Investing in cryptocurrency for beginners
6 easy steps to get started investing into cryptocurrencies and best ways to store it.
(Editor’s note: This is not financial advice. Please read our full disclaimer.)
Getting started with cryptocurrency can be interesting, scary, fun, easy and hard. I am assuming you already know what cryptocurrency is, since you are here. Cryptocurrency is basically digital gold, and let’s get it straight that several businesses already accept cryptocurrency as a way of payment.
There are so many ways to purchase crypto. First of all, there is a big difference between a centralized and a decentralized exchange.
A centralized exchange is a third-party service and they hold the coins for you.
- There comes an owner.
- They are safe.
- They follow rules and regulations.
The most popular and common examples of a centralized exchange are Coinbase, Binance and Crypto.com. However if you store your crypto on a decentralized exchange (a wallet) only you own the cryptocurrency. Some examples of decentralized exchanges are Coinbase Wallet, Metamask, Phantom and Trustwallet. I will write more about wallets and different options to store your crypto later on, so let’s jump right into how to buy your first crypto coin.
First, we have to choose an exchange. I chose Coinbase in this example, because it is the most user-friendly and one of the biggest exchanges in the world. There are so many cryptocurrencies, and it is up to you to DYOR (do your own research) and buy the ones you feel comfortable with buying. If you invest into small market cap coins we are betting on people’s opinions about that specific coin.
- Sign in to Coinbase. They take privacy really seriously, so you have to complete several steps with confirming your ID. Follow the necessary steps.
- Select Buy / Sell on the upper right-hand side.
- Click the Buy field to select the asset you’d like to purchase.
- Enter the amount you’d like to buy denominated in crypto or your local currency.
- Select your payment method.
- Click Preview Buy to confirm your purchase (you can always click the back arrow to make a change). If everything looks correct, go ahead and buy the cryptocurrency.
There are a few ways to store your cryptocurrency. Some secure, others, not quite:
Hot wallets are the cryptocurrency wallets that you utilize in your online exchanges such as Coinbase, Binance, US, or Bittrex. They’re very convenient because you don’t have to worry about downloading a wallet application or spending money on a hardware wallet. As convenient as they may be, they come with a couple of huge flaws.
If you have a secure password and 2-factor authentication enabled, you’re still not safe. The main concern is hackers. If they compromise the information stored within the exchanges, they could potentially have access to everyone’s money.
Secondly, you do not own your private keys on the exchanges. Unlike a cold wallet such as a hardware wallet or a paper wallet, the hot wallet’s private keys are owned by the exchange.
Don’t store large amounts on the exchanges. Keep some there if you want to make trades or if your cryptocurrency of choice doesn’t have a good wallet yet (I’m looking at you IOTA.)
This is a type of “hot wallet” that sits on your hard drive. An example of a software wallet is Exodus. This wallet supports cryptocurrencies such as Bitcoin, Dash, Augur, Ethereum, and Litecoin.
Most software wallets allow you to export and download your private keys. The major security flaw of these is potential hackers, and they can fall victim to viruses. If you’re going to use a software wallet, make sure it’s on a dedicated computer that’s only used for cryptocurrency to minimize the risk of any cyber-attacks.
This brings us to our cold wallet, and thus most secure, options…
Paper wallets are exactly what you would think they are. They contain your private and public keys. This has the advantage of not being on your computer and thus not being susceptible to hacking.
The main disadvantage to this method is that just like all paper, it’s very fragile. If you get it outside into the rain, you leave it out in the sun, it catches fire, or a wind gust catches it, your wallet is gone forever (unless you made a backup or two). Use proper care, and store your paper wallet in a fireproof safe for safekeeping, or a safety deposit box at your bank.
Hardware wallets are the most secure type of cold wallet out there. The awesome thing about a hardware wallet is that it essentially acts as a key. Your coins and tokens are NOT stored on the device itself. This means that if you lost your hardware wallet, dropped it in the pool, ran over it, or got it stolen, all would be safe if you had the respective recovery seeds to restore it, which we’ll get into in a moment.
Your best (and most budget-friendly) options are the Ledger Nano S and the Ledger Nano X. I highly recommend the Ledger Nano S, for the simple fact that it allows you to store all the major cryptocurrencies, as well as a lot of the up-and-coming alternative coins on them as well. It’s also very budget-conscious.
In conclusion, buying either BTC, ETH or any other crypto coin should be easy and fun, and there are so many ways to buy and store the crypto. If you are a beginner I highly recommend you choosing between one of the biggest exchanges and get to know them! I recommend Coinbase for everyone because of the high security because it is really user-friendly.
Once you understand more how the platform works, I recommend you to learn about other exchanges such as Binance and Coinbase Pro, because the transaction fees and swapping fees are lower.