For proof of the growing investor interest in cryptocurrency, look no further than the financial apps already on your phone.

Digital payment giants PayPal, Venmo, and Cash App – along with the Robinhood mobile stock trading platform – are making cryptocurrency investing easier than ever, with options to buy and trade coins in their stores. applications.

But even if you feel more secure buying crypto with an app you may already be using on a cryptocurrency exchange you’ve never heard of, the risk and volatility remains. Some of these traditional players are also much more limited in their offering than traditional cryptocurrency trading platforms.

Here’s what you need to know about buying crypto outside of cryptocurrency exchanges, and how to decide what makes the most sense for you.

Integration of cryptocurrency

Apps like PayPal and Venmo are making accessible entry points for crypto novices to dip their toes in the water. And, depending on how you already use the apps, their offerings may be well suited to your knowledge base and interests.

For example, a person with no knowledge but a few dollars to spend may find an exchange like Gemini confusing, but may be willing to buy Bitcoin through their Venmo account just to experiment while starting to learn.

In general, experts say these apps can be great places to start if you’ve decided it makes sense to invest in cryptocurrency, but don’t understand all the different types of crypto very well. how an exchange works or the different storage options.

While using a more traditional exchange may seem complicated, you can just log into your account and buy whatever you want without having to worry about it, says Tyrone ross, financial advisor and CEO of Onramp Invest, a crypto investment platform for financial advisers. “For newbies, I really suggest going to the PayPal, Venmo, Cash App types of places because they make things as easy as possible.”

Even for investment professionals, cryptocurrency can be intimidating. Personal finance expert Suze Orman recently told NextAdvisor about her first attempt. “To be honest, I didn’t really know how to buy a large amount of Bitcoin and crypto,” she says. “Coinbase annoyed me, I bought a bit and then sold it, but it was just too complicated for me – although not at all complicated.”

Instead, she decided to invest indirectly, through shares in companies with crypto holdings, but recently reverted to buying crypto, this time on PayPal. “I now own $ 5,000 in Bitcoin, and I’m doing it through PayPal because it was just easy to do,” she says.

How these apps differ from crypto exchanges

There are some important distinctions between using a fintech app to buy crypto versus using a traditional exchange like Kraken or Crypto.com, largely involving ways in which you can (or cannot) transact. , and limitations on where you can keep the crypto you buy.

Payment platforms and cryptocurrency

PayPal, Venmo (which is owned by PayPal), and Cash App each work a little differently when it comes to crypto. Each of these apps offers different coins and different fee schedules for buying and selling crypto. While the Cash App allows you to move your coins off the platform or move Bitcoin you hold elsewhere in your account, it is not an option on PayPal or Venmo.

Robinhood crypto

Robinhood offers a few different cryptocurrencies (like Bitcoin, Ethereum, Bitcoin Cash, and even Dogecoin), which you can buy and sell in the app. Like its other investment options, one of the main advantages of crypto trading on Robinhood is the lack of fees, which can vary widely between traditional exchanges.

Its accessibility as an investment platform is a big draw to many – whether they invest in crypto or the stock market – but it is also what can make Robinhood so risky. It has been criticized for making trading too fun and encouraging volatility through active trading, rather than growing long-term investments. Much like stock trading, approaching an already speculative asset like crypto with this mindset can make your investment even riskier.

When it comes to crypto specifically, Robinhood also has limitations similar to PayPal and Venmo. Unlike traditional exchanges, Robinhood does not allow you to move your coins off the platform or transfer coins that you already have in your Robinhood Crypto account. This means that you cannot move your private key (the encrypted code that gives access to your cryptocurrency) into your own wallet, nor trade on an exchange like Coinbase. For believers in the crypto mantra “not your keys, not your coins” this can be a major drawback.

Whether you are considering Robinhood or an app like Venmo, remember that cryptocurrency is very volatile. Even if you only invest a few dollars to experiment, it is a good idea to approach your investment with a long-term mindset – once you are certain that it will not interfere with your other financial goals – and be prepared to buy and hold over time rather than participating in active trading.

Should you choose them over traditional exchanges?

Even the most popular cryptocurrency exchanges, like Coinbase and Gemini, may not be platforms you’ve heard of or trust with your financial information. And others are just plain hard to navigate, making the process of buying crypto even more complicated for newbies.

Since there is little federal regulation, it can be difficult to assess the safety or reputation of a traditional crypto trading platform. While apps like Venmo or PayPal can’t protect your crypto assets under FDIC insurance like they can bang for your buck, familiarity with those apps can make the experience a bit easier – maybe you have already linked your financial information, or the user interface is just more familiar.

“I really think the volume of transactions and the transparency of their financial and business operations is what you want to look at,” says Douglas bonparth, financial advisor and president of Bone Fide Wealth in New York. “Are most people going to do this?” No, they’ll find the app the easiest to download and link to their bank account, and make it easier to buy crypto. It’s a bit the appeal of mobile applications [like PayPal and Cash App] etc. “

But many experts see apps as a place to start, not necessarily a place they would recommend you store your coins for the long haul.

“It will be a great way to introduce people to the crypto space,” says Spencer montgomery, founder of Uinta Crypto Consulting, a program for new investors to learn more about crypto. But as they get more involved, “I expect that many of them, as they see success in it, will want to know more, and as they learn more, they will find that there are better ways to buy Bitcoin and go. this side.”

At some point, you may decide you want to control your keys and coins after all – and that’s why a more traditional exchange may be a better choice. For example, if an initial investment later saw a significant increase in value, you might want to move your crypto offline for greater security against cyber threats, which wouldn’t be possible on Venmo or PayPal.

If all of your crypto is on a platform that doesn’t allow offline storage, your only option is to keep it and put more money on another exchange – leaving your assets in multiple places – or sell what you have at the current price before buying elsewhere.

If you choose an exchange like Coinbase from the start, which offers the option of keeping your coins on the platform or trading and storing them yourself, it can be much easier to get started in these activities if you wish in the future.

It all comes down to the learning curve. “Exposure leads to expansion,” says Ross. “As you get exposed to space and learn more and get into the crypto economy, you are going to realize, oh wait, there are all these other things that I can do.”

Whichever option you choose, remember that cryptocurrency remains a highly speculative asset. This can be an interesting way to diversify your portfolio, even if you are just experimenting, but you should only invest what you are prepared to lose.

Whether you put a few dollars in Bitcoin through Venmo or are ready to buy on the stock exchange and keep your coins in an offline wallet, do so only after you have settled your other financial priorities, like an emergency fund and scheme. traditional retreat.