How to Buy Bitcoin (BTC)

Bitcoin can be purchased from other users, exchanges, and stockbrokers. Consider the hazards of investing in digital assets regardless of where you acquire them.

Purchasing Bitcoin is frequently the first step for newcomers to the cryptocurrency realm. For someone who is used to standard financial products, it can be a strange environment.

Bitcoin, the world’s first and most popular cryptocurrency, has surged in value from $3,237 in December 2018 to temporarily surpassing $65,000 in November 2021. (see price below). Bitcoin, like all cryptocurrencies, is risky and volatile, compared to numerous tried-and-true investments like equities, bonds, and mutual funds.

One rule of thumb is to allocate no more than 10% of your portfolio to individual equities or riskier assets such as bitcoin. Find out more about how to invest money if you’re new to it. If you do decide to buy bitcoin, you’ll have to make certain technical and logistical decisions.

In four simple steps, you can purchase Bitcoin

  1. Decide where you’ll get your bitcoins: Bitcoin may be purchased through cryptocurrency exchanges like Coinbase and traditional brokers like Robinhood.
  2. Consider how you’ll keep your cryptocurrency: Do you plan to store your bitcoin in a hot or cold wallet?
  3. Purchase what you want: Determine how much money you wish to put into bitcoin.
  4. Keep track of your money: Make a long-term strategy for this asset.
  5. Choose where you want to buy bitcoin.

Exchanges and traditional brokers are among the options for purchasing bitcoin and other cryptocurrencies.

Exchanges for cryptocurrencies

Several cryptocurrency exchanges offer bitcoin for sale. Many of them feature dozens of cryptocurrency options, while others only have bitcoin and a few others. They come with a variety of fees and consumer protections, so do your research before deciding.

Stockbrokers in the traditional sense

Traditional brokers that allow customers to purchase and sell bitcoin are few and far between right now – Robinhood was the first prominent investment broker to do so (Robinhood Crypto is available in most, but not all, U.S. states).

Robinhood does not impose fees for bitcoin trades, just like it does for stock trades.

The following are the bitcoin-accepting online brokerages and cryptocurrency exchanges that we have reviewed.

Binance.US

Nearly 60 cryptocurrencies are available for purchase and sale.

Coinbase

Nearly 100 cryptocurrencies are available for purchase and sale.

eToro

Trading platform with 17 cryptocurrencies to choose from.

Gemini

The ability to buy and sell over 50 different cryptocurrencies.

Robinhood

Bitcoin, bitcoin cash, and Ethereum are among the seven cryptocurrencies.

SoFi Active Investing is a firm that specializes in active investing.

Bitcoin, Ethereum, and Litecoin are among the more than 20 cryptocurrencies available for trade.

TradeStation

Bitcoin, bitcoin cash, and Ethereum are among the five cryptocurrencies available for trading.

Webull

Bitcoin, bitcoin cash, Ethereum, and Litecoin are among the ten cryptocurrencies available for trading.

Kraken

More than 90 cryptocurrencies are available.

Other options for purchasing or investing in bitcoin include:

  1. Bitcoin ATMs: These work similarly to traditional ATMs, except that you can use them to purchase and sell bitcoin. There are more than 27,000 bitcoin ATMs in the United States, according to Coin ATM Radar.
  1. Owners of bitcoin on a peer-to-peer basis: Peer-to-peer programs like Bisq, Bitquick, and LocalBitcoins.com allow you to buy bitcoin directly from other bitcoin owners, just like you might on Craigslist. If you’re buying bitcoin from a person, proceed with caution.
  1. ETFs (exchange-traded funds): are a type of exchange-traded fund In October of 2021, ProShares, a financial corporation, released the first bitcoin ETF. However, the fund (ticker: BITO) does not invest directly in bitcoin; instead, it invests in bitcoin futures contracts.
  1. Funds that are grayscale: Grayscale Investments is a firm that manages digital currency assets. Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Classic Trust (ETCG) are two of its investment trusts that are openly listed, which means you may buy them from a variety of discount brokers. There are fees, and GBTC frequently trades at a premium — that is, GBTC shares are frequently more expensive than bitcoin, even though bitcoin is its sole asset. Some investors, it is said, are willing to pay a premium to buy bitcoin through a regular exchange, avoiding the hassles of wallets and storage.

