If you have a smartphone, all you need to do is open an app and buy cryptocurrency.
In the United States, PayPal users are now possible for buying, selling and holding cryptocurrency for as little as $1. PayPal is one of a few widely used mobile and online payment platforms. While there are several platforms for investing in cryptocurrencies, it's important to weigh the pros and cons of each before making a final decision.
Even Bitcoin and Ethereum, two of the most well-known cryptocurrencies, are still incredibly volatile. As a result, financial advisors advise against investing more than 5% of your total assets in cryptocurrency, and caution against using it to cover short-term needs or pay down high-interest debt.
If you decide to invest in cryptocurrency, where you buy it can have significant ramifications. If you already use and trust the security precautions of an app like PayPal, you may be able to buy cryptocurrencies with it, but there are some drawbacks.
Here's everything you need to know before you buy cryptocurrency on PayPal and how to determine if it's a good investment for you.
What you should Know Before Buying Cryptocurrency using PayPal
You can buy and sell or keep cryptocurrency with PayPal. However, it's generally not a good idea to use any type of cryptocurrency to pay for goods and services. Cryptocurrency is a long-term investment, like other long-term investments.
It's a big draw for many novice investors that PayPal and other programs like Venmo and Robinhood are making cryptocurrency more accessible. An increase in danger may result from being more easily accessible.
As a licensed financial advisor at Concierge Wealth Management in Boston, Julian Morris explains that if you have a PayPal balance on your phone and are curious about cryptocurrency, you can open PayPal, click crypto, and in two seconds own a few hundred dollars worth of bitcoin. "It's just so simple to use."
According to New York University Stern School of Business finance professor and cryptocurrency researcher David Yermack, holding a small portion of the bitcoin market makes sense. To be clear: this isn't the only thing you should pay attention to.
According to him, "the tried and tested formula for success in the stock market is diversification—not only diversifying your investments, but also diversifying your portfolio."
Buying Cryptocurrency with PayPal
You'll need a PayPal account to make a purchase of bitcoin via PayPal. If you already have a PayPal account, all you have to do to purchase cryptocurrency is click on the "crypto" button and then select the coins you want to purchase.
Bitcoin, Ethereum, Litecoin, and Bitcoin Cash are all available for purchase through the PayPal app. Experts, on the other hand, advise first-time investors to stay with Bitcoin and Ethereum.
When making a purchase, you'll need to have sufficient funds, a linked debit card or a linked bank account. When it comes to weekly spending, there are no hard and fast rules. Buying and selling cryptocurrency via PayPal incurs a fee, which fluctuates according to the amount you purchase.
Fill out the W-9 and agree to the PayPal terms and conditions as well as verifying your identity. PayPal will automatically convert your cryptocurrency into the US dollar without additional cost if you chose to use it to make a purchase.
Alternatives to Using PayPal to Buy Cryptocurrencyfinancial services
If you currently use PayPal to make online purchases, it's a breeze to invest in cryptocurrencies. But there are certain drawbacks.
PayPal does not offer the same level of financial services as crypto exchanges like Coinbase or Gemini when it comes to buying cryptocurrency. For example, only bank transfers, VISA, SEPA, MasterCard, Apple Pay, Google Pay, and Skrill are accepted by Coinmama, unfortunately, as it does not accept PayPal. You may acquire Bitcoin and other cryptocurrencies using these ways. You can't even use credit cards that have been linked to your PayPal account to pay for purchases.
On the other hand, it is important to know that when you acquire cryptocurrency via a regular exchange, you have the option of either storing it in your own wallet or transferring it to another party for safekeeping.
In contrast, PayPal does not have this option. In order to withdraw funds, you must first sell your cryptocurrency on PayPal. You are then responsible for reporting the proceeds on your tax return. You cannot move your cryptocurrency from PayPal to another account on or off PayPal.
If you're looking for total control over your funds, a bitcoin exchange might be the better choice. Despite the fact that they are more difficult to use at first, you will have more control over your money and may end up paying less in transaction fees. These exchanges allow you to exchange one cryptocurrency for another (such as buying Ethereum with Bitcoin) or purchase crypto with fiat currency such as the US dollar.
For new investors who wish to explore with a tiny crypto balance on a familiar platform, PayPal can still make sense. Trading crypto on exchanges, even for individuals familiar with more traditional investment methods like equities and index funds, may be challenging. Using NextAdvisor recently, Suze Orman said she bought Bitcoin with PayPal about $5,000 rather of a formal exchange because "it was so easy to do it."
Investing using PayPal might be an excellent first step if you're a first-time investor with a modest amount of capital. This is especially true for first-time investors who don't expect to add huge sums of money that they'd like more control over (like their own wallet storage) in the future.
Investing in crypto may be done in any way you like, therefore there's no right or wrong way to go about it. The most important thing is to spend some time learning about cryptocurrency before making any investments. Morris advises customers to "be prepared" before making a purchase. There is no doubt that thorough research is essential if you want a leg up on the competition when it comes to investing.