Stone Age, Bronze Age, Iron Age, they are all gone. Welcome to the Crypto Age. It’s the era of the crypto rush, and Bitcoin is leading the pack.
The total number of bitcoins in circulation hit 19 million BTCs in April 2022, meaning that there are only 2 million BTCs left to be mined. You sure don’t want to be left out.
But, how do you buy Bitcoin? What’s all to be known about buying Bitcoin?
Worry less, the Finance Magnates’ 2022 Ultimate Guide on how to buy Bitcoin is here to escort you in every step of your journey, from making the decision to actually buying, storing and even selling your Bitcoin. Here’s everything you need to know.
So, should I buy Bitcoin?
Before making this decision, there are several factors to consider:
The Positive Side to Bitcoin Investment/Trading
a. Success: Bitcoin is the most successful implementation of blockchain technology. As such, an investment in the coin is seen as an investment into the 'future of money'. In fact, global bitcoin adoption surged 880% between 2020 and 2021.
b. Potential: Experts believe there is still a vast amount of potential to be unlocked in blockchain technology, and Bitcoin is the beacon for this movement.
The Downside to Bitcoin Investment/Trading
a. Price: The price of Bitcoin fluctuates regularly; it often rises and falls inconsistently. This instability means that you could lose your money within a very short period of care if not taken. This is extremely problematic for those looking to properly invest in the currency.
ADVERTISEMENTb. Value: Bitcoin's actual value is still something to be determined. What makes Bitcoin stand out is the technology behind it: the blockchain. In fact, some people are of the opinion that other cryptocurrencies offer far more complex technologies and better prospects to investors.
Some people believe that investing in Bitcoin is simply buying into the wave of the popularity of the coin, and that Bitcoin can be a very risky investment.
c. Security: When deciding whether to buy Bitcoin, the issue of security is one of the things to consider. Crypto exchanges continue to be victims of hacks and heists which occur too often. This makes it hard for some people to see cryptocurrency as totally secure.
Divided Bitcoin Regulation
Although interest in the regulation of cryptocurrency has increased significantly, with the most recent being US President Joe Biden’s executive order calling for coordinated regulations on digital assets, and even the European Central Bank (ECB) is trying to summon a global effort to bring bitcoin regulation into purview. Nonetheless, governments around the world remain divided on how to regulate digital assets.
There are no regulatory bodies or central systems to help retrieve your bitcoins if your digital wallet or the crypto exchange you patronize is hacked. In other words, if you lose your money, it's very unlikely that you will ever see it again.
Nonetheless, Bitcoin is growing stronger and some analysts even believe the currency could replace gold as a safe haven.
So, ready to buy Bitcoin? It starts with a wallet.
Your Bitcoin Wallet: How to Choose and Set Up the Best Crypto Wallet for You
Now that you have decided to buy bitcoin, the next most important thing is to choose a Bitcoin wallet, set it up and start running with it.
But first, what’s a wallet?
What Is a Crypto Wallet?
A crypto wallet is a tool that allows users to interact with blockchain networks to send and receive Bitcoin and other digital currencies.
This wallet could be in the form of an online programme or physical medium that stores the public and/or private keys for cryptocurrency transactions. Crypto wallets are also used to encrypt and/or sign information.
Main Categories of Crypto Wallets
Broadly speaking, there are three main categories of crypto wallets: software, hardware and paper wallets.
Software Wallet
These are wallets that are somewhat connected to the internet. As a result, they are also called hot wallets. Software wallets come in three forms: online, digital and electronic wallets (or e-wallets).
Online Crypto Wallet
These wallets come as web, desktop and mobile wallets. They provide the most convenient options to traders and are great for those that wish to access their funds on the go or anywhere under any scenario.
Web Wallet
This type of wallet is based on a browser and does not require you to download software to your device.
Desktop Wallet
As the name implies, desktop wallets are software downloaded to a desktop computer and connected to the internet.
Mobile Wallet
These wallets are stored on your mobile devices as mobile applications. They are highly helpful if you would like to access your funds while on the move, or if you desire to buy an item from a retailer using Bitcoin.
Digital or Electronic Wallets (e-wallet)
These wallets are a little simpler in terms of usability. They are downloaded and store your coins in the cloud or in the hard drive of your computer. Cloud-based options have similar problems to online wallets in the sense that you will be providing your private keys to a third party who can access your funds at any time. The hard drive option is better, but it still can be problematic should your computer be hacked, or if you use a network that's not secure to download the software.
Hardware Wallet
These types of wallets are not connected to the internet but rather store the public and/or private keys for cryptocurrency transactions in physical devices.
Because they are not connected online, they are also referred to as cold wallets or cold storage. Although cold wallets are more secure, they are less accessible for buying and selling cryptocurrencies and are more suitable for long-term investors.
