This article contains:

• What Is Cryptocurrency?
• How Does Cryptocurrency Work?
• How to Buy Crypto Using a Crypto Exchange
• How to Buy Crypto With PayPal
• Alternative Ways to Buy Crypto
• Storing your Crypto Safely
• Final Thoughts: How Easy is to Buy Crypto?
• Frequently Asked Questions (FAQ)

Buying crypto is a much easier process than it was a few years ago; back in the day, people had to go as far as mailing physical money across the country (or world) to score some BTC.

Today, buying crypto is as simple as signing up for an exchange, going through the basic KYC (Know Your Customer) questions that exchanges must collect by law, linking your payment information, and buying your crypto of choice. You don’t need a high degree of sophisticated crypto and blockchain knowledge to purchase Bitcoin or any other coin.

When evaluating places to buy cryptocurrency today, you should consider the following factors:

• Can you trust the exchange? Most popular exchanges today are trustworthy, but things can get a bit seedy if exploring the more unknown exchanges. Coinbase, Gemini, Kraken, and UpHold are all solid options.
• How many different types of cryptocurrencies does the exchange offer? Some exchanges only offer a few dozen, whereas others offer hundreds of cryptocurrencies.
• What are the transaction fees?
• Sign-up bonus offers? Why not make some extra money signing up for a platform you want to use anyway? Don’t get too excited though, most of these are just like $10 to $20 or so.

In this article, we’ll guide you through some of the easiest ways on how to buy crypto and how to store your funds and keep them safe and sound. The most common way to start is through a cryptocurrency service platform, such as a centralized crypto exchange; we’ll review a few.

Before You Buy Crypto

The crypto market has thousands of different cryptocurrencies for buying, selling and trading. If you’re starting your crypto journey, the vast majority are a hard skip.

Lesser-known coins are subject to more extreme volatility and can be wiped out of the market in a blink. A large chunk of them might act as the flagship token of unreliable and unknown projects that serve no real purpose to the sector besides being a get-rich-quick scheme. On the other hand, the top 10 currencies have the largest market caps and the strongest communities.

What Is Cryptocurrency?

In theory, cryptocurrency is a virtual currency that’s held and distributed online. In reality, it’s a digital asset that may gain or lose value in a similar fashion to stocks and bonds.

Whereas a cash currency incorporates paper bills and metal coins, a cryptocurrency uses a virtual “coin,” “token,” or “unit.” You can purchase a coin/token/unit from any company that facilitates cryptocurrency exchanges, and you can trade, buy, or sell with other people who own crypto—not unlike stock trading in corporate America.

What makes cryptocurrency distinct from standard currency (besides the fact there’s no physical cash) is that cryptocurrency is “decentralized.” There’s no central authority that governs the currency.

For example, the Federal Reserve manages the national currency of the United States, influencing prices, interest rates, and the overall supply of money being circulated in the economy. Cryptocurrency has no such oversight.

However, a cryptocurrency is generally maintained by a “system.” The system—which is managed by a cryptocurrency company—tracks all the units of cryptocurrency and their owners. The system will also determine when new crypto units can be created. All right, so that might sound a little bit like the Federal Reserve. But cryptocurrency systems have no central location or server where units are stored. There are no virtual banks.

How Does Cryptocurrency Work?

You might be wondering, “What gives a cryptocurrency unit its value?”

For most assets, the value is determined by market factors. Let’s take the real estate market, for example. What determines the value of a property? A property might be appraised higher if it’s in a desirable location, or if it’s more luxurious, or if it’s in a neighborhood that’s likely to see an increase in home prices.

What about stocks? Stock value is generally determined by the success of the company (or the impending success of the company). Higher profits mean higher dividends, which means higher stock prices.

Cryptocurrency values are also tied to the marketplace, but in a different way. There’s no physical asset that’s affected by the local economy. And the value isn’t tied to corporate profits. The value of a cryptocurrency unit is entirely dependent on whether or not people want to buy cryptocurrency units.

Wait… what??

You read that correctly. The value of cryptocurrency is based on nothing but consumer interest in buying cryptocurrency. If lots of people are buying crypto, then the value will rise. If people stop buying crypto, then the value will fall.

