Our step-by-step guide in buying your first crypto will have you trading in no time.
1. Get prepared
Before you consider creating an account, it’s good to brush up on a couple of critical points.
Cryptocurrency is a digital currency where an independent system maintains transactions, rather than established and centralised financial institutions such as banks or regular exchanges.
Decentralised finance (DeFi) is where transactions or trades can take place without the involvement of banks or authorities. The advantage of this is that people have more control over their investments, and the disadvantage is that there is less protection or insurance when things go wrong.
Crypto transactions are logged into digital ledgers called Blockchain. Blockchain is highly secure and difficult to gain access to without the required passwords, meaning it’s safe from hackers and cyber attacks.
This means that Bitcoin, for example, does not have a physical form like standard currencies and were originally unusable for most business transactions. However, more companies like eg. Paypal are starting to accept Bitcoin, providing a promising outlook to those wishing to delve into the market.
To buy cryptocurrency, you will need:
- A cryptocurrency exchange account.
- Personal identification (for Know Your Customer platforms).
- A valid payment method.
- A Crypto wallet.
- Malware and security software.
It’s wise to consider why you want to invest in cryptocurrency over other types of investment and think about your long-term goals in becoming a trader of digital assets. It will also be worth your time learning about the different types of currencies on offer and the mechanics of blockchain technology. That way you’re making a fully informed decision before stepping into the marketplace.
2. Choose your crypto exchange
When buying and selling crypto, it’s essential to use a reputable exchange. So making sure you find the right one that’s trusted in the type of investment you’re looking to make is key.
Some platforms allow you to withdraw your crypto to your online wallet for extra security. Others allow you to remain anonymous and therefore free from providing personal information.
Extra software may seem like an expensive addition to your cryptocurrency investment setup. However, a malware attack that stops your device from operating or leads to stolen data will be a much more costly disaster.
3. Link a valid payment option
To buy shares in Bitcoin or other digital currencies, you’ll need a valid payment option linked to your account. To set this up, you may need to provide ID and some personal information.
This information can range from a copy of a driving license to your employment history and source of funds depending on your country of trading’s laws and regulations.
4. Organise your wallet(s)
Before you start investing in Bitcoin or other currencies, it is essential to set up your crypto wallet.
A crypto wallet is a secure way of storing your cryptocurrency. However, like most things we’ve encountered so far, it’s not as straightforward as your usual day-to-day wallet.
A hot wallet is similar to your everyday wallet. This term is used because it enables you to have regular access to your digital currency.
- Quick access.
- Variety of support for different devices.
- Straightforward interfaces, easy to use.
- If recovery details aren’t stored elsewhere, risk losing online access permanently.
- Open to security hacks.
- Damage to a device (mobile phone, for example) means potential loss of access to hot wallet info.
A cold wallet would store the money for long periods, similar to holding cash in bank accounts.
- It is secured offline and is therefore protected from online threats like hackers or malware.
- Stores large amounts of currency for long periods.
- No quick or easy access to stored currency.
- Sometimes not easy to set up.
- It still could be physically damaged.
Hardware wallets are physical devices such as an external hard drive or USB stick that you can purchase from specialised companies or second hand. The contents can only be opened or restored (in the case of loss, damage, or theft) by your private key.
5. What cryptocurrency to choose, and when?
Depending on available funds and the type of investment you seek, you may look at how to buy Bitcoin shares or look at how to buy part of a Bitcoin. One whole Bitcoin costs tens of thousands of pounds, but this doesn’t mean you can’t benefit from looking at investing in shares of a Bitcoin (otherwise known as part of the coin itself).
Depending on your chosen payment method (debit card, credit card, Paypal), your transaction fees may work out as very expensive. For example, credit card companies generally treat Bitcoin investments as cash advances, so do your research before you buy!
Know the risks
Again, it’s essential to understand that cryptocurrency is a volatile market that changes every day, with dramatic increases and drops. This market never stops, hence you need to make a habit of checking in on the value of your investment and knowing when best to buy and sell Bitcoin.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.