Decoding Crypto: How to Buy, Sell and Track Cryptocurrencies
The technology behind cryptocurrency is different from online banking, payment services, and other financial products that process fiat money like dollars or yen. That’s because crypto assets are nothing more than lines of code in a decentralized ledger; their worth is not backed by any centralized authority, but by the collective faith of independent investors around the world.
Blockchain represents a radical departure from traditional monetary systems. As a result, the way investors acquire, hold, and sell cryptocurrency is different. For one, buyers can obtain full control of their digital assets because ownership is conferred by a cryptocurrency’s private keys.
Exchanges and wallets are paired with private and public keys -- long strings of numbers and letters, or QR codes -- that enable cryptocurrency users to send and receive funds. Private keys allow cryptocurrency to be unlocked and sent. Public keys, which are available to others, enable cryptocurrency holders to receive cryptocurrency from other senders.
Self-custodial wallets allow crypto enthusiasts to maintain sole control over their digital assets. However, most investors prefer the simplicity and ease of centralized exchanges, which act as a middleman between investors and crypto assets.
Investors looking to buy cryptocurrency have a variety of options. Here are five of the largest exchanges on the market:
Binance is the leading global exchange for cryptocurrency, with daily trading volume topping $30 billion. The firm’s U.S. wallet, Binance.US, is available in 43 states and provides access to over 50 cryptocurrencies. Trading fees range from 0.1% for spot trading to 0.5% for instant buy/sell; users save 25% when paying fees in BNB, the exchange’s native cryptocurrency. Binance is known as a hub for retail traders but has recently pushed to attract more sophisticated investors by developing institutional-grade trading services.
Coinbase, created in 2013, has become the leading U.S. exchange, with over $3 billion in daily trading volume and over 56 million registered users. Coinbase’s exchange charges a flat fee of about .5% per trade, although that can vary based on market gyrations. Coinbase offers access to around 70 cryptocurrencies, and its institutional product has attracted over 8,000 institutions. Coinbase went public in 2021 under the ticker symbol COIN, and boasts a market capitalization of around $50 billion.
Gemini is a U.S. exchange, founded and run by the Winklevoss twins, who became billionaires from their large bets on Bitcoin. Gemini offers buying and selling of over 40 different tokens. The exchange’s Earn product allows users to generate interest on their crypto holdings. The company is a New York trust company and is regulated by the New York State Department of Financial Services.
Huobi Global is a leading global exchange, but is unavailable for U.S.-based investors, making it an alternative for non-U.S. investors. Huobi enables trading for 372 different tokens, according to its website. The exchange allows investors to buy with up to 5X leverage for spot trades. Huobi was founded in China, is headquartered in the Seychelles, and trades on the Hong Kong Stock Exchange.
Uniswap is a decentralized protocol that allows buyers and sellers to directly exchange tokens with one another, making it an option for investors who want to maintain full control of their crypto assets. The Uniswap protocol enables automated transactions on the Ethereum blockchain, employing smart contracts to eliminate the need for an intermediary token holder. With its automated liquidity, Uniswap pools together crypto assets in a way that allows traders to execute buy and sell orders instantly.
For stock market investors who only want to dabble in cryptocurrency, many of today’s largest fintech applications and brokerages also offer buying and selling of virtual tokens, including PayPal, Robinhood, and Square’s Cash App.
All these exchanges, as well as fintech apps also provide investors a way to track their crypto purchases and investment performance.
For investors who want to buy cryptocurrency for the first time, education is paramount. Before choosing an exchange, investors need to research whether that platform is sanctioned by regulators in their jurisdiction. Investors need to make sure that an exchange meets their needs, too, from providing access to certain cryptocurrencies to offering trading features. First-time investors also need to ask themselves how much money they are comfortable with losing. Cryptocurrencies are volatile assets. The gains can be huge, but so can potential losses.
This article is part of our Decoding Crypto series, where we explore the fundamentals of cryptocurrency and how investors can start interacting with the digital asset. Check out our other articles:
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.