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Over the last decade, cryptocurrency has moved more into the mainstream, attracting interest from major financial institutions and everyday users alike. Yet for newcomers, the process of buying crypto can still feel overwhelming, thanks to unfamiliar terminology, new technology, and the sheer number of available platforms. The good news is that buying crypto may be simpler than you think, even if you’re brand new to digital assets. Below, we break down what you need to know into five simple steps and highlight a few essential points to understand before you get started.
Key Points
• Choose a platform to buy cryptocurrency, such as an exchange, traditional trading platform, payment app.
• Create an account, provide identification, and add funds using a debit card, bank transfer, or bank deposit.
• Place your first order, selecting either a market or limit order.
• Store cryptocurrency securely, using cold wallets for larger amounts.
• Manage holdings by protecting keys, avoiding scams, tracking prices, and keeping tax records.
Before You Buy: 3 Quick Things to Understand
Before buying your first cryptocurrency, it’s important to understand that crypto behaves differently from traditional assets. It’s also regulated differently, and can require a more proactive approach to security. Here are some key things to keep in mind:
It’s a Volatile Asset (Be Prepared for Price Swings)
Cryptocurrency prices can swing wildly — sometimes by double digit percentages in a single day. Volatility associated with crypto is linked to several factors, including:
• Market sentiment: Crypto prices are heavily influenced by the overall mood of buyers and sellers. Positive news can lead to a rally, while negative events like an exchange failure can trigger significant drops.
• Regulatory uncertainty: Crypto laws vary globally and are still evolving. Changes in government regulations and compliance rules can significantly impact crypto prices.
• Supply and demand dynamics: The shifting dynamics between a cryptocurrency’s availability at a given time and its market demand can create significant volatility. For some cryptocurrencies, such as Bitcoin, there is a fixed supply. This limited supply, combined with fluctuating demand, can lead to steep price swings.
• 24/7 trading: Cryptocurrency exchanges operate continuously, unlike traditional stock markets that have set trading hours. This constant trading increases exposure to market volatility from any global event, rumor, or news update.
It’s entirely possible that the crypto you buy today could be worth far less (possibly even nothing) tomorrow, thanks to any of these factors. Before you learn how to buy cryptocurrency, you must first decide whether you’re comfortable with the level of risk involved.
You’ll Need to Verify Your Identity (KYC)
Most regulated exchanges and wallet providers now require you to verify your identity before buying cryptocurrency. This requirement, known as Know Your Customer, or KYC, typically involves uploading a government-issued photo ID and proof of address document and, in some cases, taking a selfie.
The provider will then cross-reference this information to confirm a user is who they claim to be and isn’t using a fake or stolen identity. This is done to comply with Anti-Money Laundering (AML) regulations and prevent financial crimes like fraud and terrorist financing.
There may be ways to buy crypto privately — such as using peer-to-peer crypto exchanges, “no KYC” decentralized exchanges, and crypto ATMs — but fully anonymous purchasing is increasingly difficult. For example, the European Union (EU) is working to ban privacy-focused coins, such as Monero (XMR) and Zcash, and prohibit anonymous accounts under its AML regulation, with full enforcement expected by 2027.
In the U.S., the recently passed GENIUS Act requires stablecoin issuers to implement strong compliance programs to prevent illicit use, including customer identification programs.
You Need a Plan for Secure Storage
Once you own crypto, you need a plan for where to store your private keys — these are the secret codes that allow you to access and manage your crypto assets, which exist on the blockchain.
Before buying, it’s important to understand the basics of crypto storage:
• Custodial storage: The exchange or platform where you buy your crypto holds your keys for you (easy but less control).
• Non-custodial storage: You hold your own keys via a personal wallet (more control but more responsibility).
If you opt for non-custodial storage, you’ll need to set up a private wallet. There are two main types:
• Hot wallets: A hot wallet is connected to the internet, making it convenient for frequent and fast transactions. Because they are always online, hot wallets may be more vulnerable to security threats such as hacking, phishing, and malware. Examples include mobile, desktop, and web wallets.
• Cold wallets: A cold wallet stores private keys offline, helping to protect it from online threats. Examples include hardware wallets (physical devices that look like a USB drive) and paper wallets (a physical paper with your public and private keys printed on it).
Crypto is
back at SoFi.