However, the problem with hard wallets is that they can be lost or stolen. If stolen, the thief gains access to the owner’s funds. It is, therefore, vital to keep hardware wallet devices as secure as possible in an appropriate fire-proof location.
Paper Wallet
This type of wallet comes in the form of a printed piece of paper containing keys and QR codes used to facilitate cryptocurrency transactions. To be secure, the owner of a paper wallet has to ensure that it is protected from disasters and theft and is kept in a secure location.
Paper wallets are the easiest to lose and anyone with a private key can access your funds. And, just like for hardware wallets, it is very important to keep paper wallets in a very secure place and ensure that no damage is done to them. All you need to create this wallet is a paper and printer.
Initially considered safe, most experts now discourage the use of paper wallets because they can be easily misplaced, and it could get into the wrong hands.
Where to Buy Bitcoin: Choosing the Best Crypto Exchange for You
In order to buy Bitcoin, you will need to set up an account on an exchange, which is simply an online platform on which you can buy and sell crypto assets such as Bitcoin. According to Forbes, there are nearly 600 cryptocurrency exchanges worldwide inviting investors to trade Bitcoin, Ether, and other digital currencies.
How then do you choose the best crypto exchange for yourself to start your digital asset investment journey?
A number of exchanges have been rated as some of the best in the world based on different criteria such as the beginner-friendliness, low fees, mobile app experience, security and ease to trade alternative coins, among others.
Some of the top-rated crypto exchanges include Cash App, Bitfinex, Coinbase, Binance, Crypto.com, Gemini, eToro and BlockFi.
Security Risks of Storing Crypto on Exchanges
Crypto exchanges require rather complex forms of verification to ensure that no fraudulent activity can take place on their platforms. To open an account on an exchange, you could be required to show several forms of ID as well as take a picture with the ID in hand.
However, despite these measures and others taken by crypto exchanges, leaving your Bitcoin or other cryptocurrencies on an exchange is very risky. This is why you need to get a wallet first.
In 2019, hackers stole 7000 BTCs from Binance in the biggest attack of that year. The exchange lost an estimated $40.8 million, although it compensated victims from its Secure Asset Fund for Users (SAFU).
More recently, Ronin Network, the blockchain project that powers the popular online game, Axie Infinity, which uses non-fungible tokens, lost $615 million worth of cryptocurrencies to hackers, becoming one of the largest crypto heists to date.
Aside from hacks, however, trouble could also arise from within an exchange. For instance, an exchange could mismanage or lose its customers’ cryptocurrency investments.
For example, the CEO of QuadrigaCX, the one-time largest cryptocurrency exchange in Canada, made 67,000 trades with the exchange clients’ funds. This, among other factors, ultimately led to the exchange’s collapse.
What Are Crypto Exchange Fees Like?
A crypto transaction fee is the amount you pay when you buy, sell or transfer cryptocurrencies from one wallet or exchange to another. The fees charged to customers differ from exchange to exchange.
There are various types of fees when it comes to operating on crypto exchanges. These include fund transfer fees, fixed transaction fees and tiered maker/taker transaction fees.
The most popular type of fee schedule used by most crypto exchanges is the tiered maker/taker transaction fee. A maker is the person that sells cryptocurrencies in an exchange, thereby providing liquidity to the market. On the other hand, a taker buys cryptocurrency.
In the context of crypto transaction fees, ‘tiered’ means that the fee follows a particular order. A tiered maker/taker transaction fee is charged based on your 30-day trading volumes on an exchange, and the rate depends on whether you are a maker or taker.
Various exchanges charge differing ‘tiers’ fees that are tied to the volume of your trading depending on whether you are a maker or taker. In most cases, as your trading volume increases, the fees charged decrease, especially for the maker position.
On average, most crypto exchanges such as Binance, Coinbase, Kraken, and Crypto.com, charge between 0% to 0.60 of your trading volume when it falls within the range of their 30-day trading volume minimum. Exchanges such as Gemini and Kraken, however, charge over 1% on certain conditions. For example, purchasing a stablecoin with another cryptocurrency (like BTC) results in a 1.5% fee on Kraken.
You’ll have to study the fee structure of the platform you selected and compare their offerings with what others are offering.
Crypto Exchanges and Available Coins
All crypto exchanges do not offer an equal number of cryptocurrencies. However, most exchanges offer all the major cryptocurrencies and tokens including Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Dogecoin (DOGE), Tether (USDT), USD Coin (USDC), etc.
BitMart offers one of the largest arrays of cryptocurrencies (or altcoins). The exchange allows its users in over 180 countries to buy and sell over 1,000 cryptocurrencies. On the contrary, Cash App is a Bitcoin-only exchange. It allows users to easily and securely buy, sell and store Bitcoin on their smartphones. On its part, Binance offers more than 500 cryptocurrencies and tokens.
