Can you opt for fiat trading in crypto? No, the crypto world doesn’t allow the trading of fiat currencies. But, when crypto users mention fiat-crypto trading, they refer to the usage of fiat for crypto purchases. The common practice in crypto trading is to purchase crypto with another crypto. For example, if you own BTC holdings you can buy other cryptos in large volumes as the value of BTC is the highest in the crypto zone. But, what if you are a beginner investor? As a newbie to the crypto scene, you certainly don’t have any crypto holdings. In that case, fiat-crypto trading is the most effective route for you.
Is fiat-crypto trading allowed in all crypto exchanges?
Again, the answer is “No”.
Not all crypto exchanges out there allow fiat trading or fiat-crypto trading. The earliest form of crypto exchange is a centralized exchange or CEX. However, a new form of crypto exchange has also emerged today, called decentralized exchange or DEX. The DEXs do not allow the usage of fiat money for crypto trading. But, the centralized crypto exchanges allow users to use both crypto and fiat money to purchase crypto.
While decentralized exchanges operate in a decentralized environment, the centralized ones operate under the administration of one central authority. The centralized authority serves as the sole custodian of user funds or holdings. The major benefits of centralized exchanges are higher liquidity and faster processing speed.
How to incorporate fiat into the crypto exchange?
Now, there are various payment methods by which you can easily incorporate fiat money into a crypto exchange.
Credit/Debit card- You can send money to the exchange through Debit/Credit card- just like the way you do while you shop online from e-commerce stores. The best advantage of card transfer is that it happens at lightning-fast speed, provided the internet network is working fine. Then, another aspect of card payment is that you are acquainted with the whole process of making a fiat payment through a card. Thus, you won’t have to go through a whole long learning curve to learn how to make payments in a crypto exchange. However, the most significant advantage of card transfer is that you will receive the cryptos immediately in the exchange wallet.
But, you should also understand the fact that card payments command way higher fees in comparison to other payment methods. You will be charged even more if the exchange is located in a foreign country. Thus, only use card transfer only when you need the cryptos immediately. Also, it’s better not to store your card details in the exchange.
Bank or wire transfer- It’s the same way you do with online banking transfers at any online shop. The process would need you to fill in your bank details, like name of bank, account number, etc The plus side of the process is that it assures lower fees than the one mentioned above. But, the process will take at least around a week to send the cryptos to your wallet.
Wallet transfer- Crypto exchanges allow users to store funds in their in-build wallets. If you are in a rush and don’t want to pay high card fees, you can go for a wallet transfer. But, do not keep a large amount of funds in the wallet- just the amount that is currently needed to purchase your desired amount of cryptos.
Steps to follow while purchasing crypto through fiat
Here is a small guide on the steps to follow while purchasing crypto through fiat money through a crypto exchange.
Step 1: Create your exchange account
First, you will have to create your account with a leading crypto exchange. As you opt for centralized exchange, you will have to go through the KYC and identity verification process. So, keep the identity documents like a passport or driver’s license handy. It’s a little more time-consuming than that of registering with a DEX but you need this to chuck out fake users.
Step 2: Login and purchase
Find the “Buy Now” tab. Select it.
Step 3: Check the payment mode menu
As you know by now, crypto exchanges allow customers to choose from versatile models of payment. Check the menu to see the types of payment modes allowed by the exchange platform.
Step 4: Enter fiat details
In this step, you will have to type in how much fiat you wish to allot for the crypto purchase. After entering the amount, you will automatically find how much crypto you could have in exchange for that fiat amount. The crypto exchange will take care of the calculation on your part. Then, just press “Continue”.
Step 5: Select the preferred payment form
Select the most compatible payment mode you want to purchase crypto this time. Once again, only go for card payment if you are in a rush. And, please try not to save the bank and card details. It’s better to type the whole information every single time than put your confidential details in the lap of hackers. Nobody is saying your chosen crypto will be hacked. But please know this, centralized exchanges don’t hold much guard against hackers. Put simply, these platforms are easier to hack. So, be careful with your confidential details.
Step 6: Confirm the crypto order
Please make sure to check the payment data once again. If all details seem to be perfect, simply confirm your crypto order. Card payment users will receive the purchased crypto in the exchange wallet immediately. For other payment methods, please wait for 7-8 days. In regard to purchasing via wallet-stored money, you will receive crypto in exchange for your wallet instantly. Read more about what can you buy with one bitcoin
As you would be creating an account with a CEX, remember, that you won’t be able to shift the crypto holdings to an external 3rd party wallet. Thus, make sure your chosen exchange platform is extremely particular about storing the user’s cryptos in a cold wallet only. These are physical wallets and hence cannot be touched by hackers. You can keep a small amount in a hot wallet for ease of trading but the maximum share should be sent to the cold wallet by the exchange.