Where Can You Buy Cryptocurrency?

If you're wondering where to buy cryptocurrency, you have several options. The best places to buy cryptocurrency can generally be separated into two main baskets:

  • Brokerages. A brokerage is a company that facilitates the purchase and sale of investments, such as stocks, bonds, and mutual funds. Several of the best stock brokers now offer cryptocurrency trading through their platforms. These can be desktop-based, app-based, or both.

  • Exchanges. A cryptocurrency exchange facilitates the buying and selling of digital currencies. The biggest difference is that brokerages offer other investment vehicles. Cryptocurrency exchanges don't.

Whether you go with a broker or an exchange, make sure it has the functionality you need. For example, if you want to buy cryptocurrency on your mobile, look for the best cryptocurrency app.

It's also possible to buy cryptocurrencies directly from other people. This used to be far more popular in the early days of bitcoin. However, that can get a little complicated and is beyond the scope of this discussion.

What is a cryptocurrency exchange?

A cryptocurrency exchange is a company that facilitates cryptocurrency transactions. Cryptocurrency exchange customers can buy and sell various digital currencies. They may also be able to do the following through the exchange's platform (not an exhaustive list):

  • Exchange one type of cryptocurrency for another at prevailing exchange rates.

  • Exchange cryptocurrency for fiat currency (like U.S. dollars), or for cryptocurrencies tied to fiat currencies.

  • Spend cryptocurrencies, for example, using a linked debit card.

  • Access educational resources to learn about digital currencies.

Look out for the exchange with the best app for trading cryptocurrency if you plan to trade digital assets on the go.

Features of the best cryptocurrency apps

There are several great cryptocurrency apps on the market. To choose the right one, you'll need to decide on which features matter most to you.

Here are a few to consider:

  • Security. Look at the exchange's security features to see how many of its assets are kept offline in cold storage, whether it has private insurance, and whether it is part of a bug bounty program that encourages ethical hackers to report any weaknesses. You can also find out whether the exchange has ever been hacked.

  • Customer service. If you're new to cryptocurrency investing, 24/7 customer service is a must. Nobody wants to wade through pages of FAQ to get help because money hasn't arrived in their account.

  • Range of currencies. There are over 4,000 cryptocurrencies, but even big exchanges only offer 50 to 150 coins. On most platforms, you'll likely be able to buy Bitcoin and one or two other major currencies. But if you want to buy a specific currency or plan to invest in some of the smaller coins, you'll need an exchange that has some variety.

  • Ease of use. Cryptocurrency apps have developed rapidly as more people want to invest. However, at times that fast development has come at the cost of user-friendliness. Make sure the app has the features you want to use, and if you've never traded before, pick one that is beginner-friendly.

  • Fees. Paying unnecessary fees is throwing money away, whether you're choosing a bank, a brokerage, or the best cryptocurrency app. Check how much it costs to deposit, withdraw, and trade before you open an account. It's also worth checking the withdrawal and deposit options to make sure they work for you.

  • Research. Cryptocurrencies are a relatively new kind of investment, so the more you can learn, the better. Some apps include cryptocurrency learning centers as well as information on specific coins.

  • Interest earning. Several cryptocurrency exchanges offer ways to earn interest on your coins. Make sure you understand and are comfortable with how the interest is generated. The exchange may loan out your money, or it may pay you staking fees if you commit to leaving your coins alone for a set period.

  • Location. Some exchanges cannot operate in every U.S. state. Make sure the exchange you choose covers your state and complies with U.S. crypto regulations.

Cryptocurrency exchanges vs. brokers

By definition, a broker is an intermediary between two parties. It typically involves a financial transaction. For example, a real estate broker facilitates transactions between buyers and sellers of real estate.

So, technically speaking, cryptocurrency exchanges can be considered brokers. However, as we discussed above, there are two different types of intermediaries that facilitate the buying and selling of cryptocurrencies. Cryptocurrency exchanges, which allow users to buy and sell cryptocurrencies only. And brokerages that offer cryptocurrency trading alongside other investments like stocks and bonds.

They are all technically brokers. But there are two distinct types of businesses you can use to buy and sell cryptocurrencies.

What is the best Bitcoin trading app?

Gemini won The Ascent's 2021 award for best cryptocurrency exchange for Bitcoin and best cryptocurrency exchange overall. It has excellent security credentials, and offers a wide range of features for beginner and advanced traders.

Gemini stood out as one of the best Bitcoin trading apps because you can do more than just buy Bitcoin. Gemini Earn pays interest on cryptocurrencies, and Gemini Pay lets you spend your Bitcoin at over 30,000 stores.

