The crypto frenzy has got millions of people exploring how to buy cryptocurrency and what they can do with their digital coins. From making online purchases to increasing your capital via investments, cryptocurrency represents an exciting new way to enjoy the digital era.

However, before you begin buying or selling cryptocurrency, it’s important to understand exactly how it works.

Read on to find out everything you need to know about this novice asset class and learn how to buy and sell cryptocurrency now!

What Is Cryptocurrency?

Sometimes referred to as digital money or virtual currency, cryptos don’t have a physical form, but that doesn’t detract from their value.

Each virtual currency has its own value that fluctuates according to the market, in the same way traditional currencies, like USD, GBP, and EUR, do. But unlike fiat, digital coins are decentralized networks powered by blockchain technology. Thus, cryptocurrency investments are immune from government interference.

Cryptocurrency has grown exponentially in recent years. Bitcoin was the first crypto asset to come into existence in 2009. Most people were skeptical at the time. But the BTC price, which was just a fraction of a cent a year after its launch, recently reached a record high of $64,895.

And today, there are more than 4,000 different digital coins out there. The most popular ones are Bitcoin, Litecoin, Ethereum, Stellar, XRP, Cardano, Uniswap, and Chainlink. Needless to say, BTC has been the most well-known and sought-after coin for several years now.

How Cryptocurrency Works

The technology behind cryptocurrency and cryptotrading can be fairly complex. Essentially, it’s cyber money secured by cryptography. Every transaction is recorded using blockchain — a distributed ledger run across separate computer networks. This makes it practically impossible for cryptocurrency to be counterfeit. It also provides buyers and sellers with an enhanced level of privacy, as trades can be made anonymously.

And how to use cryptocurrency?

There are various purposes. For example, you can purchase and store cryptocurrencies virtually in the hope that they will rise in value and generate a return on your investment. Alternatively, you can transfer them to friends and family as a gift. Also, an increasing number of companies and online vendors are now accepting Bitcoin and other digital coins as a form of payment.

Ultimately, there are many crypto possibilities. But unless you trade on the crypto derivatives market, the key to all of them is making a purchase first.

How To Buy Cryptocurrency

Buying cryptocurrencies isn’t complicated, but it involves some important decisions. Namely, you need to choose a vendor and a coin to buy. So, before you even consider buying cryptocurrency, you should undertake thorough research.

Every crypto asset has its own value, which can fluctuate sharply. This means that cryptocurrencies are a highly volatile, high-risk investment. Yet, they can offer high rewards, too.

For example, if you purchase $100 worth of Bitcoin and the value of the coin drops by 50%, your investment will drop in value to $50. Conversely, if the value increases by 50%, your Bitcoin will now be worth $150.

Due to the speed at which the value of coins can change, it’s important to be careful with your funds and consider any potential cryptocoins to invest in carefully before proceeding.

Similarly, you should ensure that you understand the technology and concept behind cryptocurrency before making live trades. For instance, knowing how to store your crypto securely will help to keep your funds safe. This is critical when learning how to buy and sell cryptocurrency.

And once you’ve assessed the level of risk you’re comfortable with and decided which coins you want to trade, you’ll be ready to make your first purchase. Well, almost… You’ll first need to find a cryptocurrency exchange to use.

A virtual coin exchange is a business that allows buyers and sellers to trade digital currencies. You can think of it as an online platform where you can buy, store or sell cryptocurrency.

Selecting an Exchange

There are hundreds of exchanges supporting investing in cryptocurrency. But, naturally, you’ll want to verify that they offer a reputable and secure service before you sign up.

Choosing which exchange to use isn’t always easy. So be sure to assess the following features:

Coins offered

If you already know which of the top crypto coins you want to purchase, this is a good place to start.
Most cryptocurrency exchanges offer the most popular coins, such as Bitcoin and Ethereum. However, not all cryptos are present on every exchange. If you want to buy a less-known asset, you may need to shop around and find a platform that offers it.

Centralized vs Decentralized

A centralized crypto exchange allows you to buy or sell coins, but a third party (the exchange) monitors the trade and secures the assets on behalf of the vendor and buyer.

To use a centralized exchange for cryptocurrency investment, you’ll need to reveal some personal information and have it verified. Typically, the more details you provide, the more you’ll be able to trade.

In contrast, decentralized exchanges don’t monitor trades on your behalf. Instead, the trade takes place between the seller and the buyer via the blockchain. Most decentralized exchanges don’t require you to verify your identity. This makes them popular amongst people who wish to remain anonymous.

