If you’ve read any financial news recently then you’ve likely heard about Bitcoin. Although Bitcoin has been around for several years – since 2009 to be exact – it seems this cryptocurrency only seems to grow in popularity.
There are hundreds of types of cryptocurrency, and Bitcoin is only one of them. However, because it is one of the oldest, it is arguably the most well-known of all the cryptocurrencies. You will largely see it referred to as BTC for short.
What exactly is Bitcoin? In a nutshell, it is a virtual currency traded, created, and stored with blockchain. Blockchain is a decentralized ledger system, which simply means it flows through a “bank” that is not regulated by any government or agency. Blockchain is what allows Bitcoin transactions to take place.
If you are familiar with Bitcoin, or at least the concept of it at this point, your next natural question is how do I purchase Bitcoin? Do I simply log onto the Bitcoin website and start buying? Not exactly. But there are several options for purchasing once you decide you’re ready to buy.
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What to know before you buy Bitcoin
Buying it is entirely different from the way we are used to operating our traditional bank accounts. So before you purchase this cryptocurrency, you should be aware of the differences and risks involved with these types of digital assets.
When you purchase Bitcoin, you are speculating on a currency, since there is no physical product you are holding. You are betting the U.S. dollar value of one Bitcoin will be higher in the future versus today.
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Why you need a Bitcoin wallet or crypto exchange
To start investing in Bitcoin, you should have a cryptocurrency exchange account, such as Bitcoin exchange. These exchanges store your private keys, which is how you access your crypto and complete transactions.
These “wallets” for storing your Bitcoin come in different forms, and depending on how you prefer to access your information and your security concerns, then it will determine which one you choose.
Paper wallets: A paper wallet stores your passwords on paper, or some other physical medium. Then it’s up to you to store this in a safe place. This method is harder for someone to steal your access information, however, it can easily be lost or misplaced.
Hardware wallets: This wallet uses a physical device to store your password keys, usually a thumb drive. You can easily carry it around with you or keep it on your person at all times, but like a paper wallet, it can get misplaced or lost.
Online wallets: Also referred to as hot wallets, these wallets are online or app-based and store your password information digitally so you can send, receive, and use your cryptocurrency. A hot wallet relies on the internet to function, versus a cold wallet that does not need the internet.
If you choose not to use an exchange and you want to purchase Bitcoin, you should use a service where you can store your Bitcoin.
Whatever you do, it’s wise not to broadcast to everyone you are purchasing or holding a ton of Bitcoin. Although unlikely, this makes you a target for someone to steal access to your private keys. The private keys are needed to authorize transactions, so you want to keep them as guarded as possible.
By not using an exchange or secure brokerage, you risk your access information being stolen, which means someone could steal your Bitcoin after hacking into your account.
Another tip to note is you do not have to purchase an entire Bitcoin. Most crypto exchange accounts allow you to purchase a fraction, which might be especially helpful if you have a small amount of money for your purchase.
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Where to buy Bitcoin
Because it is a digital currency, you will find many high-tech ways to purchase this crypto.
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Coinbase considers itself as a one-stop shop for all cryptocurrency activity, including purchasing Bitcoin. Coinbase is one of the biggest companies in the cryptocurrency market, based in the USA, and has over 56 million verified users for all of its products. One advantage of Coinbase is how straightforward it tries to be for the purchasing process.
To get started, you must create an account. The information is basic, including your name, email, and password. Next, you’re required to verify your identity with the two-factor authentication, to prove it’s really you.
To purchase, you can link a debit account, bank account, or credit card, and you only need $25 to start with to buy a portion of the Bitcoin. You can also buy and sell your Bitcoin via the Coinbase mobile app.
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Binance is another crypto exchange and trading platform allowing you to buy and sell crypto, including Bitcoin. You can download the Binance app and take it with you on your smartphone, tablet, or desktop.
Binance tends to have lower transaction fees, which are determined by your trade volume – the more you use Binance, the lower your fees. Binance also lets you purchase a portion of a Bitcoin for as little as $15.
Binance is also super fast. It claims to have such a large server it can handle 1,400,000 orders per second. This means you can expect your transactions to be completed quickly, which is helpful since the site allows buying, selling, and Bitcoin trading.
To get started, you first have to create an account. You will have to provide your name, email, and mobile phone number. You can open this account straight from the mobile app too, if you prefer. Then to start purchasing Bitcoin, you can link your debit or credit card or bank account, or buy it directly from other users on the Binance P2P (peer-to-peer) platform.
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Most of us recognize the PayPal payment processor from our days of online shopping. But you can use this as another method to purchase Bitcoin too.