This is a head-scratching concept for both beginning and veteran investors. But it’s not such a crazy idea to high-risk investors who frequently trade in volatile assets. A “volatile asset” is an asset that may experience large and rapid changes in value. Penny stocks are a common (and more “socially acceptable”) type of volatile asset. They often pose too much risk for the average investor, but they can yield extremely high returns to those wolves of Wall Street who carefully study marketplace activity.

In the same vein, cryptocurrency can yield high returns if an investor takes advantage of marketplace surges.

How to Buy Crypto Using a Crypto Exchange

One of the easiest ways to buy crypto is through a well-established cryptocurrency exchange, like Binance or Coinbase.

Crypto exchanges allow users to buy, sell and trade digital assets. Some of these might have a broader display of products/services, such as staking, yield farming and crypto lending. But these companies are more directed towards experienced users as they convey a higher level of risk. For now, you should stick with more beginner-friendly exchanges such as Coinbase.

Before opening an account in any exchange, make sure it has a solid reputation in the space. You can narrow down if the platform is right for you by reviewing certain factors including:

1. Security: has the exchange been hacked before? What security methods does it leverage? Does it have insurance/has most assets in cold storage (storing funds offline to mitigate cyber-attack risks)?
2. Fees: does the exchange has simple and transparent fees? Or rather a complicated fee structure or hidden costs? How competitive are these fees compared to others?
3. Supported assets: This shouldn’t be an issue for beginners, but it’s good to know how many currencies the exchange supports since not all list the same assets.

Now that we have that in mind, it’s time to open your account.

All exchanges have different registration protocols, so the information you need to provide varies. Generally, you need to provide your email and full name, type a password, and submit a government-issued document, like a passport, social security number or an ID card, to verify the account.

After your account is fully verified (some exchanges first require proper verification to allow you to start placing orders), you must link a payment method.

You can connect your bank account or use credit or debit cards (if the exchange supports their card deposits). Both options carry an underlying transaction fee (some exchanges may charge a deposit fee) though bank transfers are usually cheaper than card deposits.

Once you have funds in your account, you can place a buying order. This process differs depending on the exchange. Generally speaking, most platforms will allow you to use your USD funds to buy Bitcoin, Ethereum, or any other available crypto by simply entering the amount in dollars you want to buy in crypto.

Some other exchanges, like Kraken and Binance, present more buying options such as limit orders and market orders. The first allows you to place a purchasing order when the cryptocurrency hits a specific price, while the latter means you’re purchasing the asset at the current market price.

How to Buy Crypto With PayPal

PayPal allows users to buy crypto assets. You can purchase crypto directly via in-app using your PayPal balance, bank account or debit card linked to your PayPal account. Another way is sending funds from an external wallet.

For example, you can send crypto from your Binance account to your PayPal account:

• First, head to the Crypto Hub section on PayPal and copy the address from one of the available cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash and Litecoin.
• Once you have selected the currency you want to receive, paste the address onto Binance and confirm the transfer of tokens.

It’s the same process the other way around:

On your Binance account, head over to Wallet and click on Deposits.

Copy the Binance address of the cryptocurrency you want to receive.

Go to PayPal’s crypto section, choose the asset you want to send, paste the Binance address, and click Send.

Note that PayPal generates a new address for each deposit. You could reuse an old address to send and receive crypto. However, it’s not recommended due to privacy and security reasons. For example, since the blockchain is transparent, a hacker could know the number of funds you have if you constantly use the same address, who you frequently transact with, and more. So an attacker might attempt to steal your private keys using several hacking methods.

Alternative Ways to Buy Crypto

There are a few ways to buy Bitcoin or other cryptocurrencies besides cryptocurrency exchanges and payment processors.

P2P (peer-to-peer) marketplaces are a popular way to buy Bitcoin but without the anonymity of decentralized exchanges. In a P2P marketplace such as LocalBitcoin, users can choose from a list of buyers and sellers and pick the person they wish to transact with directly.

Another method is buying crypto through online brokers such as eToro and Robinhood. But keep in mind some brokers that support crypto might not allow you to send your funds to an external wallet. This means your broker holds the private keys —a secret alphanumeric code that proves ownership of an asset— of your crypto and not you. This poses a risk —no matter how safe your broker, centralized or decentralized exchange is, they are always subject to cyber-attacks. We’ll expand on this point in another section.

