How to buy cryptocurrency (step-by-step guide using Coinbase)

Crypto has been making headlines for a number of years now, and millions upon millions of us across the world now own crypto. Feel like you’re late to the party? Don’t worry, crypto technology is still very much in its infancy, so who knows where it could go in the future. 

If you’re keen to get involved and own a bit of cryptocurrency yourself, you’re in the right place. We’ll run through how with a handy step by step guide. As an example, we'll use Coinbase, which is probably the most popular crypto exchange (a website and app) to buy crypto.

We think it’s one of the easiest to use, and it’s also safe and secure, trusted, and very well known in the industry. Plus, you can start with just £1.

It also has one of the largest ranges of cryptocurrencies to buy and trade, so when you get a bit more confident, you can expand your crypto portfolio if you want to. And there’s lots of features for advanced traders, so it's a great place to learn.

So, let’s get cracking.

Actually, before we start, have a think about what crypto you’d like to buy. The main two are bitcoin and ethereum.

Bitcoin is often considered digital gold, and also a currency that you can use to buy things (e.g. online or even in a shop that accepts bitcoin). It’s the largest cryptocurrency in the world, and very popular.

Ethereum on the other hand, is effectively a network that can run applications and systems on top of. For instance, it’s becoming very popular for financial technology services and things like banking services. 

As a quick example, instead of sending money via your bank to a bank account in another country (which can be very expensive and slow), you could send money across the ethereum network (in various currencies, such as a digital version of US Dollars or British Pounds), and it will arrive almost instantly, all safe and secure.

There’s 100,000s of coins out there, but not all are established like bitcoin and ethereum, so please do your research before buying any coin.

Step 1: open your Coinbase account

Right, the first step is to set up your Coinbase account. Head over to the Coinbase website¹ (either on your phone or on your desktop computer) and complete your details to open your account. You’ll need to be over 18, and you’ll need to verify who you are with some proof, such as your driving license or passport. (You’ll have to do this on all the other crypto exchanges too, as it’s required by law.)

This should be pretty straightforward and it uses the latest technology to verify who you are, so you should all be set up in a few minutes. If there are any issues, you can get in touch with the customer support team on the Coinbase website¹ and the virtual assistant. There’s also a great help centre to answer any questions you may have on their website too.

Step 2: search for the crypto you’d like to buy

Once you’re all set up, it’s time to buy. Have you done your research on what crypto you’d like to buy? Let’s use bitcoin for our example (the most popular crypto). Now when you log in, you might be slightly overwhelmed, but trust us, Coinbase is one of the easiest to understand and navigate (that’s why we picked it!).

Note: Coinbase also has an advanced exchange for more advanced traders to buy and sell crypto regularly. But we won't go into that here.

You’ll see a tab for ‘Assets’ and this is your crypto balance, your cash balance, and something called stablecoins…

Stablecoins are local currencies (like US Dollars) that exist on a crypto network (such as Ethereum). These don’t change in value, they are ‘pegged’ to the value of the underlying currency, so $1 as a stablecoin will also be worth $1 in the ‘real’ currency. We don’t need to worry about these for now either, as we’re just going to buy bitcoin.

To buy bitcoin, we want to search for it in the search bar, so simply search bitcoin, or often you can simply click into the search bar and it will list all the top assets. Select bitcoin and you’ll see a button to buy and sell, click that too.

Step 3: buy

Now it’s time to buy. There’s two methods to use, either a one-time order, or a recurring buy. You can probably guess what each one means, but just to clarify, a recurring buy is where you can set a schedule to automatically buy crypto at certain times, such as daily, weekly, 1st and 15th of the month or a specific day each month.

You also have a range of payment options, you can use your cash balance if you have money in it (or stablecoin), or you can use a debit card (e.g. your bank card), Apple Pay, Google Pay, or add your bank account to make a direct bank transfer. There’s also PayPal if you prefer that. So pretty much every payment option you'd like to use.

Different payment methods have different fees. Coinbase actually recommends a bank transfer for larger amounts, and, if you prefer, a debit card for smaller amounts (but avoid this if you can as the fees are higher). We’ll run through all the Coinbase fees below, but it’s worth mentioning you’ll see how much you’ll be charged in fees when you proceed to buy.

