How to Buy And Sell Cryptocurrency – Janine Griffiths
I have a confession. I wrote this blog for myself. Allow me to explain. A few years back, I became really curious about the potential of cryptocurrencies. I was particularly interested in Bitcoin, which has increased in value over the years.
Sure, it had been subject to a fair amount of peaks and troughs, but I think we can all agree that it’s come along way since its inception in 2009.
Since then, I’ve become interested in other cryptocurrencies too. I viewed them as a long term investment that can potentially become profitable in the future. I also saw them as a form of financial freedom that was independent of any government or organisation. The problem was, I didn’t know how to profit for them. I knew fairly well how to buy them, but I’m not exactly an experienced investor and frankly, I didn’t know where to start.
Many blogs I had read were either too technical or not detailed enough. Perhaps it was my lack of understanding. So my solution was to do as much research as I could and jot down a series of notes about my findings and common themes.
This blog is a compilation of those notes and is meant as a simplified layman’s guide on how to buy and sell cryptocurrency. I hope I’ve been successful in my aim to strike a balance between simplifying what can be a potentially complex subject and including enough useful detail to get you started. So without further ado, let’s get to it.
First things first, how do you buy cryptocurrencies in the first place? Because obviously you will need to purchase them before you can sell them. There are many options available to you and the fees vary depending on the platform you are buying from and the cryptocurrency you are buying. So let’s take a look at where you can buy cryptocurrencies.
There are two types of exchanges: centralised and decentralised.
Centralised exchanges like Coinbase have a governing organisation that oversees all transactions. Decentralised exchanges do not.
Examples of centralised exchanges include: Bittrex, BitMEX, Binance, ChangeNOW, etc
With a cryptocurrency exchange, there are multiple buyers and sellers that are placing offers to buy and sell simultaneously. Buyers can choose to buy at any price, but to complete the order, a seller should agree to the transaction. The median price on these exchanges are set as the last agreed-upon price between buyers and sellers.
To use an exchange, you will usually have to register your details, and wait for verification. Often, you will need a passport photo to verify your identity.
Most of the exchanges will ask you to set up 2FA Authentication, which will allow you to enter a pin code on your phone or via an app. I strongly suggest activating 2FA authentication when given the opportunity to do so, because the majority of exchanges have been hacked in the past.
The payment methods accepted by exchanges depends upon the one you are using. Most will accept credit cards or debit cards, and PayPal. After your account is verified, it is just a question of adding your account details.
One thing you should be aware of is that almost all of the exchanges will charge you a transaction fee of at least 1.4%. Once your account is up and running, you can then start buying cryptocurrencies that are listed on the exchange. Most exchanges will ask you to add a payment method first, before you can select the cryptocurrencies you want.
So here are the main things you should look out for before selecting a cryptocurrency exchange:
Security. Not all exchanges are created equal. One of the most important considerations is security. With so many exchanges having been hacked in the past, I would carefully check their security policies. For example, some exchanges have a policy of reimbursing their customers in part or in full if they have been hacked whereas others…don’t.
Furthermore, if an exchange does not offer 2FA authentication or password backups, then don’t bother with it. Exchanges are the most lucrative target for many hackers, so failing to have basic security protocols is a definite no-no.
Transaction fees. Not only should you check the transaction fees, but you should also compare them to other exchanges. The lower the fee, the better for you.
Payment Options: Some exchanges offer more convenient methods of payments than others. These include PayPal, bank transfers, direct debit, card payments, et cetera. Choose an exchange that will be easier and more convenient for you.
Cryptoassets: This will all depend on which cryptocurrency you want to buy. For example, if you want to purchase one of the more niche altcoins, then you should check whether the exchange offers the cryptocurrencies you need.
User reviews: The user reviews will give you an idea of the kind of experience you can expect. Of course, all online reviews should be taken with a grain of salt. But if there are many reviews, the general tone of those reviews will certainly give you an idea of whether it is likely to be worthwhile or not.
These types of exchanges do not have a governing organization, so you don’t have to trust the middle man. Instead, the rules are set by smart contracts, which are built upon the if this, then that principle. Essentially, this is a technical way of saying that the technology is designed so that whatever actions you take on the exchange (such as selecting a cryptocurrency) will determine the outcome.
This cuts out the need for any broker or middle man. It also helps users to sidestep any government interference, regulations, bans or taxes.
From a security point of view, these exchanges are less vulnerable than centralised exchanges because the centralized hot wallets of the exchange are lucrative targets for hackers, whereas DEX users are in control of their own funds. This means there are no central points of attack. On a DEX, users can trade with other users and the cryptocurrencies will be transferred from each other’s wallets rather than from wallets in the cryptocurrency exchange.
