Choosing an Exchange
Find exchanges that will work in your country. There are hundreds of cryptocurrency exchanges all over the world. For regulatory reasons, not all exchanges work in all countries. Additionally, exchanges may only take traditional money from certain countries. Generally, you're best served by choosing an exchange located in the same country where you are. That way, your cryptocurrency is governed by the same laws and regulations that you are. Look for a physical address for the exchange to confirm that the exchange is located in your country. You can typically find this on an "about" page that lists basic information about the exchange. If you can't find a physical address, you're probably better off not using that exchange. In addition to identifying the physical address, it may be beneficial to examine the certifications obtained by a specific exchange, such as those from FinCEN, FINTRAC, AUSTRAC, or the FCA.
Limit your choices to exchanges that take traditional money. If you're buying cryptocurrency for the first time, you'll have to use traditional money – known as fiat currency in crypto circles – to buy your coins. For this reason, there's no point in registering with an exchange that only accepts cryptocurrency for payment. You might look at methods of payment as well, and think in terms of security. Some exchanges require bank transfers, while others accept PayPal or credit or debit cards. While using your credit or debit card for your purchase may be convenient for you, it is less secure than other methods. You also want to take note of how long the exchange takes to complete your transaction. If you are comparing two exchanges that are otherwise equal, but one takes over a week to complete a transaction, while the other completes transactions within 24 hours, you likely want to go with the second choice.
Determine how you want to use cryptocurrency. There are some exchanges that prohibit or limit withdrawal of cryptocurrency from your account. This would be fine if you simply want to buy cryptocurrency as an investment. However, if you plan to use your cryptocurrency regularly to buy goods and services, you'll want an exchange with fewer limitations. Consider when the exchange is open to trades and make sure this suits your schedule as well as your intended use of cryptocurrency. For example, if you plan to actively trade cryptocurrency, you may feel more comfortable with an exchange that is open to trading 24/7. If this is your first cryptocurrency purchase, you may not know exactly how you want to use cryptocurrency – and that's okay. Think in terms of what you might have an interest in doing in the future, and give yourself room to expand as your comfort with crypto grows.
Decide what types of cryptocurrency you want to buy. If you're just getting started with cryptocurrency, Bitcoin – which represents about 47 percent of cryptocurrency on the market – is a simple and safe bet. However, given that there are thousands of other coins available, it's worth looking into at least a few others before you make a final decision. Once you've identified maybe a handful of different coins that you're potentially interested in, check your list of exchanges and cross off any exchanges on your list that don't trade in the cryptocurrencies you want.
Compare fees at different exchanges. There are different types of fees charged by exchanges, and these can vary widely. The most basic fee is a network or miner fee, which will also be the lowest (typically only a few cents USD per transaction). Depending on your method of payment, you may also be charged a conversion fee. This fee varies anywhere from 0.5 percent to 5 percent of your total purchase, and is charged by the exchange to convert your fiat currency into cryptocurrency. Some exchanges don't charge a conversion fee for funds transferred directly from your bank. You may also be charged transactional fees by the exchange based on your trading volume. These fees range from 0.1 percent to 0.5 percent, with lower fees typically paid by more active traders (those who buy and sell on the exchange more frequently).
Evaluate the exchange's user interface. If you can't figure out how to use the exchange, you're not going to get much enjoyment out of trading cryptocurrency. Look for a straightforward, intuitive interface that you can easily navigate. You might also look at the resources the exchange has to educate and guide beginners as they start to trade cryptocurrency. Beginner-friendly exchanges include Coinbase, Bitit, Cex.io, CoinMama, Coinsquare, Gemini, Kraken, and ShapeShift.
Research the exchange's reputation. Do some research off the website of the exchange itself to find unbiased articles and reviews. Read about the history of the exchange and its founders. If you can't verify an exchange's legitimacy, don't invest your money there. If the exchange has had security issues or other problems in the past, find out how those problems were addressed. You may have to dig deep to find negative stories that the exchange developers attempt to hide from search results so as not to dissuade potential customers. Don't just look on the first page of search results, go 10 or 15 pages deep if possible.
