Nowadays buying Bitcoin is really easy as there are a lot of online exchanges where you can purchase it, whatever if it’s centralized or decentralized. You just have to verify your identity on the chosen exchange (or not, if you familiar with decentralized exchanges), so you can deposit via credit card or bank transfer and you are ready to purchase Bitcoin (or mostly most of the other cryptocurrencies or even tokens).
Bitcoin or BTC is a decentralized digital currency that operates without a central bank or single administrator. Created by an unknown person or group of people under the pseudonym Satoshi Nakamoto, it was introduced in 2009 as open-source software. The digital asset utilizes blockchain technology to record transactions between parties. Over the years, Bitcoin has evolved into both an investment asset and a medium of exchange for goods and services.
Buying Bitcoin isn’t difficult, but it is important to note that as BTC has gone through some big swings that have made some people millions, there are probably many more who have suffered big falls. So it’s important to have a good knowledge of the market and to keep up to date.
It has become really easy to buy Bitcoin these days, and you can do so directly and indirectly. It is possible to get it from a broker or even through an exchange.
Importance of Understanding How to Buy Bitcoin Safely
While buying Bitcoin is simple it is important to understand the complex technology behind it, such as blockchain and cryptographic keys. With the proliferation of platforms and methods available for purchasing Bitcoin, it is important to be well-informed and cautious. Mistakes can be costly and can put the safety of your investment at risk. Thats why its so important to understand the different ways to buy Bitcoin and how to protect both your funds and your privacy. In this article, we will guide you with a special focus on the safest and most efficient methods of buying Bitcoin.
The Importance of Preparation Before You Buy Bitcoin
In today’s digital world, we need to navigate carefully. Especially when it comes to finances. Always be cautious about market dynamics and timing. Cryptocurrencies are known for their volatility, i.e. price fluctuations within a short period of time. However, with the right research, you can gain insight into market trends and have a better chance of making a successful decision on the right timing. Fortunately, various online tools, websites and forums can help you with their real-time analysis and expert opinions.
Investing in Bitcoin—or any other asset, for that matter—should be done responsibly. One of the key considerations is determining how much you’re willing to invest. Decide on an investment budget that aligns with your financial goals and risk tolerance. Never invest money you can’t afford to lose. It’s also advisable to start small if you’re a beginner, gradually increasing your investment as you gain more experience and understanding of the market.
Step-by-Step Guide on How to Purchase Bitcoin
Let’s take a closer look at how you can buy Bitcoins on an exchange.
- Step 1: The first step to buying Bitcoin on a traditional exchange is to create an account. This usually involves providing an email address, creating a password, and verifying your identity through a process that may require a government-issued ID and proof of residence. Once your account is verified, you’re ready to proceed with the purchase.
- Step 2: Before buying Bitcoin, you’ll also need to set up a wallet where you can securely store your coins. Some exchanges provide an integrated wallet, but you can also choose to transfer your Bitcoin to an external wallet. If you opt for an external wallet, make sure to verify the wallet address before proceeding with any transactions. Make certain that you wrote your private keys and store it at a safe place – remember, “not your keys, not your coins”!
- Step 3: After your account and wallet are set up, navigate to the buy/sell section of the exchange. Select Bitcoin as the cryptocurrency you wish to purchase, input the amount you want to buy, and choose your payment method. Review the transaction details, including any fees, and confirm the purchase. Your Bitcoin will then be transferred to your specified wallet. Of course you can sell Bitcoin as well.
Paying for Bitcoin: Payment Options
Let’s also look at the opportunities for you in terms of salary.
Most exchanges accept payments via credit or debit cards. This method is convenient but may come with higher fees and could be subject to cash advance charges from your bank.
Many people opt for bank transfers because of the generally lower fees. However, this method can take several days to complete, depending on your bank and the exchange.
If you already own another cryptocurrency, you can often use it to buy Bitcoin. Exchanges like Binance allow users to trade multiple types of cryptocurrency, making it possible to exchange something like Ethereum for Bitcoin.
Choosing the Right Wallet Before Buying Bitcoin
For a full detailed information you can read our article of “Best Bitcoin Wallets in 2023“. But of course below is a shorter version.
