Cryptocurrency is becoming increasingly difficult to ignore as an asset class. 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 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 be the best way for another investor. You need to consider your own situation, your broader portfolio, and other needs and requirements before deciding upon 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. Tesla, for example, accepts Bitcoin as a form of payment for its cars.
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 of the situation is that it is anything but easy. The computers and software required to mine cryptocurrencies are costly and exceptionally energy-intensive. The end result is that you could end up spending 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. The reality of the situation is that 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 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, eToro, Gemini, Bitstamp, and Kraken are all popular too, 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.
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.
- Fees. Fees need to be competitive and structured in a way that lowers your transaction costs 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?
- 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.
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. Both of those ideas are hugely beneficial to investors, though obviously, any cryptocurrency investment has to be made in full knowledge of risk. If you decide to buy cryptocurrency, you must also know how to sell it through your exchange. You may also make use of stop-loss orders that mean the 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. They can be online or cold, offline 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.