There are thousands of different cryptocurrencies, but experts say you should take a hard pass on most of them, at least to start. Crypto values fluctuate by the hour, and this can be especially true for lesser-known coins. Even more established cryptocurrencies like ethereum and bitcoin experience their share of volatility, but at least have a greater record of increasing in value over time.
Bitcoin is the most valuable and widely held crypto on the market, and with prices reeling in the crypto and stock markets, now could be a good time to buy if you’re comfortable with the risks and interested in investing.
Here’s how to buy it:
Before you invest
Cryptocurrency is a highly volatile, speculative investment. And altcoins like BNB amplify the volatility and risk. Only invest in crypto what you’re prepared to lose, and make sure you have other financial priorities in place first: save money in an emergency fund, contribute to retirement savings, and pay off any high-interest debt balances.
1. Choose an Exchange
Bitcoin can’t be purchased through your bank or investing firm yet — though some organizations are working toward that possibility in the future. For now, you’ll have to go through a cryptocurrency trading platform to exchange your U.S. dollars for Bitcoin or other digital currencies.
There are hundreds of cryptocurrency exchanges you can use to buy crypto online, but a few of the more popular ones are Coinbase, Gemini, and Kraken. These exchanges are online platforms where you can buy and sell cryptocurrencies.
You can narrow down your search for the right platform based on a few factors:
Cryptocurrency investments are not backed by a central institution like FDIC-insured bank accounts. If your account is compromised, or the platform where you keep your coins is hacked, you could be at risk of losing your investment.
If you plan to keep your crypto on your account with an exchange (rather than move it into your own crypto wallet), make sure you choose an exchange that uses offline, cold storage, and has strong protections against theft. Some exchanges also have independent insurance policies to help protect investors from potential hacking.
Exchange fees can vary greatly, and may be applied as a flat fee upfront or as a percentage of your trades. Fees can be based on price volatility, and many are charged per transaction.
While fees should definitely be a consideration, experts say you also get what you pay for, especially when sticking to the bigger, more established exchanges like Coinbase. If an exchange has more protections, better security, or other important features to you, it may be worth slightly higher fees.
Some exchanges charge fees based on a spread, or margin on top of the market price. Others base fees on a flat rate or percentage of your total purchase, which can vary based on your location, payment method, and other factors.
Exchanges with more active trading features often use a fee model determined by market price fluctuations, known as maker-taker fees. If you buy at the current market price, you’ll be charged a (usually higher) “taker” fee. Or, you can set a price at which you want to buy, and wait for the market to reach that point. That’s known as a limit order, and incurs a “maker” fee.
Make sure you know what fees you’ll be charged — which you can find on the exchange’s website — before signing up. The fee structure should be clearly stated when you make your purchase, but it can help to factor in that cost beforehand so you don’t spend more than you expected.
Not all exchanges offer every single cryptocurrency out there.
Popular coins like Bitcoin (BTC) and Ethereum (ETH) are available on most crypto exchanges, while more niche altcoins may only be available on certain exchanges. Since experts recommend sticking with these big two cryptos and more mainstream exchanges like Coinbase, this shouldn’t be an issue for most new investors.
2. Fund Your Account
Depending on the exchange you choose, you may need to provide information like your Social Security number, ID, and your source of income when you create your account.
With most exchanges, you’ll be able to connect your bank account or a debit card to transfer U.S. dollars into your exchange account. There may be different fees depending on which method you use to fund your account — typically, bank transfers will cost less than card options.
Remember, funding your account isn’t the same as actually purchasing crypto. Just like with traditional investing, you never want to leave uninvested money sitting in your account. Once you fund your account, you’ll still need to exchange your dollars for Bitcoin.
3. Place an Order
Once you’ve connected a payment method, you’ll be able to actually place your order for Bitcoin. This process can differ depending on the exchange you use.
Generally, if you’re using a platform like Coinbase or PayPal, you can simply enter the amount in dollars you want to trade for Bitcoin, and buy at the current rate (after accounting for any fees).
If you use an exchange designed for more active trading — such as Coinbase Pro — you may have the option to place both market and limit orders. A market order means you purchase the cryptocurrency at that moment, for the current market price. A limit order means you’ll set a price you want to pay for the cryptocurrency. Once the currency reaches that point it will automatically be purchased.
