Welcome to the final article of the introductory series Getting Started in Crypto. So far, you’ve learned about the basics of cryptocurrencies and blockchain technology. We’ve also walked through how the blockchain will change many aspects of society, from record keeping to exchanging things of value. And we’ve talked about how to use public and private keys to track your crypto funds and how to safely store those keys in a wallet on your journey of how to buy cryptocurrency.
You are now better positioned to start transacting with cryptos. In this final article, we will explore some of the more intricate detail of the crypto ecosystem and how to buy cryptocurrency. This will include a range of the different services you will need in order to buy and sell cryptocurrencies.
It is critical in this emerging tech economy that you that you have an understanding of how this new ecosystem works before you begin to actively trade in cryptocurrencies. Having a sound understanding will provide you with a more solid basis and reduce the chances that you will make mistakes.
With that being said, the easiest way for beginners to understand how crypto trading works is to compare it to the stock market. Tools such as Trading View, Coin Market Cap, and CoinPaprika are all great places to start so you can get a better understanding of the live market action. This is where you can see the crypto trading ecosystem at work.
As you saw from the previous articles, it’s a pretty simple process. First, you’ll need to open what might be easier to think of as a brokerage account, for example, with a website like Coinbase, and link it to your bank account. Once you link the accounts you can send funds from your bank account to your brokerage account.
The cryptocurrency ecosystem is still in its infancy and new services are being developed every day. Therefore, you may need to use two or more services to buy and sell cryptocurrencies. And that makes it a bit more difficult to trade these assets, but that difficulty is also your opportunity. It means you can get into this space before everyone else.
How to buy cryptocurrency
The cryptocurrency trading ecosystem works similarly to the traditional stock ecosystem. The first step is that you need to link your bank account to a cryptocurrency website, and then transfer those cryptocurrencies to an exchange.
And as I outlined in the previous article, there are two types of exchanges. The first type of exchange allows you to link your bank account to buy and sell cryptos like Bitcoin. Remember we call this your ‘main crypto account’ because it’s connected to your bank account.
The second type of exchange allows you to use your Bitcoin to buy and sell other cryptocurrencies. Once you convert your local fiat currency to Bitcoin, you can send it from your main crypto account to a crypto exchange. On the exchange, you can use your bitcoin to buy other cryptocurrencies.
Also, remember the blockchain eliminates the middleman, so you won’t have a Broker to buy and sell cryptocurrencies on an exchange. You’ll be your own Broker, and you’ll be in control of how to buy cryptocurrency and the entire process.
Just like the stock trading ecosystem, when you’re ready to sell your cryptocurrencies the process goes in reverse. You’ll sell your cryptocurrency for Bitcoin on the exchange and then move the Bitcoin back to your main crypto account’s wallet.
You can leave the Bitcoin in your wallet to buy more cryptos, or you can convert it into your local currency and send it back to your bank account. Personally, I would only leave cryptos in a wallet that I control the private keys to.
How to buy cryptocurrency summary
So let’s do a quick recap on the process of how to buy cryptocurrency. To buy and sell cryptos, you’ll first need to link your main crypto exchange account to your bank account. From there, you will convert your local currency into Bitcoin.
Once you have Bitcoin, you can transfer it to a trading exchange to buy and sell other cryptocurrencies. When you’re ready to sell your cryptos, the process goes into reverse. You’ll convert the cryptos to Bitcoin on the trading exchange and then send your Bitcoin back to your main crypto account.
You can either store the Bitcoin in the main account’s wallet. As stated multiple times, this is not the best idea, but many people do this and run the risk of losing it all to a hack. Or you can convert it into your local fiat currency and send it back to your bank.
If you have experience in trading stocks, you can see that the crypto trading ecosystem is not that much different than the stock trading ecosystem. But there is one important thing you need to realize with how to buy cryptocurrency. You can’t buy cryptocurrencies through a traditional brokerage account.
Let’s go over that now. It’s a mistake that many new crypto investors make. Trading cryptos can be confusing to people who are new to this space. You see, like stocks, cryptocurrencies have ticker symbols. A ticker symbol is an abbreviation used to identify a company’s stock.
For example, Walmart’s ticker symbol is WMT and Apple’s ticker symbol is AAPL. Cryptos also use ticker symbols. Bitcoin’s ticker symbol is BTC. And the ticker symbol for another popular crypto called Ethereum is ETH.
Now let’s say you wanted to buy Ethereum. If you go to your stock brokerage account and type in the symbol ETH, your broker will buy you the furniture chain Ethan Allen. That’s because Ethan Allen goes by the stock ticker ETH, and we don’t want you to make that mistake.
That’s why you must use a cryptocurrency exchange to buy cryptocurrencies. You won’t find them on a stock exchange at the moment. Even though there is more and more talk about ETFs, cryptos are still limited to crypto exchanges at the moment.
Earlier in this article, I said you may need several services when you start trading cryptocurrencies. That’s because we’re still in the early stages of this technology. Here’s what I mean. You’ll find that some crypto exchanges only carry a few dozen coins, while others carry hundreds of coins.
When you think about it, it’s not that much different than a stock exchange. For instance, you may be familiar with the New York Stock Exchange and the NASDAQ Exchange, as these are two of the biggest stock exchanges in the world.
The New York Stock Exchange lists about 2,800 companies, and the NASDAQ Exchange lists more than 3,300 companies. You can buy and sell stock on both exchanges, but companies listed on one exchange aren’t listed on another.