SoFi Crypto is the first and only national chartered bank where retail customers can buy, sell, and hold 25+ cryptocurrencies.
How to Buy Crypto in 5 Steps
What follows is a step-by-step guide to buying cryptocurrency.
Step 1: Choose Where to Buy Your Crypto
You’ll first need to decide where you want to make your purchase. Common options include:
Crypto Exchanges
These are built specifically for buying and selling crypto and typically offer the widest variety of coins. Examples include Coinbase, Kraken, Gemini. Exchanges generally charge low trading fees, tools to transfer crypto in and out of the platform, along with access to blockchain features like crypto staking. However, exchanges tend to present more complex trading interfaces and may lack robust customer support.
Traditional Brokers and Banks
If you have a brokerage account for trading stocks, you may be able to use it to purchase cryptocurrency. Some traditional trading platforms now offer crypto as an option along with equities. In addition, banks, including SoFi, are starting to offer or are considering offering cryptocurrency services alongside traditional banking.
Brokers and banks offer a familiar interface and institutional-level security, but may offer fewer coin choices than exchanges. In addition, they may lack some features that exchanges offer, such as the ability to receive staking rewards, make purchases, or transfer your crypto to an external wallet.
Also keep in mind that even if you purchase crypto through a broker or bank, these assets are not guaranteed or protected by government-backed insurance like the Securities Investor Protection Corporation (SIPC) or Federal Deposit Insurance Corporation (FDIC).
Payment Apps
Some mobile payment apps, including PayPal, Venmo, and Cash App, now offer built-in crypto features. These types of apps may offer a simple entry point for beginners. However, they generally only offer the most popular cryptocurrencies, may charge relatively high fees, and may not allow you to withdraw your crypto to a private wallet.
Step 2: Create and Fund Your Account
If you choose a crypto exchange (or other new-to-you platform), you’ll need to create an account by providing your name, address, and contact information. You’ll also likely need to complete KYC verification.
Once your account is verified, you can link a payment method, such as a bank account or debit card, and add funds to your account. This enables you to buy crypto with fiat currency (government-backed money like the U.S. dollar).
Step 3: Place Your First Crypto Order
When buying crypto, there are two types of orders:
• Market order: This option buys instantly at the current market price and tends to be easiest for beginners.
• Limit order: This lets you set your desired price; the trade only executes if the market hits that price.
Limit orders may be helpful if the market is moving quickly or if you want to price-shop, but market orders are common for purchases.
Before you finalize your purchase, you’ll typically have a chance to review the order and estimated fees. Once you tap “buy,” the order executes. How quickly your crypto will appear in your account may depend on the type of cryptocurrency you purchase and order you place.
Step 4: Decide How to Store Your Crypto
After buying crypto, you’ll need to decide where to store your keys. You may have the option to:
• Leaving it on the exchange/platform: Major providers typically offer custodial wallets. This offers convenience but storage methods can vary and may leave your assets vulnerable to the potential risks of the platform itself, such as hacking and insolvency.
• Moving it to your own wallet: Transferring the keys to a private wallet provides direct control over the assets. Within this category, cold storage wallets, which operate offline, are generally considered a higher security option against online threats.
Recommended: How to Send Crypto to Another Wallet
Step 5: Manage Your New Crypto Holding
Buying crypto is just the beginning. Responsible management helps protect your holdings and ensure you stay compliant with tax laws. Some tips to keep in mind:
• Protect your keys: Never share your private keys, seed phrase (which acts as a master key to your wallet) or platform login information with anybody else. Be sure to store your seed phrase offline in a safe location, such as a fireproof safe or bank safe deposit box.
• Beware of scams: Be vigilant against phishing attacks (where fraudsters trick users into revealing sensitive information like private keys or passwords), fraudulent investment schemes, and other common crypto scams.
• Keep track of your crypto’s performance: Crypto prices move fast, so tracking your holdings is important. Many platforms include built-in portfolio dashboards, but you can also use crypto tracking apps, price alert notifications, and third-party portfolio management tools.
• Keep records for tax purposes: The Internal Revenue Service (IRS) treats cryptocurrency as property, which means most transactions you make using crypto trigger a taxable event. This includes:
◦ Selling crypto for fiat currency
◦ Exchanging one crypto for another
◦ Using crypto to pay for goods or services
Many exchanges and platforms offer downloadable tax reports, but maintaining your own records is still wise, especially if you move crypto across multiple wallets.
