So you’ve learned the basics of bitcoin, now you’re excited about its potential and want to buy some. But how?
Compared with when Bitcoin first launched in 2009, buying cryptocurrency has gotten easier by the day. Today, you can purchase bitcoin directly on crypto exchanges, peer-to-peer marketplaces, Bitcoin ATMs and even on some traditional brokerage platforms. The list is quite elaborate.
You can also opt to use hard cash, credit or debit cards, or wire transfers, depending on whom and where you are buying from.
Now, before you buy your first bitcoin, you must decide how you want to store it. Think of this as having a bank account or physical wallet to keep your money.
In the case of bitcoin, you can use an online wallet in the form of an exchange platform or an independent provider, a mobile wallet, a desktop wallet or an offline wallet such as a hardware device or a paper wallet. You can find more information on bitcoin wallets and tips on how to use them here.
That being said, here’s a quick rundown on how you can buy the leading cryptocurrency.
One of the easiest ways to buy bitcoin is via cryptocurrency exchanges. As the name suggests, a crypto exchange is a platform that allows you to buy and sell cryptocurrencies using different traditional fiat money options or other digital currencies.
To buy bitcoin on a crypto exchange, you will need to open an account on the exchange platform. Chances are that you may also be required to go through some know-your-customer (KYC) and anti-money-laundering (AML) procedures – these are just basic background checks so that the crypto exchange knows you are who you say you are. This typically entails submitting your official ID and sometimes your proof of address. On the flip side, some exchanges give you restricted access and benefits when you sign up with just your email without verifying your identity. This is a perfect option if you wish to stay anonymous and don’t plan to buy a large amount of bitcoin.
Speaking of crypto exchanges, while there are hundreds of them to choose from, as a beginner, it is recommended that you stick with popular high-volume exchanges such as Binance, Coinbase, Houbi, FTX and Kraken. However, it’s always advisable to conduct your own research before selecting a particular exchange to use. Some are available only to people from certain countries, while others are geared toward more experienced traders.
Keep in mind that most platforms will charge fees for certain funding options, such as credit card deposits. In addition to charging deposit fees, you will also need to pay a fee for every transaction, to incentivize a bitcoin miner to process your transaction.
Note that the exchange will automatically generate a wallet for you. The downside of this is that you don’t have control over your private key – the key that determines who the true owner is of the cryptocurrency stored in the wallet – and could potentially lose some of all of your bitcoin if the exchange is hacked. This, however, is a great option if you plan on exchanging your bitcoin for other cryptocurrencies and taking small profits from price swings.
If you plan to buy a significant amount of bitcoin without a plan to sell any time soon, you are better off moving your funds to an offline or hardware wallet.
Peer-to-peer bitcoin markets
While crypto exchanges may have grown to become the de facto way to buy bitcoin, you can also purchase the digital asset directly from other bitcoin owners via peer-to-peer platforms like LocalBitcoins, Paxful, Binance P2P and Bitquick. This is also known as over-the-counter (OTC) trading.
OTC trading is considerably faster and offers more diverse payment options. However, buying bitcoin directly from individuals can be extremely risky. Meeting a complete stranger face to face to privately exchange money for cryptocurrency doesn’t always work out for the best. Platforms like LocalBitcoins offer a much safer solution and use an in-house escrow service to ensure the exchange process runs smoothly.
Traditional stock brokers
Thanks to the growing popularity of bitcoin, several traditional brokers now allow customers to buy and sell the digital asset on their platforms. Robinhood is a pioneer in this regard. It is the first mainstream investment broker to allow customers to purchase bitcoin on its platform, along with a selection of other cryptocurrencies. Its crypto arm, Robinhood Crypto, is also available in most states in the U.S. Similarly, you can also buy bitcoin on broker platforms such as eToro and TradeStation.