The new year arrived with a bang for the crypto market, posting early gains for Bitcoin, Ethereum, and a broad group of altcoins. Heavy selling that followed a series of industry implosions, including the collapse of FTX and a liquidity crunch at Genesis, seems like rearview mirror memories as many crypto investors resume buying.
The buzz surrounding cryptocurrency isn’t going anywhere — not anytime soon, anyway. If anything, the crypto market is more likely to continue to explode over the next decade as more investors get comfortable with the idea of this type of investment.
But while crypto makes headway in the mainstream, the reality is that the crypto landscape can be hard to navigate — especially for new investors. Even the most basic transactions, like figuring out how to buy tokens or coins, can be confusing when you’re first entering the market.
Luckily, it doesn’t have to be. While you may have to learn a few new processes to buy crypto, like using an ATM, there are plenty of options out there to do so — many of which are new-user-friendly. If you’re hoping to navigate the crypto buying landscape, here’s what you need to know.
- The global cryptocurrency market size is valued at $998 billion, which means that there are now tons of crypto users across the globe.
- Navigating the crypto market can be intimidating for new or less experienced users, which can make it tough to get started.
- Centralized and decentralized exchanges are two good options for crypto purchases, but each option comes with its own set of benefits and challenges.
What Types of Crypto Are Available to Purchase?
Most new crypto users are familiar with just a handful of coins — and that typically includes Bitcoin. Bitcoin was the first cryptocurrency, and it’s still the most widely recognized — and most valuable option — on the market.
These days, though, the crypto market isn’t limited to just Bitcoin. There are thousands of others out there, and countless others enter the market on a regular basis. These coins, called “altcoins,” are spread across a wide range of blockchains, including Ethereum, Binance Smart Chain, and others. The values and use cases of these coins are as varied as the tokens themselves, so it can be tough to narrow down the options.
How to Choose a Cryptocurrency
There are nearly 20,000 cryptocurrencies that are currently available for public trading, according to market research. And, as noted above, there are new coins and tokens entering the market on a daily basis. As of this writing, the global crypto market cap is $998 billion, but that number fluctuates regularly — and will likely continue to do so.
Not all coins and tokens are valuable like Bitcoin and Ethereum are, though. While some coins will have total valuations in the billions, other tokens may be worth a fraction of a penny each — and may, in turn, fizzle out as the hype surrounding them recedes.
Given the variety of coin options on the market, it’s important to know and understand what the potential options are before making a purchase. In many cases, it may be smart for new buyers to focus on more established or more popular coins before taking a dive into the less common options. However, it’s important to remember that even the most established coins aren’t a sure thing; they can still result in losses due to the volatile nature of the crypto market.
As of January 2023, the top 30 coins by market cap included:
- Bitcoin (BTC)
- Ethereum (ETH)
- Tether (USDT)
- BNB (BNB)
- USD Coin (USDC)
- XRP (XRP)
- Binance USD (BUSD)
- Cardano (ADA)
- Dogecoin (DOGE)
- Polygon (MATIC)
- Solana (SOL)
- Polkadot (DOT)
- Litecoin (LTC)
- Shiba Inu (SHIB)
- DAI (DAI)
- Tron (TRX)
- Avalanche (AVAX)
- Uniswap (UNI)
- Wrapped Bitcoin (WBTC)
- Cosmos (ATOM)
- Chainlink (LINK)
- UNUS SED LEO (LEO)
- Monero (XMR)
- Ethereum Classic (ETC)
- Toncoin (TON)
- Bitcoin Cash (BCH)
- Stellar (XLM)
- Near Protocol
But those are hardly the only options buyers have for purchasing crypto. Depending on the exchange or platform that is used to purchase tokens, there may be a lot more, or a lot fewer, options available to choose from.
Crypto-Buying Platforms: What Are The Options?
There are numerous options available for purchasing crypto. Some are likely to be easier to navigate for new investors, and others require a steep learning curve or a solid cache of knowledge about the market and the tech behind crypto.
In general, though, the two main options are:
While traditional brokers typically offer access to traditional assets like stocks, bonds, and ETFs, some online brokers will also allow you to buy and sell cryptocurrency. However, these platforms typically aren’t the best option, as the crypto features and selections tend to be limited.
On the other hand, a cryptocurrency exchange is a platform dedicated specifically to cryptocurrency transactions. While the coin options vary by exchange, each exchange generally has its own set of rules for buying, trading, or transacting with your crypto.
What’s great about crypto exchanges is that they can offer a slew of features related to crypto — and will typically include buying and selling crypto, too. In addition, crypto exchanges typically offer a more diverse selection of coins and tokens, along with wallet storage and other useful account features. Most exchanges also allow you to buy crypto with fiat money, and may also allow you to exchange your tokens for another type.
Fiat currency is essentially any government-sanctioned currency, like the U.S. dollar.
That said, there are two types of crypto exchanges: decentralized and centralized. And, if you’re going to invest in crypto, it’s important to understand the core differences between the two.
Centralized Crypto Exchanges
Centralized exchange platforms, or CEXs, are essentially crypto platforms that act as middlemen in order to facilitate crypto transactions between users. In other words, when you purchase a coin or trade a token on a centralized exchange, you aren’t trading with another crypto user. You’re using the centralized exchange to facilitate the transaction for you.
These platforms tend to function more like a bank than anything. The big draw for users is that they are typically easy to navigate, offer slick user interfaces, and streamline the steps for buying and trading crypto. That’s generally the perfect setup for newer crypto users.
