Today, BTC remains a highly volatile asset, and simple things like an ill-timed tweet from Elon Musk can decimate its value. If you want to buy Bitcoin, experts recommend that you invest only a small percentage of your net worth. In this guide, we will learn how to buy Bitcoin in simple ways.
Want more than just to buy BTC? Access dozens of different cryptocurrencies buying guides 2022 here.
What Is Bitcoin?
Bitcoin is the dominant force in the market for cryptocurrencies, but there are thousands of other cryptocurrencies — some reputable, some not. Different cryptocurrencies are often designed for different purposes.
Bitcoin is a digital currency that is open to, and controlled by, thousands of individuals around the world who are financially incentivized to maintain the security and validity of the network. Bitcoin operates outside of the control of a central entity, like a government or company, but within the control of the protocol’s open-source rules. As set out in those rules, only 21 million bitcoin will ever exist, each of which is divisible into smaller units. This limited supply and decentralized architecture has established Bitcoin as a new form of money for the digital world.
Read More: What is Bitcoin?
How Does Bitcoin Work?
Bitcoin is built on a distributed digital record called a blockchain. As the name implies, blockchain is a linked body of data, made up of units called blocks containing information about each transaction, including date and time, total value, buyer and seller, and a unique identifying code for each exchange. Entries are strung together in chronological order, creating a digital chain of blocks.
“Once a block is added to the blockchain, it becomes accessible to anyone who wishes to view it, acting as a public ledger of cryptocurrency transactions,” says Stacey Harris, consultant for Pelicoin, a network of cryptocurrency ATMs.
Blockchain is decentralized, which means it’s not controlled by any one organization. “It’s like a Google Doc that anyone can work on,” says Buchi Okoro, CEO and co-founder of African cryptocurrency exchange Quidax. “Nobody owns it, but anyone who has a link can contribute to it. And as different people update it, your copy also gets updated.”
While the idea that anyone can edit the blockchain might sound risky, it’s actually what makes Bitcoin trustworthy and secure. For a transaction block to be added to the Bitcoin blockchain, it must be verified by the majority of all Bitcoin holders, and the unique codes used to recognize users’ wallets and transactions must conform to the right encryption pattern.
These codes are long, random numbers, making them incredibly difficult to produce fraudulently. The level of statistical randomness in blockchain verification codes, which are needed for every transaction, greatly reduces the risk anyone can make fraudulent Bitcoin transactions.
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How to Make Money with Bitcoin (BTC)?
How to Earn Free Bitcoin (BTC)?
Why Buy BTC?
For many investors, the limited supply of bitcoin makes it a compelling alternative to a traditional hard asset like gold.
Most significantly, an investment in Bitcoin allows you to take your financial future into your own hands without having to rely on traditional monetary systems.
How to Buy Bitcoin in 4 Steps
- Step 1: Decide where to buy Bitcoin. Cryptocurrency exchanges like Coinbase and a few traditional brokers like Robinhood can get you started investing in Bitcoin.
- Step 2: Think about how to store your cryptocurrency. Are you going to keep your Bitcoin in a hot wallet or a cold wallet?
- Step 3: Make your purchase. Figure out how much you want to invest in Bitcoin.
- Step 4: Manage your investment. Determine your long-term plan for this asset.
How to Buy Bitcoin on a Crypto Exchange
To buy Bitcoin or any cryptocurrency, you’ll need a crypto exchange where buyers and sellers meet to exchange dollars for coins.
There are scores of exchanges out there, but as a beginner, you’ll want to opt for one that balances ease of use with low fees and high security. If you don’t already have an exchange in mind, check out our top picks for the best crypto exchanges. You can buy BTC on several different crypto exchanges.
1. Coinbase
- STEP 1. Create a Coinbase account
Download the Coinbase app and start the sign up process. You will need a valid ID and may be asked for proof of address in order to transact, so be sure to have those ready. Verifying your ID may take longer than a few minutes, depending on where you live.
- STEP 2. Add a payment method
Tap on the payment method box and connect a payment method. You can use a bank account, debit card or initiate a wire.
- STEP 3. Start a trade
Press button then select “Buy” from the list of options.
- STEP 4. Select Bitcoin from the list of assets
Search for Bitcoin by typing “Bitcoin” into the search bar. When you see Bitcoin show up in the results, tap it to open up the purchase screen.
- STEP 5. Enter the amount you want to buy
Use the number pad to input the amount you want to spend in your local currency. The app will automatically convert that into a Bitcoin amount.
- STEP 6. Finalize your purchase
Tap “Preview buy” when ready. You’ll be shown the details of your purchase. Make sure everything looks good and then confirm your purchase. That’s it, you’ve bought Bitcoin.
