The realm of cryptocurrencies has experienced meteoric growth in recent years, transforming from a niche interest into a mainstream investment option. As more people explore the potential of these decentralized digital assetsAsset An economic resource with value that an individual or organization owns, controls, or expects future benefits from. Examples of assets: gold, stocks, cryptocurrencies, etc., the question of how to buy cryptocurrencies arises. There are several ways to buy cryptocurrency: this comprehensive guide delves into all methods available for purchasing cryptocurrencies.
How to to buy cryptocurrencies using legal tender
First of all, a consideration: almost all the methods we will see require the use of an electronic payment instrument such as a credit card, a prepaid credit card or a bank transfer. However, as we will see, it is still possible, in some limited cases, to use cash to purchase cryptocurrencies. Here is a complete list of the various methods to purchase cryptocurrencies using legal tender:
- Centralized Crypto Exchanges (CEXs)
- Decentralized Crypto Exchanges (DEXs)
- Initial Coin Offers (ICOs)
- Over-the-Counter (OTC) Desks
- Peer-to-Peer (P2PP2P P2P stands for Peer to Peer. A peer-to-peer network allows users to exchange data without intermediaries.) Platforms
- Bitcoin ATMsAutomated Teller Machine (ATM) An electronic banking outlet that allows customers to perform basic banking transactions without the need for a teller.
- Cryptocurrency brokerages
- Banks and financial institutions
- Mobile apps
- Crowdfunding platforms
- Reward Programs
Let’s see them in detail.
Centralized Crypto Exchanges (CEXs)
CEXs are the most well-established and widely used platforms for buying and selling cryptocurrencies. They offer a wide range of features, including:
- User-friendly interfaces
- Wide selection of cryptocurrencies
- Multiple payment methods
- Staking and lending services
- Security features
However, CEXs are also subject to regulatory scrutiny and may be less private than decentralized options. Here is a summary of the pros and cons of buying cryptocurrency through a CEX:
Pros
- Wide range of cryptocurrencies available
- Multiple payment methods
- Often have competitive fees
- User-friendly interface
- Relatively safe
Cons
- May be less secure than decentralized options
- May be subject to regulatory scrutiny
- May require KYC/AML verification
- May have limited liquidity for less popular cryptocurrencies
Learn how to buy cryptocurrencies using a Centralized Crypto Exchange (CEX).
Decentralized Crypto Exchanges (DEXs)
DEXs are peer-to-peer platforms that allow you to trade cryptocurrencies directly with other users without the need for intermediaries. They offer the following advantages:
- Decentralized and censorship-resistant
- No KYC/AML requirements
- High liquidity for certain cryptocurrencies
However, DEXs may be more complex to use than CEXs and may have lower liquidity for less popular cryptocurrencies. Here is a summary of the pros and cons of buying cryptocurrency through a DEX:
Pros
- Decentralized and censorship-resistant
- No KYC/AML verification required
- Lower fees than CEXs for some transactionsTransaction Exchange of value, property, or data between two parties.
- More control over your funds
Cons
- May require technical expertise
- May have limited liquidity for some cryptocurrencies
- More complex to use than CEXs
Learn how to buy cryptocurrencies using a Decentralized Crypto Exchange (DEX).
Initial Coin Offerings (ICOs)
ICOs are a type of crowdfunding where early adopters can purchase tokens in a new cryptocurrency project in exchange for fiat currency or other cryptocurrencies. They allow investors to buy tokens or coins in the project at a discounted price before they are listed on public exchanges. ICOs can be a risky investment, as there is no guarantee that the project will be successful. However, they can also be a way to get in on the ground floor of a potentially valuable new cryptocurrency. Here is a summary of the pros and cons of buying cryptocurrency through an ICO:
Pros
- Potentially high returns: ICOs can offer investors the opportunity to get in on the ground floor of a new cryptocurrency project, which has the potential to become very valuable.
- Early access to new technology: ICOs allow investors to participate in the development of new cryptocurrency projects and gain access to new technology before it is widely available.
- Community involvement: ICOs often involve a strong community of developers, investors, and supporters, which can create a sense of camaraderie and shared interest.
Cons
- Risk of fraud: ICOs are often unregulated, which makes them more susceptible to fraud and scams.
- Illiquidity: ICO tokens may be illiquid, which means that it can be difficult to sell them for a profit.
- Volatility: The prices of ICO tokens can be volatile, which means that there is a high risk of losing money.
Learn how to Buy Cryptocurrencies Using Initial Coin Offers (ICOs).
