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It’s easier than ever to buy cryptocurrency – all you need to do is pull out your phone and open an app.
PayPal is one of the few popular mobile and online payment platforms that allows users in the US to now buy, sell and hold cryptocurrencies with only $1 invested. But if you want to add cryptocurrency to your portfolio, you need to think carefully about which platform you use – and whether you should invest in crypto at all.
Even the most common and proven coins – Bitcoin and Ethereum – are still highly volatile. That’s why experts recommend investing no more than 5% of your portfolio in crypto, and never letting it get in the way of things like emergency saving or paying off high-yield debt.
If you decide to invest, where you buy your crypto can have important implications worth thinking about in advance. It might be easy to buy crypto with an app you already use – and rely on 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 find out if 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 certain purchases, but it’s generally a bad idea to use crypto as a means of payment. As with other long-term investments, experts recommend buying and holding your cryptocurrency long-term.
PayPal protects eligible purchases from fraud when you pay with crypto.
PayPal, along with other apps like Venmo and Robinhood, makes crypto more accessible, which is a major draw for many novice 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 own a few hundred dollars worth of cryptocurrency in two seconds,” says Julian Morris, a certified financial planner at Concierge Wealth Management in Boston. “They just make it really, really easy.”
Given the value of the cryptocurrency market, there’s reason to own a little bit of it, says David Yermac, a finance professor at the New York University Stern School of Business who researches cryptocurrency. But it shouldn’t be your main focus.
“The proven formula for investing success 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 need to create an account. If you already have a PayPal account, all you need to do is click a button that says “crypto” and choose which coins to buy to buy crypto.
You can buy four types of crypto in the PayPal app: Bitcoin, Ethereum, Litecoin and Bitcoin Cash. However, experts recommend sticking with Bitcoin and Ethereum if you are a new investor.
To complete your purchase, you will need an available balance, a linked debit card, or a linked bank account. You can spend as little as $1 or as much as $100,000 per week. Like many crypto exchanges, there are fees for buying and selling crypto on PayPal, which vary depending on how much you buy.
PayPal crypto fees
Purchase or sale amountPayPal Fee$1 – $24.99$0.50$25 – $1002.30%$100.01 – $2002.00%$200.01 – $1,0001.80%$1,000.01 and above 1.50%
You must also verify your identity, fill out a W-9, and agree to PayPal’s terms and conditions. If you decide to make a purchase with crypto, PayPal will automatically convert it into US dollars at no additional cost.
Alternatives to Buying Crypto on PayPal
Investing in crypto with PayPal is easy, 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 – an important distinction when it comes to full crypto ownership.
That is not the case with PayPal. You cannot transfer cryptocurrency from your account to other accounts within or outside PayPal, and you must sell your cryptocurrency on PayPal to withdraw money, which you are also responsible for reporting on your tax return.
If you want complete control over your coins, a cryptocurrency exchange might be a better choice. While they can be more complicated to navigate as a beginner, you have more flexibility with your coins and may pay less in fees. You can use these exchanges to trade one crypto for another (such as using Bitcoin to buy Ethereum) or buy crypto with common currencies, such as the US dollar.
Still, PayPal can make sense for new investors who want to experiment with a small crypto balance on a well-known platform. Even for those well-versed in traditional investment options such as stocks and index funds, crypto investing using exchanges can be complicated. For example, personal finance expert Suze Orman recently told NextAdvisor that she bought $5,000 in Bitcoin on PayPal instead of a traditional exchange because “it was just easy to do it.”
If you are a new investor with a few bucks to spare, PayPal can be a good place to start. Investing a small portion of your wallet in Bitcoin on a platform you already trust can make sense for beginners, especially if you don’t expect to add large amounts of money that you may want to have more control over later (like your own wallet storage ).
There is no wrong or right way to invest in crypto – it ultimately depends on your personal preferences. What’s more important is taking the time to learn about crypto before investing in it. “Before you hit a ‘buy’ button, you just want to be prepared,” Morris says. “And if you want to be a prepared investor, you definitely need to do a lot of research.”
Remember that any crypto investment is volatile and you should only invest what you are willing to lose. “If you’re going to own it, you want to own just a little bit as part of a very diversified portfolio,” Yermack says.
You should also prioritize other important aspects of your finances, such as having an emergency fund or paying off high-yield debt, before investing in crypto – be it through PayPal or not.
And whichever platform you choose, take the time to learn about smart long-term crypto investments, how to keep your coins safe, and how to deal with the volatile price swings.