Before you buy, there are a few things you should know.

Have the following information on hand: It only takes a few minutes to set up a cryptocurrency account, but you’ll need to supply certain information, such as your Social Security number and the number for your bank account, debit card, or credit card, to fund your bitcoin account. Some providers may also need you to present a photo ID. Keep track of any new passwords for your cryptocurrency account or digital wallet (more on those below).

Don’t buy bitcoin with a credit card: While some providers allow you to buy bitcoin using a credit card, investing with a high-interest product like a credit card is never a good idea.

Investor protections should be understood. Or, in this situation, the absence of it: The Securities Investor Protection Corporation does not guarantee bitcoin and other cryptocurrency investments for exchange failures or theft, although regular stock brokerage accounts are covered up to $500,000. Private insurance is offered by some exchanges, such as Coinbase, although it does not cover specific internet breaches, such as someone stealing your password.

Make sure you’re connected to the internet over a secure, private connection: This is critical whenever you conduct financial transactions over the internet. It is not a good idea to buy bitcoin in a coffee shop, in your hotel room, or through other public internet connections.

Choose a method for storing bitcoin

Bitcoin can be stored in one of two types of digital wallets: hot or cold. Transactions are often faster using a hot wallet, but a cold wallet often includes extra security measures that assist keep your money safe but also slow down transactions.

A very hot wallet

With a hot wallet, bitcoin is stored in the cloud by a reputable exchange or provider and accessed via an app or a web browser. Any trading exchange you join will provide you with a free bitcoin hot wallet, which will automatically keep your purchases. Many users, however, prefer to transfer and keep their bitcoin through a third-party hot wallet, which is usually free to download and use.

Why would you use a wallet from someone who isn’t an exchange? Bitcoin hot wallets are an enticing target for hackers, despite supporters claiming that the blockchain technology behind bitcoin is even more secure than typical electronic money transfers. “Many exchanges and online wallets have experienced security breaches in the past, and such services still do not provide enough protection and security to be utilized to hold money like a bank,” says Bitcoin.org.

Many hot wallet providers exist, each offering a different sort of wallet. Here are a few examples:

Coinbase: Coinbase, a famous bitcoin currency exchange, provides free online hot wallets and covers losses caused by security breaches or hackers, employee theft, or fraudulent transactions.

Electrum: is a piece of software that allows you to keep your bitcoin on your laptop or desktop computer.

Blockchain: Blockchain, like Coinbase, is an online hot wallet; but, unlike Coinbase, Blockchain is not a currency exchange, making it a less appealing target for hackers.

Mycelium: is a bitcoin wallet that is solely available on mobile devices, with Android and iPhone versions available.

Although some hot wallet providers provide insurance for large-scale hack assaults, that insurance may not cover isolated instances of unauthorized account access.

A cold wallet is a compact, encrypted device that you can use to download and carry your bitcoin. Cold wallets can be as expensive as $100, but they are far more secure than hot wallets.

Providers of cold wallets include:

Trezor: This startup sells compact, key-sized cold wallets that cost between $60 and $220.

Ledger Nano: Ledger Nano is a cold wallet that looks like a thumb drive and costs between $60 and $120.

Use a strong password and two-factor authentication when creating accounts for your digital wallets and currency exchange.

Purchase your item

After you’ve linked your bitcoin wallet to your preferred bitcoin exchange, the final step is the simplest: selecting how much bitcoin you wish to buy. While a single bitcoin can cost tens of thousands of dollars, you can buy and sell fractional shares of the cryptocurrency (trading symbol BTC or XBT), so your initial investment could be as little as $25.

Keep track of your money

If day trading appeals to you, one alternative is to purchase bitcoin today and then sell it if and when its value rises. However, if you believe bitcoin has a bright future as a digital currency, you may want to buy and hold for the long term. Whatever your strategy, keep in mind that possessing bitcoin will result in a complicated tax situation.

Author

Samuel is a financial reporter whose interests include blockchain, market, business, insurance, and Crypto to provide relevant information to all interested.