How to buy your first crypto
Lesson 2 of 39 in the course “Crypto”. Free, with animations and a quiz.
Where people buy crypto
The easiest start is a crypto exchange: a site or app where you swap regular money for coins. The path: sign up, pass KYC (an ID check), top up by card or bank transfer, buy. The picture shows where crypto lives: an exchange keeps coins for you, a wallet holds your keys (the secret access to your coins), and the blockchain records every transfer.
How to pick an exchange
Before depositing, run the five checks from the picture. Does the exchange have a license where you live, and does it accept people from your country? Does it publish proof of reserves, a report showing its reserves cover client money? For example, $104 in reserves for every $100 of client funds. What are the trading and withdrawal fees? And how many years has it run without withdrawal problems?
Spread and fees
The spread is the gap between the buy price (ask) and the sell price (bid) at the same moment. Example quote from the picture: buy at 1.1246, sell at 1.1244, a gap of 0.0002. So right after buying you are slightly in the red. On top come the exchange trading fee and the fee for withdrawing coins. A limit order, meaning a buy only at the price you set, helps you avoid overpaying.
Spot, not futures
Spot: you buy the coin itself and can withdraw it to your own wallet. Futures: a contract on the price, usually with leverage, meaning a position bigger than your money thanks to the exchange's funds. Leverage brings liquidation: the exchange closes your trade by force and your deposit is gone. Spot cannot be liquidated, the coin just gets cheaper or pricier. Beginner basics: spot only.
How much to put in first
Make your first buy with money you can afford to lose: crypto can drop by tens of percent. The picture shows how the size of your risk changes the result. If each bad move costs 1% of your money, five in a row leave you 95.1%. At 10% each, you keep 59%, which is minus 41% (0.9 × 0.9 × 0.9 × 0.9 × 0.9 ≈ 0.59). Small amounts buy you time to learn.
Check yourself
- What is safer for a beginner: spot or leveraged futures?
Correct answer: Spot, where you buy the coin itself. Spot cannot be liquidated: the coin is yours even if the price drops. With leverage, the exchange can force-close your trade and take your deposit. - What is KYC on an exchange?
Correct answer: An identity check with your ID. KYC means an identity check: the exchange asks for an ID and sometimes a selfie. Without it you usually cannot deposit or withdraw. - How much should your first buy be?
Correct answer: An amount you can afford to lose. Crypto can fall hard. A small amount lets you learn without hurting your budget: remember the gap between 1% and 10% risk.