Another easy way to purchase cryptocurrencies is by using brokers. With a broker, the organisation sets the price and fee that they’re willing to sell for.
They either hold the funds or work with a network of other brokers in order to keep sufficient supply. Brokers will usually keep prices similar to that of others in the same markets in order to appeal to buyers. Some of the broker exchanges include XTB, and eToro. Coinbase is one of the easiest broker exchanges to use. Its ‘getting started’ button will guide you through the process of buying a cryptocurrency.
The advantage of a broker is that they often offer enhanced support, so you won’t completely lose your account as can happen with an exchange. They can provide some accountability in case anything goes wrong. One of the biggest advantages of using a broker is that they will buy or sell cryptocurrency for a fixed price, meaning that prices are less subject to volatility than on exchanges.
Cryptocurrency brokers, like exchanges, make it easy to get stuck in and buy crypto. But this comes with a word of warning. Not all crypto brokers offer basic security such as 2FA Authentication. So be sure to pick one that does.
Quick note: Most if not all of the exchanges and brokers have the cryptocurrencies or altcoins you may need, but it is still important to check what cryptoassets are on offer before selecting an exchange.
Bitcoin ATMs are relatively new on the crypto scene. They are similar to the fiat ATMs, only they allow you to buy Bitcoins for cash deposits. Some ATMs will ask you for your phone number and then send you a text message to verify. You will then be asked to provide your cryptocurrency address and if you don’t have one, they will usually allow you to create one.
Once you have deposited the cash (or in some cases, you are able to pay by card), the ATM will send the funds to your wallet and issue you with a receipt.
It should be noted however that if you used the ATM to create the wallet, then the details of that cryptocurrency wallet (private and public keys) will be on your receipt — so be careful not to lose this!
The problem is that there aren’t many ATMs — as they are still relatively new. However, you can find a list of available ATMs here. Transaction fees can also be relatively high — sometimes between 5–10%.
Allow users to buy and sell cryptocurrency to and from each other directly, without the middleman. It also helps users to avoid some of the high fees that come with brokers. Some of the more well known P2P exchanges are LocalBitcoin and LocalEthereum. These exchanges work in a similar way to Craigslist. Once you have set up an account, it is then a question of looking through the listings and deciding who you want to buy the cryptocurrencies from.
Some sellers will require that you submit your photo ID and some have restrictions on the type of payments they can accept. You should also consider the reviews and reputation of the seller and/or buyer. Look for one that has made a lot of trades.
After that, it will be a question of entering your details and answering any questions the listing is seeking for and entering how much you want to pay. The seller can then choose whether to accept your request. If accepted, the funds are usually held in a website’s escrow (a secure place that nobody has control over) until both the seller and buyer can confirm they have fulfilled their end of the bargain.
Once you have deposited the funds, the seller will get a notification that the payment has been made and they will provide a reference number. Write the reference number onto the receipt and take a photo of it and send the photo of the receipt to the seller.
When things have been confirmed by both yourself and the seller, the escrow will release the funds to the seller.
The great thing about these platforms is that there are no fees and many allow you to buy cryptocurrency with cash. However, the drawback is that they are not as easy to use as cryptocurrency exchanges and for that reason, they tend to have fewer users.
You should also be careful when choosing a buyer.
The process of selling cryptocurrency is broadly the same as buying. You can sell cryptocurrencies from the same places you buy them. Some exchanges such as Kraken and Bitstamp make the process of cashing in your cryptocurrencies very easy.
So let me give a brief summary of how you can convert Bitcoin into cash. In some cases, if you hold other cryptocurrencies, you will need to convert them to Bitcoin before you can obtain the cash equivalent.
Of course, every platform is different and while I won’t go into detail about the exact processes or the ins and outs of every platform, hopefully, the short summaries below will give you an idea.
To trade on a cryptocurrency exchange such as Bittrex, Bitfinex and Binance, there will usually be a button with something like ‘exchange’ or ‘trade’ written on it. Of course, you will need to select the cryptocurrency you wish to sell. Enter the price you want to sell the currency for and then submit your selling order.
Most exchanges use a bidding or auction system, so once you enter your desired price, this will then show up on the exchange. When a buyer sees it and agrees to the sale, the process of transaction will begin.
In any case, once your selling order is complete, the system will then take care of the rest and find a buyer who is willing to take your coins for the price you have specified.
