How To Buy Cryptocurrency

If you’re new to the crypto world, figuring out how to buy Bitcoin, Dogecoin, Ethereum, and other cryptocurrencies can be confusing initially.

Thankfully, it’s pretty simple to learn the ropes. Follow these five easy steps to start investing in cryptocurrency.

Remember: investing in cryptocurrency is purely speculative, and your capital is at risk. You might lose some or all of your money.

Further, cryptocurrency trading is largely unregulated in India, and if something goes wrong—for example, if a company goes out of business—you will have no recourse to compensation.

1. Choose a Broker or Crypto Exchange

To buy cryptocurrency, you first need to pick a broker or cryptocurrency exchange. While either lets you buy crypto, there are key differences between them.

What Is a Cryptocurrency Exchange?

A cryptocurrency exchange is a platform where buyers and sellers meet to trade cryptocurrencies. Exchanges often have relatively low fees, but they tend to have more complex interfaces with multiple trade types and advanced performance charts, all of which can make them intimidating for new crypto investors.

Some of the most well-known cryptocurrency exchanges are WazirX, CoinDCX, Zebpay, and Mudrex. While these companies’ standard trading interfaces may overwhelm beginners, particularly those without a background in stock trading, they also offer user-friendly, easy purchase options.

However, convenience comes at a cost, as the beginner-friendly options charge substantially more than it would cost to buy the same crypto via each platform’s standard trading interface. To save on costs, you might aim to learn enough to use the standard trading platforms before you make your first crypto purchase—or not long after.

An important note: as someone new to crypto, you’ll want to ensure your exchange or brokerage of choice allows fiat currency (such as sterling and INR) transfers and purchases made with sterling. Some exchanges only allow you to buy crypto using another crypto, meaning you’d have to find another exchange to purchase the tokens your preferred exchange accepts before you could begin trading crypto on that platform.

Related: Best Crypto Exchanges

What Is a Cryptocurrency Broker?

Cryptocurrency brokers take the complexity out of purchasing crypto, offering easy-to-use interfaces that interact with exchanges for you. Some charge higher fees than exchanges. Others claim to be “free” while making money by selling information about what you and other traders are buying and selling to large brokerages or funds or not executing your trade at the best possible market price.

While they’re undeniably convenient, you must be careful with brokers because you may be restricted from moving your cryptocurrency holdings off the platform. With some, for example, you cannot transfer your crypto holdings out of your account.

This may not seem like a huge deal, but advanced crypto investors prefer to hold their coins in crypto wallets for extra security. Some even choose hardware crypto wallets that are not connected to the internet for even more security.

2. Create and Verify Your Account

Once you decide on a cryptocurrency broker or exchange, you can sign up to open an account. Depending on the platform and the amount you plan to buy, you may have to verify your identity. This is an essential step to prevent fraud and meet regulatory requirements.

You may only be able to buy or sell cryptocurrency once you complete the verification process. The platforms may ask you to submit a copy of your Aadhaar card or PAN card, and you may even be asked to upload a selfie to prove your appearance matches the documents you submit.

3. Deposit Cash to Invest

To buy crypto, you must ensure you have funds in your account. You might deposit money into your crypto account by linking your bank account or paying with a debit card. 

4. Place Your Cryptocurrency Order

Once money is in your account, you’re ready to place your first cryptocurrency order. There are hundreds of cryptocurrencies, ranging from well-known names like Bitcoin and Ethereum to more obscure cryptos like Theta Fuel or Holo.

When you decide which cryptocurrency to purchase, you can enter its ticker symbol – Bitcoin, for instance, is BTC – and how many coins you’d like to purchase. With most exchanges and brokers, you can purchase fractional cryptocurrency shares, allowing you to buy a sliver of high-priced tokens like Bitcoin or Ethereum that otherwise take thousands of rupees to own.

5. Select a Storage Method

The Reserve Bank of India does not back cryptocurrency exchanges, and they’re at risk of theft or hacking. You could even lose your investment if you forget the codes to access your account. That’s why having a secure storage place for your cryptocurrencies is essential.

As noted above, if you’re buying cryptocurrency via a broker, you may have little to no choice in how your cryptocurrency is stored. If you purchase cryptocurrency through an exchange, you have more options:

• Leave the crypto on the exchange. When you buy cryptocurrency, it’s typically stored in a crypto wallet attached to the exchange. If you don’t like the provider your exchange partners with or want to move it to a more secure location, you might transfer it off the exchange to a separate hot or cold wallet. Depending on the exchange and the size of your transfer, you may have to pay a small fee to do this.
• Hot wallets are crypto wallets stored online and run on internet-connected devices, such as tablets, computers, or phones. They are convenient, but there’s a higher risk of theft since they’re still connected to the internet.
• Cold wallets. Cold crypto wallets aren’t connected to the internet, making them your most secure option for holding cryptocurrency. They take the form of external devices, like a USB or hard drive. You have to be careful with cold wallets, though: if you lose the key code associated with them or the device fails, you may never be able to get your cryptocurrency back. While the same could happen with specific hot wallets, some are run by custodians who can help you get back into your account if you get locked out.

Steps To Buy Cryptocurrency In India

Let us see some general steps to buy cryptocurrency in India:

Step 1: Sign up on your desired crypto exchange platform.

Step 2: Set up your account security by verifying your email address.

Step 3: Complete the Know Your Customer (KYC) process.

Step 4: Add funds to your crypto exchange wallet.

Step 5: At last, buy the cryptocurrency you wish for.

Alternative Ways to Buy Cryptocurrency

While buying cryptocurrency is a significant trend, it’s a volatile and risky investment choice. If investing in crypto on an exchange or via a broker doesn’t feel like the right choice for you, here are a few options to invest in Bitcoin and other cryptocurrencies indirectly:

1. Wait for Crypto Exchange-Traded Funds (ETFs)

Exchange-traded funds are popular investments that allow you to buy exposure to hundreds of individual holdings in one fell swoop. This means they provide immediate diversification and are less risky than selecting individual investments.

There is a huge appetite for cryptocurrency ETFs, which allow investors to invest in many cryptocurrencies simultaneously. Investors from India need to open a global account or invest via brokerage platforms from an RBI-approved channel. To invest in cryptocurrency ETFs overseas, investors must transfer money using the Liberalized Remittance Scheme.

2. Invest in Companies Connected to Cryptocurrency

If you’d instead invest in companies with tangible products or services that are subject to regulatory oversight—but still want exposure to the cryptocurrency market—you can buy shares in companies that use or own cryptocurrencies and the blockchain that powers them. You’ll need an online brokerage account to purchase shares in publicly listed companies such as:

• Nvidia (NVDA) is a technology company that designs and sells graphics processing units, which are at the heart of the systems used to mine cryptocurrency.
• Block, Inc. (SQ), a payment services provider for small businesses, has purchased millions of dollars worth of Bitcoin since October 2020. In February 2021, the firm disclosed that Bitcoin made up around 5% of the cash on its balance sheet. In addition, SQ’s Cash App allows people to buy, sell, and store cryptocurrency.

As with any investment, consider your goals and current financial situation before investing in cryptocurrency or individual companies that have a heavy stake in it. Cryptocurrency can be extremely volatile—a single tweet can make its price plummet—and it’s still a very speculative investment. This means you should invest carefully and with caution.