Since its inception in 2009, Bitcoin has made cryptocurrency a common word in the world’s vocabulary. The news often reports significant movements in the price of Bitcoin as the value has risen. And it’s so popular that many people who want to learn how to invest money are curious about getting into Bitcoin.
But even with frequent news mentions, few people understand how to buy cryptocurrency for the first time. The way these digital currencies are “mined” and sold can seem overwhelming. But there are some unexpectedly simple ways to get into crypto.
If you want to buy cryptocurrency or just want to know how it works, we’ll share both the easy way and the do-it-yourself way to buy Bitcoin.
Why buy Bitcoin?
Cryptocurrency for beginners can be a challenging topic to get a firm grasp on. However, once you understand the basics of how Bitcoin works, it’s more about understanding the market for cryptocurrencies.
Bitcoin (BTC) was first conceived in a white paper in late 2008 by a person using the pseudonym Satoshi Nakamoto. In January 2009, the blockchain was launched and Bitcoin came into existence.
Bitcoin isn’t a printed government-issued currency like U.S. dollars, also known as a fiat currency. Instead, people use computers to mine bitcoins by processing bitcoin transactions on the blockchain, a detailed listing of every bitcoin transaction ever.
Initially, Bitcoin wasn’t used to pay for transactions. Instead, it was just a digital item. In 2010, a person used bitcoins to make a purchase for the first time. At the time, each bitcoin was only worth about a quarter of a penny each.
People can make many arguments for why you should buy a cryptocurrency like Bitcoin. The idea behind Bitcoin is it gives its user complete control over their currency. They can spend it whenever they want, wherever it is accepted, and without limitations. It’s a secure method of payment that is irreversible, something that sellers like.
On the buyer side, using Bitcoin protects you from fraudulent transactions from vendors. Vendors can’t access your account to make additional charges as they could if you gave them your debit card or credit card number.
Today, Bitcoin is the most popular cryptocurrency which has resulted in speculation in its value and active trading. While you can use bitcoins to make transactions with certain vendors, many people view it as an investable asset. This is yet another reason people own cryptocurrency and purchase Bitcoin in particular.
How to buy Bitcoin
Buying Bitcoin the do-it-yourself way requires you to follow a few key steps:
1. Choose an exchange
The first thing you need to do is choose a Bitcoin exchange. Exchanges are trading platforms that allow you to buy or sell Bitcoin for money, such as United States dollars. You may have the option to store your Bitcoin at these exchanges, too. That said, other storage options provide better security, which is key to protecting your Bitcoin.
Popular exchanges include: Coinbase, Coinmama, or Gemini Exchange. Each exchange may offer different fee structures, cryptocurrency options, payment methods, and security options. Compare each exchange you’re considering to find the best choice for your situation. As long as an exchange meets your needs, choosing the lower fee option will help you keep more of your money.
2. Connect your payment option
Next, you need to load a payment option into the exchange to purchase Bitcoin. Each exchange offers different payment methods: bank transfers, wire transfers, PayPal payments, or payment card purchases, such as credit cards. Once you create an account with the cryptocurrency exchange, look for a place to manage your account details. This often includes an option to add payment methods like a credit card or a bank account.
Make sure you trust the exchange you’re working with. The last thing you want is to put your info into an exchange that gets hacked, resulting in your payment information getting leaked or even used maliciously. Some payment methods, such as credit cards, provide more security against fraudulent transactions. Keep this in mind when choosing how to fund your account.
3. Buy some Bitcoin
After your exchange account has a funding source, it’s time to buy Bitcoin. There are generally two types of orders you can use to purchase Bitcoin.
- A market order tells the exchange to buy Bitcoin at the best price currently available on the market. Depending on your order’s size, a market order may partially fill your order at different prices.
- A limit order requires the exchange to buy your Bitcoin at a set price or lower. As soon as the exchange finds a price at or below that price, it will execute it. If that price doesn’t materialize, the transaction doesn’t go through.
When you place an order, you tell the exchange how many bitcoins you want to purchase, or what fraction of coins you want. Limit orders also allow you to specify the maximum price you want to pay. Each transaction must be confirmed using blockchain technology. This verifies transactions are valid and then records them in blocks, which may take time.
4. Store your Bitcoin safely
After you purchase your Bitcoin, it’s essential to store it securely. This can help avoid losing your bitcoins to criminals looking to steal your cryptocurrency. Bitcoin wallets are one place to store your Bitcoin private keys (used to transact your Bitcoin) and exist in several forms. All these digital wallets are software programs designed to securely store Bitcoin. You can have desktop, mobile app, web, or hardware wallets. Each has its pros and cons.
