How do you buy cryptocurrency?

Most people buy cryptocurrency by opening an account with a company that sells it, paying in ordinary money and receiving coins in return. The main routes are a crypto exchange, a broker or payment app, an exchange-traded fund, a bitcoin ATM and a direct trade with another person. They differ in cost, convenience and who ends up holding the coins.

What are the main ways to buy crypto?

• Crypto exchanges. A crypto exchange is a marketplace that matches buyers with sellers. Coinbase, Kraken and Binance are well-known examples.
• Brokers and payment apps. Some stock-trading and payment apps, such as Robinhood, PayPal and Cash App, sell a short list of coins inside an app people already use. Some restrict moving coins out to a private wallet.
• Funds. A spot bitcoin ETF is a fund that holds bitcoin and trades on a stock exchange. US versions began trading in January 2024. The buyer owns shares in the fund, not coins.
• Bitcoin ATMs. Bitcoin ATMs are kiosks that turn cash into crypto. They typically charge far more than online routes.
• Peer to peer. Two people agree on a price and trade directly, sometimes through a platform that holds the coins in escrow until payment arrives.

What are the steps on an exchange?

1. Open an account. This takes an email address and a password.
2. Verify identity. Regulated platforms ask for a government ID and often a selfie, a check known as KYC.
3. Add money. Funding is by bank transfer or card.
4. Place an order. A market order buys at once at the going price. A limit order waits for a price the buyer sets. Coins can be bought in fractions.
5. Decide where the coins stay. They can remain in the exchange account, where the company holds them, or be withdrawn to a personal crypto wallet, where the owner holds the keys.

What does it cost?

The price on the screen is rarely the whole cost. A platform may charge a trading fee, build a margin into the price it quotes, add a surcharge for card payments and charge again for withdrawals. The guide to crypto fees explains each charge.

What are the risks?

Prices can move sharply within hours, and nothing guarantees that a buyer gets their money back. Coins left on a platform depend on that company staying solvent and secure, a risk the collapse of the FTX exchange in November 2022 made plain.

The Federal Deposit Insurance Corporation, which protects US bank deposits, has said its insurance does not cover crypto assets or the failure of a crypto company. Blockchain transfers also cannot be reversed, so coins sent to a fraudster or a mistyped address are usually gone. First-time buyers are also a frequent target of fraud, often through fake trading sites or instructions to pay at an ATM.