How to buy and sell crypto
Cryptocurrency is in the news all the time these days. If you don't yet own any, you might wonder, where are people getting this stuff? Can I get some too?
One way to acquire bitcoin or other cryptocurrency is to buy some. Of course, once you own it, you may also want to know how to sell it. There are various venues out there for trading cryptocurrency, some accessible to beginners and some more appropriate for advanced crypto users.
Here's a breakdown of your options for buying and selling crypto.
A financial institution you already know
Increasingly, banks and brokerage firms are offering customers the option to purchase cryptocurrency through the same accounts they use to hold other forms of value, such as stocks or cash. For instance, through a partnership with Bakkt, Hanover Community Bank will offer customers the ability to purchase bitcoin or ether through its mobile banking app.
If you are already a customer, this approach means you don't have to find a new company or learn a new system in order to trade cryptocurrency. If you feel comfortable with the customer service and security of your platform, getting into crypto could be a smooth transition.
So far, only a few mainstream financial institutions offer crypto. And those that do may only offer a few of the thousands of cryptocurrencies currently in existence. But it's a start.
A centralized crypto exchange
If you have ever used an online stock trading platform, centralized exchanges may be familiar to you. Like more traditional financial platforms, a centralized crypto exchange allows you to trade digital assets through a third party.1 To participate, you create an account, providing identifying information similar to how you would with an online bank or brokerage. You may be able to fund your account using a credit card or bank transfer.
Once you have a funded account, it's just a matter of clicking on the crypto you want to buy and typing in the amount, then pushing a button. Selling works the same way.
The Bakkt App allows you to buy bitcoin and ether in this way.
After working with your regular financial services provider, signing up for a centralized exchange is probably the next easiest way to get into crypto. Well-known centralized exchanges offer customer service. Some even help you determine if your crypto trades have resulted in taxable income. Centralized exchanges also seek to have a lot of liquidity, allowing you to sell or buy your cryptocurrency quickly.
You should keep in mind, however, that a centralized exchange is a third party between you and the blockchain—the shared digital ledger that keeps track of all transactions in bitcoin or in another cryptocurrency. If you were attracted to crypto because you believe the blockchain makes fraud impossible, or to avoid third-party fees, you may want to consider the next option instead.
A decentralized crypto exchange
Unlike a centralized exchange, this type of platform operates on a peer-to-peer basis, connecting you with another person who wants to buy or sell cryptocurrency, with no third party.2 This type of exchange may use smart contracts on the blockchain to complete the transaction.
This type of platform may appeal to you if you prefer to retain control of your cryptocurrency at all times, instead of having a centralized exchange trade it for you. You may also benefit from the fraud protection provided by the blockchain's public and irreversible transactions. And because there's no central company involved, fees are low or nonexistent.
However, if you are in a hurry to sell or buy a lot of cryptocurrency quickly, you could be frustrated by a decentralized exchange. Most are currently smaller than centralized ones, so there can be less liquidity.3 These services may not have all the features and support that some centralized exchanges offer, making them potentially more suitable for advanced crypto traders.
There are more than 36,000 machines in the world where people can purchase cryptocurrency, according to Coin ATM Radar.4 You might see one at a convenience store or even at Walmart.5
These machines are made by various manufacturers, so they don't all work the same way, but the basic idea is that you feed cash into the machine in exchange for cryptocurrency. Some machines also allow you to sell crypto—for example, by inputting the details of your digital wallet—and receive dollars.6
Trade directly with another person
Just as you could send cryptocurrency to a friend to pay for your share of dinner, you can buy or sell crypto directly to another individual for an agreed-upon price. To do so, simply transfer the amount of crypto you want to sell via the wallet service or app you normally use. You may choose to accept paper money in exchange for your crypto, another type of crypto currency, or whatever payment you have agreed upon. (It's important you exercise caution if you are trading with someone you don't know.)
With all these options, the world of cryptocurrency is just a click or two away. While we can't predict the future, we do know today that millions of people are trying out crypto buying and selling using all these methods. Which one is right for you?