The first step for anyone looking to get into cryptocurrency is buying crypto. While the world of decentralized finance (DeFi) might sound exciting, most beginners start with centralized exchanges (CEXs) like Coinbase or Crypto.com (CDC). These platforms make it easy to buy, sell, and store cryptocurrency with a user-friendly interface and familiar tools.
Let’s walk through how to get started buying cryptocurrency safely on a centralized exchange.
1. Choosing a Centralized Exchange (CEX)
Before you can buy cryptocurrency, you need to choose a centralized exchange to trade on. Two of the most popular and beginner-friendly options are:
- Coinbase: Known for its simple interface, Coinbase is a great choice for those new to crypto. It offers a wide range of cryptocurrencies and robust security features.
- Crypto.com (CDC): Another solid option, CDC offers a broader range of features like a built-in wallet, rewards for holding certain assets, and an easy-to-navigate app.
When choosing a CEX, consider the following factors:
- Ease of Use: Is the platform simple to navigate?
- Security: Does the platform have strong security measures (e.g., two-factor authentication, cold storage)?
- Available Cryptocurrencies: Does the exchange offer the cryptocurrencies you want to buy?
- Fees: What are the transaction and withdrawal fees?
- Regulation: Make sure the exchange operates legally in your country.
2. Steps to Set Up an Account
Once you’ve chosen your exchange, setting up an account is straightforward. Here’s how to get started:
Step 1: Sign Up
- Visit the exchange’s website or download their app.
- Click the Sign Up button and provide the required information (email, password, etc.).
Step 2: Verify Your Identity
To comply with regulations, most CEXs require you to go through a process called Know Your Customer (KYC), where you verify your identity. You’ll need to:
- Upload a government-issued ID (e.g., driver’s license, passport).
- Take a selfie or use facial recognition to confirm your identity.
- Provide basic personal information (e.g., address, date of birth).
This process is usually quick and necessary to ensure security and prevent fraud.
Step 3: Enable Two-Factor Authentication (2FA)
For added security, enable two-factor authentication (2FA) on your account. This typically involves linking your account to an app like Google Authenticator, which generates a temporary code every time you log in. This extra step helps protect your account from unauthorized access.
3. Adding Funds to Your Account
Once your account is set up, the next step is to fund it so you can buy crypto. Most centralized exchanges offer several ways to add funds, including:
- Bank Transfer: This is one of the most common methods. You’ll link your bank account to the exchange and transfer funds directly. This method usually has lower fees, but it can take a 3-5 days for the funds to arrive.
- Credit or Debit Card: Some exchanges allow you to buy crypto instantly using a credit or debit card. This method is faster but often comes with higher transaction fees.
- Wire Transfer: Some exchanges, particularly Crypto.com, let you wire transfer and you can move your funds out within a couple of days.
- Other Payment Methods: Some exchanges offer additional options like PayPal or even crypto deposits if you already own some cryptocurrency.
Make sure to review the fees associated with each method before deciding how to fund your account. Please note, it is very common for exchanges to let you trade with the funds immediately while the funds are processing. However, they’ll prevent you from withdrawing the platform until your funds actually settle.
4. Buying Cryptocurrency
Now that you’ve added funds to your account, it’s time to buy your first cryptocurrency. Most exchanges follow a similar process:
- Choose a Cryptocurrency: On the exchange, navigate to the list of available cryptocurrencies (e.g., Bitcoin, Ethereum, etc.). You can search for your preferred asset by name or symbol (BTC for Bitcoin, ETH for Ethereum).
- Place an Order: Once you’ve selected a cryptocurrency, decide how much you want to buy. You can either:
- Place a Market Order: This buys crypto at the current market price, executing immediately. This is the most common method for purchasing.
- Place a Limit Order: This allows you to set a specific price at which you want to buy. The order will only execute when the market reaches that price. Please note, some exchanges will have a pro vs basic version and not all exchanges offer Limit Orders.
- Review and Confirm: Before finalizing your purchase, review the transaction details, including fees, and confirm the purchase.
5. The Benefits and Risks of Leaving Crypto on an Exchange
Once you’ve bought your cryptocurrency, you’ll have two options: leave it on the exchange or transfer it to a personal wallet. Both have benefits and risks:
Benefits of Leaving Crypto on an Exchange:
- Convenience: Exchanges make it easy to access your crypto, buy, sell, or trade with just a few clicks.
- Built-In Security: Most reputable exchanges offer security features like 2FA, encryption, and insurance for certain types of breaches.
- Ease of Use: For beginners, managing crypto on an exchange is simpler, as you don’t have to worry about storing private keys or managing a separate wallet.
Risks of Leaving Crypto on an Exchange:
- Not Your Keys, Not Your Coins: When you leave your assets on an exchange, you don’t actually control the private keys. The exchange holds them for you, meaning you don’t have full ownership.
- Hacks: While most exchanges have strong security measures, they are still prime targets for hackers. If an exchange gets hacked, you could lose your assets.
- Withdrawal Limits: Some exchanges impose withdrawal limits, which could prevent you from accessing large amounts of crypto in a single day.
- Regulatory Issues: Exchanges can be subject to government regulations and, in some cases, may freeze or restrict access to your funds.
Conclusion
Onboarding cash and buying your first cryptocurrency through a centralized exchange is the easiest way for beginners to enter the crypto space. It’s simple, secure, and allows you to buy crypto with just a few clicks. However, as you venture further into crypto, it’s important to consider whether you want to leave your assets on the exchange or take control of them by transferring them to a personal wallet. Understanding these benefits and risks will help you navigate your crypto journey with confidence.