How to Buy, Trade, and Store Cryptocurrencies

A non-geek’s guide to the process of investing in crypto—with a clear understanding of the challenges and risks

By Glenn Derene

April 23, 2026

A photo illustration of hands holding a smartphone against a green background patterned with blue 3D hexagonal cubes. On the phone screen, three green coin icons with dollar signs are visible. A stream of one-hundred-dollar bills and glowing orange cryptocurrency coins emerges from the phone, floating toward the upper right corner of the frame. The image has a textured, grainy, halftone dot aesthetic. — Experts recommend approaching cryptocurrency as a high-risk investment and limiting it to—at most—a small portion of a diversified portfolio.

To consumers used to conventional financial products, cryptocurrencies can seem abstract and a little mysterious. They rely on sophisticated technology, operate in a rapidly evolving regulatory framework, and are often subject to wild swings in value.

What’s more, crypto assets lack what investment pros call fundamentals—the legal share of corporate profits or contracted loan repayments that underlie the value of stocks and bonds, for example. Instead, the value of cryptocurrency depends largely on market demand and investor sentiment.

That’s partly why they’re so volatile, says Lee Reiners, a lecturing fellow at Duke University and a former bank examiner at the Federal Reserve Bank of New York. “In essence, you are investing in computer code,” he says.

Neha Narula, director of the Digital Currency Initiative at the MIT Media Lab, puts it this way: “The reason that something like bitcoin is worth something is because people believe it’s worth something.”

For these and other reasons, every expert we consulted recommends approaching cryptocurrency as a high-risk investment and limiting it to—at most—a small portion of a diversified portfolio.

In this article

What Are Crypto Exchanges?
What Is Peer-to-Peer Trading?
What About Crypto ATMs?
A Few Words About Crypto Wallets
Exchange-Traded Crypto Funds and Other More Conventional Ways to Invest

If you are nonetheless considering purchasing crypto as an investment, this article—part two of a three-part series on cryptocurrencies—will help you to do so with wide open eyes. It provides a brief, plain-English tour through the process of buying, trading, and storing these digital assets; describes the pros and cons of crypto exchanges, peer-to-peer trading platforms, and more conventional investment instruments such as crypto ETFs and index funds; and explains the role of digital wallets, as well as the benefits and risks of allowing others to host your wallet vs. self-hosting.

We’ll begin where most cryptocurrencies are bought and sold: The exchanges.

What Are Crypto Exchanges?

Buying crypto from an exchange such as Coinbase, Gemini, and Kraken is similar to the process of buying stocks, bonds, or mutual funds through a conventional brokerage. You create a password-protected account, answer a bunch of personal questions to verify your identity (a process known in the retail financial world as “know your customer”), then link your crypto exchange account to a conventional bank account or credit card, which you’ll use to buy crypto assets.

Because some cryptocurrencies have gotten incredibly expensive (bitcoins, for instance, were trading around $75,000 during the week this article was published), you may end up buying fractional coins. For instance, 1/100,000,000 of a bitcoin is called a “satoshi” after bitcoin’s pseudonymous creator, Satoshi Nakamoto.

When you buy crypto on an exchange, it’s typically held for you in a custodial “wallet,” a password-protected piece of software maintained by the exchange containing the cryptographic keys to the crypto you’ve purchased. You can either choose to leave the keys there and let the exchange host your wallet, or you can transfer your keys to a self-hosted wallet that you control (more on this distinction later). Any crypto assets in your custodial wallet can also be sold on the exchange, and the proceeds can then be credited back (in dollars or another conventional currency) to your linked bank account.

These transactions typically involve trading fees and—as when you buy company stock or conventional foreign currencies—can include a “spread” between the amount in dollars you’ll get paid when you sell cryptocurrency (the “bid”) and the amount you’ll pay when you buy it (the “ask”).

It’s also worth noting that while crypto purchases can sometimes appear to happen instantly, the underlying movement of money between your bank and the exchange can take days to fully clear. Because exchanges want to let users trade quickly, newly purchased coins can show up in your account right away, even if the bank transfer funding the purchase hasn’t fully settled. By contrast, after you sell crypto, your proceeds usually sit in your exchange balance before being transferred back to your bank—a process that can take several days unless you’re willing to pay extra for an “instant” payout.

When deciding which exchange to use, it makes sense to consider several factors, including the size of transaction fees and the spreads between buy and sell prices; the security practices and history of security breaches; the ease, speed, and cost of withdrawing funds; and the availability of customer support.

The crypto exchanges CR contacted for this article highlighted their significant educational resources for new investors, as well as their user-friendly features for both new and sophisticated investors.

An important distinction between crypto exchanges and traditional investment brokerages comes in the way they are regulated. Unlike brokerages, which are regulated by the Securities and Exchange Commission (SEC), crypto exchanges are generally not registered with the SEC as broker-dealers and are not subject to the same investor-protection rules. That means, for instance, if a crypto exchange fails, investors won’t be protected by Securities Investor Protection Corporation (SIPC) insurance, which would typically cover securities up to $500,000 (including up to $250,000 in cash) at registered brokerages. (Read the third article in our series for a deeper dive into the regulatory debates surrounding the crypto industry.)

