Navigating the cryptocurrency market for the first time can be daunting. A common recommendation for beginners is to first purchase USDT (Tether) and then use that to buy BTC (Bitcoin). While this might seem like an extra step that could incur more fees, it often proves to be a more cost-effective method that results in acquiring more Bitcoin for your money.
This guide breaks down the reasons behind this strategy and provides a clear, step-by-step tutorial for new investors.
Understanding the Core Advantage: Minimizing Slippage
The primary reason to use USDT as an intermediary is to minimize slippage. Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed.
When you try to buy Bitcoin directly with fiat currency (like USD, EUR, or CNY) on many exchanges, you may encounter higher slippage. This is often because the direct trading pairs have less liquidity or wider bid-ask spreads compared to the massive USDT trading markets. The higher slippage means you end up with less Bitcoin than you anticipated for your initial investment.
By first converting your fiat into USDT—a stablecoin pegged to the US dollar—you effectively park your value in a stable asset. You then enter the highly liquid BTC/USDT trading pair, where slippage is typically much lower. This two-step process, even after accounting for the trading fee from USDT to BTC, frequently results in a better final outcome and more Bitcoin in your wallet.
A Step-by-Step Guide to Buying Crypto
For those new to the space, here is a general overview of the process to acquire Bitcoin using this method.
Step 1: Choose and Register on a Reputable Exchange
Your first step is to select a secure and well-established cryptocurrency exchange. Once you have chosen a platform, you will need to create an account by providing an email address and setting a strong password.
Step 2: Complete Identity Verification (KYC)
To comply with international regulations, most exchanges require users to complete a Know Your Customer (KYC) process. This usually involves submitting a government-issued ID and sometimes a selfie for verification. This step is mandatory for depositing fiat currency and lifting account limits.
Step 3: Purchase USDT
With your account set up and verified, you can now buy USDT. Exchanges typically offer several ways to do this:
- Quick Buy/Sell: A simple interface where the exchange automatically matches you with a seller at a quoted price.
- P2P/C2C Trading: A peer-to-peer marketplace where you browse offers from individual sellers, choose your preferred payment method (like bank transfer, PayPal, or others), and trade directly with them.
Once you complete a purchase using your local currency, the USDT will be credited to your exchange's funding account.
Step 4: Transfer USDT to Your Trading Account
Before you can trade, you need to move your USDT from the general funding account to your spot trading account. This is usually a quick, internal transfer with no fee.
Step 5: Trade USDT for BTC
Now, navigate to the trading section of the exchange and select the BTC/USDT trading pair. You can place different types of orders:
- Market Order: Buy BTC instantly at the current best available market price.
- Limit Order: Set the specific price at which you want to buy BTC. The order will only execute if the market reaches your price.
After your order is filled, the Bitcoin will appear in your spot trading account. For long-term storage, it is highly recommended to transfer it to your own private, secure wallet. 👉 Explore secure storage strategies for your assets
Key Considerations for a Smooth Experience
- Fees Matter: Always be aware of the trading fees and any deposit/withdrawal fees associated with each step. Factor these into your calculations.
- Security First: Enable two-factor authentication (2FA) on your exchange account. Never share your password or private keys with anyone.
- Price Volatility: While USDT is stable, Bitcoin's price is highly volatile. The price can change significantly between the moment you buy USDT and when you execute your BTC trade.
Frequently Asked Questions
Q: Is it really cheaper to buy USDT first?
A: In most cases, yes. While it involves two transactions, the reduced slippage in the high-liquidity BTC/USDT market often outweighs the cost of the extra trade, especially when compared to direct fiat/BTC pairs which can have less favorable rates.
Q: What is a stablecoin and why is USDT used?
A: A stablecoin is a type of cryptocurrency designed to maintain a stable value, typically pegged to a fiat currency like the US dollar. USDT is the most widely adopted stablecoin, offering immense liquidity and acting as a dollar proxy within the crypto ecosystem, making it an ideal trading pair.
Q: Are there any risks to using USDT?
A: While widely used, it's important to know that stablecoins like USDT carry some regulatory and counterparty risk, as they are backed by reserves held by a private company. It's generally not advised to hold large amounts of stablecoins long-term; they are best used as a medium for trading and transferring value.
Q: Can I use other stablecoins like USDC instead of USDT?
A: Absolutely. Other reputable stablecoins like USDC are excellent alternatives. The process is identical: buy the stablecoin first, then trade it for BTC. Just ensure the exchange supports a liquid trading pair for the stablecoin you choose (e.g., BTC/USDC).
Q: What’s the difference between a market order and a limit order?
A: A market order executes immediately at the current market price, ensuring speed but not price. A limit order lets you set a specific price, guaranteeing price but not execution—your order will only fill if the market hits your price.
Q: Why shouldn’t I just keep my crypto on the exchange?
A: The mantra "not your keys, not your crypto" exists for a reason. While convenient for trading, leaving assets on an exchange exposes you to potential security risks like hacking. For significant amounts, a self-custody hardware wallet is the safest storage solution.
Conclusion
For beginners, the strategy of first converting fiat currency into USDT and then trading for Bitcoin is a smart and often more economical approach. It leverages the high liquidity of the USDT market to reduce slippage and provide better execution prices. By understanding the process, being mindful of fees, and prioritizing security, you can confidently take your first steps into the world of cryptocurrency investment.