It is easier than ever to buy cryptocurrency — all you have to do is pull out your phone and open an app.
PayPal is one of a few popular mobile and online payments platforms now allowing users in the U.S. to buy, sell, and hold cryptocurrencies with as little as $1 invested. But if you’re looking to add cryptocurrency to your portfolio, you should think carefully about which platform you use — and whether you should be investing in crypto at all.
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Even the most common and time-tested coins — Bitcoin and Ethereum — are still highly volatile. That’s why experts recommend investing no more than 5% of your portfolio in crypto at all, and never letting it get in the way of things like saving for emergencies or paying down high-interest debt.
If you do decide to invest, where you buy your crypto can have important implications worth thinking about ahead of time. It may be easy to buy crypto with an app you already use — and trust the security measures of — like Paypal, but there are limitations compared to traditional cryptocurrency trading platforms.
Here’s what you need to know before buying crypto on PayPal and how to figure out whether it makes sense for you.
What You Need to Know Before Buying Crypto on PayPal
Any PayPal user can buy, sell, and hold crypto. You can also use crypto at checkout for select purchases, but it’s generally a bad idea to use any cryptocurrency as a form of payment. As with other long-term investments, experts recommend buying and holding your crypto long term.
PayPal, along with other apps like Venmo and Robinhood, are making crypto more accessible, which is a major draw for many beginner investors. But increased accessibility can also increase your risk.
“If you have a PayPal balance on your phone, and you’re curious about cryptocurrency, you can open PayPal, click crypto and in two seconds own a few hundred dollars worth of cryptocurrency,” says Julian Morris, a certified financial planner at Concierge Wealth Management in Boston. “They just make it really, really easy.”
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Given the value of the cryptocurrency market, there is a case for owning a little bit of it, says David Yermack, a finance professor at the New York University Stern School of Business who researches cryptocurrency. But it shouldn’t be your main focus.
“The tried-and-true formula for success in investing always involves diversification — not putting all your eggs in one basket, but trying to own a little bit of many things,” he says.
How to Buy Crypto on PayPal
To buy crypto from PayPal, you’ll need to set up an account. If you already have a PayPal account, all it takes to buy crypto is clicking a button that says “crypto” and choosing which coins you’d like to buy.
You can purchase four types of crypto on the PayPal app: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. However, experts recommend sticking to Bitcoin and Ethereum if you’re a new investor.
To complete your purchase, you’ll need to have available funds, a linked debit card, or a linked bank account. You can spend as little as $1 or as much as $100,000 a week. Like many crypto exchanges, there’s a fee for buying and selling crypto on PayPal, which varies depending on how much you buy.
PayPal Crypto Fees
You also have to verify your identity, fill out a W-9, and agree to the PayPal terms and conditions. If you decide to make a purchase with crypto, PayPal will automatically convert it into the U.S. dollar at no additional cost.
Alternatives to Buying Crypto on PayPal
Investing in crypto using PayPal is simple — especially if you already use the app for online payments. But it has limitations.
The crypto you buy through PayPal is not the same as buying crypto on an exchange like Coinbase or Gemini. When you buy crypto from a traditional exchange, you have the option to transfer it to a wallet for secure storage or to someone else — a key distinction when it comes to full crypto ownership.
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That’s not the case with PayPal. You can’t transfer crypto from your account to other accounts on or off PayPal, and you have to sell your crypto on PayPal to make a withdrawal, which you’ll also be responsible for reporting on your tax return.
If you want full control over your coins, a cryptocurrency exchange may be a better choice. While they can be more complicated to navigate as a beginner, you’ll have more flexibility with your coins and potentially pay fewer fees. You can use these exchanges to trade one crypto for another (like using Bitcoin to buy Ethereum) or buy crypto using regular currency, like the U.S. dollar.
Still, PayPal can make sense for new investors who want to experiment with a small crypto balance on a familiar platform. Even for those well-versed in traditional investment options like stocks and index funds, crypto investing using exchanges can be complicated. For example, personal finance expert Suze Orman recently told NextAdvisor that she purchased $5,000 in Bitcoin on PayPal instead of a traditional exchange because “it was just easy to do it.”
If you’re a new investor with a few dollars to spare, PayPal can be a good place to start. Investing in a small portion of your portfolio in Bitcoin on a platform you already trust can make sense for beginners, especially if you don’t anticipate adding large amounts you might want more control over (like your own wallet storage) later.
There’s no wrong or right way to invest in crypto — it ultimately depends on your personal preferences. What matters more is taking the time to learn about crypto before investing in it. “Before you click a ‘buy’ button, you just want to be prepared,” says Morris. “And if you want to be a prepared investor, you certainly need to do a lot of research.”
Remember, any crypto investment is volatile, and you should only invest what you’re prepared to lose. “If you’re going to own it, you only want to own a little bit as part of a very diversified portfolio,” says Yermack.
You should also prioritize other important aspects of your finances, such as having an emergency fund or paying down high-interest debt, before investing in crypto — whether it’s through PayPal or not.
And whatever platform you choose, take time to learn about smart crypto investing for the long-term, keeping your coins secure, and how to deal with the volatile price fluctuations.