That’s because there has been a longstanding debate among regulators and politicians about whether crypto assets should be classified as commodities (like soybeans, oil, or precious metals) or as securities (like stocks, bonds, mutual funds, and ETFs). Regulators have taken differing approaches to crypto in recent years, with some emphasizing applying existing securities laws to crypto firms, and others focusing on classifying many digital assets as commodities and developing new regulatory frameworks. The Clarity Act of 2025, a bill currently making its way through Congress, aims to resolve this conflict.

In the meantime, many critics say the current regulatory uncertainty leaves consumers exposed to a range of risks. According to Molly White, a prominent crypto critic and author of the Citation Needed newsletter, even if the legislation does become law, it could take some time before it takes effect. As a result, she says, “at the current moment, at least in the U.S., there isn’t much oversight. And so we’re really in the sort of wild west when it comes to crypto right now.”

What Is Peer-to-Peer Trading?

The important thing to understand about peer-to-peer crypto trading platforms is that they operate with a lower level of customer service, fewer consumer protections, and even less oversight than the exchanges.

Services like Hodl Hodl, LocalCoinSwap, and Bisq operate as either online marketplaces or open-source, downloadable software meant to play matchmaker to buyers and sellers. They require either no or minimal know-your-customer vetting, and while some do help facilitate transactions, most services that operate in the U.S. avoid regulatory exposure by keeping the actual exchange of money off-platform—leaving buyers and sellers to handle payment directly, via bank transfer, cash app, or other means. Once a deal is reached, the crypto keys are typically transferred directly between the buyer’s and seller’s wallets.

In many ways, P2P services are the closest thing to what Satoshi Nakamoto envisioned when he first proposed bitcoin as a decentralized currency, free from the influence and cost of intermediaries like banks or brokerages. In practice, however, most P2P platforms still bake direct or indirect fees into every transaction, whether through charges built into the software itself, network fees, or wider spreads that compensate sellers for added risk. And because these platforms lack the scale and liquidity of major exchanges, the “spread” between bid and ask prices on P2P networks is often less favorable.

P2P platforms promise a high degree of privacy and flexibility to users, but because they minimize intermediaries and oversight, they can expose users to significantly higher risks than large exchanges, including fraud, pricing disadvantages, and limited recourse if something goes wrong.

What About Crypto ATMs?

If you live in a sizable city, you may have noticed one of these machines in a local convenience store. Crypto ATMs (sometimes called “bitcoin ATMs”) do give users instant access to crypto, but experts caution that they’re among the most expensive and risky options.

Part of the reason is that operators need to cover the costs of operating the machines, as well as potential losses from the wild swings in value that could occur in between dispensing the crypto and when the transaction is completed—and those costs get passed onto customers. As a result, crypto ATM fees and bid-ask spreads are significantly higher than those of exchanges and P2P platforms. According to Bankrate , fees at crypto ATMs can range from 5 to 20 percent, compared with 0.1 to 1.5 percent on exchanges. (Network fees sometimes raise costs further.)

That’s why these machines mainly appeal to someone who needs crypto in a hurry, which is unfortunately the profile of a typical scam victim. Experts say crypto ATMs are the primary location where crypto scammers send their victims to turn cash into bitcoin. According to an FTC report published in 2024, bitcoin ATMs were linked to $113 million in scam losses in the previous year, a figure that the agency admits likely underreports the total amount of fraud.

A Few Words About Crypto Wallets

Despite the name, a crypto wallet doesn’t actually store your cryptocurrency. It’s a piece of software (sometimes on a dedicated piece of hardware like a USB key) that manages the cryptographic keys to digital assets that belong to you, while the currency itself is actually housed on the blockchain. (See Part 1 of this series for a refresher on blockchains and other crypto basics.)

A crypto wallet can either be custodial, meaning it’s hosted by a third-party, often an exchange like Coinbase, Gemini, or Kraken, or it can be self-hosted (sometimes called “noncustodial”), meaning the wallet and its keys live on a device you maintain. Each approach has its benefits and risks.

Custodial Wallets. If you entrust your wallet to an exchange, you are relying on the company to maintain and secure the wallet (and access to your assets) on your behalf. Large, well-funded exchanges tend to have better cybersecurity tools and protocols than your average investor, but they are also a tempting target. And there have been many large-scale crypto-hacking incidents, including Mt. Gox (2011), CoinCheck (2018), KuCoin (2020), DMM Bitcoin (2024), and most recently in February of 2025, when the Dubai-based exchange ByBit lost $1.5 billion in Ether to North Korean hackers, according to the FBI.

And once crypto assets are stolen, there’s no guarantee that you can get them back. Crypto exchanges are not covered by FDIC insurance, so there’s no federal program to reimburse investors if assets are stolen or the exchange itself collapses, as happened with FTX in 2022 (although a federal court did order FTX to pay back many of its investors as part of the firm’s bankruptcy).

