How To Buy Cryptocurrency – Forbes Advisor Canada

How To Buy Cryptocurrency – Forbes Advisor Canada

If you’re new to the crypto world, figuring out how to buy Bitcoin, Dogecoin, Ethereum, and other cryptocurrencies can be confusing at first. Fortunately, learning the ropes is pretty simple. You can start investing in cryptocurrency by following these five easy steps.

1. Choose a Broker or Crypto Exchange

To buy cryptocurrency, you must first choose a broker or a crypto exchange. Although both allow you to buy crypto, there are a few key differences between them to keep in mind.

What is Cryptocurrency Exchange?

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 trading types and advanced performance charts, all of which can make them daunting for new crypto investors.

Some of the best known cryptocurrency exchanges in Canada are Coinbase, Netcoins, Newton, Coinberry and Binance Canada. While the standard trading interfaces of these companies can overwhelm beginners, especially those with no background trading, they also offer user-friendly easy-to-buy options.

However, convenience comes at a price, as beginner-friendly options cost far more than it costs to buy the same crypto through each platform’s standard trading interface. To save on costs, you can aim to learn enough to use standard trading platforms before or soon after making your first crypto purchase.

An important note: As a newbie to crypto, you’ll want to make sure that the exchange or brokerage you choose allows fiat currency transfers and purchases in Canadian dollars. Some exchanges only allow you to buy crypto using another crypto; this means that before you start trading crypto on that platform, you need to find another exchange to buy tokens that your preferred exchange accepts.

What is a Cryptocurrency Broker?

Cryptocurrency brokers take the complexity out of buying crypto by providing 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 on what you and other traders are buying and selling to major brokerages or funds, or by not executing your trade at the best possible market price. Wealthsimple Crypto is one of the most well-known crypto brokers.

While they are undeniably convenient, you should be wary of brokers because you may face restrictions on removing your cryptocurrency holdings from the platform. For example, in Wealthsimple Crypto you cannot transfer your crypto assets from your account. This may not seem like a big deal, but advanced crypto investors prefer to keep their coins in their crypto wallets for extra security. Some even choose offline hardware crypto wallets for added 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 quantity you plan on purchasing, you may need to verify your identity. This is an important step to prevent fraud and meet federal regulatory requirements.

You may not be able to buy or sell cryptocurrency until you complete the verification process. The platform may ask you to submit a copy of your driver’s license or passport, and you may even be asked to upload a selfie to prove your appearance matches the documents you submitted.

3. Invest Cash for Investment

To buy crypto, you need to make sure you have funds in your account. You can fund your crypto account by linking your bank account, authorizing wire transfer, and even paying by debit or credit card. Some exchanges in Canada will also allow you to use Interac e-Transfer. Depending on the exchange or broker and your funding method, you may have to wait a few days before using your deposit to buy cryptocurrency.

Beware of a big buyer: While some exchanges or brokerages will allow you to deposit money from a credit card, doing so is extremely risky and expensive. Credit card companies process cryptocurrency purchases with credit cards as cash advances. This means they are subject to higher interest rates than regular purchases and you must also pay additional cash advance fees. For example, when taking a cash advance, you may have to pay 5% of the transaction amount. This is on top of any fees your crypto exchange or brokerage may charge; these can go up to 5%, meaning you could lose 10% of your crypto purchase to fees.

4. Place Your Cryptocurrency Order

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

Once you have decided which cryptocurrency to buy, you can enter the ticker symbol (e.g. Bitcoin is BTC) and how many coins you want to buy. With most exchanges and brokers, you can buy partial shares of the cryptocurrency, buying a series of highly priced tokens like Bitcoin or Ethereum that would otherwise have to be owned by the thousands.

The symbols for the top 10 cryptocurrencies based on market cap* are as follows:

  1. Bitcoin (BTC)
  2. Ethereum (ETH)
  3. Tether (USDT)
  4. USD Coin (USDC)
  5. Binance Coin (BNB)
  6. XRP
  7. Binance USD (BUSD)
  8. Cardana (ADA)
  9. Left (LEFT)
  10. Dogecoin (DOGE)

*Based on market value as of 12 May 2022

5. Choose a Storage Method

Cryptocurrency exchanges, Canada Deposit Insurance Corp. (CDIC) and is at risk of theft or hacking. Because there are millions of dollars of Bitcoin already, if you forget or lose the codes to access your account, you may even lose your investment. That’s why it’s so important to have a safe storage place for your cryptocurrencies.

As mentioned above, if you are buying cryptocurrency through a broker, you may have little or no choice in how your cryptocurrency is stored. If you buy cryptocurrency through an exchange, you have more options:

  • Leave the crypto on the stock market. When you buy cryptocurrency, it is usually stored in a crypto wallet linked to the exchange. If you don’t like the provider of your exchange partners or you want to move to a more secure location, you can transfer it from 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 so.
  • Hot wallets. These are crypto wallets that are stored online and work on internet-connected devices such as tablets, computers or phones. Hot wallets are convenient, but because they are still connected to the internet, the risk of theft is higher.
  • Cold wallets. Cold crypto wallets are not connected to the internet, making them your safest option for holding cryptocurrency. They take the form of external devices such as a USB drive or hard drive. However, you should be wary of cold wallets – if you lose the keycode associated with them or the device breaks or malfunctions, you may never get your cryptocurrency back. While the same can happen with some hot wallets, some are managed by escrow that can help you get your account back if you get locked out.

Alternative Ways to Buy Cryptocurrency

While buying cryptocurrency is a big trend right now, it is a volatile and risky investment option. If investing in crypto on an exchange or through a broker doesn’t sound like the right choice for you, here are a few options for indirectly investing in Bitcoin and other cryptocurrencies:

1. Wait for Crypto Exchange Traded Funds (ETFs)

ETFs are extremely popular investment vehicles that give you exposure to hundreds of individual investments in a single move. This means they provide instant diversification and are less risky than investing in individual investments.

Currently, there are 5 cryptocurrency ETFs approved for trading on the Toronto Stock Exchange in Canada. These are Evolve Bitcoin ETF (EBIT), Fidelity Advantage Bitcoin ETF (FBTC), CI Galaxy Bitcoin ETF (BTCX), Purpose Bitcoin ETF (BTCC), and 3iQ CoinShares Bitcoin ETF (BTCQ).

2. Invest in Crypto Affiliated Companies

If you prefer to invest in companies that have tangible products or services that are subject to regulatory oversight but still want exposure to the cryptocurrency market, you can buy stocks of companies that use or own cryptocurrencies and the blockchain that powers them. You will need an online brokerage account to purchase shares of publicly traded companies such as:

  • Nvidia (NVDA). This technology company designs and sells graphics processing units that are at the heart of systems used for cryptocurrency mining.
  • PayPal (PYPL). A popular choice for people who already buy products online or transfer money to family and friends, the payment platform has recently been expanded to allow customers to buy and sell certain cryptocurrencies with PayPal and Venmo accounts in the US.
  • Square (SQ). This payment services provider for small businesses has acquired over $220 million in Bitcoin since October 2020. In February 2021, the firm announced that Bitcoin makes up about 5% of the cash on its balance sheet. Additionally, Square’s Cash App (not available in Canada) allows people to buy, sell, and store cryptocurrency.

As with any investment, be sure to consider your investment goals and current financial situation before investing in cryptocurrency or individual companies with a large stake in it. Cryptocurrency can be extremely volatile – a single tweet can cause its price to plummet – and it is still a very speculative investment. This means that you have to invest carefully and carefully.

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