If you are new to cryptocurrencies, figuring out how to buy Bitcoin, Dogecoin, Ethereum, and other cryptocurrencies can be confusing at first.
Fortunately, it’s pretty simple to learn the ropes. You can start investing in cryptocurrencies by following these five easy steps.
Remember: investing in cryptocurrencies is purely speculative and your capital is at risk. You may lose some or all of your money.
Also, cryptocurrency trading is largely unregulated in India, and if something goes wrong, for example, a company goes out of business, you will not be able to resort to compensation.
1. Choose a cryptocurrency broker or exchange
To buy cryptocurrencies, you must first choose a cryptocurrency broker or exchange. While either one allows you to buy crypto, there are key differences between them to be aware of.
What is a cryptocurrency exchange?
A cryptocurrency exchange is a platform where buyers and sellers meet to exchange cryptocurrencies. Exchanges often have relatively low fees, but tend to have more complex interfaces with multiple trade types and advanced performance charts, all of which can make them intimidating for new crypto investors.
Some of the well-known cryptocurrency exchanges are WazirX, CoinDCX, Zebpay, and UnoCoin. While the standard trading interfaces of these companies can overwhelm beginners, especially those with no background in stock trading, they also offer easy-to-use call options.
However, convenience comes at a cost, as beginner options charge substantially more than it would cost to buy the same crypto through each platform’s standard trading interface. To save costs, you can aim to learn enough to use standard trading platforms before you make your first cryptocurrency purchase, or not long after.
One important note: As someone new to crypto, you’ll want to make sure your exchange or brokerage of choice allows transfers in fiat currency (such as British Pounds and INR) and purchases made with British Pounds. Some exchanges only allow you to buy crypto using another crypto, which means you would have to find another exchange to buy the tokens that your preferred exchange accepts before you can start trading crypto on that platform.
Related: The best crypto exchanges
What is a cryptocurrency broker?
Cryptocurrency brokers take the complexity out of buying cryptocurrencies and offer easy-to-use interfaces that interact with exchanges for you. Some charge higher fees than exchanges. Others claim to be “free” while making money by selling information about what you and other traders are buying and selling to large brokerages or funds or not executing your trade at the best possible market price.
While they are undeniably convenient, you should be careful with brokers because you may face restrictions moving your crypto holdings off the platform. With some, for example, you cannot transfer your crypto holdings out of your account.
This may not seem like a big deal, but advanced crypto investors prefer to store their coins in crypto wallets for added security. Some even choose hardware crypto wallets that are not connected to the internet for added security.
2. Create and verify your account
Once you decide on a cryptocurrency broker or exchange, you can sign up for an account. Depending on the platform and the amount you plan to buy, you may need to verify your identity. This is an essential step in preventing fraud and meeting regulatory requirements.
You may not be able to buy or sell cryptocurrencies until you complete the verification process. The platform may ask you to submit a copy of your driver’s license or passport, and you may even be asked to upload a selfie to prove that your appearance matches the documents you submit.
3. Deposit cash to invest
In order to buy cryptocurrencies, you will need to ensure that you have funds in your account. You can deposit money into your crypto account by linking your bank account or making a payment with a debit card.
4. Place your cryptocurrency order
Once there is money in your account, you are ready to place your first cryptocurrency order. There are hundreds of cryptocurrencies to choose from, from familiar names like Bitcoin and Ethereum to more obscure cryptos like Theta Fuel or Holo.
When deciding which cryptocurrency to buy, you can enter its ticker symbol (Bitcoin, for example, is BTC) and how many coins you want to buy. With most exchanges and brokers, you can buy fractional shares of cryptocurrencies, allowing you to buy a portion of high-priced tokens like Bitcoin or Ethereum that otherwise cost thousands of rupees.
5. Select a storage method
Cryptocurrency exchanges are not backed by the Reserve Bank of India and are at risk of theft or hacking. You could even lose your investment if you forget or lose the codes to access your account. This is why it is so important to have a safe storage place for your cryptocurrencies.
As stated above, if you are buying crypto through a broker, you may have little to no choice in how your crypto is stored. If you buy crypto through an exchange, you have more options:
- Leave the crypto on the exchange. When you buy cryptocurrencies, they are usually stored in a so-called crypto wallet attached to the exchange. If you don’t like the provider your exchange is associated with or want to move it to a more secure location, you can transfer it off the exchange to a separate hot or cold wallet. Depending on the exchange and the size of your transfer, you may have to pay a small fee to do so.
- Hot wallets. These are crypto wallets that are stored online and run on internet-connected devices such as tablets, computers, or phones. Hot wallets are convenient, but there is a higher risk of theft since they are still connected to the Internet.
- cold wallets. Cold crypto wallets are not connected to the internet, making them your safest option for holding cryptocurrencies. They take the form of external devices, such as a USB drive or hard drive. However, you should be careful with cold wallets: if you lose the key code associated with them or if the device breaks or crashes, you may never be able to get your crypto back. While the same could happen with certain hot wallets, some are run by custodians who can help you get back into your account if you get locked out.
Alternative ways to buy cryptocurrencies
While buying cryptocurrencies is a major trend right now, it is a volatile and risky investment option. If investing in cryptocurrencies on an exchange or through a broker does not seem like the best option to you, here are some options to invest indirectly in Bitcoin and other cryptocurrencies:
1. Wait for cryptocurrency exchange-traded funds (ETFs)
Exchange-traded funds are popular investments that allow you to buy exposure to hundreds of individual holdings at one time. This means they provide immediate diversification and are less risky than selecting individual investments.
There is a huge appetite for cryptocurrency ETFs, which allow you to invest in many cryptocurrencies at once. Investors from India must open a global account or invest through brokerage platforms from an RBI approved channel. To invest in cryptocurrency ETFs abroad, investors must transfer the money under the Liberalized Remittance Scheme route.
2. Invest in companies connected to cryptocurrencies
If you prefer to invest in companies with tangible products or services and that are subject to regulatory oversight, but still want exposure to the cryptocurrency market, you can buy shares in companies that use or own cryptocurrencies and the blockchain that powers them. You will need an online brokerage account to buy shares in publicly traded companies, such as:
- Nvidia (NVDA) This technology company designs and sells graphics processing units, which are the heart of the systems used to mine cryptocurrencies.
- Square (SQ) This payment service provider for small businesses has purchased millions of dollars worth of Bitcoin since October 2020. In February 2021, the company revealed that Bitcoin represented around 5% of the cash on its balance sheet. Additionally, Square’s Cash app allows people to buy, sell, and store cryptocurrency.
As with any investment, be sure to consider your investment objectives and current financial situation before investing in cryptocurrencies or individual companies that have a large holding in them. Cryptocurrencies can be extremely volatile (a single tweet can cause their price to crash) and remain a highly speculative investment. This means that you should invest with care and caution.