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You are here: Home / Business & Finance / Beginners’ Guide to Buying Crypto

Beginners’ Guide to Buying Crypto

December 23, 2020 by Nitin Maheta

Rapidly-growing cryptocurrency valuations in 2020 had generated a rising trend of interest to buy, leading to an impressive bull market. Opportunities emerged along the way and with the developments occurring in the cryptocurrency industry, retail individuals now have access to different ways to take advantage of the financial revolution.

People who already know how cryptocurrencies are created should also find out that there are different ways to buy and at the same time, the ideal method depends on personal objectives as well as several pros and cons that will be highlighted in the current material.

cryptocurrency

Source: https://pixabay.com/photos/cryptocurrency-financial-concept-3409655/

Contents

  • Using an exchange platform
  • Cryptocurrency trading
  • Which is the most appropriate method?

Using an exchange platform

Buying cryptocurrencies via exchange platforms was originally the only way it was possible to gain exposure on the market. It implies that the user buys tokens and then stores them into a dedicated cryptocurrency wallet. At the latter date, a selling operation would enable profit coverage, in case valuation had risen in the meantime.

However, several aspects need to be clarified. On one hand, it is not possible to sell short, meaning taking advantage of falling markets. Buying “physical crypto” is an investment that will play out only if the price goes up.

At the same time, users need to ensure strong security for their cryptocurrency wallets, due to multiple vulnerabilities occurring along the way. Although there are still many people using exchange platforms, this isn’t the only way to buy crypto.

Cryptocurrency trading

The development of a derivatives market based on cryptocurrencies is now facilitating access to crypto-based instruments such as CFDs. Traders working with regulated and reputable brokerage brands can buy and sell-short cryptocurrency contracts via a desktop platform or a crypto trading app.

Aside from the trust of established brokerage houses, traders can benefit from multiple trading tools and features, without having to worry about custody or storage vulnerabilities. Still, it is important to note that in this case, they don’t hold the underlying instrument and can only take advantage of price movements.

Also, cryptocurrency trading is a short-term targeted activity, as traders are generally looking to generate returns on the high volatility in the crypto market. Elevated intra-day activity is generating trading opportunities that can last even a few minutes, which will make using a traditional exchange impossible.

Which is the most appropriate method?

It all comes down to each individual’s objectives. For a long-term crypto investment, using a traditional exchange platform to buy physical tokens and store them into a cryptocurrency wallet would be the most appropriate method. For short-term trading, using the services of a brokerage house covering crypto instruments would be better, thanks to the benefits previously mentioned.

Given Bitcoin recently hit a new all-time high and other large cryptocurrencies are posting impressive gains for the year, buying crypto is once again a trending activity, as more and more people want to join the industry. With different options at their disposal, the only thing left is making sure education and the development of a rules-based system has been done, in order to cope with the market the same as professionals do.



About Nitin Maheta

Nitin Maheta is editor in chief and webmaster of MakingDifferent Blog. You may reach him out on following social media:

Facebook | Twitter | Instagram

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