If you don’t already have a PayPal account, you can set one up and immediately use it to purchase Bitcoin. To create an account, you must provide your name, physical address, date of birth, and a Tax Identification Number.
Once your account is ready, you can use your existing PayPal balance, a linked debit card, or a linked bank account to make the transaction. You should note, you can not use a credit card to make this purchase.
PayPal also charges transaction fees for each purchase. It depends on the amount of Bitcoin, but it is around 2% of the overall amount.
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Robinhood is another option for buying Bitcoin. You may already be familiar with this site since you can buy gold, ETFs, stocks, options, and other products all in this one place, including Robinhood’s mobile app. Robinhood is a brokerage with zero-fee trading and now has 10 million active users.
Robinhood is available to anyone to open an account, however, you must be based in the U.S. to do so. Any account holder may purchase Bitcoin, except for those in the states of Hawaii, Nevada, New Hampshire, and West Virginia. Not only can you buy BTC, but you can also purchase Bitcoin cash, and again, without paying any commissions.
The advantage to using a site like Robinhood is that you do not have to use a separate crypto exchange. If you are feeling confused or don’t want to take the steps to choose a crypto exchange, then Robinhood allows you to store your Bitcoin with them.
To open an account with Robinhood, you must be 18 years or older, have a valid Social Security Number, and a legal U.S. address within the 50 states or Puerto Rico. You must also be a U.S. citizen, U.S. permanent resident, or hold a U.S. visa.
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eToro is another online trading platform allowing you to buy and sell cryptocurrencies, including Bitcoin. For those who prefer to buy their Bitcoin with a bank account, eToro may be the solution for you. eToro is like Robinhood in that it acts as a brokerage and offers other investment options like ETFs and stocks.
eToro does charge fees for various types of transactions, but you are given all fees upfront so you see the charge beforehand. One exclusive feature eToro offers is CopyTrader. This technology lets you compare top traders’ performance with crypto and then replicate their trading activity.
To open an account with eToro, you must be at least 18 years old, accept the terms and conditions, and input basic personal information. Once you’ve supplied this, you are ready to go.
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A Bitcoin ATM is not totally unlike the ATMs we are familiar with, except this type of ATM allows you to buy and sell Bitcoin using cash. And unlike traditional ATMs, you can not withdraw money, nor is it tied to a central bank account. Instead, a Bitcoin ATM connects to the internet and lets you buy and sell Bitcoin instantly.
To use these machines, your identity must first be verified. Some require you to input your mobile phone number and then confirm your ID with a code. Most require you to scan a QR code from your Bitcoin wallet or other exchange.
Once your ID is verified, you choose how much Bitcoin you want to purchase and then put cash into the machine. Once you’ve made your purchase, you receive a confirmation. This is usually a very quick process, similar to the ATMs we are used to.
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What can I do once I purchase Bitcoin?
Once you’ve made your Bitcoin purchase, you may be wondering what the next steps are. Turns out, you have multiple options with BTC and the best action depends on what your goals are with your crypto. You can:
Hold or store it: You can either hold your Bitcoin in the account where you purchased it from, or a more secure method is to store it in your digital wallet. If you are holding it, it’s because it’s an investment, much like buying into the stock exchange.
Sell it: If you think you want to sell Bitcoin, you should confirm if the account where you purchased it from also allows you to sell it.
Convert it: Some accounts, such as Coinbase, allow you to convert a portion of your Bitcoin to another form of crypto.
Transfer it: Bitcoin can be transferred to someone else virtually.
Spend it: There are several places now accepting Bitcoin, which means you can spend it the way you would with paper currency. You can buy gift cards, travel, and many other items through retailers accepting Bitcoin.
Donate it: There are online charities that allow you to donate your BTC.
Related: Credit Cards Offering Crypto Rewards
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Pros and cons if you choose to purchase Bitcoin
It’s hard not to discuss Bitcoin without highlighting the volatility of the product and other risks associated with this type of purchase. In general, there are a few points to keep in mind when it comes to purchasing Bitcoin or any other form of crypto.
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- Potential to make money
- May help you diversify your portfolio
- Transactions are immediate
- Transactions are anonymous
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- Potential to lose money
- No regulatory oversight of your purchase
- Risk of cyberhacking your Bitcoin
- No refund once a transaction has occurred
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The bottom line
If you plan to purchase Bitcoin, or are only curious how you go about getting your hands on this crypto, then make sure you do your research beforehand. The crypto market may seem a little daunting at first, but understanding how to correctly buy Bitcoin and what to look for with these exchanges is your first step before you ever purchase.
Remember, no matter how you buy Bitcoin or any other crypto, there is risk involved and no guarantees your purchase will gain value. Anything you choose to purchase it with should be money you’re okay with losing.
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