What is cryptocurrency?
A cryptocurrency is a digital currency that operates on a decentralised network. Cryptocurrencies are not issued or monitored by a central authority, so they are immune to any interference from the government.
This digital or virtual currency is based on a blockchain system that ensures the integrity and security of the transactional data online, the essential part of any cryptocurrency. They allow secure payments online because they are encrypted. They come in the form of virtual ‘tokens’ and not real physical money like fiat currencies that you would use in the bank.
How do I buy cryptocurrency?
To buy cryptocurrency, you will need to use an online exchange platform. We at CryptoParrot specialise in providing you with a simulated trading experience before investing. We allow you to practice buying crypto on a demo version to understand the process. We have, however, included a step by step guide below on how to buy crypto as there is a general process to follow:
Choose an online platform
Several online cryptocurrency exchanges allow you to buy, sell and hold cryptocurrencies. Some will enable you to remain anonymous, while others require you to input your personal details on registration. The most popular platforms will use a KYC or know your customer process to identify the individual to use their site. It is important to use a reputable platform with a good history of security, so doing some research beforehand will be beneficial.
Input your payment method
Once you’ve chosen the online exchange, you now need to connect a payment option to it. The platform will have most likely asked for your ID like a driver’s license or passport photo to confirm that you are who you say you are and legitimate to use the site. Most online platforms will allow you to connect your bank account directly, or you can use a credit or debit card. You may also have the option to use PayPal or other financial methods because it is typically easier to transfer funds this way.
Fees will come into play when you want to deposit your money into the exchange. Bank account transactions have generally smaller fees than credit and debit cards because they take longer to process, but it is good to check before making a deposit. Some online platforms may not charge deposit or withdrawal fees, but there could be other charges to look out for, like per transaction fee or a processing fee. Once you have connected your payment method, you will be given access to a digital wallet that you can use to secure your funds on the platform.
Place a cryptocurrency
You have chosen the online exchange and connected your payment details. Now you can begin to purchase cryptocurrency. Cryptocurrencies are extremely volatile and continuously move up and down in the market, so it’s good to understand there is always a risk when investing. Cryptocurrencies have become significantly popular in recent years. The amount of currencies available to the number of people choosing to buy all affects how well they do in the market and what you want to invest in. The platform you have selected will give you the option to buy, sell or hold the crypto. Some platforms even offer you recurring purchases, so you’re consistently investing weekly, biweekly or monthly.
Store your crypto
The online exchange will provide you with a digital wallet, but we also recommend having a private digital wallet so you can control access to the funds. It allows you to store your crypto separately from the exchange, letting you be in charge of the security in the long-term. There are different types of crypto wallets to choose from, online ‘hot wallets’ or paper and hardware ‘cold wallets’.
Hot wallets generate private keys to access your funds; they run on internet-connected devices like your computer or phone. It is a convenient way to store your funds but, keeping your private key on a device may make it more vulnerable to hacks. It is always good to not share how much money you hold and take precautions like using strong passwords and two-factor authentication.
On the other hand, cold wallets are not connected to the internet, so you stand at less risk of your funds being compromised. An example is a paper wallet, the most secure way to store crypto offline. You can generate this wallet off specific websites, and it lets you print off your public and private keys on a piece of paper for your safekeeping to access the wallet. These wallets are made for long term investments due to their high security. For a short-term or easily accessible cold wallet, many individuals opt for a hardware wallet. Typically a USB drive is used to store the private key offline. Cold wallets are more secure in comparison, but they require more knowledge to set up.
Where to buy cryptocurrency
As mentioned, CryptoParrot offers you the chance to practice buying and selling cryptocurrencies before you start using actual money on an exchange. Some online platforms also provide a demo mode on their account. Still, they do not offer an experience tailored to help both beginners of cryptocurrency and those who are more experienced in advancing their skills as we do.
There are several online exchanges that you can choose from to purchase cryptocurrency. An online exchange is a digital marketplace where you can convert your fiat money into cryptocurrency. These exchanges include popular names like Coinbase or Binance. Each platform has its own pricing and fees, so you decide which one you prefer.
There are also other methods to buying cryptocurrency. For Bitcoin only purchases, Bitcoin ATMs allow you to insert cash that is transferred into Bitcoin and then sent to a secure digital wallet.
P2P or peer-to-peer exchanges. Some online platforms offer this service where you can post a request to buy or sell a cryptocurrency anonymously after you have created an account. You can then browse through the listing of buy and sell offers and choose the listing that matches your price range and payment method. Some listings may only accept bank transfer payments, but you get to find the best deal for the cryptocurrency you want.
Thinking about a crypto trading strategy
It is always good to practice your trades if possible before you make a purchase. You can learn about the movement and trends of a particular asset in the market and know when is the best time to buy or sell or hold onto a cryptocurrency. We specialise in a trading simulator that allows you to practice your trading strategy and helps educate you. If you are a beginner or a more experienced trader, you can continue developing your knowledge through our tools and features.