Once you’ve picked your preferred payment method, simply click ‘buy’, and your crypto will appear in your account under Assets. All yours, safe and sound.

Step 4: store in your Coinbase account or transfer it

The final decision is to decide how you want to store your crypto. You can keep it in your Coinbase account, which means Coinbase will look after it for you.

It’s very secure as you’ll need to login with your login details and authentication. Authentication is also required to transfer your crypto out, adding more security. If you are just buying a little bit of crypto, or planning to use it again in the future, leaving it in your Coinbase account is probably your best option.

For more advanced crypto investors, there’s an option of an external wallet, and these are typically a hardware wallet, which is a real device that you can keep at home. This provides a more secure way of storing your crypto, as only you will have access to it, rather than say Coinbase holding your coins for you.

This comes with more responsibility as you’ll need to safely store your private key to your wallet (which is like a password), as it’s the only way to access your crypto later on (if you lose access).

We were geeking out a bit there. If you’re new to crypto, you can come back to this option later, and simply keep your coins on Coinbase.

Of course you have the option of transferring your crypto to anywhere you like, or spend it as you wish, it’s all yours.

Nuts About Money tip: you can spend your crypto with Coinbase too - for instance a Coinbase debit card to spend directly from your Coinbase account.

Final step: to stake or not to stake

If you are keeping your crypto on Coinbase, you can stake certain crypto, such as ethereum, called Coinbase Earn, and this is where you effectively earn interest on your money (often called yield or rewards in crypto). And you can earn quite a bit.

The reward you get is for pledging your crypto to Coinbase temporarily, and Coinbase will then use it as a deposit to help operate the network. Those who help to run the network with their computing power also have to deposit some crypto as a reserve to prove they are doing it for the good of the network, and not trying to hack or break the network. As a reward, they get regular payments of the crypto network they are running (e.g. ethereum).

That was a bit complicated, and you don’t really need to know how it works (unless you are interested). You can think about it like adding your crypto to a savings account and earning interest in return. The interest (rewards) you get are variable and can change over time, and typically range from 1% to 15% depending on the cryptocurrency.

Note: your crypto will be locked away until you ‘unstake it’, which can take a few days to a few months depending on the crypto.

Quick summary

Is buying crypto easier than you thought? It was very difficult in the early days, but now, crypto exchanges like Coinbase are super easy to use, and are essentially massive tech companies that happen to be in the crypto industry. They have great apps and websites, and are very efficient at buying and selling crypto for you, all handled in a few minutes. And they can store it all for you too.

This is probably very different to your old banking app isn't it? As crypto is a relatively new industry, you might not be familiar with the names of the exchanges, but there are some great ones out there (e.g. Coinbase), who are much larger than you probably think (it’s one of the biggest companies in the world).

To recap, download Coinbase on your phone, or simply head over to the Coinbase website¹ to get started. Complete your personal details, and prove who you are (things like uploading your ID), and that's it, you’re all set to buy whichever crypto you’d like. Search for the crypto, and then hit ‘buy’. It will be all yours to either save, spend or transfer it to wherever you’d like.

Next, we’ll run through some key information to help you get up to speed on buying crypto.

Crypto exchange fees

With crypto, there are fees involved when buying, selling and trading crypto. It’s very similar to say buying a foreign currency for a holiday, you’d pay a fee to convert your Pounds (GBP) to Euros to spend on your summer holiday in Spain.

With crypto there can be hidden fees, so make sure you choose an exchange that has transparent fees, again Coinbase is a good example of this. Their fees are transparent, and for the simplicity and piece of mind, we think their fees are reasonable. You’ll see how much you’ll pay when buying or selling, and before you confirm.

Transaction fees

These are fees to make the actual transaction, which is the buying or selling, or converting to another cryptocurrency. These are typically a small percentage, but can also be a fixed fee depending on the crypto exchange you are using. And with some exchanges, you can pay a monthly subscription fee to remove the transaction fee (up to a limit). Coinbase has this option (it's called Coinbase One and it can be found in settings).

Maker/taker fees

Note: if you are new to crypto maybe skip this section and the 'Spread fees' section below.

