How to buy crypto ? What is CEX exchange and DEX exchange ? You’ll find out everything about it and more in this fascinating article.
The meteoritic rise of crypto valuations to command trillions in market cap has captured the attention of governments, retailers, investors, and institutions. Cryptocurrencies are digital assets that a government or central bank does not back or have control of. Instead, cryptocurrencies are traded peer-to-peer (P2P): directly between users without an intermediary from a public blockchain.
If you’re new to cryptocurrency and eager to buy, you may find the process a little daunting. Buying Bitcoin, Ethereum, and other cryptocurrencies can be tricky because, among many factors, price fluctuations, the complexities of crypto and blockchain, and the fact that they are still new with developing infrastructure can introduce challenges.
The good news is that you can follow a few strategies to make it easier than you think. This guide will help you understand the basics of buying crypto and some of the best places to go about it.
But first, the basics.
What Are Cryptocurrencies?
Cryptocurrencies are decentralized virtual currencies traded between peers without any centralized authority.
They are decentralized because they are not issued or managed by any single entity but rely on the blockchain powered by distributed nodes. This allows cryptocurrencies to avoid the trust issues that have plagued government-issued currencies for centuries. Bitcoin is the most popular cryptocurrency because it was the first and is still the most widely traded.
Cryptocurrencies were originally the domain of tech enthusiasts and computer scientists. Despite their expansion over the years, they’re still relatively new compared to other asset classes. But they have gained mainstream attention in recent years as investors and merchants have become interested in their potential as an asset class.
Over the years, cryptocurrencies have risen from obscurity to being a core asset in finance, enabling the movement of trillions worth of value every year. Furthermore, top cryptocurrencies are being adopted by institutions and Bitcoin has even been made legal tender by some governments.
Best Platforms To Buy Crypto
Many people are hesitant to buy Bitcoin and other cryptocurrencies because they aren’t sure where to start. If you want to buy cryptocurrencies, you can do so from the below platforms.
Centralized Exchanges
Centralized Exchange (CEX) is the platform where you trade one cryptocurrency for fiat or another cryptocurrency. They’re generally safe and reliable because they support fiat currencies, are regulated and require less technical know-how to connect. However, they are custodial and could be susceptible to hacking or loss of funds if they collapse. Best CEX examples are Binance, Coinbase, and Gemini.
Decentralized Exchanges
Decentralized Exchange (DEX) is trading platform deployed on smart contracting platforms like Cardano, BNB chain, or Ethereum, allowing users to swap cryptocurrencies without an intermediary. Although it could be an option for users, it may be a bit technical to access. The primary advantage when using a DEX includes better security and the buyers retaining control of assets. Leading examples include Uniswap, PancakeSwap, and SushiSwap.
Uniswap
Uniswap is an automated system of non-upgradable smart contracts on the Ethereum blockchain that operates as an automated liquidity protocol with a constant product formula. By putting a priority on decentralization, censorship resistance, and security, it eliminates the need for trusted intermediaries. Open-source software with a GPL license is Uniswap.
PancakeSwap
With the greatest trading volumes on the market, PancakeSwap is the best decentralized exchange on BNB Smart Chain. Why should you pay more? BNB Smart Chain, a blockchain with much cheaper transaction costs than Ethereum or Bitcoin, powers PancakeSwap. Compared to other leading decentralized exchanges, trading costs are also lower.
SushiSwap
SushiSwap is an Ethereum-based software that aims to encourage a network of users to manage a marketplace where people may buy and trade digital assets. SushiSwap accomplishes this through a network of liquidity pools, much to platforms like Uniswap and Balancer. Trading occurs when users secure assets in smart contracts, exchanging one token for another as they purchase and sell cryptocurrencies from these pools.
Top 3 Cryptocurrencies
These are the top three cryptocurrencies available for purchase in most leading cryptocurrency exchanges and with high liquidity for smooth trading.
They are:
Bitcoin (BTC): This asset is the “original” cryptocurrency, first launched in 2009 by its mysterious founder, Satoshi Nakamoto. BTC is the most liquid cryptocurrency with over $564 billion in market cap as of Q2 2022 and listed by all centralized exchanges. Some countries like El Salvador have also adopted it as legal tender.