Decide on a trading strategy first. With our help, we will make sure you know and understand the market and use the tools to practice the technique that works best for you. The price of cryptocurrencies regularly fluctuates as they are influenced by several factors, including media coverage, government regulations, and statements from influential business people.
Your chosen trading strategy will let you decide what type of ‘close’ conditions you want to implement when you exit a trade. It is important to think about because your capital is at risk when you buy crypto. Choosing the right close conditions can minimise the loss on your open position once it has reached an agreed target. Using our website will let you practice this technique and test your knowledge of your chosen cryptocurrency when the price starts to fluctuate in the market.
Think about diversifying your trades. It is better to spread your investment to more than one cryptocurrency rather than having it all in Bitcoin, for example. You can start with a small deposit and gradually build on that amount as you progress in your crypto journey. Diversifying also reduces the daily risk associated with one specific coin.
Watch trading times. It is essential to follow the fundamentals of the cryptocurrencies you want to invest in. Find out if the crypto trades 24 hours a day or follow the Monday to Friday schedule. Follow the cryptocurrency news and stay ahead of the market. It is good to look out for announcements to see how they affect the crypto assets.
Technical analysis. It allows you to use real-world data to predict the future of the market. Using strong technical indicators to look at past statistics of the crypto in question to work out what will happen in the upcoming minutes or hours will help you justify each trade you make.
What are the risks of buying crypto?
Investing in cryptocurrency does carry risks, mainly because it is highly volatile. It is important to understand these risks before you start trading or buying cryptocurrencies. These risks are outlined below.
Volatility. As mentioned, cryptocurrencies are prone to unexpected changes in the market throughout the day. It can lead to sudden moves in price, changing the value of the crypto. If you’re familiar with a strategy, you know whether to hold onto the asset or not. Still, with practice, you will begin to see similar trends, even with the most volatile cryptocurrencies.
Cryptocurrencies are unregulated. As they operate on a decentralised network, the central banks and governments do not have access to any records of your transactions. It means that if your online platform is caught up in a security breach or hacking issue, there is no one to go to if you have lost your funds. We recommend looking into different types of digital wallets like hot or cold wallets to help reduce the risk.
Human error. Yes, trading cryptocurrencies through a blockchain system is essential to the privacy and security of your data. But the individual who is trading may accidentally click on an unfamiliar attachment and later find out they have been hacked. Or accidentally share personal information outside of the secured network and increase the risk of losing funds.
Platforms could discontinue cryptocurrencies. We think you should always research the crypto you want to buy before you do. Research the online exchange because you may have started trading one individual crypto. Still, it’s not as secure as it seemed. It could end up being suspended, or worse, it could be taken off the site if the prices in the market are unreliable.
Is it a good idea to invest in cryptocurrency?
Despite the risks involved, buying cryptocurrency has great earning potential. As they become more prominent and mainstream, their value could increase further. More companies are getting on board with cryptocurrency. Companies like Tesla have already made significant investments in Bitcoin and even accept it as a payment for their vehicles. Choosing to invest now could be wise in terms of a long term investment as cryptocurrencies are set to become more widely accepted.
Be sure only to invest money that you can afford to lose. Be ready for drastic shifts in the market and, if possible, have some spare funds on hand. Diversifying your investments is a good way to fall back on other assets if one specific crypto ends up plummeting. Choose wisely. The most popular crypto, Bitcoin, is always a favourite because it was the first digital currency to enter the market back in 2009 and has seen substantial growth. But that is not the only option. Research other cryptos to consider investing in and decide which is right for you.
If investing in cryptocurrencies is new to you, it may seem challenging. We know that understanding the crypto process takes time, but it is rewarding. At CryptoParrot, we want to help you advance your learning and feel confident enough to know how to buy cryptocurrency before you begin to spend real money on an online exchange.
It is good to consider the risks involved when investing. Cryptocurrencies are highly volatile, so monitoring their movement in the market and getting hands-on experience is important for your crypto journey. With our trading simulator, your capital is not at risk, so when you’re ready to purchase cryptocurrency, you will have a grasp on it already.
Buy Cryptocurrency FAQ
🌐Where can I buy cryptocurrency?
Several online platforms allow you to trade cryptocurrency. It is good to check out if these platforms are reputable and reliable before purchasing crypto. At CryptoParrot, we will enable you to use our trading simulator to practise techniques before transitioning onto an online exchange.
❓Should I invest in crypto?
Venturing into a new investment can be exciting and rewarding, but it also comes with risks. Buying cryptocurrency is quite popular now as the digital currency has become more mainstream over recent years. It has the potential to increase in value because more companies are considering it as a reliable form of payment. There are several cryptocurrencies to choose from, so your options are not limited.
😕Is it risky to buy cryptocurrencies?
It is good to know that cryptocurrencies are extremely volatile assets. If you want to buy crypto, you should take some time to understand their movement in the market. Research your favourite cryptos and learn their daily trends and patterns to help your trading in the long run. We offer a platform that allows you to practice trading without the risk of your capital first. So you can train and develop your skill before spending any money until you are ready.