The best Bitcoin trading app depends on your personal needs, and there are many good apps on the market. Before you download an app, think about everything you want it to do. For example, if you want to buy and hold Bitcoin, your needs are different from those of a person who plans to build up a diverse portfolio of coins.

Do you need a cryptocurrency wallet?

Cryptocurrency wallets are a safe way to store your digital assets, but you really only need one if you plan to amass large amounts of crypto assets or want to spend your crypto easily. The cryptocurrency you own is protected by public and private keys -- a bit like your PIN and bank account number. You use a wallet to store your encrypted keys and keep them safe.

There are two types of wallet:

  • Cold wallet. This is usually a piece of hardware that is kept offline, making it extremely difficult to hack. Cold wallets cost between $50 and $150, and are often considered the safest way to store digital currencies.

  • Hot wallet. Hot wallets are connected to the internet, so they are not as secure. However, like normal wallets, they are a convenient place to keep small amounts of crypto you might want to use.

Until recently, when cryptocurrency became more mainstream, wallets were a lot more necessary. In the early days, several cryptocurrency exchanges fell victim to hacks. And at that point, if your crypto was stolen, there was no way to get it back. So long-term crypto enthusiasts use exchanges only for trading, and store their coins in their own wallets.

However, these days, it is a lot safer to leave your coins with the exchange or brokerage where you bought them. The best app for cryptocurrency will have excellent security and store your assets offline in cold storage. Several companies also insure the crypto assets they hold.

Moreover, some platforms don't give you the option to move your digital currencies. For example, the crypto platforms offered by Robinhood or SoFi Active Investing are designed for investment purposes. So if you bought Bitcoin with them, you wouldn't be able to move it out of your account.

In contrast, exchanges like Coinbase and Gemini have built-in wallets. Like any good exchange, each lets you transfer your currency to an external wallet as well, though you may have to pay a withdrawal fee. You may have to find a wallet that is compatible with your exchange.

Think about what you plan to do with your cryptocurrencies before you buy them. If you are investing long term and want to buy and hold, you may be happy to entrust your crypto keys to the exchange or brokerage. But if you plan to trade regularly or want to spend your coins, a wallet may make sense. In which case, you'll need to look for the best app for trading cryptocurrency that will connect easily to your wallet.

What fees can you expect with the best cryptocurrency apps?

If you're looking for the best cryptocurrency app, fees play an important role.

Here are some fees to watch out for:

  • Trading fees. Fees vary depending on the exchange and type of trade. You can find fee-free trading, but you're more likely to have to pay between 0.1% and 0.5% per trade. Fees usually get lower if you trade high volumes, and you can sometimes reduce the cost further by using the exchange's native coin.

  • Deposit fees. A lot of the best cryptocurrency trading apps let you transfer money from your bank account for free. But it is worth checking, as some will charge up to 1.5%, especially if you use a debit card. If you want to pay by credit card, be aware that you're likely to get charged at least 3.5% and your bank may also treat it as a cash advance.

  • Withdrawal fees. As we saw above, you can't currently withdraw your digital assets from traditional brokerages that are trading cryptocurrencies. The exchanges usually charge a set fee depending on the currency you want to withdraw. You can check the exact fees on their websites.

Fees can really eat into your profits, especially if you trade regularly. The best cryptocurrency trading app will let you trade, deposit, and withdraw your money at a minimal cost.

Are cryptocurrencies safe?

There are two components to cryptocurrency safety -- security and investment volatility.

Let's first look at the security of your cryptocurrency investments. The cryptocurrency you hold in your account in a broker or exchange is typically very secure. That's as long as you use a reputable exchange or broker (like all of those mentioned here). Indeed, one of the selling points of bitcoin's blockchain is its security.

Most leading cryptocurrency exchanges keep the bulk of their digital assets in "cold storage." This means they are stored offline and aren't at risk of being hacked or stolen. In the earlier days of cryptocurrencies, there was a risk of exchanges being hacked, but these issues have largely been dealt with.

Alternatively, as discussed above, you can opt to keep your cryptocurrencies in a separate digital wallet of your own. You could even use one to create your own offline storage. However, the security and functionality of the major exchanges should be enough for most investors. Bear in mind that you'll need to take steps to secure your account too -- even the best app for cryptocurrency won't be protected if you don't enable two-factor authentication and set up strong passwords.

Now let's consider safety from an investment perspective. It's important to point out that cryptocurrencies -- even bitcoin, the largest and most-established one -- are a young asset class and are rather volatile. This is especially true for the smaller cryptocurrencies in the market. So, you need to be ready to withstand major price swings over time. And, just as with other investments, don't invest money you can't afford to lose.