How to Buy Bitcoin
Investing shouldn’t be a light-hearted decision, but it sounds more complicated than it is. In traditional finance, some brokers guide investors through the process, making it a more straightforward experience.
With Bitcoin, there can be no intermediaries, and there should not be in the true spirit of the cryptocurrency. However, the Bitcoin offering is varied, and users can decide to invest in BTC individually with no third parties involved or by engaging a broker like an exchange or a fintech company to do the job for them.
Bitcoin Magazine is here to provide a beginner with the proper tools to make their first BTC purchase or help experienced Bitcoin users switch to more principled platforms in line with Bitcoin philosophy.
What is Bitcoin?
Bitcoin is the first decentralized and peer-to-peer cryptocurrency created by anonymous Satoshi Nakamoto in 2008.
It is decentralized and peer-to-peer because it relies on an open global network of nodes that communicate with each other to validate transactions without the need for a central authority like a bank or a financial institution.
Over the years, it has grown exponentially to become the most secure network, virtually impossible to break, and suited to allow its users to take complete control and responsibility for their own money. If you take good care of your Bitcoin, nobody can take it away from you, censor you, or manipulate your holdings. You can learn more about it in our in-depth guide about Bitcoin and how it works.
Frequently Asked Questions
Can I buy 1 Bitcoin?
You can buy any amount of Bitcoin, even as little as $1. Bitcoin is divisible, and satoshis are the smallest denomination of bitcoin. One satoshi is equivalent to 100 millionth of a bitcoin.
What’s the minimum amount I should Invest?
From an investment point of view, it is advisable to start allocating at least $10 to optimize the payment of transaction fees. If you’re planning to grow your capital gradually, you can look into ‘dollar cost averaging,’ allocating small amounts every day, week, or month.
What’s the safest way to buy Bitcoin?
The most popular exchanges like Coinbase are usually considered safe to buy Bitcoin. However, no matter where you buy it, remember to secure it immediately after purchase and take it into your own custody by removing it from exchanges subject to hacking, censoring transactions, or preventing withdrawals.
Where is the best place to buy Bitcoin?
This article will help you understand what the best-suited service for you is. It can be an app, an exchange, or a broker; however, the best place may depend on the amount you want to buy, your location, and how much you value privacy over convenience.
Key Considerations Before You Buy
Holding Bitcoin vs. an IOU
There’s a famous Bitcoin community mantra saying, “not your keys, not your coins.” What does that mean?
Bitcoin is a type of money different from traditional coins; when you own it, you actually hold a private key that gives you access to the asset. It allows you to store it securely and use it, send or receive it. By controlling the private key, you’re the only owner of Bitcoin, and nobody else can access it.
If you transact Bitcoin through an exchange or lending service, they more often hold the private key and act like a bank that keeps your money relatively safe. They can prevent you from withdrawing your own money or inducting censorship on your private key access. If your service provider is hacked, you can lose your Bitcoin.
Whether you’re looking to buy Bitcoin to make a profit or hodl it for a long time, you should consider protecting it so that it cannot be confiscated or stolen away from you.
Keeping your asset on online platforms effectively equals having an “I owe you” (IOU), not the Bitcoin itself. This is why IOU is a good idea if you plan to trade Bitcoin, but as soon as your asset becomes substantial, you should remove it from the third-party service and place it in a non-custodial wallet that only you can access.
Bitcoin is still a relatively young asset with just over a decade. Like every new asset, it is subject to volatility, which is considered a feature, not a bug, among the Bitcoin community. Many bitcoiners take advantage of the volatility to sell the asset when it climbs in value and buy back when it crashes to grow their stack. Bitcoin traders use volatility to make money during price swings.
Ardent bitcoiners would say you should hodl Bitcoin for over two cycles (typically over eight years) because volatility still points to the upside over the long term. You could still generate attractive returns in between cycles if you embrace it.
Bitcoin’s transactions are anonymous, so no name, address, email, or sign-in forms are necessary to use BTC; however, they are linked to specific public addresses that are indeed shared and open for everyone to watch.
Those addresses will forever display the transactions executed through them; therefore, it’s easy for everyone to know how much Bitcoin has been sold, bought, moved, and used through one specific address.
This inconvenience is avoidable by changing the public address every time you want to use Bitcoin. Most wallets do this automatically, making your money more difficult to trace.
You can take further measures to enhance security and anonymity and explore them in our article on How to buy Bitcoin anonymously.
