Cryptocurrency has gained significant popularity in recent years, and many people are interested in entering the market. However, buying cryptocurrency can be a complex process that requires careful consideration. In this article, we will explore the steps to buy cryptocurrency and provide some valuable tips to ensure a successful investment.
Step 1: Choosing an Exchange
The first step in buying cryptocurrency is to choose a reliable and reputable exchange. It’s essential to compare different exchanges before making a decision, as they can vary in terms of fees and security measures.
When considering fees, take note of both “maker fees” and “taker fees,” which are typically listed on the exchange’s website. Maker fees are charged when you place a limit order, where your order is only filled if the price meets your specified conditions. On the other hand, taker fees are charged for market orders, where you buy at the next available price.
Apart from fees, it’s crucial to prioritize security. Not all exchanges are created equal, and due to the relative novelty of crypto, some are more reliable than others. Consider selecting exchanges with a significant trading volume to reduce the risk of scams and other unwanted events.
Step 2: Entering the Market
After choosing an exchange, the next step is to create an account and complete any necessary ID verification. Once your account is set up, you can link a bank account and transfer the funds you intend to invest. It’s worth noting that the cryptocurrency market is highly volatile, so it’s wise to only invest an amount you can afford to lose.
Once your funds are available on the exchange, you have the option to enter the market through either a limit order or a market order. Evaluate your investment strategy and choose the order type that aligns with your goals.
Step 3: Storing it Safely
If you decide to buy cryptocurrency through an exchange and prefer to have full control over your coins, it’s essential to prioritize the security of your investments. As a self-custodial investor, you are responsible for managing the safety of your assets.
If you lack the time or knowledge to ensure proper cybersecurity measures for your crypto holdings, it may be more suitable to buy through a brokerage platform. These platforms typically offer additional security measures and provide peace of mind to investors.
Lastly, some exchanges allow users to stake or lend their assets, similar to earning interest on a bank account deposit. However, it’s crucial to note that staking and lending come with high risk, despite the attractive annual percentage rates (APRs) offered. Several crypto platforms have collapsed after promising unsustainable APRs, resulting in customers losing their investments. Please note that Fidelity does not offer staking.
FAQs
Q: Are all cryptocurrency exchanges the same?
A: No, cryptocurrency exchanges can vary in terms of fees and security measures. It’s essential to research and choose a reliable and reputable exchange.
Q: What should I consider when selecting an exchange?
A: When choosing an exchange, consider factors such as fees, security measures, trading volume, and user reviews to make an informed decision.
Q: Is it safe to self-custody my cryptocurrency?
A: Self-custody involves taking full control of your assets, which requires thorough knowledge of cybersecurity measures. If you’re uncertain or lack the expertise, consider using a brokerage platform instead.
Conclusion
Buying cryptocurrency can be an exciting and potentially rewarding investment. By following the steps outlined in this article, you can navigate the process with confidence and make informed decisions. Remember to choose a reputable exchange, prioritize security, and protect your investments. Happy investing!
