What Happens When You Buy Crypto
From pressing the button to holding the asset, with every party involved and every fee along the way.
What this covers
The button says buy. Several things happen behind it, and knowing them explains where the costs are.
Step one: your money arrives at the exchange
By bank transfer, card, or another method. It becomes a balance in your account, which is a number in the exchange’s database.
At this point you have not bought anything. You have deposited money with a company.
The cost here: the deposit fee, which is zero for bank transfer on most platforms and several percent for a card.
Step two: your order is matched
The exchange matches your buy order against a sell order from another customer or a market maker.
Nothing moves on any blockchain. Both accounts are updated in the exchange’s database.
The cost here: the trading fee, plus the spread if you used a simplified buy interface rather than the order book.
Step three: you hold a balance
Your account now shows an amount of crypto. The exchange holds the actual coins in its own wallets, pooled across all customers.
You own a claim against the exchange. You do not hold the coins.
The cost here: none directly. The risk is that the company holding them fails or freezes your account.
Step four, optional: you withdraw
If you send the coins to a wallet you control, the exchange makes an actual blockchain transaction.
Now you hold the asset. The keys are yours, nobody can freeze it, and nobody can help you if you lose access.
The cost here: the withdrawal fee, which includes the network fee plus whatever the platform adds.
Where the money goes, summarised
| Stage | Typical cost |
|---|---|
| Deposit by bank transfer | Usually zero |
| Deposit by card | Two to four percent, sometimes more |
| Trading fee | A fraction of a percent |
| Spread on simplified interface | Frequently several times the trading fee |
| Withdrawal | A fixed amount per withdrawal |
The decision most people get wrong
Stopping at step three.
Leaving everything on the exchange is convenient and means you are holding a claim against a company rather than an asset. Several large platforms have failed and customers lost funds.
The reasonable arrangement is a working balance at the exchange, small enough that losing it would be an annoyance, and the rest in a wallet you control.
Platforms that support withdrawal to your own address, such as a platform that lets you withdraw to your own wallet, make that straightforward. Some consumer applications sell you price exposure without letting you withdraw at all, which is a different product.