Cryptocurrencies have attracted masses in the recent years, especially in the current year. There are many investors who have turned millionaires from crypto trading while there are some who look to foray into the field. If you plan to embark on the journey and wondering where to buy crypto, then the answer is crypto exchanges.
Cryptocurrency exchanges are online marketplaces where one can trade between cryptocurrencies. Here, a digital asset can be traded for another digital asset based on their existing market value. You have the option to buy/sell cryptocurrencies or exchange them. GDAX and Binance are now the most popular exchanges.
Crypto exchanges are often confused with crypto wallets. So, before diving deeper, it’s vital to identify the difference between both. Basically, cryptocurrency wallets and brokerages facilitate users to store, receive and send cryptocurrencies. Wallets secure cryptocurrencies and they store keys linked to a blockchain transaction. The digital assets are then transmitted to crypto exchanges from crypto wallets for trading.
Most crypto exchanges facilitate their users to trade in one digital asset (s) against another. Some even allow transactions of fiat currencies such as US dollars. Thus, dollars and many fiat currencies can be exchanged for cryptocurrency. One such example of an exchange is Kraken; it presently takes USD, CAD, GBP, JPY, and trades in Ripple, Monero, Litecoin, Ethereum, and Bitcoin.
If the above-mentioned part seems unclear, don’t be worried: we will explain how to buy, sell, and trade crypto’s using cryptocurrency wallets and exchanges.
First, you’ll require creating an account online to invest your fiat cash (such as USD) in a crypto asset. This can be done by creating an account with a crypto wallet. Currently, Coinbase is the most popular and quite the safest solution available.
Next, you can buy and hold the most popular and useful cryptocurrencies, including Ethereum, Coinbase, or Bitcoin. Finally, after you’ve created this wallet, you can receive and send coins to some other wallet(s) using your wallet’s address.
What if you don’t want to invest solely in Ethereum or Bitcoin but also in altcoins such as Stellar and Ripple? If the wallet you have restricts you to buy or sell cryptos (as it doesn’t support them), a cryptocurrency, then you can create an account with a crypto exchange.
You must be wondering how to buy crypto and start trading? Here is how! To buy crypto and begin trading, an account must be created on a crypto exchange, and you need to send coins from your wallet into that specific account.
Then, you must deposit Ethereum or Bitcoin (or whatever medium of exchange accepted by the crypto exchange) to the correct crypto address that is on your trading account from the crypto wallet you have. You can then swap your coins for other cryptos such as Ethos and Monero.
However, if you desire to earn from these coins, the method is rather difficult. This is because most altcoins don’t have wallets or addresses that provide both fiat gateway (the process of converting international fiat money to cryptocurrencies) and storage. Thus, you’ll require exchanging these cryptocurrencies for traditional currency, such as Ethereum.
After that, you can use your crypto exchange account to send these basic coins to your wallet’s address, where you can encash them.
Note: You might be able to buy cryptocurrency with a debit card or credit card, but this will likely come with additional costs, some of which can be extremely large, up to 5% of your transaction. Some crypto exchanges will allow you to transact using other cryptos or their own branded stable coins.
Varying exchanges have different restrictions, which vary based on the cryptocurrency you want to purchase. For pennies or a few dollars, you might be able to purchase fractional shares of coins. Check the prerequisites for the cryptocurrency you want to buy on your preferred crypto exchange.
Download the exchanges’ app or visit their website to create a crypto exchange account. Each crypto exchange has its registration process. You may be able to create an account and buy and sell modest quantities of cryptocurrency without authenticating your identity or providing personal information in some cases. However, as the sector has progressed, the US government has implemented Know Your Customer requirements to combat money laundering and fraud. In general, you’ll need to offer the following:
You may also be required to submit a photo or a government-issued ID scanned copy to verify your identification.
Crypto exchanges function similarly to brokerage systems. Each provides a platform via which users can establish various order types to buy, sell, and speculate on cryptos with other traders.
Crypto exchanges can be centralized, meaning they are run by a single corporate entity, such as a brokerage firm that ensures trade security or can be decentralized. Decentralized exchanges, like cryptocurrency blockchains, often give verification powers to anybody wanting to join a network and validate transactions. This may promote accountability and transparency and ensure that exchange can continue to operate if the company that runs it suffers a setback.
However, legal issues may arise because of such processes. As a result, we urge our readers to become aware of the cryptocurrency legislation and guidelines on buying crypto in their respective state laws before engaging in cryptocurrency trading.
Cryptocurrencies are treated as property in some jurisdictions, including the USA, and are subject to capital gains taxes. Others have made the buying and selling of such cryptocurrencies completely illegal.