Security

Security should be a top priority when you conduct any transactions online. Buying and selling cryptocurrencies makes no exception.

In some ways, decentralized exchanges are more secure than centralized ones. This is because trades are stored directly in the blockchain, leaving no room for hackers to access your information or funds.

And when a third party stores your data, as with centralized exchanges, there is a risk of unauthorized access to it. However, reputable brokers implement a range of advanced security features to keep their crypto investors safe. Thus, selecting an exchange that offers multi-factor authentication can enhance the level of security provided.

Liquidity

Liquidity refers to how easily you can convert digital currency into fiat or an alternative crypto coin. High liquidity means the asset can be traded easily, without the value being affected.

Typically, centralized exchanges offer higher liquidity than decentralized platforms. This is because more users and a greater variety of cryptocurrency coins are being traded.

Fees

While decentralized exchanges don’t usually charge fees, their centralized counterparts do. These trading costs vary greatly, so be sure to check the pricing terms before you sign up.

More often than not, exchanges also charge a deposit fee. For example, 1.5% on a bank transfer or 3% for deposits via a credit card. Then, you’ll pay another commission or flat fee when you make a trade. This will make your investment more costly. So, make sure you’re aware of the non-trading fees, too.

Creating an account

So, you’re getting into cryptocurrency, and you’ve chosen an exchange. What’s next? Of course, you’ll need to sign up and create an account.

You begin this process by providing an email address and password. Depending on which exchange you’re signing up with, you may be required to submit additional information, such as a name and address.

Most centralized exchanges require you to verify your identity during the account creation process. This may involve uploading a copy of a government-issued ID. Once verified, your cryptocurrency account will be opened, and you’ll be able to link a payment method to it.

You can usually add a bank account or credit card. But many cryptocurrency exchanges also facilitate deposits and withdrawals via PayPal.

In fact, in January 2021, more than $240 million worth of crypto trades have been made in a single day using PayPal. This highlights just how many people are using the digital payments system to buy and sell cryptocurrencies. Check out some more PayPal statistics to get a better understanding.

Start buying

When your account is up and running, you’ll be able to place an order and buy virtual currency. The exact steps you’ll need to go through will depend on the exchange you’re using. In general, however, you’ll simply need to search for the coin you want to buy and confirm how much you wish to purchase.

Following this, you can select the payment method you want to use from the accounts you’ve already listed. If you’ve linked your bank account to your crypto exchange, for example, you can select this payment method and complete the transaction. The coins you’ve purchased will then be transferred to your cyber wallet.

How to Buy Cryptocurrency with PayPal

If you’re in the US and have a Personal or Premier PayPal account, you can buy, sell or hold cryptocurrency directly.

Simply log in to your PayPal account and tap the Crypto button to buy or sell digital currency. Select which coin you want to trade and input how much you want to buy or sell.

When buying cryptocurrency with PayPal for the first time, you’ll need to verify your identity. Then, you’ll need to select a payment method, such as the bank account linked to your PayPal account or your PayPal balance, and confirm the transaction.

Safe Storage

When you’ve purchased coins, you’ll need to be able to hold them securely before you decide to sell or use them. To do this, you’ll need a digital wallet.

A digital wallet is essentially an app that allows you to store crypto. You’ll have a private key, like a long, complex password, to gain access to your digital note wallet.

Remember – these keys often cannot be changed, so you mustn’t forget what your key is!

Just check out this story! One Bitcoin owner has suffered a $220 million loss after failing to remember his password. Make sure you don’t make such headlines!

A digital coin exchange will typically offer users a wallet when they sign up, so you may already have one without realizing it. Often, they’re free to use. Yet, some involve inactivity fees, making them not the best place for your long-term investment. There are also many independent wallet providers, so you don’t have to use the wallet that comes with your exchange account.

Notably, there are two types of digital wallets: hot and cold.

Hot wallets are connected to the internet, which makes it easy to make fast trades. However, this also makes them vulnerable to cybersecurity attacks.

In contrast, cold wallets aren’t connected to the internet, making them more secure for cryptocurrency trading. On the flip side, they are more complex, costly, and offer lower liquidity. A cold wallet may take the form of a USB stick or even a ‘paper wallet’ that enables you to print off your private key and store it somewhere secure, like a safety deposit box.

Wrap Up

Although trading crypto is fairly new, it’s growing in popularity. Amid reports of record highs and large returns, mainstream investors are becoming increasingly interested in crypto and its potential. In addition, more and more businesses now accept payments in digital coins.

And, now that you know how to buy cryptocurrency, you’ll be able to choose an exchange, link your preferred payment method and make your first purchase!