer, you’re betting where the price of an asset will be at a certain time in the future.

When you buy derivatives through a CFD broker, there’s also the possibility of leveraging that asset. Rather than spending $1,000 to buy 1 BTC, you can spend $10 to get the same effect.

The Bottom Line

Now you know more about cryptocurrency and the steps you can take to get started. Cryptocurrency will be a game changer and you can be part of it. If you are ready to get started you can purchase Cryptocurrency at Robinhood.

References:

Investor.gov. “Spotlight on Initial Coin Offerings and Digital Assets”

Related Articles

Best Investment Apps of 2021

Best Mutual Funds of 2021