How To Buy Bitcoin

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, mobile payment apps, peer-to-peer marketplaces, Bitcoin ATMs and even on some traditional brokerage platforms. Bitcoin ETFs are also a viable option for those hesitant to hold actual bitcoin. 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.

Cryptocurrency exchanges

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 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.

Once you’ve picked an exchange to use, the next step is to fund your account in order to purchase bitcoin. Most exchanges would allow you to fund your account through bank transfers, credit cards or PayPal.

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.

Read more: How Bitcoin Mining Works

Once your account is funded, you can then proceed to buy bitcoin on your chosen exchange.

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.

Bitcoin ETFs

For investors interested in bitcoin but hesitant to engage directly with cryptocurrencies, a spot bitcoin exchange-traded fund (ETF) presents an attractive alternative. A spot bitcoin ETF tracks the price of bitcoin and allows investors to gain exposure to its price movements without owning bitcoin directly.

Read More: Bitcoin ETFs Explained: What Are They & How Do They Work?

Unlike traditional ETFs that might invest in a range of assets, spot bitcoin ETFs directly track the price of bitcoin. They hold actual bitcoin, and their shares are traded on traditional stock exchanges. You can also gain exposure to bitcoin’s price movements by buying bitcoin futures ETFs, which may be more easily available in different jurisdictions.

Investors interested in gaining exposure to bitcoin via ETFs should conduct thorough research to find the ETF that suits their investment goals and risk tolerance. Consider factors such as management fees, the track record of the ETF provider and how closely the ETF tracks the price of bitcoin.

If you already have a brokerage account, you can simply buy shares of a spot bitcoin ETF just as you would with any other stock. If you don’t have an account, you’ll need to set one up and fund it.

Mobile payment apps

Bitcoin's rise in popularity has significantly impacted the financial technology sector. Mobile payment apps such as Venmo, Cash App and PayPal have adapted to this trend by integrating services that enable users to buy, sell and hold bitcoin directly within their platforms.

These apps offer a convenient and accessible way to purchase bitcoin quickly from a mobile device. This approach may be suitable for individuals with limited knowledge of bitcoin who still seek exposure to it.

However, there are drawbacks to this convenience. Like crypto exchanges, when you buy bitcoin on mobile payment apps, you don’t own the private keys to your bitcoin wallet, meaning less control over your cryptocurrency. Transactions may also incur fees that can be higher than those on dedicated crypto exchanges. However, most of these apps charge nothing if moving bitcoin to another account on the platform.

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 Paxful, Binance P2P and NoOnes. This is also known as over-the-counter (OTC) trading.

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 Paxful, Binance P2P and NoOnes offer a much safer solution and use an in-house escrow service to ensure the exchange process runs smoothly.

Peer-to-peer bitcoin markets may not be available in all countries. Geographic regulations can significantly impact the availability of peer-to-peer bitcoin exchanges. Regions with strict legal frameworks, stringent KYC and AML policies, complex taxation or onerous payment service laws can hinder the operation and accessibility of these platforms.

Bitcoin ATMs

Bitcoin ATMs operate similarly to regular cash ATMs. The main difference is they allow you to buy and sell bitcoin, as opposed to just withdrawing fiat. These devices will send bitcoin to your wallet in exchange for cash. All you need to do is feed in the bills, hold your wallet’s QR code up to a screen and the corresponding amount of bitcoin is beamed to your account.

Several Bitcoin ATM companies have struck deals with third party ATM providers to make it possible to buy bitcoin in convenience stores, gas stations and on city blocks. Coinatmradar can help you to find a Bitcoin ATM near you.

A similar option to buying bitcoin via a Bitcoin ATM is to purchase gift cards like Azteco or similar vouchers designed to buy and spend small amounts of crypto.

Although Bitcoin ATMs are typically safe to use and a legitimate way to purchase bitcoin, they are unfortunately being taken advantage of by scammers. The United States Federal Trade Commission has stated that scammers are impersonating legitimate government organizations or authorities and demanding payment via bitcoin purchased at Bitcoin ATMs, claiming it’s for taxes, fines or other official expenses. Victims believing they are dealing with a legitimate entity use the ATM to transfer bitcoin to the scammer. Never make a bitcoin purchase unless it is of your own volition. Never transfer bitcoin to a wallet that you do not have control over or access to, unless you are making a payment for goods or services.

Traditional stock brokers

Thanks to the growing popularity of bitcoin, several traditional brokers and FinTech brokerages 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.

Several banks as well have begun offering crypto trading desks, often for their high net worth clientele. Likewise, financial advisers and wealth managers may also be able to buy and hold bitcoin on their clients’ behalf.

How to securely store purchased bitcoin

Transferring purchased bitcoin to a personal wallet is vital for ensuring security and control over one’s assets. Crypto exchanges and mobile payment apps, while convenient for trading, can be targets for hackers and may also face regulatory or internal issues, risking asset accessibility.

Read More: Your First Crypto Wallet: What Is a Crypto Wallet and How to Use It

Personal bitcoin wallets grant users full control over their private keys, diminishing the threat of theft or loss due to a failure on the part of a crypto exchange or money transfer app.

Securing bitcoin in a personal wallet involves several key steps.

• Choose a reputable wallet: Choose a well-known and secure bitcoin wallet. There are two main types of wallets: hot wallets (online wallets) and cold wallets (offline storage).
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• Transfer your bitcoin: After purchasing bitcoin through an exchange or app, transfer it to your wallet by following the prompts on the exchange or app. You will send the bitcoin from the crypto exchange or app to your personal bitcoin wallet using the public address of your wallet. Ensure the public address is correct. It is impossible to reverse a bitcoin transaction. This public address will be generated automatically when you set up your bitcoin wallet.
• Keep your private keys safe: Having ownership of your own private keys allows you to access and control your bitcoin. Never share them with anyone and ensure they are stored securely. If using a cold wallet, make sure to keep it in a safe place where it will not be lost or stolen.
• Use strong passwords and 2FA: For any online wallet or exchange, use strong, unique passwords and enable two-factor authentication to add an extra layer of security.

Editor's Note: This article does not constitute investment advice and is not intended to invite or induce investment in bitcoin (BTC) or any other cryptocurrency. It is meant for factual and educational purposes, with respect to certain aspects of BTC and its associated blockchain, for those who might be interested. Cryptocurrency is a high-risk investment and you should not expect to be protected if something goes wrong.