KEY TAKEAWAYS
- Choosing a reliable exchange is crucial. Regulation, liquidity, and reputation are key factors that shape the trading experience.
- Crypto storage varies by wallet type, balancing security and convenience. Secure practices are essential for protecting assets.
- New traders might consider starting with smaller investments to manage risk while gaining experience in crypto trading.
Introduction
Even with nearly 560 million crypto traders worldwide, it’s never too late to join the cryptocurrency market.
Before taking that step, learning how to buy and securely store crypto is a key starting point.
Whether opting for Bitcoin, Ethereum, USD Coin, or other tokens, this post will outline the steps to buy and store cryptocurrency securely for beginners to the industry.
Table of Contents
Why Buy Crypto?
Before learning the “how” of buying and storing crypto, it’s important to understand the “why.”
The rise of cryptocurrency is reshaping how investors think about finance, bringing both potential gains and notable risks.
Below are some industry statistics to support this claim:
- Market Growth: According to a Fortune report, the total market cap of cryptocurrencies reached over $3 trillion in 2022.
- Bitcoin Dominance: Bitcoin, the first and most dominant cryptocurrency, surpassed $75,000 in March 2024, reaching an all-time high – Binance.
- Token Variety: Exploding Topics reports over 9,800 active crypto tokens in 2024, with thousands more either in development or deprecated.
- Transaction Volume: In 2024, daily crypto trading volume exceeded $55 billion, according to CoinMarketCap.
These numbers demonstrate the significant scale and opportunities that the cryptocurrency market holds for potential investors. For instance, they indicate the massive scale and potential of the crypto market. The market’s explosive growth and the increasing variety of tokens signal diverse investment opportunities, whether it’s eyeing the next big altcoin or sticking with Bitcoin.
Understanding Cryptocurrency
Cryptocurrency can be thought of as a digital asset that lives on the Internet, powered by advanced math and computer science. At its core, it’s a form of money that exists only in digital form and is secured by cryptography, making it nearly impossible to counterfeit or double-spend.
The technology behind crypto is called blockchain—a decentralized network of computers (called nodes) that work together to record and verify every transaction made with the currency. This system ensures transparency and security without a central authority like a bank managing FIAT currencies.
There are thousands of cryptocurrencies in circulation. Here are 10 of the most popular assets:
- Bitcoin (BTC): The original cryptocurrency, often called “digital gold.”
- Ethereum (ETH): Known for its smart contracts and decentralized applications.
- Ripple (XRP): Focuses on real-time, cross-border payment systems.
- Litecoin (LTC): Similar to Bitcoin but with faster transaction times.
- Cardano (ADA): Aims to create a more secure and scalable blockchain.
- Polkadot (DOT): Facilitates the transfer of data and assets across different blockchains.
- Solana (SOL): Known for its high-speed transactions and low fees.
- Chainlink (LINK): Provides real-world data to smart contracts on the blockchain.
- Binance Coin (BNB): The native token of the Binance exchange, used for trading and fees.
- Dogecoin (DOGE): Started as a meme but has gained serious traction as a payment method.
While this list highlights 10 of the most popular crypto assets, this list is by no means exhaustive, as many other significant digital assets exist in the market each with their own use-cases.
Concerns regarding the security of cryptocurrencies primarily stem from misunderstandings or high-profile hacks of exchanges, such as those involving Ronin, Binance, and Coincheck. These incidents reflect weaknesses in exchange security protocols rather than flaws in the blockchain technology itself. For example, the hack of Mt. Gox was not a failure of the blockchain but rather a failure of the exchange’s security measures.
Traditional banking systems also face significant security challenges, with billions lost to fraud each year. Despite this, individuals continue to deposit funds in banks. For instance, in 2014, JP Morgan Chase experienced a hack that compromised the personal information of 76 million households and 7 million small businesses. Similarly, in 2016, the Bangladesh central bank was targeted in a cyberattack that attempted to steal nearly $1 billion through fraudulent SWIFT transactions, ultimately resulting in the successful laundering of $81 million through casinos in the Philippines.
Step-by-Step Guide to Buying Cryptocurrency
With the basics covered, it’s time to move on to the core of the article – a step-by-step guide to buying and securely storing cryptocurrency.
