How to Buy and Trade Crypto

Now that you understand the basics of Solana, cryptocurrency, and web3, the next step is learning how to trade SOL and engage with Solana’s ecosystem of apps and services. If you're new to Solana, this guide will help you get started buying, selling and trading SOL and other cryptocurrencies.

There are many ways to purchase crypto, but most of them begin with exchanging the fiat currency of your home country with blue-chip cryptocurrencies like SOL, BTC, and ETH. The most prominent ways to onramp your fiat currency to crypto is through exchanges like Coinbase, Kraken, and Binance. Wallets like Solflare have also introduced services for you to buy crypto with your local fiat currency directly from your self-custodial wallet quickly and easily. There are also services like Stripe and Moonpay that make the process as seamless as possible.

To buy or trade SOL, you’ll need a digital wallet. Wallets are applications where you store your crypto, trade assets, collect NFTs, and access the web3 ecosystem. The wallets we’ll talk about today are self-custodial, which means you and only you hold access to your assets, as opposed to them being managed by a third-party. Holding your assets in self-custody offers 100% transparency and control over your funds. It offers one of the fundamental use cases of crypto and is highly recommended.  

Solana-compatible wallets come in various forms, including desktop, mobile, hardware, and web-based options. The most popular software wallet options for Solana include Solflare and Phantom. You can rely on them to trade crypto, collect NFTs, and engage with web3 directly from your wallet securely and easily.  

Setting up a Solflare wallet is simple and quick. Here’s how: 

• Open a browser and head to Solflare.com.
• From there, click Access Wallet and click I Need A New Wallet.
• Write down your Recovery Phrase and store it in a safe location. Your recovery phrase is like an ultra-secure password that you can use to access your wallet from anywhere. 
• Once you have done so, click I Saved My Recovery Phrase. From there, type in your Recovery Phrase to ensure it’s secure, and click Continue.

 

Congratulations! Now you have a digital crypto wallet. That’s all it takes to get online with Solana. You can also find further guidance in our Crypto Wallets Explainer.  

Another option for storing your crypto is a hardware wallet. A hardware crypto wallet, also known as a cold wallet, is a physical device designed to store your crypto offline. Hardware wallets are typically small, portable devices that resemble USB flash drives They are encrypted to safeguard private keys and ensure tamper resistance. If you’re going to be passively holding a significant amount of crypto for an extended period of time, a hardware wallet is a good option. 

Now that you know how to get your fiat currency onto the blockchain and how to store your assets, let’s talk about where you can trade SOL.

While you can trade Solana-based tokens directly from software wallets like Solflare, crypto is often traded on exchanges. There are two main types of exchanges that offer very different user experiences: centralized exchanges and decentralized exchanges. 

Centralized Exchanges — CEX

Centralized exchanges like Coinbase and Kraken provide platforms for holding your assets, in addition to markets where you can buy and sell them. Centralized exchanges are custodial, which means they keep your assets in their wallets, and manage your trade execution for you, while charging a fee for their services — much like a bank. Centralized exchanges (CEXs) are platforms operated by companies that act as intermediaries between buyers and sellers in trades, matching orders together and providing liquidity, or a reliable pool of assets to trade with. 

The pros: CEXs often come with intuitive user interfaces, advanced trading features, and some semblance of customer support. You can think of CEXs as a digital asset banking and trading service. Once you've chosen an exchange, you'll need to fund your account with fiat currency or other cryptocurrencies to start trading Solana tokens. Most centralized exchanges support various deposit methods, including bank transfers, credit/debit cards, and cryptocurrency deposits. Be mindful of deposit fees, processing times, and minimum deposit requirements when funding your account.

While centralized exchanges are a good option for newcomers to crypto, there are downsides. CEXs can be locationally restrictive, meaning they are only available in some countries. Centralized exchanges can charge significant fees per trade, or if you choose to cash out your assets and transfer funds to your bank. Centralized exchanges can also be vulnerable to security breaches, hacking attacks, and regulatory scrutiny. There’s a saying in crypto: “Not your keys, not your wallet.” It means that it’s always better to hold your own assets in a self-custody wallet. Additionally, CEX users may face restrictions on fund withdrawals and privacy concerns due to Know Your Customer (KYC) regulations.

Decentralized Exchanges — DEX

The web3 native option for trading crypto is decentralized exchanges — often referred to as DEXes — which are very popular and often exceed centralized exchanges in daily volume. On a DEX, you can trade your assets directly with other people without the aid of a custodial service. You can think of a DEX as more of an apparatus than a service, and they are often significantly cheaper, while requiring a slightly higher degree of technological know-how. Most crypto wallets allow you to connect directly to a DEX, so you can execute trades without your crypto ever leaving your custody. 

DEXs leverage smart contracts to execute trades automatically, providing greater transparency and security to your trades. DEXs offer several other advantages, including enhanced privacy, lower trading fees, and resistance to censorship. DEXs can also offer more advanced or novel financial products that you won’t find on CEXs. 

DEXs provide the foundation for decentralized finance – known primarily as DeFi – which is an entire industry of innovative financial products and services that are native to cryptocurrency. However, DEXs may suffer from lower liquidity, slower transaction speeds, and limited trading pairs compared to centralized exchanges. Additionally, novice users may find DEXs more challenging to navigate. On Solana, leading DEXes like Jupiter are a great option once you have advanced your capabilities to an intermediate level. 

Ready for a deeper dive into DeFi? Read an Intro to Decentralized Finance on Solana.

While investing in crypto can be exciting, remember to approach your investments with caution and a strategic approach.

It may be tempting to buy and trade as many tokens as possible and use every platform at once, but cryptocurrency can be volatile and some tech is still experimental. That’s why managing risk is critical for all crypto investors, and the best way to manage risk is with knowledge: Conduct thorough research, stay informed, and avoid emotional decision-making. 

A great place to learn more about this is our Crypto Security Essentials explainer, which has a checklist of do’s-and-don’t for newcomers to crypto. It’s so important that you equip yourself with good knowledge here, because your investments may be at risk if you do not. 

The last thing you need to know before buying and trading crypto is how digital assets are taxed where you live. This changes from country to country, but understanding tax implications is crucial when dealing with cryptocurrencies. Many jurisdictions treat cryptocurrencies as assets subject to capital gains tax. To help, there are a number of tools and platforms that can assist with tracking transactions and calculating tax liabilities accurately, simplifying the reporting process. 

Crypto offers a world of possibility, but it also requires careful consideration of things like wallet security, exchange selection, and taxes. But don’t worry. It’s not as overwhelming as it seems, and we’ll be here to guide you in your journey.

Once you’ve got a handle of wallets and assets and how to connect with web3, you’re ready to start exploring the Solana ecosystem. Because Solana is so easy to use, affordable, and highly performant, there are many diverse applications and assets built on it that you can use right now.  

For example: Solana is  where regular people can put their home devices to work by sharing computing power to build global networks — and get paid for it. It gives anyone, anywhere access to financial services like savings, lending, and trading without needing a bank thanks to DeFi, or decentralized finance. 

Solana is home to the world's biggest community of digital artists and NFT collectors, allowing them to showcase and profit from their creations. It also lets internet culture fanatics  turn their skills into real money through memecoins, and is the arena for web3 gaming worlds where your in-game items have real value.

Now you’re ready for the fun part: learning what you can do in the Solana ecosystem today.