How To Buy Bitcoin
For anyone getting into Bitcoin, it can seem daunting. The first thing most people need to fathom is how to buy Bitcoin.
There are many ways to get hold of some Bitcoin, and it’s easy when you know how. In fact, in most cases it’s easier to purchase Bitcoin than stocks from a legacy broker.
However, because Bitcoin relies on no middleman, it’s imperative that you know exactly how to buy Bitcoin, how to send it and how to store it, before you attempt to do so.
There are thousands of cryptocurrency exchanges and some of them allow you to buy Bitcoin with cash or credit card.
You can buy BTC on peer-to-peer marketplaces. These are different from exchanges as they are basically a platform bringing buyers and sellers together.
On these marketplaces you can buy Bitcoin with Walmart gift cards, Amazon gift cards, Airmiles, or whatever the seller is willing to accept. There even Bitcoin ATMs where you can get hold of some.
So you want to learn how to buy Bitcoin? Let’s take a deeper look.
Not Your Keys Not Your Bitcoin
Before you buy any Bitcoin, there are a few things you should know first.
First thing you should do is set up a Bitcoin wallet so you have somewhere to safely store it.
There are many different types of wallet, such as hardware and software wallets.
You even get given a Bitcoin wallet when you sign up with an exchange, but it’s highly recommended that you have your own, and not use an exchange wallet. There’s a saying in the Bitcoin space: Not your keys, not your Bitcoin.
Basically this means, if you don’t have access to the private key (exchange wallets have this) you don’t have full control of the bitcoins. And if an exchange is hacked, you could lose your bitcoins.
That said, most big exchanges are reputable, but it’s just not worth risking it, when you can store your own in a secure hardware wallet.
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Choosing a Bitcoin Wallet
It’s important to note that bitcoins are not really ‘in’ your wallet. Bitcoins never actually leave the blockchain, so your wallet is basically a bridge with an interface that shows how many bitcoins you have in your private address.
Hardware wallets are the easiest way to safely store your purchased bitcoins. They’re basically hardware devices that allows you to store your bitcoins, and you have full control of the bitcoins stored on there.
If you buy a hardware wallet, however, you must buy from a reputable source. And when it arrives, if the package has been tampered with, send it back!
The Trezor and Ledger devices don’t actually connect to the Internet, and there are a few security steps to get into your wallet.
When you first open and launch your hardware wallet, you’ll get a seed phrase for back up. This is only needed if your wallet is destroyed or lost.
As long as you have the seed phrase you will be able to open up your same wallet on pretty much any other device.
If anyone else has your seed phrase, they will have access to your wallet, so make sure you keep it private and stored in at least 2 different physical locations.
Software Wallets are probably the most popular wallets, because they’re free to download. There are many different wallets, and although they are safe, they are more susceptible to phishing attacks than hardware wallets.
Electrum is a wallet I hear plenty of good reviews about, but I don’t personally use it as I have a hardware wallet.
Arguably, the safest way to store your bitcoins is to write your private keys on some paper and store it in a few different places, just in case disaster happens and you lose your only piece of paper. I wouldn’t recommend this, however, especially if you’re only just getting into Bitcoin.
How To Buy Bitcoin From an Exchange
Cryptocurrency exchanges act like other legacy exchanges, but instead of you buying through a broker, you purchase the Bitcoin yourself. And unlike legacy markets, you can buy BTC 24/7/365.
There are thousands of exchanges, operating pretty much in every country, but not all of them allow you to buy Bitcoin with cash.
Most exchanges are for trading BTC, but there are platforms that allow you to fund your account with cash and then purchase some Bitcoin.
The most popular exchanges are Kraken, Binance or Coinbase. Each exchange is different, but basically you have to create a new account, verify your personal details with a passport, attach your bank account, and you’re good to go.
You can buy Bitcoin on some exchanges without verifying your account, but you’ll be limited to how much you can buy.
With the three exchanges I mentioned you can easily buy Bitcoin with credit card. Or you can send a bank wire to fund your account.
Once your account is funded, you simply buy Bitcoin with the currency you have sent. Simply put an order with the price you’re willing to pay, and as soon as that is matched you will have purchased some Bitcoin.