1. Find, Compare, and Choose the Right Exchange
The first step in learning how to buy and store crypto is finding the right exchange. When diving into crypto trading, the first stop should be selecting the right exchange. Think of an exchange as the digital marketplace where traders will buy, sell, or trade cryptocurrencies. But not all exchanges are created equal, so it’s important to weigh options carefully.
Key factors to consider when choosing a crypto exchange:
Regulations
It’s essential to verify if the exchange that comes up during research complies with local regulations and legal requirements before proceeding further.
For example, Coinbase, Kraken and Gemini are all regulated in the U.S. and adhere to strict compliance measures.
In Singapore, Coinhako, Crypto.com and Independent Reserves are all regulated exchanges under the Monetary Authority of Singapore (MAS).
It’s important to note that some exchanges may be legal for foreigners, but not for locals. Be sure to verify the legal status of an exchange based on individual residency status before proceeding.
Liquidity
Liquidity refers to the ease with which one can buy or sell large amounts of cryptocurrency without causing a significant price change.
Exchanges such as Binance, OKX and HTX are known for their high liquidity. Therefore, Binance could be suitable for traders looking to execute large quantity trades smoothly.
Reputation
Not every exchange is equally trustworthy.
Researching user reviews and industry feedback could be a good way to gauge the trustworthiness of an exchange.
For instance, Binance and Coinbase are well-regarded in the crypto community for their reliability and customer service, while lesser-known exchanges might lack established credibility.
Centralization vs. Decentralization
When selecting an exchange, it’s important to consider who controls it.
For example, Binance operates as a centralized exchange (CEX) controlled by a single entity, which may raise concerns for those prioritizing privacy.
In contrast, platforms like Bybit and Uniswap function as decentralized exchanges (DEXs), offering greater privacy and user control by eliminating the need for a central authority.
Decentralized platforms often require more technical expertise, making them less intuitive for those new to the space.
2. Set Up Your Account
No matter which cryptocurrency exchange is chosen, the registration process follows a generally similar format. The process usually starts with creating a username and password, followed by linking email or phone number for added security. The crucial part is the KYC (Know Your Customer) verification, which involves providing personal information and identity documents to comply with regulatory standards and ensure the security of the account.
While it might feel intrusive, KYC is essential for safeguarding against fraud and ensuring the account’s legitimacy. Skipping this step isn’t an option on most reputable exchanges, so be mentally prepared to verify identity before being able to trade.
3. Fund Your Account
The third step is relatively straightforward, just like funding any online account or digital wallet.
Most exchanges offer several payment methods, including bank transfers, credit/debit cards, and sometimes even PayPal.
Each method comes with transaction fees and processing times—bank transfers are usually cheaper but slower, while card payments are often faster but come with higher fees.
Checking these details in advance on the chosen exchange helps prevent any unexpected costs from catching traders off guard.
4. Making Your First Purchase
Once the account is set up, users can proceed with their first crypto transaction.
When purchasing Bitcoin (BTC), the purchase is usually made through a market order or limit order.
A market order purchases at the current market price, prioritizing transaction speed while offering less control over the final transaction price.
Consider a scenario with Ethereum trading at $1,500.
A market order would execute at the next available price, which could potentially be around $1,600.
Alternatively, a limit order provides the option to specify a desired price, such as $1,550.
The transaction will only occur if Ethereum’s market price falls to or below that figure, offering more precision but possibly requiring additional time for execution. The trader could avoid the potential $100 discrepancy that could come from executing a market order.
Regardless of the method chosen, be sure to adhere to best trading practices.
For example, it’s important to avoid investing more than what can be comfortably lost and to remain mindful of transaction fees. This approach helps reduce risks and ensures a solid start to any crypto journey.
Storing Cryptocurrency Securely
Buying crypto is one thing; keeping it safe is a whole other knowledge set. After making the first purchase – ETH, for example – traders will need to decide how to store it securely. Here’s a rundown of wallet types and their security benefits to help you safeguard your digital assets:
If cryptocurrency transactions were entirely anonymous, law enforcement agencies would not have been able to trace money laundering activities associated with platforms like Silk Road. In recent years, the emergence of privacy coins like Monero has contributed to discussions about transaction anonymity. While Monero offers enhanced privacy features by encrypting both sender and recipient information, it is important to note that the details remain recorded on the blockchain.