These are more common with advanced exchanges where you are trading regularly. They are fees depending on if you make a buy or sell order and want the transaction to happen immediately, called a market order, and buy or sell at the current price, which is called a taker fee.

Or, if you place an order for a certain price in the future, called a limit order, and wait until that price is reached for your order to go through. This would have a maker fee.

A maker fee is generally lower because you are adding an order to the general market, increasing the volume of orders, which can benefit other traders and the exchange, whereas with a taker fee (the order happens immediately) you are taking the volume away from the market.

These fees can often reduce dramatically depending on how often and how much you trade.

Spread fees

These are a bit more complicated, and often thought of as a more hidden fee.

A spread fee is a small fee in the price of a cryptocurrency when you buy or sell. For instance, a few pence more than the real price when buying, or a few pence less than the real price when selling. The actual amount will vary depending on the cryptocurrency and crypto exchange you use.

This is because the price advertised is the midpoint between the two, based on the orders of people wanting to buy, and the orders of people wanting to sell, which are slightly different. So if you were to buy a coin now, and then immediately sell it, you’d only be able to sell it for slightly less, as that's the price someone is bidding for it, and this can act as a small fee itself.

Note: with some exchanges where you are purchasing directly from the exchange, they might include a small markup too, to ensure you are getting the price quoted and the transaction goes through smoothly, even if the price changes slightly during the buying process.

Is crypto safe?

Buying crypto itself is legal in the UK and safe to do so. That doesn’t mean the value of your crypto can’t go down in value, and some coins will fall in value significantly in a short amount of time and others will rise significantly too, so make sure you do your research before committing to anything you’re not sure about.

Crypto exchanges are legal to use too, and in the UK these are authorised by the Financial Conduct Authority (FCA) to offer crypto services. That means they’ve been reviewed and approved to do so, passing strict criteria.

The FCA are the people who make sure financial services are looking after their customers and their money. When looking for a crypto exchange, make sure you check they’re registered with the FCA on the FCA register.

What’s a crypto wallet?

Some crypto exchanges will offer a wallet separately, and some will set one up for you automatically. A crypto wallet is where you can store your crypto on the blockchain (network) securely so only you have access. It means the crypto exchange doesn’t hold your crypto in their own wallets (pooled with everyone else's money). It's in a separate wallet just for you.

You’ll have your own private key to access it (essentially a very long password) and without this key no one can access it (not even you or the crypto exchange if you lose it, so make sure you store it safely).

These can be a digital wallet, such as one online with a crypto exchange, or they can be a hardware wallet, which is a physical device that you can keep to provide extra security.

The alternative to a wallet is the crypto exchange holding it for you as we’ve mentioned. That’s not a bad thing and can make things much easier, and a bit less confusing. You also don’t have to worry about losing your private key.

Let’s recap

That’s our 5 easy steps for buying some crypto. In the complicated and confusing world of crypto, it’s really quite simple isn’t it?

That’s thanks to the pretty awesome technology companies who have built easy to use crypto exchanges, with great websites and apps, which are quite frankly, some of the best finance apps out there. We’ve featured Coinbase as one of those, as we think it’s pretty great. As the crypto industry is relatively new, these companies were able to build their technology from scratch and therefore it’s usually much better than if an old dusty bank were to make one!

Anyway, all you need to do is find an exchange you like to get started. If you’re not sure, start with Coinbase¹, it’s one of the best. You don’t need to pay anything upfront to sign up, and you can even try a few different exchanges in future. If you want to learn more about them, here’s our Coinbase review.

Once you’ve signed up, search for the crypto you want, such as bitcoin, and then hit ‘buy’. From there you can transfer some money over from your bank or use a debit card to make a purchase there and then, with the crypto usually arriving in seconds into your Coinbase account. 

You can either keep it there (recommended for beginners) or send it to a wallet you own if you prefer. With exchanges like Coinbase you can also stake some coins to earn rewards in return (effectively interest).

That’s it, easy peasy! You are now the proud owner of some crypto. A true crypto investor! Good luck in the future, and we hope you make a small fortune. Don’t forget though, there’s no get rich quick schemes, slow and steady normally wins the day!

Legal info

Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.