How Do You Buy and Sell Crypto?

You buy and sell crypto through an account with a crypto exchange like Gemini: you add dollars and place a buy order to get in, then place a sell order and withdraw the dollars to your bank to get out.

A crypto exchange is an online marketplace, run by a company, where you swap dollars for digital coins and digital coins back into dollars.

Cryptocurrency is digital money that exists only electronically, with ownership tracked on a public record called a blockchain.

Both directions take minutes, but crypto held in an account is not insured the way a bank deposit is, meaning there is no federal protection like the FDIC insurance that covers checking accounts, and prices can swing sharply within hours.

Create an Account

Sign up on the exchange's website or app with your email and a strong password.

Then turn on two-factor authentication, an extra login step such as a code sent to your phone.

Verify Your Identity

Exchanges ask for a government-issued ID, much like opening a bank account.

On Gemini, full trading and transfers unlock only after this step is complete.

Fund the Account

Gemini lists wire transfers, ACH transfers, debit cards, and Apple Pay or Google Pay among the main ways to add money.

ACH is the standard electronic transfer between U.S. bank accounts, and it usually takes longer than a card payment.

Check the fee shown for each option before you choose one.

Place Your First Buy Order

Choose the coin, enter a dollar amount, and decide between a one-time purchase and a recurring buy.

Review the trade details, including any fee, before you confirm.

Decide Where to Keep It

Most beginners leave their coins in the exchange account, which is simple but means you rely on the company to protect them.

A wallet is an app or device that stores the secret codes proving you own your coins, and it gives you more control, but the FTC notes that if you lose access to one, no one can step in to recover your funds.

Place a Sell Order

When you are ready to sell, choose the coin you hold, enter how much to sell, and review any fee before you confirm.

The sale converts your coins into dollars inside the exchange account.

Withdraw the Cash

You cannot send crypto straight to a bank, so you sell first and withdraw second.

On Gemini, withdrawals go to a linked bank account in your name by ACH transfer from a U.S. bank or by wire transfer, and debit cards and PayPal are not supported for withdrawals.

What Does a Buy and Sell Look Like in Dollars?

Say Bitcoin trades at $76,000 and you buy $100 worth, which gets you about 0.0013 Bitcoin, since coins can be split into small pieces.

If the price rises 10% to $83,600 and you sell, you receive about $110, a $10 gain before fees.

If it falls 10% to $68,400 and you sell, you receive about $90, a $10 loss before fees.

Fees on the buy and the sell both reduce those results, and either sale is something the IRS expects you to report, as covered below.

When Should You Sell Crypto?

There is no guaranteed right moment to sell, so it helps to decide your reason, such as needing the cash for a bill or a purchase, before you buy.

Prices can keep rising or falling after you sell, which is why a reason tied to your own plans holds up better than a guess about the market.

What Are the Risks of Buying and Selling Crypto?

Three risks matter most for a first-time trader.

Price Swings

The FTC says cryptocurrencies tend to be more volatile than stocks and bonds, and a drop is no guarantee of a later recovery.

Scams

Consumers reported losing more than $1 billion to crypto-related fraud from January 2021 through March 2022.

The FTC says anyone who demands payment in crypto or guarantees profits is a scammer.

Payments That Cannot Be Undone

Crypto transactions typically cannot be reversed, so coins sent to the wrong address or to a scammer are usually gone.

Do You Owe Taxes on Crypto?

Sometimes, because the IRS treats digital assets as property rather than currency, so selling, trading one coin for another, or spending crypto can create a taxable gain or loss.

Buying with dollars and holding is not a taxable event by itself.

If you sell for more than you paid, the profit is a capital gain, and a sale for less creates a capital loss.

Coins held more than one year before you sell produce long-term gains, which generally face lower tax rates, while gains on coins held one year or less are taxed as ordinary income.

Every filer must also check a yes or no box about digital assets at the top of Form 1040.

Save a record of what you paid and when, since you will need it to figure your gain, and if you trade often, a tax preparer can sort out the details.

Does the Failed CLARITY Act Change How You Trade?

Not for the steps above, because the failed vote leaves current rules in place.

The bill would have split oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission, the federal agencies that regulate stocks and commodity-style markets, and required many exchanges to register.

Benzinga reports that both agencies are positioned to fill part of that gap, and Sen. Cynthia Lummis, the bill's lead sponsor, has urged crypto firms to look to regulators rather than wait for Congress.

Is There a Way to Trade Without Owning Coins?

Yes, some brokerage accounts offer exchange-traded funds, baskets of investments that trade like stocks, that track Bitcoin's price.

You own fund shares rather than the coins, so you cannot move them to a wallet or spend them.

How Much Should You Start With?

Start with an amount you could lose without disrupting your budget, since no one can promise a recovery after a drop.

A recurring buy purchases a fixed dollar amount on a schedule, a method called dollar-cost averaging, so you buy more coins when prices are low and fewer when they are high.

It smooths out your entry price but does not guarantee a profit.

Gemini lets you create an account, verify your identity, and buy or sell from one app, and its recurring buys can run daily, weekly, twice monthly, or monthly.