2. Kraken
- STEP 1: Find a crypto exchange or trading platform that offers Bitcoin
There are a number of exchanges that will let you trade your funds for Bitcoin. One of them is the eToro trading platform.
- STEP 2: Sign up
If you’d like to buy Bitcoin through eToro, all you need to do is sign up, verify your account and make a deposit. From there, you’ll be able to buy and sell Bitcoin easily.
- STEP 3: Buy Bitcoin
Bitcoin can be purchased fractionally, so you don’t need to buy a full Bitcoin to own some. For example, if Bitcoin’s price is $10,000, you can purchase 0.1 Bitcoin for $1,000.
3. Bitfinex
- STEP 1. Log in to your account or sign up to Bitfinex.
- STEP 2. Go to Deposit, choose Payment Cards.
- STEP 3. Select the payment processors.
- STEP 4. Choose the crypto and enter the amount.
- STEP 5. Select the destination wallet and proceed payment
4. Binance
- STEP 1: Create your Binance Account
Sign up with your email address or mobile phone number, and choose a strong password. Or, download the Binance crypto trading app from the App Store or Google Play store and open an account there.
- STEP 2: Start Buying Bitcoin
There are two main ways to buy Bitcoin on Binance using cash: you can link your debit/credit card or bank account, or buy crypto directly from other users on Binance P2P.
Linking your debit card, credit card, or bank account (available in many regions) is one of the easiest ways to buy Bitcoin. Through this method, you can buy Bitcoin for a minimum of about $15. (This amount varies depending on the currency you use.)
Buy Bitcoin directly from other Binance users with your local fiat currency via Binance P2P. Browse a variety of Bitcoin listings to shop the best offers on Bitcoin from other users. With thousands of merchants and hundreds of payment methods available, Binance P2P caters to many regions in the world right now.
5. KuCoin
- STEP 1. Sign Up for KuCoin Account
- STEP 2. Secure Your KuCoin Account
- STEP 3. Verify Your Identity
- STEP 4. Connect Your Account to Funds Fund Your Account
- STEP 5. Start Trading on KuCoin
How to Buy BTC With PayPal
- 1. Login to Paypal and Select Cryptocurrency
You should see the option for cryptocurrency in the top right of the dashboard, next to ‘Send’ and ‘Request’.
- 2. Select ‘Bitcoin’
Or choose any of the other coins listed.
- 3. Select ‘Buy’
- 4. Choose How Much You Want to Buy
Enter an amount of dollars you want to spend on Bitcoin or choose a pre-set amount below.
- 5. Select Payment Method
You likely already have you bank account linked to you Paypal account, but you can also hook up another method if you don’t want to use your bank account.
- 6. Hit the ‘Buy’ button
After finalizing your purchase, you will be taken to a confirmation screen and you should see your coins reflected in your Paypal account dashboard.
How to Buy Bitcoin With a Credit Card
Not all platforms will allow you to use a credit card to make your cryptocurrency purchases. If you do choose a platform allowing such transactions, keep in mind that there may be extra fees associated with the purchase. Many credit card companies process cryptocurrency purchases via credit card as cash advances, which can incur high interest rates, among other fees.
Some credit card companies allowing cardholders to make crypto purchases treat the purchases as a cash advance (cash advances usually involve a cardholder using a credit card to withdraw money from an ATM). This has several critical disadvantages.
There are several types of fees a cardholder can incur:
- Cash Advance Fees: Some cards treat a cryptocurrency purchase as a cash advance. This means each crypto purchase is subject to a cash advance fee. A typical fee of either $10 or 5% (whichever is greater) would be charged. These fees are in addition to fees charged by the vendor or exchange.
- Cash Advance Interest Rates: Most cards have a higher Annual Percentage Rate (APR) for cash advances—often over 25%. This is a variable interest that changes with the market. Interest will start to accrue on the day the purchase is made and will continue to accrue until the credit is paid off. By comparison, cardholders have up to 25 days to pay off a regular credit card charge before accruing any interest.
- No Credit Toward Rewards orBonuses: Credit used to purchase crypto (and thus make a cash advance) typically doesn’t qualify for any purchase rewards nor toward spending that would normally apply to a welcome bonus.
- Lower Credit Limits: Cash advances often have a lower credit limit than the cardholder’s overall credit limit that applies to the card itself. Cardholders hoping to make big crypto buys may find themselves limited by the cash advance terms and limitations.
How to Store Bitcoin?
Bitcoin can be stored in two kinds of digital wallets: a hot wallet or a cold wallet. With a hot wallet, transactions generally are faster, while a cold wallet often incorporates extra security steps that help to keep your assets safe but also make transactions take longer.
Hot Wallet
With a hot wallet, Bitcoin is stored by a trusted exchange or provider in the cloud and accessed through an app or computer browser on the internet. Any trading exchange you join will offer a free bitcoin hot wallet where your purchases will automatically be stored. But many users prefer to transfer and store their Bitcoin with a third-party hot wallet provider, also typically free to download and use.