Keeping your wallet on an exchange can help with password management. According to several exchanges we contacted for this article, if you forget your password, they will facilitate a password reset using two-factor authentication, frequently followed by a multiday hold on withdrawals to prevent fraud.

Self-Hosted (aka Noncustodial) Wallets. Even if you’ve bought crypto on an exchange, you can always transfer your digital assets to a self-hosted wallet from companies such as Exodus, Zengo, or Trust Wallet. Some wallets even allow you to purchase crypto directly through the wallet (although they are typically doing so through an exchange and charging a fee). Some self-hosted wallets can handle multiple currencies, but you should always check to ensure that a wallet you use can store the type of asset you plan to use it for.

Most wallets are free to download, but the companies make money through fees on crypto sales, various crypto financial services, and promotions. When you set up a self-hosted wallet, you create a password that secures the wallet on the device as well as a 12 to 24-word “seed phrase” to recover your wallet and all of your asset keys in case the device it is stored on is lost.

Once your assets are in a self-hosted wallet, they are yours to manage. That’s a good thing if, for instance, the exchange you bought them through collapses or gets hacked, because the assets in your wallet won’t be exposed to those risks. But managing your own coins can become a problem if you forget the seed phrase and your wallet is lost or stolen.

“There’s an adage in crypto called ‘not your keys, not your coins’,” Reiners says. “If someone else has access to your private keys, they have access to your bitcoin. They can steal it. They can move it wherever they want. So you’ve heard these just insane stories about someone who had their private key on a thumb drive that got accidentally thrown out and now they’re going crazy.”

That’s because with a self-hosted wallet, there’s no recourse for getting back your assets if they are lost or stolen. There are infamous stories of forgotten seed phrases and “cold wallets,” both fascinating and painful to read, including the Welshman whose hard drive containing the keys to thousands of bitcoins, worth hundreds of millions of dollars, was accidentally thrown away. He has spent years trying to buy the landfill he believes it is in. Also, estate planners warn that crypto investors who forget to share the passwords and seed phrases with their heirs risk losing those assets forever.

And the stories get darker from there. There are a disturbing number of cases where crypto holders have been kidnapped and physically coerced into turning over their assets. They include a bizarre incident where two men allegedly tortured an Italian crypto investor for two and a half weeks in a luxury New York City townhouse in an attempt to get his coins.

So what’s the bottom line on custodial vs. self-hosted wallets? Custodial wallets may be easier for beginners, and they offer account recovery options. Self-hosted wallets provide more control but require careful management of passwords and recovery phrases because losing access to a self-hosted wallet can mean permanent loss of funds.

Exchange-Traded Crypto Funds and Other More Conventional Ways to Invest

If you don’t feel like dealing with wallets or exchanges, there are other ways to invest in crypto through established, name-brand brokerages. In the past few years, several large asset management companies such as BlackRock and Franklin Templeton have created crypto exchange-traded funds (ETFs) that you can invest in through brokerages such as Charles Schwab, Fidelity, and Robinhood. There are also similar crypto index funds that track a basket of currencies to gain exposure to a broader crypto market, similar to the way an S&P500 index fund, for example, tracks the stock market performance of large U.S. companies.

This allows investors to gain exposure to crypto without really touching it at all. It also inverts the decentralized ethos of cryptocurrencies into a more traditional investment product. “We know ETFs. We know where to buy them. We know the SEC oversees them. So we feel comfortable with that,” Reiners says. “The irony here is that we’re talking about exchange-traded funds when originally the vision was peer-to-peer payments without intermediaries.”

But as many of the experts we consulted point out, these more conventional investment instruments don’t mitigate the risk of losses from volatility.

In fact, some newer investment innovations actually increase the volatility risk of cryptocurrencies. For example, some companies now hold large amounts of cryptocurrency on their balance sheets, effectively turning their stock into a proxy for crypto prices. Companies like Strategy (which was initially a software company called MicroStrategy) and Sharplink (originally a sports betting company called SharpLink Gaming) are known as digital asset treasuries, or DATs. They offer investors the ability to buy conventional stock shares in what are essentially crypto-holding companies. Because many of these firms use borrowing to increase their exposure, their share prices can rise and fall even more sharply than the underlying crypto assets. (In fact, the stock of both companies declined sharply in the months before this article was published.)

So if you do plan to gamble some of your hard-earned savings on crypto, it’s worth heeding the cautionary words of MIT’s Narula: “This is still a really risky area, and there’s a possibility that this could all go to zero,” she says. “So, you know, a little bit of caveat emptor, I suppose. Be careful and know what you’re doing if you’re going to invest in this.”

Glenn Derene

I'm a technology geek, lover of drones, and writer/editor. In my 20 years as a journalist, I've written about cars, travel, and wine—but my first love has always been technology. In my off hours, you'll find me building robots, flying quadrotors, teaching my kids to build computers, or kayaking around the Norwalk Islands in Long Island Sound.