Types of Wallets: Software, Hardware, and Online
Before you buy Bitcoin, you’ll need a place to store it, known as a digital wallet. There are several types of wallets to choose from:
Software Wallets: Installed on your computer or mobile device, they offer reasonable security and convenience.
Hardware Wallets: Physical devices that store your Bitcoin offline, providing an extra layer of security against online hacks.
Online Wallets: Accessible via the web, these are the most convenient but are often less secure than other types.
It’s advisable to store your coins in a more secure wallet—preferably a hardware wallet. To do this, you’ll need to initiate a transfer from the exchange to your wallet’s address.
Deciding where to store your Bitcoin depends on your goals. If you’re frequently trading, keeping them on the exchange might be convenient. However, if you’re holding Bitcoin for the long term or plan to use them, a crypto wallet is advisable.
Wallet Security Measures
Regardless of the type of wallet you choose, security should be a top priority. Here are some recommended security measures:
- Use strong, unique passwords.
- Enable two-factor authentication (2FA).
- Keep private keys in a secure location.
Keeping your Bitcoin safe is one part of the equation; the other is making sure you can recover it if something goes wrong. Whether you’re using a hot or cold wallet, you’ll likely be given a “recovery phrase” during the setup process, this is the private key with a series of words that you can use to restore your wallet if you lose access to it, such as forgetting a password or losing your device.
Some wallets also offer backup files that you can save to your computer or external storage. It’s crucial to store these recovery options in a safe and offline location, like a secure vault or even a safety deposit box. Failing to backup or safely store these recovery options can mean losing your Bitcoin forever. Remember: “not your keys, not your coins”! So, it’s not just about securing your Bitcoin, but also ensuring that you can get them back under unforeseen circumstances.
What Is a Private Key
You can have two types of keys: public and private keys. Think of your public key as your bank account that is available to everyone to transfer money to, while your private key is a unique key that gives you access to the money in your bank account. The expression “not your keys, not your coins” refers to this key. It is extremely important that you keep this in a place that is inaccessible to others!
Online wallets or exchanges typically do not provide private keys. Although it may seem that because you log in to your account with a password, you have full ownership of the address, but it is perhaps clear now that this is wrong.
Different Ways to Buy Bitcoin
There are several ways to buy Bitcoin. There are more well-known and less well-known ones. In the following section, we will describe these options.
Traditional Exchanges (e.g., Coinbase)
One of the most widely used solutions among Bitcoin buyers is traditional cryptocurrency exchanges. Platforms like Coinbase,Kraken or Binance offers a user-friendly interface, a wide range of cryptocurrencies, and various payment methods. After setting up an account you can buy or sell, and sure you can purchase Bitcoin by transferring funds from your bank account or using a credit or debit card.
Overall, this solution may be a good choice for you if cost is your primary concern, as it may offer the “cheapest” solution overall. Of course, the costs of different exchanges may vary, so we definitely recommend you to do your research before you invest in order to save some money in fees.
It needs to be highlighted that several exchanges offer wallets that allow you to store your cryptocurrencies securely – however its on the internet and everything can be hacked as we know — we already saw some hacked exchanges in the past.
Peer-to-peer Platforms (e.g., Binance)
Another way to buy BTC is through P2P (peer-to-peer) platforms, where you can buy from or sell to other individuals directly. Its advantage offering lower fees compared to other solutions. Again, make sure to be careful and use platforms that offer escrow services and user reviews to ensure a safe transaction.
Although Binance is primarily known as a cryptocurrency exchange, it also offers P2P trading. This combines the trust with the flexibility of peer-to-peer transactions.
Personal Exchange
Of course, it is also possible to buy and sell Bitcoin “in real life”. There are forums dedicated to this topic. It’s simple, you can make a transfer when you meet in person and give your address. However, we would like to point out that this method can be dangerous, as there are several scam stories. Basically, unless you are convinced that the other party is trustworthy, we do not recommend this method. And, of course, never take your private key with you in such cases.
Bitcoin ATM
Bitcoin ATMs are also a direct and fast way to buy Bitcoin, but you will probably pay the highest fees compared to online platforms. You may need a Bitcoin wallet, but other than that you can buy Bitcoin with a credit card (or debit card) just like a normal ATM. The commission can be as high as 7% per transaction.