Over-the-Counter (OTC) Desks
OTC desks are private marketplaces for buying and selling large amounts of cryptocurrency. They offer the following benefits:
- Lower fees than CEXs
- Ability to customize transactions
- Access to illiquid cryptocurrencies
However, OTC desks require more documentation and verification, making them less accessible to retail investors. Here is a summary of the pros and cons of buying cryptocurrency through a OTC Desk:
Pros
- Lower fees than CEXs for large transactions
- Can accommodate more customized transactions
- Access to illiquid cryptocurrencies
Cons
- Requires more documentation and verification than CEXs
- Not as user-friendly as CEXs
- Less transparent than CEXs
Learn how to buy cryptocurrencies using Over-The-Counter (OTC) desks.
Peer-to-Peer (P2P) Platforms
P2P platforms connect buyers and sellers directly, allowing you to purchase cryptocurrencies from other individuals. They offer the following advantages:
- Wide range of payment methods
- Competitive pricing
- Ability to buy and sell specific amounts
However, P2P transactions may carry higher risks of scams or fraud. Here is a summary of the pros and cons of buying cryptocurrency through P2P platforms:
Pros
- Wide range of payment methods
- Competitive pricing
- Ability to buy and sell specific amounts
Cons
- Higher risk of scams or fraud
- May require more technical expertise
- Less transparent than CEXs
Learn how to buy cryptocurrencies using peer-to-peer (p2p) platforms.
Bitcoin ATMs
Bitcoin ATMs allow you to buy Bitcoin with cash. They are becoming increasingly common and offer the following convenience:
- Convenient way to buy Bitcoin
- No need for a bank account
However, Bitcoin ATMs typically have high fees and limited liquidity. Here is a summary of the pros and cons of buying cryptocurrency through Bitcoin ATMs:
Pros
- Convenient way to buy Bitcoin
- No need for a bank account
Cons
- High fees
- Limited liquidity
- Not as secure as CEXs or DEXs
- Limited number of cryptocurrencies available
Learn how to buy cryptocurrencies using Bitcoin ATMs.
Cryptocurrency Brokerages
Cryptocurrency brokerages offer a streamlined and user-friendly experience for buying and selling cryptocurrencies. They are similar to traditional brokerages, but instead of stocks, they deal in cryptocurrencies. Here is a summary of the pros and cons of buying cryptocurrency through cryptocurrency brokerages:
Pros
- Streamlined and user-friendly experience
- Similar to traditional brokerages
- May charge lower fees than CEXs
Cons
- May not offer the same range of features as CEXs
- Not as decentralized as CEXs or DEXs
Learn how to buy cryptocurrencies using cryptocurrency brokerages.
Banks and financial institutions
A growing number of banks and financial institutions are offering cryptocurrency tradingTrading Trading is a speculative activity of buying and selling financial assets aimed at profit. services. This is a relatively new development, but it may become more common in the future. Here is a summary of the pros and cons of buying cryptocurrency through banks and financial institutions:
Pros
Wider adoption and acceptance
More user-friendly than P2P or OTC platforms
Cons
May have limited selection of cryptocurrencies
May have higher fees
Learn how to buy cryptocurrencies using banks and financial institutions.
Mobile apps
Several mobile apps allow you to buy cryptocurrencies using legal tender. They offer the convenience of purchasing cryptocurrency from your mobile device. Here is a summary of the pros and cons of buying cryptocurrency through mobile apps:
Pros
- Ease of use and portability
- Convenient way to buy and sell cryptocurrencies on the go
Cons
- May have limited features and fees
- Not as secure as desktop platforms
Learn how to buy cryptocurrencies using mobile apps.
Crowdfunding platforms
Some crowdfunding platforms, such as Kickstarter and Indiegogo, are accepting cryptocurrency donations. This is a way to support projects you believe in while also acquiring cryptocurrency. Here is a summary of the pros and cons of buying cryptocurrency through crowdfunding platforms:
Pros
- Support projects you believe in
- Acquire cryptocurrency passively
Cons
- May not be a good way to accumulate large amounts of cryptocurrency
- Risk of investing in unsuccessful projects
Learn how to buy cryptocurrencies using crowdfunding platforms.
Reward programs
Some companies offer rewards programs that allow you to earn cryptocurrency for your purchases. This is a way to accumulate cryptocurrency without having to spend any money upfront. Here is a summary of the pros and cons of buying cryptocurrency through rewards programs:
Pros
- Passive way to earn cryptocurrency
- No upfront investment required
Cons
- May not earn a significant amount of cryptocurrency
- May require you to spend a lot of money