While the way each centralized platform works is nuanced, here’s what you can generally expect from centralized crypto exchanges:
- Custody is held by the platform: Rather than retaining your coins or tokens in your own wallet, you’ll give custody of your tokens to the platform. In other words, unless you move them, your tokens remain in your account on the platform rather than in a wallet outside of the exchange.
- Streamlined transactions: You aren’t transacting directly with other crypto users on a CEX, so transactions typically occur instantaneously. That isn’t always the case for decentralized exchanges.
- Requires validation for account set-up: Centralized exchanges are required to validate their users’ identities as part of Know Your Customer. This process can be laborious and require numerous steps, which means it can take a lot longer to set up an account than it otherwise would.
- Higher fee structure: Because these platforms are user-friendly, you typically pay for the privilege of using them. That comes in the form of higher fees on average compared to decentralized exchanges.
- Limited coin options: In order for a token to be listed on a CEX, it has to go through an audit process to prove that it can satisfy security protocols, has trading activity, and that complies with legal standards. That takes time, and not every coin or token can pass the test. As such, CEX access is generally limited to popular coins rather than the new tokens that roll out.The upside to that is that you’re less likely to be stuck with a scam coin on a CEX, as the coins listed on those exchanges are heavily vetted. That can be an upside for new users.
A few of the CEX platform options include:
Decentralized crypto exchanges
On the other hand, we have decentralized exchanges, or DEXs, which cut out the middleman and allow crypto users to transact directly with other crypto users. Using a DEX typically requires at least some crypto knowledge, and these exchanges typically have a much steeper learning curve to contend with.
In general, here’s what you can expect from a DEX:
- Requires more working knowledge of crypto: A DEX can be a great option for certain types of users, but there’s a lot to using these platforms. You’ll need to set up a wallet beforehand, and you’ll need to know to connect to the exchange. You’ll also need to know how to trade or swap your tokens while on the exchange.
- Peer-to-peer trades: Rather than using a CEX as a middleman, you’re likely conducting trades or transacting in other ways with individual crypto users instead. As such, it may take longer to find someone who’s buying what you’re selling. Or, if liquidity is low, you may face other hurdles.
- Custody is retained by the user: When you purchase a token or coin on a DEX, it appears in your wallet — not an account on a platform. That means you keep control of your crypto assets at all times.
- No validation required: Decentralized exchanges don’t require any validation by users. The entire structure retains your anonymity, which can be a big plus for certain types of users. Plus, it’s faster to get started because there are no rigorous requirements for validating identity.
- Variety of coin options: Anything can be listed on a DEX, provided it’s available via the blockchain that the DEX uses to make trades and transact. This gives users access to the newest token options, but it comes with some risk, since scam-rick coins are a common issue in crypto.
Some of the DEX platform options include:
How to Buy Cryptocurrency
1. Choose a crypto broker or exchange.
Before you purchase any crypto, you’ll need to determine what platform you want to use. If you’re a new user, a CEX may make more sense — at least initially. Once you have your footing, you can determine whether you want to shift to a DEX instead.
Once you’ve narrowed down that option, you may want to determine what features you want from the platform. Most DEX and CEX platforms offer features well outside of just buying, so if you’re going to go through the hassle of setting up your account, you may want to determine that the platform offers what you need beforehand.
That includes the payment options, which can vary greatly by exchange. If you want to make your purchases in fiat currency, you might need to go with a CEX, which typically allows you to pay for crypto with U.S. dollars in some form or fashion.
2. Create your account, which may include verification.
Once you’ve narrowed down the options, you’ll need to set up your account. If you opt for a CEX, this typically requires providing at least one identifying document, like a license, to the platform — and you’ll likely be required to provide other identifying information as well. If you aren’t comfortable with that, you may want to consider doing your homework on how to navigate decentralized exchanges instead.
3. Connect your bank account or deposit cash to invest.
If you’re using a CEX, you’ll need to connect your bank account or debit card, or make a deposit, before you can purchase your crypto. The benefit of using a centralized exchange as a new user is that this part of the process is typically streamlined, so once your account is approved, you can typically start buying or trading crypto right away after you’ve funded your account.
4. Place your crypto order.
From there, you’ll need to determine what crypto you want to purchase. It’s important to do your homework before buying, whether you’re using a DEX or a CEX, so take your time before you leap. Once you’ve determined what crypto options you want to purchase, you can place an order for the amount you want to buy.
If you’re using a CEX to purchase your crypto, your tokens will appear in your account. You typically have the option of moving them off the exchange by sending them out of your account and putting them into a separate wallet.
You should make sure that you know what you’re doing before you send any crypto out of your account, though, to keep your tokens from being lost. You should also be sure to check the terms of the exchange, because some platforms will allow you to transfer your crypto out — but you won’t be able to transfer it back in.
5. Store your crypto in a safe place.
In general, your account on a CEX is a safe place for your crypto. However, if you allow the exchange to retain custody of your tokens, there is always a risk of losing them if the exchange goes belly up. That typically doesn’t happen, but it is a risk to consider.
In many cases, it may make sense to opt for holding your tokens in a wallet outside of the exchange instead. That’s generally the safest option, but again, it’s important to understand the ins and outs of using a wallet off an exchange before you take that route.
Learn More About Buying Cryptocurrency
Final Thoughts on Buying Crypto
Buying crypto doesn’t have to be intimidating. There are user-friendly options that can make it a lot easier for new or less experienced users to navigate the purchase of tokens or coins on an exchange. The option that works best for you will depend heavily on what your experience level is and what your goals are. Whatever route you take, just be sure to know what you’re getting into first.