If you’re curious about cryptocurrency, or eager to buy your first Bitcoin, we’re here to help.
Understanding how to buy and sell cryptocurrencies is only half as difficult as it sounds.
Once you know how to buy them, you’ll just take the opposite steps to sell them.
With that said, there are three popular ways to buy (and sell) cryptocurrencies:
Through an established service
On a cryptocurrency exchange
If you think about it, it’s much like buying anything digitally. Either you can do it directly, if both parties trust each other, or you can do it through some kind of a middleman, who ensures a smooth trade in exchange for a small fee.
It’s important to remember that, like with any financial transaction, there’s risk involved in each of these methods. You should aim to deal with the most trusted, yet fairest buyers and sellers whenever possible.
The first way you can buy cryptocurrencies is by purchasing them directly from a trusted seller. In doing so, you can negate any of the fees associated with a middleman.
1. Find a trusted seller: perhaps a friend, family member, or an established trader in your area or online. This is probably the hardest step of all if you don’t yet have any relevant contacts.
2. Decide mutually on an exchange rate, whether you’re trading Bitcoin for US dollars, Ethereum for gold, or Litecoin for bananas -- what be it.
3. Pay the funds in hand or online, and have the seller’s cryptocurrencies sent to one of your addresses (in whatever order you both agree to).
Normally the party with the least reputation will pay first. If it’s your first time buying cryptocurrencies, that will probably be you. Note that this is standard practice, and all you can do to avoid scams is find the most trusted seller possible.
If you’re looking to sell cryptocurrencies this way, the process is very much the same. You can actively seek out buyers or just wait for them to find you, and then it’s a matter of deciding the rate and exchanging the funds, as per above.
Although there are no added fees this way, you have to be sure that the seller/buyer is going to pay you back. For this reason, many users who want to buy or sell cryptocurrencies sign up to sites like LocalBitcoins, where traders can view each other’s histories and then, if they decide to transact, rate each other.
Finding trusted sellers can be a worrying affair, especially when there’s lots of money on the line, so another alternative is to trade your cryptocurrencies with the help of an established service. This way, their reputation as a working business is what guarantees that you’ll get your funds.
The steps are as follows:
Sign up to a service that will allow you to purchase your desired cryptocurrency with your fiat money.
Credit your account using whatever methods the service supports (e.g. bank transfer).
Purchase your cryptocurrency at the service’s going rate.
If possible (or in some cases, if necessary), transfer your funds from the service to your personal wallet. It’s only once the cryptocurrencies are in your own wallet that they are truly ‘yours’.
Most of these services will also support selling cryptocurrencies. That is to say that you can send the funds back to the business’ cryptocurrency wallet, have your account credited appropriately, and then withdraw the money back in your local currency.
Although the large volumes of previous trades adds a much-needed sense of security, the main trade off of these services comes in the form of a slightly less favourable rate.
One of the most popular ways to obtain lesser traded cryptocurrencies is by exchanging between them through third parties. This way, you’ll only need to do a single transaction with a reputable exchange (examples of which are below).
Some of these exchanges will require you to create an account and credit it first, in which case the procedure would be as follows:
Sign up to a cryptocurrency exchange which supports the coins you want to convert.
Credit your account by sending your crypto of choice to the provided address, which is usually designated specially for you.
Exchange your cryptocurrencies when it suits you.
Withdraw them to your private wallet by entering your address (make sure to use the right wallet and the right address for each different cryptocurrency).
Some services make it a whole lot easier by skipping the creation of an account. In these cases, it might be just as simple as sending some cryptocurrency to a given address and receiving the exchanged funds at another. It’s best to use these services for smaller transactions as, typically, this is the kind of convenience you have to pay for with worse rates.
What’s more, you might also be able to find individuals willing to exchange between cryptocurrencies directly, in a similar manner as described earlier. Again though, this means the tradeoff of a cheaper price for perhaps a higher risk.