How To Buy Cryptocurrency – Forbes Advisor INDIA
If you are new to the world of crypto, figuring out how to buy Bitcoin, Dogecoin, Ethereum and other cryptocurrencies can be confusing at first.
Thankfully, learning the ropes is fairly easy. You can start investing in cryptocurrency by following these five simple steps.
Remember: Investing in cryptocurrency is purely speculative and your capital is at risk. You could lose all or part of your money.
Additionally, cryptocurrency trading in India is largely unregulated, and if something goes wrong — for example, if a company goes out of business — you’re not entitled to any compensation.
1. Choose a broker or crypto exchange
To buy cryptocurrency, you must first choose a broker or crypto exchange. While you can buy with both cryptocurrencies, there are important differences between them that you should be aware of.
What is a cryptocurrency exchange?
A cryptocurrency exchange is a platform where buyers and sellers meet to trade cryptocurrencies. Exchanges often have relatively low fees, but they tend to have more complex interfaces with multiple trade types and advanced performance charts, which can make them intimidating for new crypto investors.
Some of the well-known cryptocurrency exchanges are WazirX, CoinDCX, Zebpay and UnoCoin. While these companies’ standard trading interfaces can be overwhelming for beginners, especially those without a stock trading background, they also offer user-friendly, easy buying options.
Convenience comes at a price, however, as the beginner-friendly options charge significantly more than it would cost to buy the same crypto through each platform’s standard trading interface. To save on costs, you may want to learn enough to use the standard trading platforms before you make your first crypto purchase — or not long after.
One important note: As a crypto newbie, you should make sure that your exchange or broker of choice allows fiat currency transfers and purchases (e.g. Sterling and INR) with Sterling. Some exchanges only allow you to buy crypto with another crypto, which means you will need to find another exchange to buy the tokens that your preferred exchange accepts before you can start trading crypto on that platform .
Related: Best Crypto Exchanges
What is a cryptocurrency broker?
Cryptocurrency brokers make buying crypto easy and provide user-friendly 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 major brokers or funds, or by not executing your trade at the best possible market price.
While they are undeniably convenient, you need to be careful with brokers as they may have restrictions on moving your cryptocurrency holdings off the platform. For example, some do not allow you to transfer your crypto holdings from 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 opt for hardware crypto wallets that are not connected to the internet for even more security.
2. Create and verify your account
Once you have decided on a cryptocurrency broker or exchange, you can sign up to open an account. Depending on the platform and the amount you want to buy, you may need to verify your identity. This is an essential step to prevent fraud and meet regulatory requirements.
You may not be able to buy or sell cryptocurrency 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 submitted.
3. Deposit cash to invest
To buy crypto you need to make sure you have funds in your account. You can fund your crypto account by linking your bank account or making a payment with a debit card.
4. Place your cryptocurrency order
Once funds are in your account, you can place your first cryptocurrency order. There are hundreds of cryptocurrencies to choose from, ranging from well-known names like Bitcoin and Ethereum to more obscure cryptos like Theta Fuel or Holo.
When you decide which cryptocurrency you want to buy, you can enter the ticker symbol – Bitcoin is BTC for example – and the number of coins you want to buy. Most exchanges and brokers allow you to buy fractional cryptocurrencies, so you can buy a piece of high-priced tokens like bitcoin or ethereum that would otherwise cost you thousands of rupees to own.
5. Select a storage method
Cryptocurrency exchanges are not endorsed 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. That is why it is so important to have a safe place to store your cryptocurrencies.
As mentioned above, when buying cryptocurrency through a broker, you may have little to no choice as to how your cryptocurrency is stored. When you buy cryptocurrency through an exchange, you have more options:
- Leave the crypto on the exchange. When you buy cryptocurrency, it is usually stored in what is called a crypto wallet, which is connected to the exchange. If you don’t like the provider of your exchange partners or you want to move it to a safer place, you can transfer it from 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 this.
- Hot wallets. These are crypto wallets 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 storing cryptocurrency. They take the form of external devices, such as a USB drive or hard drive. However, you have to be careful with cold wallets: if you lose the key code associated with it, or if the device breaks or fails, you may never be able to get your cryptocurrency back. While the same can happen with certain hot wallets, some are run by administrators who can help you regain access to your account if you get locked out.
Alternative ways to buy cryptocurrency
While buying cryptocurrency is a big trend right now, it is a volatile and risky investment decision. If investing in crypto on an exchange or through a broker isn’t the right choice for you, here are some ways to invest indirectly in Bitcoin and other cryptocurrencies:
1. Wait for Crypto Exchange Traded Funds (ETFs)
Exchange traded funds are popular investments that allow you to gain exposure to hundreds of individual stocks at once. This means they offer instant diversification and are less risky than picking individual investments.
There is a great appetite for cryptocurrency ETFs that allow you to invest in many cryptocurrencies at once. Investors from India are required to open a global account or invest through brokerage platforms from RBI approved channel. To invest in cryptocurrency ETFs abroad, investors need to transfer the funds under the liberalized remittance system Route.
2. Invest in cryptocurrency related companies
If you’d rather invest in companies with tangible products or services that are subject to regulatory oversight but still want to be active in the cryptocurrency market, you can buy shares in companies that use or own cryptocurrencies and the blockchain that powers them. You need an online brokerage account to buy shares of publicly traded companies such as:
- Nvidia (NVDA) This technology company designs and sells graphics processors that are at the heart of the systems used to mine cryptocurrencies.
- Square (SQ) This small business payments processor has bought millions of dollars worth of Bitcoin since October 2020. In February 2021, the company announced that Bitcoin accounts for around 5% of the cash on its balance sheet. In addition, Square’s Cash app allows people to buy, sell, and store cryptocurrency.
As with any investment, make sure you consider your investment goals and current financial situation before investing in cryptocurrency or individual companies that have a significant stake in it. Cryptocurrency can be extremely volatile – a single tweet can send its price plummeting – and it’s still a very speculative investment. This means that you should invest diligently and with caution.