Cryptocurrencies have gone mainstream in the past few years. While Bitcoin was just a niche product a few years ago, it has now become popular among retail and institutional investors. In addition to BTC, there are now more than 11,000 cryptocurrencies that have a market cap of more than $2 trillion. This makes them a relatively popular asset class. In this article, we will look at the different options that are available when you want to buy cryptocurrency.
Using centralized exchanges
The most popular method of buying bitcoin and other cryptocurrencies is to use one of the popular exchanges. These exchanges are companies that provide a marketplace where people can buy and sell cryptocurrencies in full or partially.
Exchanges have been in a strong growth in the past few years. In 2021, Coinbase made history when it went public in New York. At its peak, the company’s market capitalization soared to more than $100 billion although that has changed. It is now valued at more than $63 billion, making it one of the biggest companies in the world.
Other exchanges have made a lot of progress as well. For example, the market value of FTX has jumped to more than $30 billion, making its founder a billionaire. Gemini, the company started by the Winklevoss twins, has also reached a valuation of more than $7 billion. And Binance, the biggest firm of them all, has reached a market value of more than $100 billion in the private markets.
These companies have a relatively easy model. They provide cryptocurrencies and a way for people to buy them. Users do so by creating an account, depositing funds, and then buying the coins. They can do this using some of the popular payment methods like credit cards and wire transfers. Exchanges also allow buying of coins like Litecoin using a debit card.
The benefit of using these companies is that they have deep liquidity, meaning that orders are often implemented at a relatively good pricing. At Bankless Times, they have reviewed some of the best cryptocurrency exchanges in the world.
Using decentralized exchanges
Another way of buying cryptocurrencies is to use decentralized exchanges. The exchanges we have mentioned above are all centralized. This means that they are owned by individuals who are responsible for making decisions. They are also for-profit entities that are motivated by profit. Also, they must always work within the confines of local laws.
Decentralized exchanges, on the other hand, are different. Although they are started by individuals, they are governed by the community. It is the community that makes major decisions. They are also different because they don’t collect user data from their users. Some of the most popular decentralized exchanges are Uniswap, PancakeSwap, and SushiSwap.
Peer-to-peer exchanges
Another option for buying cryptocurrencies is through peer-to-peer exchanges. These are companies that enable people to buy and sell cryptocurrencies in a secure manner.
There are several benefits of using these peer-to-peer exchanges over the other ones mentioned above. For one, you can sell and receive your coins in your preferred location. For example, if you want to receive your coins in a local bank or in an online wallet like PayPal, you can get users who do that. Another benefit is that you can negotiate a good price with the crypto seller. Their limitation is that they don’t carry a lot of coins like exchanges like Binance. Some of the best-known exchanges are Paxful and LocalBitcoins.
Buying crypto using wallets
The growing popularity of cryptocurrencies has pushed more companies into the industry. For example, a company like Square generates billions of dollars from Bitcoin trading. It does that through its Cash App product. Americans can easily buy and sell bitcoin using the network.
Similarly, a company like PayPal has added cryptocurrency support to its eponymous application and to its Venmo product. Venmo is a social peer-to-peer platform that is relatively similar to Cash App. Many other popular online wallets have embraced cryptocurrencies.
Using CFD brokers
It is also possible to buy Bitcoin and other exchanges using contract-for-difference (CFD) brokers. A CFD is a financial instrument that tracks another asset. By buying a CFD, you will benefit from the price movement of the real asset. For example, when you buy a Bitcoin CFD, you will be owning BTC indirectly.
CFD exchanges are usually suited to people with experience in trading and investing. That’s because they provide leverage, which is a useful service that maximizes capital. For example, if you have $1,000, you can buy Bitcoin worth $30,000 if you select a leverage of 1:30. Some of the popular CFD brokers that provide cryptocurrencies are ATFX, OctaFX, and easyMarkets.
The bottom line
It has become relatively easy to buy cryptocurrencies lately. In this article, we have looked at some of the best options you can use to buy cryptocurrencies like Bitcoin and Ethereum. Your choice will mostly depend on what you want to do with your coins and the overall cost of the transactions.