Once the entire process has been completed, the coins will disappear from your account and the system will then take care of the rest and find a buyer who is willing to take your coins for the price you have specified.
Once that process has been completed, the coins can be withdrawn to your bank account by submitting a bank transfer or alternatively used to buy other cryptocurrencies.
On peer-to-peer exchanges, you can advertise the cryptocurrencies you want to sell and the terms of that sale. If a buyer likes the terms of the deal, buyers can select the ad. When that ad is accepted, the platform acts as an escrow and locks the digital assets so that the funds are inaccessible to either party.
Once the buyer has sent the money, the cryptocurrency is unlocked and sent to the buyer. This prevents fraud on either side, and ensures that both the buyer and seller sticks to their side of the bargain.
There are many different online cryptocurrency forums and communities where you can find people who want to buy crypto coins.
To identify potential buyers, the best course of action is to set up a thread about wanting to sell your cryptocurrencies. You should disclose the price, the amount you have, and the method by which you wish to get paid.
This will allow buyers to get in touch with you and discuss the offer in greater detail. Be prepared for a little bit of bargaining here as they will usually try and get a better price off you.
Of course, the obvious thing to watch out for in these forums is that you do not have the protection of a third-party mediator, exchange or site to ensure that everything will go smoothly.
To mitigate the risks, I strongly recommend that you only sell to people with strong references from former trades. If all looks well and good, ask them to send you the money and send the coins across to their unique cryptocurrency wallet address.
In some countries, like the UK for instance, many of the main high street banks make it difficult for you to withdraw large amounts of money from cryptocurrency exchanges or similar platforms. Some users have complained of their funds not being accepted, due to the fact it is crypto-related.
In extreme cases, users have had their bank accounts closed. Most of these people have done one of the following:
- Moved large amounts of money of more than 5 figures (this will usually trigger a KYC money-laundering investigation.)
- Operated a cryptocurrency business (most banks in the UK don’t accept this)
- Moved money in and out of an account regularly from cryptocurrency exchanges or similar businesses — this will usually trigger an investigation as to whether you are running a cryptocurrency business
While many users have experienced no problems when trying to withdraw funds into their bank accounts, this can be a problem for some users — even those that do not fall into the above categories. So I definitely recommend contacting your bank to check if this will be a problem beforehand.
In the meantime, here is a quick list of crypto-friendly banks:
Just be sure to read the reviews before selecting a new banking provider.
Some Bitcoin ATMs are bi-directional allow you to sell bitcoins as well as obtain them. These typically include Robocoin, Genesis1 and Satoshi2 from Genesis Coin, BitAccess and BATMThree model from General Bytes.
You will usually need to have an existing account to conduct selling operations. Please note that the registration process often involves a lot of time, energy and effort.
Some machines such as Robocoin require you to have a telephone number for activation and notifications, government-issued ID, palm scan and a current photo taken by the ATM’s webcam.
Different machines and operators will vary their processes, but you can pretty much guarantee that some sort of verification process will be needed before you can sell cryptocurrencies.
The machines will then give you a QR code with a wallet address where you can send your bitcoins to. Some machines will give you cash in exchange immediately, whereas others will give you a redeem code and you will need to wait for the transaction confirmation.
Most machines will require you to confirm only once, whereas others will need you to confirm up to six times before you can receive the cash.
Due to the amount of regulation surrounding Bitcoin ATMs, the verification process can be somewhat involved and thorough for some users. You may find the other methods in this blog easier when it comes to selling Bitcoin.
These machines are still in their early stages and the majority of these machines will only allow you to trade Bitcoin, although a select few allow you to trade Ethereum, Litecoin and other cryptocurrencies.
The process of buying and selling cryptocurrencies is relatively simple, but it can be daunting for the uninitiated. Hopefully, this guide has done a good job in presenting the available options to you and inspired you to give it a try.
It’s hard to name the best platform to buy or sell cryptocurrency, because of course, that will depend on your personal preferences.
Personally I prefer the security of exchanges when it comes to buying or selling crypto, but of course, they do take their share of your earnings in fees. Peer-to-peer exchanges are the next best thing, although using those websites can be a little complex if you do not fully understand the process.
In any case, there is always a little bit of a learning curve when it comes to buying or selling cryptocurrencies for the first time. However, I am someone who believes that bitcoin and cryptocurrencies like it are more than just an investment — they are the future of money, in much the same way that fiat was before it replaced the gold standard.
So from that perspective, I believe that it is well worth taking the time to understand how it all works. Hopefully, this guide has gone some way in helping to bridge the gap between the technicalities of trading crypto and the rewards derived from it.