Cryptocurrency is becoming increasingly difficult to ignore as an asset class, even though it is widely seen as high risk. The potential for high returns against surging inflation makes cryptocurrency a more attractive investment proposition than ever.
However, one factor that may put people off investing in cryptocurrency is simply knowing how to buy it.
As digital currencies work differently from traditional assets, some brokers may not have the ability to buy and sell crypto. Or, if an investor uses an online platform to run their portfolio, they may find that their platform and brokerage account cannot yet make crypto trades.
What is the best way to buy cryptocurrency?
There are several ways to take a cryptocurrency position. The best way for you will not automatically be the best for another investor. You need to consider your situation, broader portfolio, and other needs and requirements before deciding the best way to buy cryptocurrency.
One of the ways you can purchase a digital asset is by selling it for something else that is not a traditional currency like US dollars (USD) or British Pounds (GBP). Instead, you can use cryptocurrency as a payment method for selling an item. Many companies are now taking payment of many popular cryptocurrency assets.
Another way you can build up holdings in cryptos is to mine for coins. Mining for cryptocurrency requires highly sophisticated computers and software to solve the highly complex cryptography puzzles that cryptocurrencies are based upon.
While that may sound like a straightforward way to build up a position in Bitcoin or other altcoins, the reality is that it is anything but easy. The computers and software required to mine cryptocurrencies are costly and exceptionally energy-intensive. The result is that you could spend as much as your final mined coin is worth - depending on where the market places that token at that time.
Finally, one way to buy cryptocurrency is to use a trading platform or crypto exchange. There are countless examples of these now available for the everyday investor. They have made investing in cryptocurrency possible without large investment amounts. If you are interested in making crypto purchases and crypto investments, you will likely choose to buy them on an exchange or platform.
Increasingly, as digital currencies and exchanges are run by agile and forward-thinking FinTech firms, setting up an account is easy, requiring little more than an identity check and bank transfer from your bank account. From there, an exchange's technology will allow you to buy and sell the cryptos it has available as you see fit. The ease of doing so will likely make it a far more attractive proposition than finding a buyer for an asset you are happy to sell in exchange for digital currencies or setting up a crypto mine.
Is Coinbase the best of all cryptocurrency exchanges?
Coinbase is a well-established cryptocurrency exchange, but it is by no means the only one or necessarily the best. What it does, it does well for many. However, not every user will find it the most suitable crypto exchange for their needs. There are many other competitors on the market. Binance, Gemini, eToro, and Kraken are also popular, with more and more digital exchanges being set up frequently. One famous exchange you may have heard of is Robinhood. However, as a UK investor, Robinhood is not yet available as it has yet to set up the capability for UK-based trading accounts.
Another crypto copy trading platform that may be an option for you is ICONOMI. The company has a simple, straightforward platform that is still as powerful as the biggest copy-trading platforms out there. With over 100,000 registered users, it allows you to buy crypto assets like Ethereum (ETH) or other leading cryptos in the crypto market. Importantly, through its social trading feature, you can copy other crypto investors on the platform, which can help with your knowledge base of how to buy bitcoin and trade cryptocurrencies in general. ICONOMI is also FCA registered.
To decide which of the above and any other exchange is suitable for you, look at how they measure for you in terms of several factors:
- Interfaces. They need to be intuitive, slick and easy to use, with a high level of security to protect against hacks.
- Fees. Costs need to be competitive and structured in a way that lowers your transaction fees as far as possible.
- Regulation. Ensure that a reputable authority regulates any exchange you use (i.e. the Financial Conduct Authority in the UK). Regulation offers you protections that provide comfort and confidence when investing.
- Extra features. What additional features does the exchange or platform offer you? Do they help? Or are you paying for added extras you do not actually use? Can you use a mobile app to trade?
- Digital currency range. You want to invest in the digital currencies you want and not be limited by your exchange. Ensure that your potential platform has the coverage you require. Look for currencies outside Ethereum, Bitcoin, Bitcoin Cash or Ripple’s XRP.
Looking at these factors will help you evaluate the best exchange for you.
Buying, selling and storing cryptocurrency
Cryptocurrency offers an investor the ability to make meaningful returns and is a means of portfolio diversification - just as ETFs and derivatives have been in the past. High returns and diversification are hugely beneficial to investors, though obviously, any cryptocurrency investment has to be made with full knowledge of the potential risks.
If you decide to purchase Bitcoin or other cryptocurrencies, you must also know how to sell them through your exchange. For example, you could use stop-loss orders, meaning an exchange platform sells your holding as soon as it reaches a level you do not want to go below.
Storing cryptocurrencies in a crypto wallet that works for you is also vital. Cryptocurrency wallets can be online "hot wallets" or "cold storage" offline using hardware like USB sticks. Like choosing the crypto you want to invest in, only you can decide which storage facility type you are most comfortable using.