Crypto

11 min read

December 21, 2021

How to Buy Bitcoin

Your step-by-step guide to purchasing the most popular cryptocurrency on the market.

If you’ve been contemplating whether or not to buy Bitcoin for a while now...well, you’ve come to the right place! 

While it seems like cryptocurrency may just be a phase, its durability over the past few years has proven that it’s the future, whether or not all investors agree. 

If you want to cash in while cryptocurrency is still in its semi-early stages, this article will take you through the steps you need to know how to buy Bitcoin. 

Should You Buy Bitcoin?

First and foremost, should you even buy Bitcoin? While only you can make that decision, here is a quick breakdown of some pros and cons of buying Bitcoin: 

Pros

  • Bitcoin is accessible and versatile. There are no borders when it comes to cryptocurrency, so if you want to use Bitcoin to send remittances or spend money in a foreign country with little to no fees, Bitcoin is a great option. 
  • Bitcoin isn’t linked to a central authority like a central bank, giving users autonomy and control over their own finances.
  • While Bitcoin prices can be volatile, it has a high return potential — much more than the stock market! If you’re willing to take a little risk, it can certainly pay off in a big way. 
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Cons

  • As mentioned above, Bitcoin is volatile. Just as it has a high potential to make a massive return on your investment, you could also lose your money. 
  • Since Bitcoin has no central authority, Bitcoin transactions lack legal protections, so your finances through cryptocurrency remain unprotected. What this means is that if you lose all your money in a cryptocurrency market downturn, no government or central authority exists to insure your assets. In comparison, during the recession of 2008 and 2009, while a lot of individual money was lost, a decent chunk was also insured by the government, so people were able to recover some of their losses through these protection mechanisms. 
  • All transactions through Bitcoin are final, so you can’t reverse them as you might with your credit card. This is because Bitcoin transactions are anonymized and can’t be traced back to you. 
  • While Bitcoin is growing in popularity, its uses are still minimal. Not all stores or countries accept Bitcoin as common tender yet and may never, depending on how the cryptocurrency market shapes out. 

As mentioned above, only you can decide if this choice is right for you and your finances. If you do decide to go for it, though, read on to find out how to buy Bitcoin!

How Do You Buy Bitcoin?

So, just how do you buy Bitcoin? In order to buy Bitcoin you need to set up a Bitcoin “wallet”. This is a virtual storage center and there are a few options you can choose from: (1) an online wallet offered by companies like Coinbase, which would be the easiest option, (2) a “wallet” that is stored on your computer’s hard drive and (3) an offline option, like a vault. This is known as a “cold storage” option, which is the term for offline wallet options when it comes to Bitcoin and could mean storing Bitcoin on a USB drive locked in a safe deposit box. 

It could also mean keeping your Bitcoin in a paper wallet which contains the data necessary to generate any number of Bitcoin private keys (a secret number that allows Bitcoin to be spent). Of course, the issue here is that if your USB drive or private wallet is stolen, you have no way of retrieving your cryptocurrency.  

As mentioned, however, if you’re an everyday user and new to Bitcoin, online services are your best option in figuring out how to buy Bitcoin. On Coinbase, you can buy, sell, exchange and trade Bitcoin. It comes with an easy-to-use app, too, which makes it one of the most popular options for those hoping to invest in and use Bitcoin often.

If you would rather store Bitcoin on your desktop, however, you can use an app like Electrum. It is software-based (as opposed to online-based) which provides an added layer of security. 

After you have decided on where you want to store your Bitcoin, you need to register with a company that accepts regular money in exchange for cryptocurrency. These are known as “broker exchanges” and some reliable ones include Coinbase, Gemini, and eToro. 

Once you’ve found an exchange that’s right for you, register, create an account, and complete security checks. These steps will vary depending on the exchange but they will involve “Know-Your-Customer” rules of the country in which the exchange is located, anti-money laundering policies, and likely also two-factor authentication. 

Finally, you will link your bank account, which is typically recommended if you want lower fees and plan to transfer large amounts of money. (Note that while bank transfers only incur fees of around 1%, they can take longer to go through compared to card purchases which are instantaneous but have fees of 3-5%.)

Now, if you don’t want to go through the steps required to open a Bitcoin wallet, you can simply open an account with an online brokerage that allows you to buy and sell Bitcoin contracts. The only downside here is that your Bitcoin will be housed with the brokerage instead of in your own “wallet” but this may be the easier path for some. Moreover, Robinhood or PayPal are also good options if you want to get started sooner rather than later and skip the steps needed to open a Bitcoin wallet.

Finally, another easy way to acquire Bitcoin is to get paid in cryptocurrency! With a platform like OnJuno you can set up a direct deposit so that part of your paycheck goes directly to buy cryptocurrency like Bitcoin, ETH, and USDC. OnJuno has a built-in wallet you can use to receive your cryptocurrency check, but you can also select other wallets if you already have a Bitcoin wallet. 

Factors to Consider When Buying Bitcoin

An important factor to consider when figuring out how to buy Bitcoin is the location of your broker exchange. For instance, using an exchange based in your country will lower bank fees, as it’s free to transfer money from your bank account to a cryptocurrency exchange.

There are a number of other fees you will want to look out for when buying Bitcoin: 

  • Cash Advance Fees: These are fees charged by a credit card company for a cash advance for crypto purchases, so check with your credit card provider before buying Bitcoin to see if this hidden fee might crop up for you. 
  • Buying Fees: These are charged by exchanges and can vary widely though, as a general rule of thumb, credit and debit card purchases will always be more expensive than bank transfers so check the fees and pricing pages before purchasing Bitcoin.

Buying Bitcoin: FAQs

How much can I expect to pay to buy Bitcoin? In general, the price to buy Bitcoin consists of a fee per trade plus the cost to convert your fiat currency to Bitcoin.

Is my Bitcoin purchase protected? No, your Bitcoin purchase is not protected by the Securities Investor Protection Corporation (SIPC). With certain exchanges, like Coinbase, fiat balances in individual accounts may be FDIC-insured up to $250,000 per account. 

What are other ways to buy or invest in Bitcoin? Outside of a cryptocurrency exchange or a traditional broker, you can use Bitcoin ATMs (they work like regular ATMs and can be found on Coin ATM Radar) or peer-to-peer owners, which is buying Bitcoin directly from another person. You can use tools like Bisq or Bitquick, though you should exercise caution, just as you would on sites like Craigslist. You can also acquire Bitcoin through a Bitcoin ETF, which, albeit an indirect way to buy Bitcoin, nevertheless gets you Bitcoin exposure. 

What information should I have handy at the time of purchase? You will need your SSN, the number to your bank account or debit card or credit card, and a legal picture ID in order to open a crypto account. Also, use a secure and private internet connection versus a coffee shop or hotel room WiFi. 

Ultimately, whether or not to buy Bitcoin is a personal decision. But, the steps are becoming easier and easier as cryptocurrency rises in popularity so learning how to buy Bitcoin is a useful skill that will serve you well for years to come.

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Keertana Anandraj
Keertana Anandraj is a recent college grad living in San Francisco. When she isn’t conducting international macroeconomic research at her day job, you can find her in the spin room or planning her next adventure.

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