Types of Crypto Wallets
Crypto wallets are online or offline solutions for keeping private keys safe. Simply put, private keys are the passwords to digital asset ownership and transaction legitimacy. So it’s important that they be well-protected but also accessible in order to send and receive crypto assets. Crypto wallets can be classified into two main categories, each with their respective subcategories:
Hot Wallets
Hot wallets are digital wallets connected to the Internet. They offer ease of access and convenience for frequent transactions. Hence, they’re ideal for quick access and transactions, as they allow traders to manage their crypto on-the-go using a smartphone or computer. Popular examples of mobile wallets include:
- Coinbase Wallet: A web-based wallet for managing multiple cryptocurrencies.
- MetaMask: Popular for Ethereum and ERC-20 tokens, used for interacting with decentralized applications (dApps).
- Blue Wallet: Blue Wallet supports multiple wallets, lightning wallets and fee and transaction controls.
Popular examples of desktop wallets include:
- Electrum: A lightweight desktop wallet for Bitcoin, known for speed and low resource usage.
- Armory: Offers advanced features for Bitcoin users, including multi-signature support and enhanced security.
- Trust Wallet: Available as both a mobile app and a browser extension on desktop. Trust wallet is popular as a multi-coin wallet supporting over 100 blockchains with DeFi integration.
Cold Wallets
In contrast, cold wallets are offline storage options for cryptocurrencies. Since they’re not connected to the Internet, they provide better security against online threats and are more suitable for holding large amounts of coins for longer periods. Cold wallets are also further classified into two main types – hardware and paper. Popular examples of hardware wallets include:
- Ledger Nano X: A secure hardware wallet that supports many cryptocurrencies and connects via Bluetooth for mobile use.
- Trezor Model T: Provides advanced security features and a touchscreen for user convenience.
Similarly, popular examples of paper wallets include:
- Bitaddress.org: Generates and prints paper wallets for Bitcoin, offering high offline security.
- MyEtherWallet: Allows you to create paper wallets for Ethereum and ERC-20 tokens to keep private keys offline.
Best Practices for Wallet Security
With an understanding of how to buy and store cryptocurrency, the following are some key practices for ensuring wallet security:
Multi-factor Authentication (MFA) and Encryption
Multi-factor authentication (MFA) or Two-factor Authentication (2FA) adds an extra layer of security by requiring more than one form of verification, such as a password and a code sent to a phone. Encryption protects private keys and sensitive information by converting them into unreadable code that cannot be deciphered without the proper decryption key.
To enable MFA on the wallet, here are the steps:
- Step 1: Go to the security settings of the crypto exchange or wallet app.
- Step 2: Set up MFA by linking the user account to an authentication app (e.g., Google Authenticator).
Regular Software and Firmware Updates
Keeping a wallet’s software and firmware up to date ensures traders have the latest security patches and features. Here’s how:
- Step 1: Download and install any available updates to ensure the latest security patches and features.
- Step 2: For hardware wallets like Ledger Nano X, traders can use the Ledger Live app to update firmware as new versions are released.
Storage Diversification – Hot & Cold Storage
Combining hot and cold storage strategies enhances security by balancing convenience and protection.
Hot wallets are used for frequent transactions, while cold wallets are used for long-term storage and larger amounts.
For instance, traders could choose to keep a small amount of Bitcoin in their Trust Wallet for daily transactions and store the majority of their Bitcoin in a Trezor Model T hardware wallet for long-term security.
Conclusion: Ready to Start Trading?
By the end of this article, hopefully the process of buying and storing crypto should feel more approachable. As shown, purchasing and securing tokens isn’t overly complicated.
The true challenge comes in learning to trade effectively and becoming successful.
It will take time to become more proficient, but mastering the basics will certainly provide a strong foundation for future crypto trading goals.
Starting with smaller investments and gradually expanding with more digital assets is a sensible approach.
Exploring advanced tools and strategies can also enhance investment potential over time.
DISCLAIMER: THE CONTENT PROVIDED IN THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSIDERED FINANCIAL, LEGAL, OR INVESTMENT ADVICE. CRYPTOCURRENCY INVESTMENTS CARRY A HIGH DEGREE OF RISK AND MAY NOT BE SUITABLE FOR EVERY INVESTOR. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. YOU ARE ENCOURAGED TO DO YOUR OWN RESEARCH AND CONSULT WITH A LICENSED PROFESSIONAL BEFORE MAKING ANY FINANCIAL DECISIONS. THE INFORMATION HEREIN IS CURRENT AS OF THE PUBLICATION DATE AND MAY CHANGE WITHOUT NOTICE.
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