Crypto Brokers: Etoro, PayPal, and More
Crypto brokers like eToro and PayPal offer a more streamlined experience for buying Bitcoin, especially for those who are new to the cryptocurrency market. Unlike traditional exchanges, these platforms often provide a simpler user interface and a set of tools designed for easier trading and investment. eToro, for instance, offers a “CopyTrading” feature, which allows you to automatically copy the trading actions of successful traders, making it easier to navigate the volatile crypto market.
PayPal simplifies the process further by integrating cryptocurrency transactions into its well-known payment platform, after making a PayPal account it allows for quick and convenient purchases. However, it’s important to note that these conveniences often come at a cost—crypto brokers typically charge higher fees than traditional exchanges, and they may impose limitations on transferring your Bitcoin to external wallets.
Revolut
Revolut, a popular finance app, enables users to buy Bitcoin along with other cryptocurrencies like Ethereum and Solana, and also it offers coins to staking. However, purchasing through Revolut may not be the most cost-efficient method due to high trading fees starting at 2.5% and a $9.99 monthly account fee. It has its limitations such as the inability to transfer cryptocurrencies to an external wallet or receive them from outside sources.
To buy Bitcoin with Revolut, you would navigate to the ‘Cryptocurrency’ section, select Bitcoin, and specify the amount you wish to buy. While this process is user-friendly, it’s crucial to note that you won’t own the actual coins but rather a representation of Bitcoin, and you can’t transfer your Bitcoin to another user or an external wallet within Revolut. This places limitations on how you can use your purchased cryptocurrency within the wider ecosystem.
Revolut does not grant users the private key to their purchased cryptocurrencies, meaning users do not have full control or ownership of their assets, as any cryptocurrency bought must also be sold within the app. Given these limitations, some might prefer using other platforms like Uphold, where users can buy, sell, trade a wider variety of crypto assets with lower fees and transfer them as they please.
How to Choose the Best Way to Buy Bitcoin
Now that you know the possible ways to buy bitcoin, let’s look at what you should consider when weighing up the options.
- Transaction speed: The speed at which you can complete a transaction varies depending on the method you choose. Traditional exchanges usually offer quicker transactions but may require time for account verification. P2P platforms and Bitcoin ATMs may offer near-instant transactions but may come with trade-offs like higher fees or lower security.
- Associated costs: Different methods of buying Bitcoin come with varying fee structures. Traditional exchanges often have lower fees but may charge for withdrawals or deposits. P2P platforms and Bitcoin ATMs generally have higher transaction fees. Perhaps a few percent difference may not seem significant, but when you think about it, during a more active activity, they do matter. A lot of little goes a long way, so the saying goes.
- User experience: Your choice might also depend on how comfortable you are with the buying process. For beginners, traditional exchanges usually offer an easier navigation and purchasing experience. More experienced users may opt for P2P platforms for more control over the buying process.
- Security: it’s an essential aspect of investing. Unfortunately, some newer crypto players have had serious problems with this. One of the most notorious hacking attacks was against KuCoin, a Singapore-based crypto exchange founded in 2013, in 2020. The attackers managed to steal $281 million worth of coins and tokens. Fortunately, they managed to recover $204 million within weeks. Never forget: “not your keys, not your coins”!
Tips for Those Looking to Invest in Bitcoin Long-Term
If all this makes you want to invest in Bitcoin, here’s a little crutch.
One effective strategy for long-term investment is dollar-cost averaging, where you buy a fixed dollar amount of Bitcoin at regular intervals, regardless of its price. This approach minimizes the impact of volatility and lowers the risk over time.
While timing the market is challenging, especially given Bitcoin’s volatility, some investors attempt to buy during price dips and sell at peaks. However, this strategy requires a deep understanding of market trends and should be approached with caution.
If you’re planning on a long-term investment, consider diversifying your cryptocurrency portfolio. While Bitcoin is the most well-known cryptocurrency, there are many other options with different risk profiles and potential returns. A diversified portfolio can reduce your overall risk.