Ethereum (ETH): The decentralized smart contract platform hosts ETH, the cryptocurrency that primes the Ethereum ecosystem. Ethereum Network is the first smart contracting platform from which users can deploy smart contracts and launch dApps. ETH is the second most valuable cryptocurrency. As of Q2 2022, ETH had over $245 billion in market capitalization.
Cardano (ADA): The smart contracting platform is peer-reviewed and is the most decentralized proof-of-stake (PoS) consensus algorithm platform with over 3k nodes. The Cardano project is led by Charles Hoskinson, who also co-founded Ethereum. With an emphasis on privacy, decentralization, and scalability, the network aims to be scalable, secure, and stable. According to trackers, in Q2 2022, ADA had a market capitalization of more than $18 billion.
Safety Tips When Buying Cryptocurrencies
As demonstrated, there are several ways you can go about when buying cryptocurrencies like BTC or ETH. However, this also comes with the risk of losing funds. Before you start buying any coins, here are some safety tips you should follow:
- Do your research. Don’t blindly buy a cryptocurrency without understanding its fundamentals or opt for a given exchange because of marketing. The best way to start out is to buy established coins like ETH, BTC, ADA, and those in the top-5 by market cap.
- When starting, make sure you use a reputable and regulated exchange like Binance or Coinbase. Periphery exchanges may have attractive offers but they could be susceptible to hacks, not sufficiently regulated, or have thinner liquidity.
- After buying your crypto, ensure you store it in a secure, reputable wallet. If using a crypto exchange like Coinbase, you can leave it there until you have an alternative, non-custodial wallet. When using a DEX, always store your coins in a trusted and battle-tested wallet, approved by the community.
Three Strategies for Long-term Investing In Cryptocurrencies
There are three ways you can buy and invest in cryptocurrencies for the long term. You can:
- Buy small amounts and hold them for a long time as a HODLer.
- Purchase a crypto product that holds a number of liquid digital assets
- Invest in a crypto fund that invests in a variety of cryptocurrencies
While attractive, these strategies have their pros and cons.
For example, holding a small amount can be an excellent way to get started without risking too much money. However, it can also be risky because the price of a coin can heavily fluctuate over a short period.
Another strategy is to purchase a fund that holds different cryptocurrencies. This method can be good for diversifying your portfolio because the price of each coin can heavily fluctuate, causing losses.
Bottom line
Buying cryptocurrencies can be a daunting task for anyone new to digital currencies. With so many different exchanges and crypto assets, it can be challenging to know where to begin. The market is also constantly changing. Thus far, there are over 19k digital assets, according to trackers. Meanwhile, old ones are getting rebranded or discontinued altogether. However, following the above steps can make the whole process easier. Overall, it is good to have a solid understanding of what you are buying before committing. Therefore, always do your due diligence and keep your cryptocurrencies safe.
Frequently Asked Questions
What are cryptocurrencies and why are they valuable?
Cryptocurrencies are decentralized digital assets traded directly between users without intermediaries like banks. Their value comes from supply and demand, utility within blockchain ecosystems, and growing acceptance as an alternative investment class.
Where can I buy cryptocurrencies like Bitcoin and Ethereum?
You can buy cryptocurrencies on centralized exchanges like Binance, Coinbase, and Gemini, which offer user-friendly interfaces and support for fiat currencies. Alternatively, decentralized exchanges (DEXs) like Uniswap, PancakeSwap, and SushiSwap allow peer-to-peer trading with greater privacy and control.
What should I consider before choosing an exchange?
Choose a reputable, well-regulated exchange with strong security measures and high liquidity. For beginners, centralized platforms are easier to navigate. Advanced users may prefer DEXs for full asset control and privacy, though they require more technical understanding.
How can I keep my cryptocurrencies safe after buying?
After buying, store your assets in a secure wallet. For long-term storage, hardware wallets or trusted non-custodial wallets are recommended. Avoid keeping large amounts on exchanges for extended periods due to hacking risks.
What are some strategies for long-term investing in crypto?
You can HODL by buying and holding over time, invest in diversified crypto products or funds, or use dollar-cost averaging to reduce exposure to volatility. Regardless of strategy, always research the asset’s fundamentals and invest responsibly.
