This post is the start of a series of posts that will cover different aspects of crypto world. It’s meant for everyone except crypto OGs. Beginners and intermediate crypto investors will find the most value in it since everything I write is from experience. I will not recommend you something if I didn’t try it myself. Above everything, I will try to keep you safe from scams which are plenty in crypto world.
So, let’s start!
Let’s start first by breaking some illusions. If you want to invest in crypto to get rich overnight I must disappoint you. There is 99,99% you won’t. Also, there is a very big chance you’ll lose most of your invested money if you decide to invest with that mindset.
With that mindset, you’ll invest in coin or NFT that some Twitter / Youtube influencer is recommending because that’s a revolutionary technology, the next big thing which you just can’t miss! Your chance to realize your “American dream”, invest 1.000€ and sell for 100.000€ in a few days/weeks/months.
Or you will get a message from Elon Musk on Twitter to send him 1 BTC and he will send you back 5 BTC in a few hours.
Or you will invest in DeFi pool which promises 150% yearly ROI.
Or you will see that you can use 100x leverage on exchange and quickly calculate you can use just 10.000€ to buy 1.000.000€ worth of BTC.
If you spend some time in crypto you’ll notice all these scams. The cryptocurrencies world is a minefield and everyone wants to take your money, not help you earn more. Sooner you realize that, more chance you have to keep your money and earn some.
You can also quickly read the latest ESA (European Supervisory Authorities) document with warnings for new retail investors in crypto assets.
Introduction to crypto terms and concepts
Now we need to get you to understand some key crypto terms and concepts. It’s hard for me to remember which terms were unknown to me when I entered crypto, so if you feel that I should add something, message me and I’ll do my best to add it.
Crypto wallet, private key and seed phrase
Every cryptocurrency has its own wallet. The wallet is basically a cryptography safe that is protected by a private key (e.g. safe combination/key). This is an example how a private key can look like.
Nothing exciting. 😀 But you must not share it with anyone, ever!
It can also come in form of a seed phrase which consists of 12 to 24 words (usually English words). Seed phrase isn’t the same as a private key, but both open up your wallet.
company public remove bread
fashion tortoise ahead shrimp
onion prefer waste blade
If you want to learn more about private key, seed phrase, and how crypto wallets work, search the Web for more in-depth info.
You don’t need any kind of hardware to have crypto wallet, but if you search the web you’ll see … drum roll … hardware wallets. 🙂 They are hardware, which store your private key, not your wallet. With them you can control how and when your private key is used.
The wallet isn’t needed if you want to invest in cryptocurrencies, you can keep all your crypto on an exchange. But if you are buying larger amounts of cryptocurrencies it’s usually smart to keep them in your personal wallet under your control.
When people mention crypto exchange they usually have in mind a centralized crypto exchange or CEX. They are run by a business entity, have their own servers, support etc. Most, if not all, crypto exchanges will ask you to complete KYC (Know Your Customer) before allowing you to buy/sell crypto. This includes sending pictures of your document (Nacional ID or passport), proof of residence, tax or social number, utility bill etc.
You don’t need crypto exchange to send and receive cryptocurrency, but in most cases, this is where you buy or sell crypto. My overview of reputable crypto exchanges can be found in the linked article.
Decentralized crypto exchange
Or DEX. It’s a crypto exchange run without a central server and no support. Management for part of decentralized crypto exchanges is anonymous. On DEX you are trading directly from your crypto wallet.
Decentralized Finance (DeFi)
Finances without a bank, usually with help of DEX.
Italian car manufacturer. 😀 And also money that is not backed by any commodity such as gold or silver according to Wikipedia (eg. US dollar, Euro, British pound…).
Cryptocurrency usually under the control of one business entity that tries to keep its value pegged to the fiat money it represents. For example, 1 USDT (Tether) will always try to be worth 1 USD (US dollar). If you check USDT/USD chart for the last few years you will see that this isn’t always the case.
How can you actually buy cryptocurrency
Buying cryptocurrency is relatively easy. There are a few ways to do it which I’ll explain conceptually here. In a new blog post, I’ll get down and dirty detailing the best, safest, and cheapest exchanges to use.
You need to know which cryptocurrency you want to buy. After you researched everything and decided what to buy, you can buy it in the following ways:
- Credit/debit card
- Bank account
If you know someone who is selling cryptocurrency, you can just meet in person, have a coffee and make a transaction during that time. You will need to have a working cryptocurrency wallet before the meeting.
This type of transaction implies cash, so it has some risks if you don’t know the person you are dealing with. It also has advantages since it leaves very little traces of who’s the seller or buyer. Good for privacy-conscious people.
There are no fees and cryptocurrency price is agreed between peers, usually by following current price on high profile cryptocurrency exchange, but it can differ.
The easiest and fastest way to buy a cryptocurrency is also the most expensive one. If you Google how to buy crypto with a credit card, you will probably find 20-30 services in the first 10 minutes. To buy on some of them you need an active wallet address, and on others, you need to use their proprietary wallet (which implies registering).
The biggest difference between them will be fees, which can be enormous, especially if you are buying smaller amounts.
Some of them don’t accept buyers from all countries, so you’ll have to be careful about that also. EU cards are usually accepted on most services. US cards not so much. Other countries also vary from service to service.
After peer-to-peer, this is the cheapest way to buy cryptocurrencies. You’ll need to use a crypto exchange that supports bank transfer of funds. Since bank transfer is involved, most of the time spend here depends on how fast banks are in your country. EU introduced SEPA Instant transfers in the last few years, so if your bank and exchange banks both support it you can transfer funds 24/7 and it usually takes less than 10 seconds for your funds to arrive. In other countries, it might take up to a few days to transfer funds to exchange.
Bank transfers aren’t usually expensive. Where I come from fees are around 0,30 € per transfer regardless of the amount. Also, exchange fees are much lower when you are buying cryptocurrency on the spot market with fiat transferred via bank transfer.
In this article, I tried to get you familiar with some crypto concepts which you need to when starting your crypto journey. I hope it helped.
Future articles will extend on this one explaining in detail the following subjects:
- How to buy Bitcoin, and other cryptocurrencies safely and cheaply?
- What are the cheapest services for buying crypto with a credit card?
- Trading made easy and simple! Should you trade crypto?
- The best strategy for simple investing in cryptocurrencies
If you have other topics you want me to cover, please use the contact form.