In this article, I will show you:
- How to buy crypto
- How to store your crypto securely
- How to trade crypto
How To Buy Crypto
Have you ever purchased foreign currency?
Buying crypto is much like buying foreign currency. You swap your local currency for the equivalent foreign currency, at the going rate. You do so at a crypto exchange. You can make a transfer from your bank to fund your account, or use a credit card or a debit card.
You can store* the crypto at the exchange or transfer it to a “wallet” on your computer or smartphone.
The decision you need to make is between:
Storing your crypto at an exchange is the easy option. They take care of storing your coins for you. The downside is that you are relying on a third party to store your coins. You may have little comeback if the exchange makes mistakes, suffer losses, or disappears.
Storing crypto yourself gives you the most control. There are a couple more steps after purchase, but the upside is that you have full control over your coins. The downside is that it requires a little more time investment, and the purchase of a hardware wallet.
Which exchange is best for you?
There are hundreds of exchanges to choose from. Key factors to consider include:
- Legality of trading in your country. Here’s a country guide
- The country you are in
- Supported coins. Check that your exchange deals in the coins you wish to purchase.
- Reputation is important in the crypto space as it is a lightly regulated industry that doesn’t have the protections typically offered by banks.
- Security. What steps do they take to ensure your funds and information are safe?
Large, established exchanges offer the most popular coins. There are smaller specialist exchanges that deal in less popular and new-release coins, however beginners need to be careful of exchanges they haven’t heard of. Some can be scams.
I tested a number of exchanges for ease of use, range of coins, reasonable fees, a deposit insurance provision, industry reputation and suitability for beginners.
My top generalist picks for 2021
For US citizens: Coinbase
Founded in June 2012. Why use the Coinbase exchange?
- Simple user interface
- FDIC insurance up to the per-depositor coverage limit (currently $250,000 per individual).
- Transparent fee structure
- Coinbase has many good features, however their customer service can be very slow and frustrating. I understand that Coinbase are making changes, but at the time of writing, customer service could use improvement.
- Click here to check out Coinbase.
- Read our detailed Coinbase Review.
Our favorite for non-US citizens: Binance
Founded in 2017 in current form. Why use the Binance exchange?
- Elegant and easy to use user interface. Pro version can be more challenging.
- Offers SAFU, which stands for Secure Asset Fund for Users. SAFU may cover the loss of user funds in extreme cases.
- Reasonable and transparent fees
- A fantastic array of features, but again, customer service could be better. I found it slow during my test and subsequent use.
- Click here to checkout Binance.
- Read our full Binance Review
How To Store Your Crypto Securely
You’ve purchased crypto at an exchange. Where do you keep it?
You can leave crypto on an exchange, like Coinbase, or in their storage “vaults”. This is the easiest way.
However, there’s a saying in crypto – “If you don’t own your private keys, you don’t own your bitcoins”.
What are private keys?
You have keys for crypto just like you have keys to a house. If you hold keys, only you have access.
If you store your crypto on an exchange, you don’t own the private key. There’s a possibility the exchange may go bankrupt, get hacked or suffer some other loss. Whilst this is rare, keep in mind that cryptospace remains lightly regulated and isn’t covered by government guarantee schemes.
Part of the appeal of crypto is that no-one else controls your money. You do. Owning a private key is the way you retain full control over your money.
How do you get a private key?
There are a number of ways, but a great way to secure your crypto is to use a secure cold storage hardware device.
Like this one, made by Ledger:
These hardware devices generate a private key for you, and are used in conjunction with your wallet. They are inexpensive and we recommend that you purchase one if you want to control your own crypto rather than leave it on a third-party exchange.
There are other ways to manage private keys, which we will discuss in a further article, however we recommend hardware wallets for beginners as they elegantly blend ease of use with a very high level of security.
Our favourite hardware wallet is the industry-leading Ledger.
Here are the two models we’ve reviewed:
How To Trade Crypto
To trade your crypto back into your local currency in the future, you can use exchanges that offer conversion to local currencies. Coinbase is but one example.
You can also use trade-centric exchanges like Binance and Coinbase to swap your crypto for other types of crypto. This activity is similar to Forex trading.
Not all exchanges are suited to trading. Some are set up for buying and storing a limited range of coins. Both Binance and Coinbase offer a range of the most popular coins, although you will need to use smaller exchanges to trade more obscure coins.
We’ll look at the merits of each crypto currency in further articles, as trading is a significant topic. For now, be aware you can trade crypto like you can trade traditional currencies. You can also trade crypto back into your own currency in future using a crypto exchange.
For more in-depth instructions on trading, see our Coinbase and Binance reviews.
Next: You’ll need a wallet…