Storing your Crypto Safely

If you bought Bitcoin or crypto, the best security practice is to store them outside any institution or protocol. Crypto wallets are usually the way to go, but it’s wise to differentiate between a hot wallet (online) and a cold wallet (offline).

Hot wallets (software wallets) connect to the internet via devices such as smartphones or computers. They are convenient to buy, sell, swap and store crypto assets directly on your phone or pc as they generate the private keys within those devices. However, hot wallets require implementing numerous security protocols since they pose several risks. For instance, your phone, computer or tablet gets stolen, hacked, or lost 2) the hot wallet suffers a security breach and your funds get compromised.

Cold wallets (hardware wallets) are small devices similar to a pen drive that doesn’t need an internet connection to store your crypto. Therefore they are usually considered the safest method to safeguard your crypto and stand far away from cyber-attacks. Some popular options are Trezor and Ledger, the leading hardware wallets in the market.

Remember the old crypto adage: not your keys, not your coins.

Final Thoughts: How Easy is to Buy Crypto?

If you’re new to the crypto space and you want to get your hands on some cryptocurrency, you might feel overwhelmed by the number of crypto assets and the technical jargon in the market. But it’s way easier than it seems. As we previously said, you don’t need a high level of knowledge on all things crypto —just some basic guidelines to start your crypto journey.

Whether you choose to buy Bitcoin or any other coin, you should always do some research about the exchange or platform. Ask yourself:

• Does the firm allow you to send your funds to external wallets?
• Has it been hacked before?
• Do they provide cold storage or leverage industry-standard security protocols?

It’s important to learn how to use a hardware wallet as it can help you in the future if you decide to move your funds offline.

Frequently Asked Questions

What Is a Cryptocurrency Exchange? How Does It Work?

A cryptocurrency exchange is an online marketplace where users buy, sell, and trade cryptocurrency. Crypto exchanges work similar to online brokerages, as users can deposit fiat currency (such as U.S. dollars) and use those funds to purchase cryptocurrency. Users can also trade their cryptocurrency for other cryptocurrencies, and some exchanges allow users to earn interest on assets held within the exchange account.

What Should You Look at When Choosing a Cryptocurrency Exchange?

When choosing a cryptocurrency exchange, there are several things to consider, including security, fees, and cryptocurrencies offered. It is also important to understand how your cryptocurrency is stored and whether you can take custody of that cryptocurrency by transferring it to your own digital wallet.

Cryptocurrency exchanges also come in centralized and decentralized formats. Centralized exchanges closely align with financial regulations from governmental authorities (such as the U.S. Securities and Exchange Commission). Many will insure U.S. dollar deposits and require proof of identity to use the platform. Decentralized exchanges are unregulated online exchanges hosted on distributed nodes that are user-owned, and there is no centralized governing authority. While this may sound scary, decentralized exchanges offer transparent transactions and fees as well as direct peer-to-peer exchange of cryptocurrency.

How Do You Buy Cryptocurrency?

Most centralized exchanges allow you to deposit funds via your bank account, credit card, or debit card to purchase cryptocurrency. You can then exchange those funds for the cryptocurrency of your choosing. While some offer only simple market orders, other exchanges will allow you to set more advanced order types, including limit and stop orders.

Once you purchase crypto through an exchange, the exchange typically holds it in a custodial wallet. Most exchanges store assets in offline “cold storage” for safekeeping. If you want to take custody of the cryptocurrency yourself, most exchanges allow you to transfer it to your “hot” or “cold” wallet, along with the private keys for that cryptocurrency.

How Do You Open a Cryptocurrency Exchange Account?

To open an account, most cryptocurrency exchanges require you to provide your name, email, personal information, and proof of identity (to follow KYC standards). This process may include answering personal questions, verifying your identity with a third-party application, or providing a picture of your driver’s license.

Once your account is approved, you can then deposit funds and start purchasing cryptocurrency.

How We Chose the Best Crypto Exchanges？

Our team reviewed 28 cryptocurrency exchanges and collected over 1000 data points using publicly available information before selecting our top choices. We weighted more than 20 criteria and gave a higher weight to those with a more significant impact on potential customers.

The top picks were selected based on factors like trading fees (weighted 20%), withdrawal fees (15%), and if an exchange offers cold storage of crypto assets (weighted 10%).