With Bitcoin, you’ll likely be purchasing a fractional share of a coin — a single coin has traded for around $20,000 in recent weeks after a massive crypto market crash in June. Whatever amount you put in will be reflected in the exchange as a percentage of a total Bitcoin. (Example: If you invested $1,000 at Bitcoin’s early July value of about $34,000, it would show that you own 0.029 of Bitcoin).
4. Practice Safe Storage
Many exchanges allow you to leave your investment within your account, which is easiest for most beginners. But if you want to further secure your digital assets, you can transfer them into a cryptocurrency wallet.
A cryptocurrency wallet is a place to store digital currency. There are various types of cryptocurrency wallets available, and they all have different levels of security associated.
The exchange you use may offer a wallet option, so you can easily transfer your coins from your exchange account to a more secure wallet. You can also use a third-party software, or opt for cold storage on an offline hardware device.
Some platforms you can use to buy crypto — including PayPal and Venmo — don’t allow you to move your coins onto your own storage device. Consider whether that’s an option you want before you buy, whether for offline security of your assets or because you may want to trade using another platform in the future.
Alternative Ways To Buy Bitcoin
You can also now buy crypto through some digital payment platforms you may already have accounts with, like Venmo, PayPal, and Cash App, as well as the investment app Robinhood. But they might not be right for every investor.
Paypal and Venmo don’t let you transfer your holdings into your own crypto wallet, meaning your private keys remain in the platform. Robinhood recently announced it’s creating a crypto wallet offering so customers can move their coins off-platform. But for crypto enthusiasts who believe in the common crypto mantra “not your keys, not your coins,” these platforms without the option to move your holding off-platform fall short. They can also charge high fees for buying and selling cryptocurrencies (and typically only offer a few coins, or only Bitcoin), so it’s worth comparing the prices you’ll pay to more traditional exchanges.
These apps can be a simple solution to buying Bitcoin, though. For beginners, using your Venmo or Cash App account to buy Bitcoin may be more accessible than an exchange like Coinbase or Gemini, and allow you to buy in while you learn more about investing in cryptocurrency. Just keep in mind that if you ever reached a point where you had a larger crypto position, these apps might limit your ability to transfer it to another platform.7
How to Buy Other Cryptocurrencies
You should follow the same steps for buying other cryptocurrencies as for buying Bitcoin. However, keep in mind that investing experts recommend sticking with the two largest cryptocurrencies, Bitcoin and Ethereum, if your goal is to invest in crypto as a long-term store of value.
You’ll be able to find Ethereum for purchase on many of the same exchanges and platforms as you can Bitcoin. If you’re looking for a very specific altcoin (which experts generally do not recommend investing in), then you may need to factor that into the exchange you choose. While some large exchanges have upwards of 50 different coins, some platforms offer only a small number of altcoins (on Venmo, for example, you can only choose between four different cryptocurrencies).
Whether you choose to add Bitcoin or an altcoin to your portfolio, always make sure that you’re comfortable with the risk of investing in such a speculative asset in the first place. Never invest more than you’re OK with losing, and don’t invest at the cost of not meeting other financial goals.
Does Bitcoin Make Sense for You to Invest In?
As with any investment, it’s important to do your research first and understand what you’re getting into. Make sure any crypto investments you make do not get in the way of other goals like funding your retirement accounts and paying off high interest debt. Experts recommend keeping your cryptocurrency investments to less than 5% of your portfolio.
Bitcoin is a good place for beginner crypto investors to start, according to the experts we’ve talked to. As the first cryptocurrency, Bitcoin has the longest record for investors to consider. Since its creation in 2009, Bitcoin has exponentially risen in value over the past decade. Many experts liken it to “digital gold” as a long-term store of value.
While Bitcoin’s recent massive price swings highlight its volatility, many experts say a small holding of cryptocurrency like Bitcoin can be a healthy (if speculative) diversifier in your overall investment strategy.
According to the NextAdvisor Investability Score, bitcoin and ethereum are considered to be better investments thanks to their longer track records and long-term value growth, among other key factors. Here’s how our score shakes out for 10 cryptocurrencies that are consistently among the top by market cap, excluding stablecoins, for reference:
|COIN||NEXTADVISOR INVESTABILITY SCORE|
|Binance Coin (BNB)||49/100|