How to buy cryptocurrencies with USD?

How to buy cryptocurrencies / cryptos with USD?

[Disclaimer: 

This blog is not to be considered as financial advising. 

It simply offers tutorials on how to navigate the crypto world and make your first transactions.

You should not invest any amount that you are not comfortable losing! 

Trade to learn the ropes first!

] 

Be prepared, acquiring cryptos

is not for the faint of heart!

But if, step-by-step,

my lead you follow! 

Coins you will earn.

In a later post we will cover how to buy tokens, that is, how to participate in an ICO.

What is a Crypto?

A Crypto is a digital medium of exchange stemming from the blockchain technology.

Cryptos have somehow hijacked back the concept of currency after it was annexed over the course of time by states and governments.

Currencies, that is the medium of exchange, proved to be a powerful lever to control economies and societies.

The blockchain technology ripped through that sleeping monopoly, 'ubering' out bankers and statesman in one single home run... well at least on paper.

The first known crypto was the Bitcoin.

Created in 2009 under the group name of Satoshi Nakamoto, it was the first decentralized digital currency.

Who creates cryptos?

Contrary to legal currencies like EUR or USD, anyone can create a crypto.

Most of the Blockchain code is open-source. Anyone with a crypto-knack and/or a geek disorder can create its own fork of the code, based upon its own vision of how it should be. 

As a result, as of today, there are more than 1600 cryptos traded on thousands of exchanges.
Source: coinmarketcap

Introducing coinmarketcap.com at that stage is actually the right transition to the object of this post:  How to buy cryptos step-by-step with USD?

Step-by-step process

Step 1: Identifying which crypto you want to buy?

Go to the free coinmarketcap  site and browse the crypto list.

The below table ranks cryptos per market capitalization. Market cap is the simple product (multiplication) of the number of issued coins * the price of that coin (crypto).

Thus, Bitcoin market cap. in the below table is:

q 17 049 125 * p 7921.61 =mc 135 056 519 091.25

Source: coinmarketcap.com (May 2018)

Another important indicator in the above table is the Price. 
It will determine how much you can actually buy with your budget.

For the sake of this tutorial, let's assume that we are willing to buy $200 of Bitcoins.

This would make us the proud owner of 200/7921.61= 0.0252474 Bitcoins (BTC)

Rome ne s'est pas construite en un jour...

Step 2: Identify on which exchange your crypto is sold and through which currency can it be purchased.

Now that we know what we want to buy: Bitcoins, where and how can we buy Bitcoins?

Click on the Bitcoin name  to reach the Bitcoin dedicated page.

Then click on Markets to see the list of exchanges (Markets) where Bitcoin can be purchased.

Finally concentrate on the exchanges that list  BTC/USD, because that's all we have at that stage, US Dollars, to get into the crypto world!

From the above table, 3 exchanges allow you to buy bitcoins with USD:

• Bitfinex
• Bitstamp
• GDAX

Tip: If you want to buy Bitcoins with a different legal currency, i.e. EUR, change the currency value on the top right of the table, from USD to your currency.

You will also notice that the Bitcoin price on those exchanges is slightly different. That's what you get with a decentralized currency.

For simplicity let's select GDAX, a US-based exchange to purchase Bitcoins.

After signing up into www.gdax.com, well...

Hum... it doesn't look simple at all..

Let's switch gear and use Coinbase, an application created by GDAX but for mom and pop investors like us.

So let's sign-up into www.coinbase.com

(Note: Coinbase fees are insane... but they really do simplify getting into the crypto world)

Coinbase interface seems more manageable, let's proceed!

Step 3: Create a trading account on the identified exchange

Be patient! With most exchanges, creating a trading account will imply providing legal documentation (proof of ID, of address), smile to your webcam for a mugshot, wait for the exchange to perform the KYC (Know your client) process and multiple factors authentication. usually login /password + your phone... so it might take several days!

Creating the trading account is one thing, but you need also to link a bank account or to wire funds

With Coinbase, linking a US Debit card is the fastest way to fund your trading account.

Once your trading account and  source of funding are approved, you can now begin to trade, that is to buy your first cryptos.
  
At that stage, it's pretty sure that the Bitcoin price that we had spotted on coinmarketcap is long gone... Hey welcome to the Badlands, it will happen again :)

Step 4: Transfer funds to your trading account

Wire $200 to your Coinbase trading account and start trading cryptos.

Coinbase cleverly doesn't charge you a fee when you wire funds to your trading account (but they will get you later;)

Step 5: Issue a buy order, your first trade

The D-day has come, we are ready to issue our first Buy order.
In Coinbase the site or the mobile application,

1. Click on Buy/Sell,
2. Select Bitcoin
3. Enter the USD amount that you are willing to spend
4. Based on the current price, Coinbase will automatically calculate the number of Bitcoins (BTC) you are able to purchase with your dollars.

What are we noticing?

The Bitcoin price has changed since we initially spotted it, it is now $7998.81
Our $200 allow us to buy 0.024007206 BTC (Fee included).

Step 6: Discover the fee structure

                                                                     La vie est dure...

Coinbase charges us a $7.67 fee for this Bitcoin purchase. This by itself should make us run away!
Yet in my experience, their site is one of the fastest way to get started on Cryptos.

Let's take it as a trade-off!

For further trading I'd recommend going back to coinmarketcap.com and evaluate others exchanges based on their fees policy. 

Step 7: What next?

Depending on your risk appetite and investing strategy, you have several options:

1. HODLING:  That is buying cryptos and holding to them for a long-term period (more than a year). In that case you might consider storing your cryptos into a cold storage unit.
2. TRADING: Watch out for Bitcoin price fluctuations on Coinbase and sell your position out whenever you'll strike a profit (Beware IRS will tax this as short-term gain if the crypto was held for less than 365 days).
3. DEEP DIVING: Out of the 1600 available cryptos  mentioned at the beginning of this post. Most of them can only be purchased using another established crypto like Bitcoin (BTC) or Ethereum (ETH). Participating in ICO also sometimes requires to already own cryptos.

  

=> In the above example, on Binance, (another exchange with a more favorable fee structure) if we were to buy some EOS coins, we could only purchase them using ETH or BTC...

This concludes the first post on how to buy cryptos with USD. I hope it was as enjoyable for you to read than for me to write it.

In the next post, I will cover how to transfer bitcoins from Coinbase to Binance?