The Takeaway
While buying cryptocurrency is now more accessible than ever, it requires a solid understanding of the risks and processes involved. By following the five steps — choosing the right platform, setting up and funding your account, placing your order, deciding on secure storage, and managing your holdings responsibly — you can navigate the market with confidence. Just remember that crypto is highly volatile and remains a high-risk asset, and you should only buy it with money you are prepared to lose.
SoFi Crypto is back. SoFi members can now buy, sell, and hold cryptocurrencies on a platform with the safeguards of a bank. Access 25+ cryptocurrencies, such as Bitcoin, Ethereum, and Solana, with the first national chartered bank to offer crypto trading. Now you can manage your banking, investing, borrowing, and crypto all in one place, giving you more control over your money.
FAQ
What are typical fees and costs when buying cryptocurrency?
Crypto transaction costs can vary significantly depending on the platform you use and the type of transaction. When buying crypto, platforms typically charge exchange fees, which can range from 0.1% to 1.5% of the purchase price. Some providers may also charge a spread, which is the difference between the buy price and the sell price listed.
When making a crypto transaction, you may incur a network (“gas”) fee to compensate the miners or validators who process the transaction on the blockchain; this fee fluctuates based on network congestion. Fees for withdrawals to external wallets or bank accounts can also apply, depending on the platform.
Can I purchase crypto with regular (fiat) currency?
Yes, crypto exchanges and platforms typically allow you to purchase cryptocurrency using traditional fiat (government-backed) currency, such as the U.S. dollar, euro, or British pound. Accounts are typically funded through a bank transfer (ACH) or bank deposit, wire transfer, or by linking a debit card. Some platforms may also accept credit card purchases, though these often come with higher fees or cash advance interest rates, and some card issuers prohibit crypto purchases altogether.
What’s the safest way to store my cryptocurrency?
A cold (or hardware) wallet is generally considered the safest option because it stores your private keys offline, protecting them from internet-based threats like hacking and malware. For smaller amounts that you plan to use frequently, a hot (software) wallet offers greater convenience but poses some risk because it is connected to the internet. Regardless of your chosen storage method, it’s important to take personal responsibility for your private keys and use security measures like two-factor authentication (2FA).
What identification is required for crypto account verification?
You will typically be required to provide a government-issued photo ID, such as a driver’s license or passport, and proof of address, such as a utility bill or bank statement, to verify your identity. In some instances, a platform may also require a selfie or video verification to confirm you are the legitimate owner of the documents. This Know Your Customer (KYC) process is standard for most regulated exchanges and platforms to comply with Anti-Money Laundering (AML) regulations.
How do market, limit, and stop-limit crypto orders differ?
A market order is a directive to buy or sell a cryptocurrency immediately at the best available current market price. This is the simplest type of order and is generally executed instantly. A limit order, by contrast, allows you to set a maximum price you are willing to pay (to buy) or a minimum price you are willing to accept (to sell). The trade will only execute if and when the market reaches your specified price or better.
A stop-limit order combines elements of both a stop order and a limit order. The stop price triggers the order to become active, while the limit price ensures the trade executes only at a price you deem acceptable.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
Photo credit: iStock/andreswd
CRYPTOCURRENCY AND OTHER DIGITAL ASSETS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
Cryptocurrency and other digital assets are highly speculative, involve significant risk, and may result in the complete loss of value. Cryptocurrency and other digital assets are not deposits, are not insured by the FDIC or SIPC, are not bank guaranteed, and may lose value.
All cryptocurrency transactions, once submitted to the blockchain, are final and irreversible. SoFi is not responsible for any failure or delay in processing a transaction resulting from factors beyond its reasonable control, including blockchain network congestion, protocol or network operations, or incorrect address information. Availability of specific digital assets, features, and services is subject to change and may be limited by applicable law and regulation.
SoFi Crypto products and services are offered by SoFi Bank, N.A., a national bank regulated by the Office of the Comptroller of the Currency. SoFi Bank does not provide investment, tax, or legal advice. Please refer to the SoFi Crypto account agreement for additional terms and conditions.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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This article is not intended to be legal advice. Please consult an attorney for advice.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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