On April 14th, 2021, the price of bitcoin reached $64,863, an all-time high. Soon after, search engines flooded with cryptocurrency-related queries, such as “how to buy crypto”, driven by the lucrative returns early investors have gathered.
By now, whether you are a millennial or about to retire, you probably have heard of cryptocurrencies more times than you can count. The thought of investing in crypto may have also crossed your mind more than once. You may have even decided to buy crypto but without knowing how.
Accessing the crypto market has never been easier than it has ever been. Many options exist today to buy and trade cryptoassets explored in this article. The first step is to be warry of the legal environment.
Before you can invest or buy crypto, you must first refer to the regulations and laws of your country. Some countries have taken a crypto-friendly stance, welcoming cryptocurrencies and crypto investments with open arms. Such countries facilitate purchasing, sending, and trading cryptocurrencies. Anyone can effortlessly and legally benefit from crypto opportunities.
However, other countries, such as China, have impeded crypto investing, placing barriers and restrictions. Yet crypto investing is legal but subject to regulations in certain countries. The purpose of regulations is often to protect investors and fend off criminals and frauds.
A common regulatory requirement is KYC or Know Your Customer. Governments mandate centralized exchanges operating in their jurisdiction to have all users undergo the KYC process.
The KYC procedure involves providing the exchange of personal information. This includes taking a selfie and uploading legal documents such as a passport or ID to prove your identity. KYC verification is necessary to curb money laundering or other illegal activities.
Due to legal restrictions, some centralized exchanges do not accept applications from citizens of some countries. Therefore, you should first check whether the exchange extends its services to your jurisdiction or not before registering. To view the list of the most popular centralized exchanges, click here.
Choosing a crypto exchange, broker, or payment service
After doing your research, the next step is to choose the right platform to make your purchase. You can buy cryptocurrencies through exchanges, brokers, and most recently through payment services, such as PayPal.
A centralized exchange (CEX) acts as an intermediary that pairs buyers with sellers. CEX typically charges a fixed fee per transaction in return for its service. Among others, Binance, Kraken, and Coinbase are the most popular centralized crypto exchange platforms.
Decentralized exchanges, on the other hand, do not involve intermediaries. DEX platforms employ smart contracts to execute peer-to-peer trading without needing the middleman. Uniswap and PancakeSwap are examples of decentralized exchanges.
CEX and DEX have their pros and cons. You can make your decision based on your individual preferences. For example, CEX is a regulated platform that requires KYC authentication. DEX does not require any KYC verifications, but you cannot buy or sell cryptocurrencies with fiat currencies on DEX, only trade or swap with other cryptos.
Although limited in numbers, more traditional brokerage firms have started offering crypto trades, such as Robinhood. However, such firms only offer a limited number of cryptocurrencies with limited features. Brokers typically extend their services for traditional investors who want exposure to the crypto market in their portfolios.
Several payment apps, such as PayPal, CashApp, and Venmo, have recently introduced cryptocurrency to their platforms in some markets. For example, In Paypal, you can currently hold, buy and sell authorized cryptocurrencies in hub as an investment only. PayPal states:
“You currently are NOT able to send Crypto Assets to family or friends, use Crypto Assets to pay for goods or services, or withdraw Crypto Assets from your Cryptocurrencies Hub to an external cryptocurrency wallet. If you want to withdraw the value from your Cryptocurrencies Hub you will need to sell your Crypto Assets and withdraw the cash proceeds from their sale.”
Factors to consider while choosing a platform
If you intend to buy crypto with fiat or national currencies using your debit card, you should choose the platform that supports this feature. Various platforms accept different payment methods and have varying processing times.
Moreover, not all cryptocurrencies are listed on every exchange or available on every platform. You need to check first the markets or exchanges that list the cryptocurrency of your interest. Coinmarketcap.com, for example, provides users with extensive information about the features of each coin and token in existence.
Another factor to pay close attention to is transaction fees. Fees can widely vary from one platform to another. You might also want to consider the platform interface, the abundance of educational material, and access to customer support.
Once you register on a given exchange or payment platform such as PayPal, placing an order can be typically done with just a few clicks: select your order type, how much you’d like to purchase, and click buy or execute a transaction. Trade orders can be of different types: market orders, limit orders, and stop orders.
Digital wallets Storage Method
If you buy crypto through a centralized exchange platform, it will store your funds on the exchange wallet that supports multiple currencies. The centralized exchange manages and holds the private key of your digital wallet, so it is custodial of your digital wallet. This creates convenience and a sense of security for beginners, but you must trust your exchange to manage your private keys and funds with goodwill.
However, if you choose to trade on a decentralized exchange, you must have a custodial or non-custodial digital wallet to store your crypto. Wallets store the private keys to your crypto assets, and they can be online or offline.
You need to connect your wallet to the decentralized exchange to conduct a trade. For example, ZamWallet is the crypto wallet provided by Zamzam. ZamWallet allows you to store, manage, send and receive crypto. You can also buy, sell, and trade tokens through the app. To learn more read, types of wallets.
You can always send your funds from a decentralized to centralized exchange vise versa.
How to Buy crypto on CEX in three steps
- After doing your due diligence and research, register an account on a centralized exchange and complete all the KYC verification procedures listed.
- Exchange your fiat money for the crypto of your choice listed on the exchange by paying for the transaction with a credit card debit card. Other methods of fiat/crypto exchange may exist, such as bank transfers and E-wallets (Qiwi, WebMoney).
- Once your deposit is confirmed and completed, the amount of crypto purchased is added to your wallet. you can now start trading your current bought crypto with cryptos by placing a trade order.
Thanks for checking out our guide.
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