Let’s go back to our Walmart and Apple examples. Walmart trades on the New York Stock Exchange and Apple trades on the NASDAQ. That means you can’t go on the NASDAQ to buy Walmart or on the New York Stock Exchange to buy Apple.
The same holds true for some cryptocurrencies. You may see one cryptocurrency trading on one exchange but not the other. On the other hand, you may see some popular cryptocurrencies like Ethereum trade on multiple exchanges, that’s just the nature of first-stage technology. It will take time before the cryptocurrency ecosystem matures like the stock ecosystem, so be prepared to use multiple services when trading cryptos.
Final example on how to buy cryptocurrency
Now let’s return to one final example. To begin purchasing cryptocurrencies you’ll need to open a main crypto account and link it to your bank account. Coinbase is a popular exchange for converting local currency into Bitcoin. So, we’ll use Coinbase as our main account.
The first step is to open an account on the Coinbase website, and then link it to your bank account. Once the two accounts are linked you can send funds from your bank to Coinbase, where it will be converted into Bitcoin or Ethereum, or any of the other listings available there. But for the purpose of this illustration we will assume that you are buying Bitcoin. We’ll then temporarily store the Bitcoin in a wallet on the Coinbase Exchange.
Now let’s say we want to buy another cryptocurrency using our Bitcoin. In this case, we want to buy a cryptocurrency called Enigma. To do that, we’ll need to move our Bitcoin funds from the Coinbase wallet to an exchange that sells Enigma, such as Binance. Enigma currently sells on a dozen exchanges in a few different pairings.
The one we will, Binance, is one of the biggest by volume in the world, and has one of the best reputations to date. You’ll also need to set up an account on Binance to begin trading there. Once we have our Binance account up and running you’ll get a public key to send Bitcoin to.
Remember this public key is linked to your wallet. It’s the digital mailbox where you store your crypto funds. You’ll enter the Binance public key into your Coinbase account and that will move your Bitcoin from your Coinbase wallet to your Binance wallet. It’s similar to sending money from your brokerage account to a stock exchange. You just need to put it in the account number and click the Send button.
After hitting the Send button, Bitcoin will be sent to your Binance account. Once our funds have been transferred to the exchange and confirmed, you can use Bitcoin to buy Enigma.
Please keep in mind that this process can take a few minutes or up to a few hours, depending on how much traffic is on the Bitcoin network. But, rest assured the transaction will go through, and you’ll see your funds show up on the exchange.
Once logged in to Binance you want to buy Enigma. Its symbol is ENG, so on the right, you’ll want to type in ENG and make sure it is under the Bitcoin exchange.
Now that we’ve found ENG on the exchange and are ready to buy it, you’ll notice that cryptocurrency values are expressed in Bitcoin prices.
So, we’ll need to convert your desired dollar amount into Bitcoin prices before we can buy ENG. If you’re not familiar with Bitcoin prices you can always use a Bitcoin calculator, they’ll handle the conversions for you. These are easy enough to find and Google has a very handy live calculator if you search for “Bitcoin Price Calculator”.
Next, you enter the number of Enigma you want to buy, or the amount of Bitcoin you want to spend on Enigma. The live pricing calculator on Binance will convert this for you.
Now let’s retrace our Enigma transaction. First, we bought Bitcoin using Coinbase. Then we sent that Bitcoin from our Coinbase wallet to our Binance Bitcoin wallet. On the Binance Exchange, we used that same Bitcoin to buy Enigma.
Next, you need to send those coins to your MyEtherWallet for safekeeping. If we wanted to sell our Enigma for a profit we will send the coins from MyEtherWallet back to Binance, and Binance will sell our Enigma for Bitcoin and then we’ll send our Bitcoin back to our Coinbase wallet, or our hardware wallet.
We can either leave our Bitcoin in our Nano Ledger or Trezor hardware wallet or convert it to a local fiat currency like US dollars and send it back to our bank account.
I know this might look complicated at first, but as I said earlier it’s not that much different than buying a stock. Remember, to buy a stock you will first need to send funds from your bank to a brokerage account. Then your broker will buy the stock you want from an exchange.
When you’re ready to sell the stock, your broker will sell it on the exchange and the money will go back into your brokerage account. From there you can either keep those funds in your brokerage account or send them back to your bank.
Buying cryptos isn’t that different. The main difference is that you are removing the middleman and you yourself are your own broker. When you begin trading cryptocurrencies, we strongly recommend that you send small amounts first to make sure everything works. That way if you make a mistake, you’ll lose only a small amount of funds. It’s much easier to recover from losing $10.00 than it is from losing thousands of dollars.
Well, we’ve come to the end of our introductory series and now you know how to buy cryptocurrency. Over these artciles you’ve learned the basics of cryptocurrencies and their underlying blockchain technology. This knowledge puts you ahead of most investors in the world.
Most people aren’t even aware of the groundbreaking potential these technologies hold. Soon you’ll be using the blockchain to exchange assets of value the same way you use the internet to exchange communication. You’ll be able to securely and safely store your private records, and control access to your personal information like never before.
You won’t need to depend on unreliable and expensive middlemen to conduct deals with other individuals. With the blockchain, you can create your very own smart contracts and include the terms you want. And for those who invest in this space early, the profits can be substantial. The blockchain will make millionaires, just like the internet did before it.
We are so glad you took the first steps toward learning about this new and exciting technology and learning how to but cryptocurrency. By working through this series, you’ll be better prepared to use and profit from new blockchain technologies.