It usually takes a matter of minutes, and is easy to do.
You are then free to do whatever you like with your bitcoins. You can trade them on the exchange, if that’s your game, or if you want to hold them for a future investment, you should send them to a wallet you have set up.
Exchange wallets are not recommended for long-term storage as they are centralized and are susceptible to being hacked, and you could lose all your bitcoins.
How to Buy Bitcoin from Peer-to-Peer Marketplaces
As they’re peer-to-peer marketplaces, the platforms don’t really get involved with the trade. They are just a meeting ground for buyers and sellers, and take a cur of the trade for doing so.
Paxful and LocalBitcoins are similar platforms but both offer different options for buying Bitcoin.
Paxful has over 300 ways to buy Bitcoin, including most national currencies, gift cards, and you can even buy Bitcoin anonymously on there.
Signing up for a marketplace account is similar to exchanges. Again, the level of KYC you choose to complete will determine the amount of Bitcoin you can buy.
If you do want to buy Bitcoin anonymously, you will probably pay a bit extra, as most people prefer not to sell it to anyone who hasn’t verified their account.
To buy Bitcoin on Paxful or LocalBitcoins, you just find a seller willing to accept the currency you’re offering.
Once you do, check out their credentials, and make sure they have built up a good reputation. At east then you know there’s little chance they will try and rip you off.
Once you have agreed a price with someone, the marketplace will take the Bitcoin from them and keep it in an escrow. Once they receive your payment, the Bitcoin will automatically be deposited in your marketplace wallet.
But remember, not to leave the bitcoins in these types of wallets. Only in a wallet you fully control.
Buying Bitcoin Is Easy When You Know How
Bitcoin is exciting. It has opened up a whole new asset class, and I believe it will completely disrupt the financial system in the coming years.
Working out how to buy Bitcoin is pretty easy, but it can be a little nerve wracking when you’re new to it.
There are so many options for buying Bitcoin, and as the years go by there will be many more.
Understanding how Bitcoin works before getting some is important, because there are no middlemen in Bitcoin, and if you make a mistake your BTC could be lost forever.
That said, it’s not difficult, it just takes caution and practice.
Author: Tommy Limpitlaw
What is the point of Bitcoin?
Bitcoin is a decentralized money. A money that nobody can control or manipulate, and a money that nobody can print and devalue. It’s also not necessary for any third party to verify transactions, so it makes it much faster and cheaper to send value. It’s also money built on the Internet: a society of almost 5 billion people.
Can you lose money on Bitcoin?
You certainly can lose money on Bitcoin. Many new investors see the gains Bitcoin has made and expect it to always be so. But the truth is, Bitcoin’s gains have come from buying Bitcoin and holding on long term and riding the market. People expecting only gains, quickly lose faith when it crashes and lose money. The best way to avoid losing money is buy Bitcoin and hodl.
Why should I buy Bitcoin?
People who understand Bitcoin buy Bitcoin because it is a peer-to-peer money that nobody can manipulate. It’s all set in the Bitcoin codebase which is secured by hundreds of thousands of computers all around the world. Bitcoins can be sent by anybody and no third party is need to verify the transactions, and nobody can stop Bitcoins being sent. There are many more reasons why people buy Bitcoin, and a deeper dive before doing so is recommended.
Can you buy less than 1 Bitcoin?
Yes. Every Bitcoin can broken down into 100 million bits. They are known as satoshis, after the pseudonymous creator Satoshi Nakamoto. And some companies will let you buy as little as $1 worth of Bitcoin, which at time of writing is worth about 11,000 satoshis. There are many companies that have a system for dollar cost averaging (DCA). This is a great way to buy Bitcoin, and is known in the space as ‘Stacking Sats’. Basically, what you do is set up small automatic, recurring payments to buy Bitcoin (or sats), and you DCA over time.
A Bitcoiner since 2017 and a Bitcoin Maximalist since 2018, Tommy is our main writer and editor at Bitcoin Maximalist. Other than researching and writing about Bitcoin, Tommy loves spending time with his family and supporting his beloved Leeds United.