Last updated on March 4th, 2023 at 02:53 am
It can’t be escaped: the cryptocurrency market is growing, along with mainstream acceptance and you want to get a piece of the pie. However, crypto investing, especially for beginners, can be overwhelming.
Some questions you may be asking yourself are:
- Have I decided on what crypto(s) I want to invest in?
- How do I plan to store my funds?
- How am I going to obtain the crypto?
- Have I done the fundamental analysis?
- How do I plan to purchase and trade my crypto?
No time like the present. The events in Venezuela and Ukraine have proven that cryptocurrency has risen to an unprecedented level of popularity and mainstream acceptance. Every day novice investors dive in and enjoy benefits (and the rollercoaster ride of volatility) as they grow and gain more knowledge.
Considering you have done your research and have made your decision on what crypto(s) to invest in, there are many different ways to start.
- Centralized Crypto Exchanges
- Decentralized Exchanges
- No Exchanges
- Crypto Wallets
Centralized Crypto Exchanges (CEXs) are basically markets that engage in crypto trading similar to a stock market. It is very easy to sign up at a crypto exchange and buy crypto from there.
There are many, many, MANY cryptocurrency exchanges to choose from. Some factors you will want to take in mind are:
- Does the exchange have the particular crypto you want?
- Are you eligible to have an account due to your geographical location/citizenship?
- Security. Has the exchange been hacked before?
- How is their customer service?
- How much are the trading fees?
- What kind of tools and research does the exchange offer?
- What are the Deposit/Withdrawal limits?
- Can you stake your crypto and earn interest?
One thing you will have to do in order to trade on a centralized exchange is that you will have to verify your identity, better known as Know Your Customer. (KYC)
Most centralized crypto exchanges have a number of levels of verification. The higher level of verification you attain, the more liberties you have in such things as higher amounts of deposits and withdrawals, participating in puts and calls, etc.
Some crypto exchanges you can try out are:
- Binance (US investors not allowed)
- Binance US
- Huobi (US investors not allowed)
NOTE: Not endorsing any of these exchanges, this is just a small enough list to get you started.
- Most exchanges offer several cryptocurrencies to buy.
- You do not need to buy Bitcoin, Ethereum, or any stablecoin to convert to the crypto of your choice.
- The exchange has help and support with any issues.
- Transaction fees may cut into a fair amount of your purchase.
- Possibility of hacking.
- Geographical/citizenship restrictions.
- Know Your Customer hoops to jump through, especially if you’re privacy-minded
- No FDIC guarantees. If the exchange tanks, the exchange is under no obligation to refund your crypto.
- Since it’s on an exchange, the crypto is technically not yours. No personal key = no personal crypto.
From a personal standpoint, exchanges are great when it comes to crypto trading and buying. However, when it comes to moving said crypto to a wallet, I ran into trouble as some exchanges had exorbitant trading fees.
Charging $30 worth of Bitcoin to move a few hundred dollars worth of Bitcoin is doable. Charging 30 Loopring to move 50 Loopring at $0.60 per token? Ouch.
If you do not want to deal with a centralized exchange there are decentralized exchanges to consider. However, you will need to get a wallet and have some crypto in said wallet before you can use it. Unfortunately, you cannot use a decentralized exchange to obtain fiat currency for exchange.
Decentralized exchanges operate without a central third party for clearing transactions, relying instead on self-executing smart contracts to facilitate trading. This dynamic enables instantaneous trades, often at a lower cost than on centralized crypto exchanges.
So let’s say you want to buy some Chainlink. You connect your crypto wallet to the exchange where you choose the crypto you want and the speed. (The higher the speed, the higher the fees.) The transaction takes place, and boom! You have your Chainlink.
However, you cannot transfer any fiat payments through a decentralized exchange. You will have to buy some at a centralized exchange and keep it in your wallet for when you want to trade.
Decentralized exchanges have no intermediaries. This means that you retain custody of your cryptocurrency and are responsible for managing your wallets and private keys. If you want total control over your private keys, this is totally for you.
The lack of an intermediary also means that most DEXs have limited counterparty risk and are not required to follow regulatory standards for procedures as Know-Your-Customer (KYC) or Anti-Money-Laundering (AML).
Some decentralized finance exchanges to consider are:
NOTE: Once again, this is not an endorsement, just a small list to get you started.
- Anonymous. You don’t need to worry about submitting personal info to the exchange to trade.
- No deposit limits.
- You can get cryptos that are not found on centralized exchanges.
- Possible liquidity issues – An exchange order may take a long time to get fulfilled if there is a low supply
- No fiat payments – You cannot import any fiat currency to exchange.
So far, this is only possible with Bitcoin. There are some sites in which you can use PayPal, your credit card or through the bank without having to jump through the hoops of Know Your Customer. (KYC) You will need to sign up for an account with them, though.
The best-known sites are:
YET ANOTHER NOTE: Third time’s the charm, not endorsing anything.
This is the best way of being in full control of your crypto assets, storing them in a wallet.
There are two types of wallets available: soft and hardware wallets. Soft wallets are already hooked up online and can be downloaded like regular software. Hardware wallets are actual physical wallets you have to hook up to your device.
Some wallets allow you to buy trade crypto without the need to access any exchanges.
- Total, utter privacy.
- Your wallet might not have the crypto you want to buy or trade.
- Software updates.
- High fees.
- Lose your password or your key phrases? Tough luck, they’re gone forever.
Crypto investment can be a minefield, especially if you are a beginner. Depending on your preferences, you may find that buying on a cryptocurrency exchange is your style, or even going to a Bitcoin ATM.
As long as you figure out what’s right for you and do your research, your first steps into the cryptocurrency world shall be easy. As always, do your own research. Good luck.
Dani Lehmer is the Founder and Head Honcho of Dani Digs In.
She is a Quality Assurance Analyst and blogger whose natural curiosity allows her
to dig in (pun intended) to help people build their businesses and satiate curiosity
in regard to data science, analysis, and crypto.