Popular wallets include: Exodus (desktop), Mycelium (mobile), and Ledger (hardware). Choose a wallet based on your Bitcoin transaction needs and the type of security you require. Hardware wallets are usually the most secure but the least convenient to use. This makes sense for Bitcoin investors not looking to transact often. People who want to use bitcoins to buy and sell items regularly may wish to use a mobile wallet connected to their phones.
3 easier ways to buy Bitcoin
You can buy Bitcoin using methods other than an exchange, too.
Cryptocurrency ATMs allow you to buy Bitcoin at a physical location. After you create an account with the operator, you can use a payment method, such as cash or a payment card, to purchase Bitcoin. You enter the Bitcoin wallet address where you want the Bitcoin sent and the transaction goes through. You may also be able to sell cryptocurrency at some of these Bitcoin ATMs, as well.
Not all ATMs are run by the same vendor. Make sure you understand who you’re dealing with and the terms involved. These ATMs charge fees to make money. They may also process transactions at different speeds. You can use a service like CoinATMRadar to find a Bitcoin ATM near you.
P2P (peer-to-peer) exchanges allow you to make Bitcoin transactions directly with other people. Depending on the platform you use, many different payment methods may be available. LocalBitcoins is one example of a peer-to-peer trading platform.
These platforms come with risks, though. You don’t know where the Bitcoin is coming from, which could result in accidentally funding illicit groups, including terrorists. You could also end up a victim of a scam if you aren’t careful. If you’re selling Bitcoin for money, a person may reverse the transaction from their funding sources, such as their bank. But Bitcoin transactions are irreversible, so you’d be out the Bitcoin.
If you want to invest in Bitcoin but don’t care about using it to make purchases, Robinhood may be the easiest option to get started. Robinhood allows you to buy and sell Bitcoin, Ethereum, Litecoin, Dogecoin, and 13 other cryptocurrencies. The best part is, you get to buy and sell commission-free and can trade 24/7. And if the cryptocurrency allows fractional amounts to be bought and sold, you can buy and sell fractional coins.
While you can buy and sell the currencies as investments, you can’t withdraw the coins from your account or deposit cryptocurrency coins into your Robinhood account. But if you want to invest in asset classes other than cryptocurrency, Robinhood also allows you to trade stocks, ETFs, and options. They offer a cash management account, as well.
Having all of these features in a single investing app can make managing your finances easier than having accounts at several firms and it eliminates some of the more complicated steps of buying Bitcoin.
If you want to learn more, read our Robinhood review.
What is the safest way to buy Bitcoin?
Safety when buying Bitcoin is key due to the high cost of a bitcoin. Only use well-known and proven options to purchase Bitcoin. Avoid options that seem too good to be true and avoid using newer companies until they are established.
Once you buy your bitcoins, be sure to store them securely. Putting a bitcoin in “cold storage” in a physical wallet may be the lowest risk option, as long as you don’t lose the physical wallet or the ability to access it. Trezor is a popular hardware wallet.
How many bitcoins are left?
In total, up to 21 million bitcoins can exist. As of February 2021, about 18.6 million bitcoins had already been mined. This leaves a little less than 2.4 million bitcoins left. Some of the mined bitcoins have likely been lost, though. This reduces the number of bitcoins available for circulation.
Is Bitcoin legal?
Bitcoin is legal in the United States, but it isn't legal in every country around the world. Check with the country you live in to see if it is legal currency in your area.
Can you buy less than one bitcoin?
You do not have to buy a whole bitcoin. Thankfully, since each bitcoin is potentially worth tens of thousands of dollars, you can easily purchase tiny fractions of a bitcoin, such as 0.000494.
While Bitcoin is a flashy investment that’s often in the news, it isn’t a good fit for everyone. Bitcoin is still a relatively new asset that has only been around for about a decade. Many claim it is the future currency of the world while others are doubtful.
Cryptocurrency could be a good investment for a portion of your portfolio depending on your goals. If it is a good fit for you, you can buy Bitcoin using Robinhood as long as you don’t care about withdrawing the cryptocurrency you buy from the platform. People who want total control of their bitcoins will need to use exchanges and Bitcoin wallets.
Even so, you should remember that all investing is risky and could result in financial losses. A fairly new investment, such as Bitcoin, can be subject to large price swings and potential losses, too. Only you can determine if it is worth investing in digital assets like Bitcoin over other asset classes.