How to Buy Bitcoin
Buying bitcoin, the ultimate blue-chip cryptocurrency, is perhaps the safest investment you can make in the crypto sector. That does not mean that holding bitcoin does not entail volatility. It is, however, more stable and reliable than any of the altcoins. On the other hand, it may not yield as spectacular returns as some of the altcoins.
Buying bitcoin may seem daunting to someone new to cryptocurrency, but it is a relatively straightforward affair. You need a crypto wallet to store your bitcoin as the only necessary prerequisite of a bitcoin purchase.
If you sign up for an exchange like Coinbase, you will get a hot wallet there, and you can use that to buy bitcoin. Just make a deposit and buy some from some of the other participants at the exchange. The bitcoin you buy lands in your hot wallet. For safekeeping, you should move your cryptocurrency to a hardware cold wallet that you own.
What Does it Mean to Buy Bitcoin?
Bitcoin is a digital asset that resides on a blockchain. The bitcoin blockchain is the safest in the world. With current technology, it is impossible to hack. And nothing can move an asset off it.
When you buy a bitcoin, you purchase the private key that grants you ownership and control over a coin on the blockchain. Only you can transfer that ownership to someone else. Or whoever else has access to your private keys.
The role of the wallet is to keep the private keys safe for you. Only when you have full and exclusive control over the private key can you call yourself the owner of a bitcoin or a fraction of a bitcoin.
You can acquire the private keys of a bitcoin or a fraction of a bitcoin by convincing someone who has them to transfer some to you. You can accept bitcoin for products and services or head to an exchange and pay money for it.
Why Would You Pay Money for Bitcoin?
Didn’t the President of the ECB call all cryptocurrencies worthless the other day? Why would you accept it as something that holds value?
- Bitcoin is not like other cryptocurrencies. Its conception, trust minimization, and decentralization lend it value no other digital asset can duplicate.
- Bitcoin is worth exactly as much as someone is willing to pay for it. Not more, and not less, regardless of what anyone says about it.
- Its price may fluctuate, and you may have to sell it for less than you bought it if you are impatient. But many people world-over believe in censorship-resistant, peer-to-peer digital cash, and that gives it plenty of value.
- If large-scale adoption happens, the price of bitcoin will skyrocket, regardless of where it is currently sitting.
How to Buy Bitcoin: Step One
Finding a cryptocurrency exchange or payment service is your first step toward becoming a bitcoin holder. There are several types of exchanges, and you can use ATM-like solutions to convert your inflation-prone fiat money to the hardest currency humanity has ever known.
The best-known and reputable exchanges are legally compliant. They require you to provide a wealth of personal information and documents. You should be aware that the exchanges will provide your information to the authorities as the laws require. Exchanges like Coinbase, Kraken, Gemini, and Binance all observe KYC (know your client) policies and require personal information.
Decentralized exchanges are in their infancy. Like bitcoin and other crypto assets, DEXs do not fall under the control of a central entity. Decentralized exchanges allow users to buy and sell cryptocurrencies anonymously.
Use long, unique passwords when signing up for an exchange account and two-factor authentication to protect your cryptocurrency holdings. Transfer them off the exchange if you don’t want to sell them soon.
How to Buy Bitcoin: Step Two
Connecting a payment option to your crypto exchange account is not as simple as it should be.
After the exchange verifies your identity, it will ask you to connect a payment option you can use to fund your account and buy bitcoin.
Many banks do not allow their clients to transfer funds to crypto exchanges. Before adding your payment option, verify if you can indeed use it to buy bitcoin.
There are also fees involved in transferring funds from a bank account, a credit card, or a debit card. Ensure that you understand these fees and their implications.
How to Buy Bitcoin: Step Three
Placing an order is the final step of your bitcoin buying journey. Your order signifies your intention to pay a certain amount of money for a crypto asset. As soon as a counterparty accepts your offer, you fill your order and gain possession of the digital assets.
Crypto exchanges allow you to place a variety of order types, including market, limit, and stop-loss orders. Many exchanges also allow you to make small periodic investments, dollar-cost-averaging your way to crypto ownership.
Buying Bitcoin with PayPal
If you live in a state or country that allows you to buy bitcoin through PayPal, you can set up a crypto account with the payment processor and buy bitcoin, Ethereum, Litecoin, and Bitcoin Cash directly.
You have to provide personal information like your name, address, TIN, and date of birth to set up the account.
Buying Bitcoin through Other Means
Bitcoin ATMs have grown increasingly popular over the years. They keep popping up in more and more locations.
To buy bitcoin from a special bitcoin ATM, show it a QR code of your wallet address on your phone, verify that it recognizes the address as a bitcoin one, and stuff cash into it. Hit the transfer button, set the network fee, and confirm.
P2P or peer-to-peer exchanges are not DEXs (decentralized exchanges). The latter match buyers with sellers anonymously. The former establish a direct connection between buyers and sellers, allowing them to trade their digital wares.
Some mainstream online brokerages may allow their users to buy bitcoin. Most brokerages only offer bitcoin and crypto-based financial derivatives, but some allow actual purchases.
When you buy bitcoin, know that no insurance other than your common sense and foresight can protect your investment. Do not fall for scams. Anything too good to be true is a scam. Never send bitcoin to anyone you don’t know, trust, or with whom you don’t have an established business relationship.