We are used to delegating responsibility for our money to third parties like a bank or a financial institution so that we don’t have to worry about where to keep it safe. However, we mentioned earlier that this comes with trade-offs, as your money is under the control of another entity, and you may lose it.
One of Bitcoin’s main features is personal responsibility, which is challenging but rewarding. It’s challenging because you must use strict practical precautions to keep it safe at all times. If you don’t, you may lose your money, and nobody can give it back to you.
Being decentralized and entirely independent from the control of a third party, Bitcoin has no typical structure of an organization. Therefore, there is no contact center to call if you lose your money or have an issue with your transfer.
You must learn how to manage it yourself. However, a lot of help is available through social media channels, books, websites, and Bitcoin Magazine, so you won’t find it hard to get your way around it quickly and efficiently, even if you’re not a techie user.
It becomes very rewarding because you attain the feeling of owning the asset entirely, and nobody can take it away from you.
Bitcoin is not exempt from taxation. Generally, if you hodl Bitcoin long-term, no income or capital gains tax is involved. You might incur a tax event when you sell or use it to purchase goods.
Before you go ahead and buy it, you should consider checking the tax implication in your country, which may differ from another jurisdiction.
How to Buy Bitcoin
The days you could buy Bitcoin only on Mt Gox (the first exchange) have long gone. Today, the offering is so abundant that you are spoiled for choice. From fintech companies to simple exchanges, you can choose to buy Bitcoin anonymously or not at any time.
Exchanges are the most common method of buying Bitcoin, so we have itemized the basic steps required to start making your first Bitcoin purchase. They may differ in terms of offerings and services, but the registration and purchasing processes are very similar across the board.
A list of exchanges and other purchasing methods will follow.
How to buy Bitcoin on an exchange:
1. Registration. You will be required to register and open an account with the service provider. Name, surname, email address, and date of birth will usually be enough to gain access to the exchange. You will undergo a different verification process depending on the services you want to use.
For example, stricter KYC is demanded in case of higher tiers intended for more significant purchases. In that case, a selfie with your credit card or passport displayed next to you will likely be requested by the exchange. A lot also depends on the exchange’s jurisdiction you are joining, as some countries require very little to no KYC at all.
2. Pre-purchase money transfer. Once you’re verified, you’re ready to go and buy Bitcoin. You can transfer money to the exchange using your credit/debit card for fast execution; however, this option will cost you very high fees.
If you are not in a rush to buy Bitcoin, you will incur lower fees to transfer money via a bank transfer, though the operation might take a few days to complete. Buy Bitcoin. Every exchange will offer you different options to buy bitcoin. You can set up any of the following types of orders:
3. Buy Bitcoin. Every exchange will offer you different options to buy bitcoin. You can set up any of the following types of orders:
- Instant order: an instant order to buy or sell at the requested price; if unavailable, a requote will occur.
- Market order: an immediate order to ‘buy’ or ‘sell’ at the current price in the market.
- Limit order: an order to buy or sell at a specific price or higher at any time in the future. It is an order visible to the market through the order book.
- Stop Order: an order to buy or sell when a stop price is met. Unlike the limit order is not visible to the market until the price is matched; then, it becomes a visible market order. like , or . Hardware wallets operate offline and are recognized as cold storage, assuring you that online hacks are virtually impossible.
4. Secure your bitcoin. Once your Bitcoin holding becomes substantial, it is recommended that you secure it in a hardware wallet like Trezor, Ledger or Opendime. Hardware wallets operate offline and are recognized as cold storage, assuring you that online hacks are virtually impossible.
There are plenty of ways to buy Bitcoin other than exchanges. In the early days, it was common to buy Bitcoin in person. However, the cryptocurrency’s value was negligible then, and such a method would not be recommended today. Keep reading to explore the multiple options available if you want to buy on exchanges or other services.
Where to Buy Bitcoin
Starting with exchanges, here are a few marketplaces where you can begin building your Bitcoin portfolio. The main difference between exchanges and other fintech services is that these offer investment vehicles that are not available in exchanges, mainly used for buying and selling digital assets only.
Bitcoin only exchanges
Listed below is a list of a mix of centralized and decentralized exchanges that are recommended to buy or sell Bitcoin only. They should be the preferred method to buy Bitcoin as they better support and safeguard the Bitcoin network.
1. River is a US-based Bitcoin-only custodial exchange that claims to be very easy and secure to use while offering plenty of good educational material to understand Bitcoin.
River charges fees…
Read More: How to Buy Bitcoin
Disclaimer:The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the website’s content as such. NewsOfBitcoin.com does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.