This article provides an overview of buying cryptocurrency and is not financial advice. Before investing in anything, crypto or not, please do thorough research and never deposit anything you cannot afford to lose. If you are unfamiliar with crypto, read our articles on blockchain, crypto, and DeFi before reading this article.
What is Cryptocurrency?
Built on blockchain technology, cryptocurrency is often referred to as digital money. While we cannot yet use crypto tokens to buy most things in the physical world, an entire metaverse exists that uses crypto tokens as its native currency. Crypto also has real-life applications, and those applications will only continue to increase together with its adoption.
In the physical world, many consider crypto to be investments and use them to increase individual wealth. In some countries where inflation is a huge threat, people store their money in stablecoins to protect the value of their money.
How to Buy Crypto Tokens
While there are multiple reasons to buy crypto, most people want to buy it as a form of investment. The crypto space is still very young, and prices are volatile. Investing in crypto could either lead to a windfall, or a total loss of money. Before investing in any project, it is essential to do your own research, and never invest money that you cannot afford to lose.
That said, the crypto market is growing at an unbelievable rate, and has become a multi-trillion dollar industry in just a few short years. It seems inevitable that cryptocurrency will one day reach mainstream adoption. Whether you would like to dip your toe in the water or jump straight in, here are three common ways to buy crypto.
1. Centralized Exchanges (CEX)
This is the easiest and often cheapest way to buy crypto if you have never invested in it before. CEXs are privately held institutions that facilitate buying and selling crypto tokens. Some notable ones include Binance, Gemini, Coinbase, and Kraken.
They often charge a fixed percentage transaction fee, and you can buy crypto tokens using a credit or debit card. Binance also offers a peer-to-peer (P2P) trading option where users can buy and sell crypto tokens to each other directly, although these prices often deviate from the market rate slightly.
The downside to buying through a CEX is that you have to transfer your tokens to your crypto wallet to interact with DeFi apps. However, if you do not wish to participate in DeFi and only trade crypto tokens, this might be a suitable option for you.
2. Directly Through a Wallet
Crypto wallets such as MetaMask and Coinbase Pro allow users to buy crypto directly through their platform and have it in your wallet, ready to interact with DeFi apps. While every wallet’s interface is slightly different, there should be a “Buy” button on the main screen of your wallet. Clicking on it will show you the various options for buying crypto in your geographical location.
If you know someone who is willing to sell you some crypto, you can get them to send the tokens directly to your wallet.
3. Decentralized Exchanges (DEX)
Most DEXs do not allow users to buy crypto tokens using fiat, but some DEXs are working on making it a feature. Bisq, a decentralized Bitcoin exchange network, already allows users to buy Bitcoin using fiat.
If you already have some crypto tokens, you may swap them for other tokens on DEXs such as Uniswap or SushiSwap.
Keeping Your Crypto Safe
While a CEX is the most accessible way for someone who has never invested in crypto before to buy crypto tokens, it is not advised to hold large positions with large amounts of tokens on a CEX. Instead, buy a hardware wallet, such as a Ledger or Trezor, if you intend on investing large amounts of money in crypto. Otherwise, enable 2-factor authentication on the CEX you are using to better protect your assets.
It is also advisable to track your portfolio to optimize your investments or trading strategy when trading crypto. Harvest by Treehouse is DeFi’s most comprehensive portfolio tracker that gives you the ability to track your DeFi investments matching that of traditional finance tools. Try it out for free today!
New to DeFi? If you found this useful, check out our other Learn DeFi articles to dive deeper into the wonderful world of DeFi! Alternatively, browse our Insights section to read more in-depth analyses on the DeFi space. You can also try out our flagship product, Harvest, to get a comprehensive analysis of your DeFi assets and learn how to track them here. Lastly, subscribe to newsletter updates in the box below!
This publication is provided for informational and entertainment purposes only. Nothing contained in this publication constitutes financial advice, trading advice, or any other advice, nor does it constitute an offer to buy or sell securities or any other assets or participate in any particular trading strategy. This publication does not take into account your personal investment objectives, financial situation, or needs. Treehouse does not warrant that the information provided in this publication is up to date or accurate.