Assess the exchange's security. Exchanges can be vulnerable to hackers, so it's important to thoroughly assess the exchange's security. First and foremost, the site itself should be secure ("https://" rather than "http://"). Beyond that, personal and financial information you transmit to the site should be encrypted. Find out if the exchange allows for offline storage of cryptocurrency (sometimes called "cold storage") and two-factor identification (2FA).
Creating an Account
Gather materials for verification of your identity. Because of the level of security required, setting up an account at a cryptocurrency exchange is a little more involved than setting up your usual online account. Have basic identification and payment information handy, as well as keeping your mobile phone nearby and your email account open. Expect it to take at least 10 minutes to set up your exchange account. For security and privacy, don't start the process in a public place, or on a public WiFi network.
Provide the requested personal information. On the home page of the exchange, click on the button to sign up or create an account. You'll be taken to a form that looks like many you've likely filled out in the past to set up an account on any other website. For this first step of the process, you'll provide your name, address, phone number, email address, and other basic information. You may also be asked to choose a username and password. Make sure your password is complicated and secure.
Verify your email and set up 2FA. Once your information is received, the exchange will send an email to the address you provided. That email will include a link or code that you'll use to verify your email address. The exchange also will send a text message to your mobile phone with a code you must enter to access your account. The text-message code is part of 2FA. This process will occur every time you log on to your exchange account. Provided you enter your password correctly, the exchange will send a code to your phone. You'll be granted access to your account when you correctly enter the code. Because the verification links and codes are only valid for a brief period of time, it is recommended that you have your phone nearby and your email account open. If you don't see an email within a few minutes, check your spam or junk folder.
Upload a government-issued photo ID. To complete the registration process, some exchanges require you to scan both sides of a government-issued photo ID and upload the scanned images to the exchange. Acceptable IDs include a driver's license or passport. You may be able to purchase small amounts of cryptocurrency without completing this step. However, the total amounts of cryptocurrency you can purchase or hold will probably be limited. The exchange also may limit the number of trades you can make per day or week.
Take a selfie with a specified logo or written phrase. On most exchanges, you'll have full access to the exchange without going through this additional step. However, some exchanges may limit the size or volume of your trades until you complete this step. Typically, the site will provide a phrase that you must write out on a piece of paper, along with the date. You'll then take the selfie so that both your face and the piece of paper are clearly visible. Some exchanges may send you a unique code that also must be written on the piece of paper.
Completing Your First Transaction
Connect your method of payment. After you've verified your identity and opened your account, you'll need to connect that account to the source of traditional money you'll use to buy your cryptocurrency. Depending on the method you choose, it could take 3 to 5 days for the connection to be completed. If you use your bank account, this will typically take longer. However, it's also more secure and typically offers quicker processing time for purchases. You may be able to connect a credit card instantaneously, but it will be less secure and you'll likely encounter additional processing fees. If you have to wait for your method of payment to connect, watch the markets for a few days and look around the exchange to become more familiar with the interface and transaction process.
Place your order. When you're ready, click the link to buy cryptocurrency and identify the type of cryptocurrency you want to buy and the amount you want. You don't have to buy a whole coin. Since cryptocurrency is infinitely divisible, you can buy any fraction of a coin. The easiest thing to do is buy a certain dollar amount, without paying attention to how much cryptocurrency you're actually buying. Cryptocurrency is extremely volatile. Especially for your first transaction, don't spend any more money on cryptocurrency than you can afford to lose. Stop and review your information before you send it. Make sure you've entered all the numbers correctly and your decimals are in the right places.
Wait for your payment to process. You typically won't see the cryptocurrency in your account right away. While processing time depends on the exchange and the method of payment you used, it may take up to a week for your cryptocurrency to appear. If you're planning on holding your cryptocurrency for investment, you should consider moving it offline as soon as possible, rather than leaving it in your exchange account. Right away, be sure to take steps to keep your cryptocurrency safe.
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