Why choose a wallet from a provider other than an exchange? While advocates say the blockchain technology behind bitcoin is even more secure than traditional electronic money transfers, Bitcoin hot wallets are an attractive target for hackers.
There are many hot wallet providers, offering a range of wallet types. Here are a few:
- Coinbase: Also a popular Bitcoin currency exchange, Coinbase offers free online hot wallets and insures losses due to security breaches or hacks, employee theft, or fraudulent transfers.
- Electrum: Software that allows your bitcoin to be stored on your laptop or desktop computer.
- Blockchain: Like Coinbase, Blockchain is an online hot wallet; unlike Coinbase, Blockchain isn’t a currency exchange and is considered a less attractive target for hackers.
- Mycelium: A mobile-only bitcoin wallet, with versions available for Android or iPhone users.
Although some hot wallet providers offer insurance for large-scale hack attacks, that insurance may not cover one-off cases of unauthorized access to your account.
Cold Wallet
A cold wallet is a small, encrypted portable device that allows you to download and carry your Bitcoin. Cold wallets can cost as much as $100 but are considered much more secure than hot wallets.
Cold wallet providers include:
- Trezor: This company offers small, key-size cold wallets ranging from about $60 to $220.
- Ledger Nano: Designed like a thumb drive, Ledger Nano has cold wallets ranging from about $60 to $120.
When creating accounts for your digital wallets and currency exchange, use a strong password and two-factor authentication.
Read More: How to Sell Bitcoin?
Is Bitcoin Right For You?
Bitcoin can be a risky investment, so it’s important to think carefully about your goals and your strategy before you decide. While Bitcoin’s price has appreciated dramatically over time, not every person who has bought it has gotten a piece of those gains. Because cryptocurrency markets in general are very volatile, it’s nearly impossible to find the “right time” to buy or sell — the price could soar moments after you sell, or plummet as soon as you buy.
That said, there are some basic guidelines. One common rule of thumb is to invest no more than 10% of your portfolio in individual stocks or risky assets like bitcoin. If you’re new to investing, find out more about how to invest money. If you do decide to buy bitcoin, there are also some technical and logistical decisions you’ll have to make.
It’s also a good idea to make sure you understand what you’re investing in. Here are some basic things to know.
Is It Possible To Buy Bitcoin Instantly?
It often takes several days to fully open and verify an account with an exchange because of the documentation requirements they face. However, once an account is open, it is possible to fund it quickly — via bank transfer, wire transfer, credit card, debit card or transferring in crypto that is held elsewhere — and then buy, sell or make a trade very quickly. Some exchanges will allow new customers to make trades using leverage — borrowed money — immediately, while others do not. This means that it is important to check whether or not cards such as Visa, Mastercard, American Express and Visa Electron are allowed with any exchange that you choose.
Once verification with an exchange has been completed and a deposit has been made, it is possible to buy any of the assets that they make a market in. The range of assets available differs substantially from exchange to exchange but all offer the top coins like Bitcoin, Ethereum, Ripple and Bitcoin Cash.
What You Need to Do to Purchase Bitcoin
Now that you have decided which exchange you would like to trade on, it is time to register an account and get a Bitcoin address! After registration, it is perfectly normal if exchanges require you to verify your identity. This is what we call “Know Your Customer” or KYC. The process will involve you submitting photos to prove your identity. After submission, the process may take a few hours or up to a few days to complete. Be patient!
After KYC is complete, you should now be allowed to deposit money into your account. Referring to the above, please select the option that makes the most sense for you. We recommend going via a local bank transfer if possible, but a SWIFT transfer or via a third party payment processor also works. Only use credit cards for small sums of purchases as the fees do add up! (Exchanges usually charge 3-4% in credit card fees)
Once the money is deposited, you are ready to buy your first Bitcoin! Remember, you don’t have to buy an entire Bitcoin — you can buy part of a Bitcoin, as each Bitcoin is broken down into 100 million Satoshis!
Is Bitcoin An Effective Hedge Against Inflation?
Some people think Bitcoin may be an effective way to protect yourself from inflation, or what’s called an inflation hedge. A hedge is a kind of investment that offsets, partially or fully, the decline in another asset. So, an inflation hedge would protect you from inflation in some way.
There’s little evidence to support the assertion that Bitcoin acts as an inflation hedge, say experts. Bitcoin has not existed long enough to have been through a major inflationary period.
And it’s not an effective hedge against the volatility of the stock market, either. Experts say that Bitcoin acts more like a risky tech stock or momentum stock, meaning that it rises when these stocks rise and falls when they fall. That’s not the kind of thing you want from a hedge, which should perform the opposite of the asset being hedged, zigging when the market zags.