Considering that there are over 18,000 cryptocurrencies in the world, most crypto exchanges only offer a handful: Coinbase (150+), Crypto.com (250+), Bisq (100+), Kraken (120+), Gemini (75+).
Let’s Buy Bitcoin
Now that we have discussed wallets and fees charged by crypto exchanges, and you’ve made a selection, it’s time to buy Bitcoin!
There are tons of ways you could buy Bitcoin. We’ll discuss some of them in sub-sections below. So, get ready!
How to Buy Bitcoin with PayPal
You can purchase Bitcoin on the PayPal app with as little as $1. It’s super easy.
NOTE: When you want to buy Bitcoin (or other cryptocurrencies that PayPal permits), PayPal displays an exchange rate and charges a transaction fee. The exchange rate includes a spread that PayPal earns on each purchase and sale.
Though, aside from buying Bitcoin directly from PayPal, you can use your PayPal account to purchase bitcoins on other platforms, such as eToro, Coinbase and Venom (which has been acquired by PayPal).
How to Buy Bitcoin with a Credit or Debit Card
To buy Bitcoin with a credit or debit card, you’ll need to find out the options your chosen exchange offers. Follow the processes outlined on their websites or FAQ pages.
Many exchanges are afraid of fraud and do not accept debits and credit cards for the purchase of Bitcoin and other cryptocurrencies. Although, more have developed stronger anti-fraud frameworks and are opening up.
Most crypto exchanges accept Visa and Mastercard debit and credit card payments. Others such as eToro accept the Maestro card. Cash App in particular has more options: It supports debit and credit cards from Visa, MasterCard, American Express and Discover. Cash App, however, does not support ATM cards, PayPal, and business debit cards for now.
Alternative Ways to Buying Bitcoin
When it comes to buying Bitcoin, you have various options at your disposal. Asides from the options discussed above, you can buy Bitcoin from a Bitcoin ATM (BATM), on Cash App, a P2P crypto exchange, or even a crypto broker. Let’s look at these alternatives in detail below.
How to Buy Bitcoin from a BATM
Bitcoin ATM (BATM) or Bitcoin kiosks allow people to buy or sell Bitcoin and other cryptocurrencies using hard currency without any pre-registration.
To buy bitcoin from a BATM, follow the simple steps outlined below:
How to Buy Bitcoin on Cash App
To buy Bitcoin from Cash App, you can either follow the regular way or choose from one of several order types.
The steps to buying Bitcoin in a regular way include:
Aside from this method, you can also buy or sell Bitcoin automatically at your selected price by using Cash App’s Custom Bitcoin Orders. Or you can go with the app’s Auto Invest order type that enables users to set up Bitcoin purchases automatically on a set daily, weekly, bi-weekly or monthly schedule.
You can learn more about these Cash App order types here.
Please note that purchasing bitcoin on this app requires that you have some cash in your Cash App balance. You may also need to enter additional geographical information.
Heard of P2P Crypto Exchange?
You sure have heard of Craigslist or Facebook Marketplace. Peer-to-peer (P2P) crypto exchanges work that way: They connect buyers and sellers of Bitcoin and other cryptocurrencies together, acting as a marketplace.
In other words, there is no third-party such as a bank to mediate your transaction. Just two users trying to get the best deals. This means that to buy crypto in a P2P crypto exchange, you have to scout for users selling at the lowest price and vice versa.
Meanwhile, in a traditional crypto exchange, you interact with charts and other market indices to determine when to buy, sell or hold your crypto assets. Here, the market determines the price at which you buy or sell.
However, note that the absence of a third party in P2P crypto exchanges does not mean that there is no intermediary: Without any intermediary to enshrine safety, P2P transactions are highly prone to fraud.
So, P2P crypto exchanges such as Binance P2P, offer an escrow functionality to ensure that all conditions are met by both parties in a transaction before funds are released.
Additionally, there are advantages and disadvantages to trading on P2P crypto exchanges as opposed to traditional crypto exchanges. Some of the benefits include access to a global market of buyers and sellers, the option of multiple payment methods, zero trading fees and escrow-powered security architecture, among others.
On the negative side, P2P transactions can be slow if the buyer or seller lags behind. P2P trading also offers lower liquidity than centralized crypto exchanges.
Who Is a Crypto Broker?
We’ve discussed crypto exchanges and their fees. So, what’s a crypto broker? A cryptocurrency broker is a firm or an individual (or agent) that facilitates the purchase and sale of cryptocurrencies between customers for a fee.
Crypto brokers are different from crypto exchanges because exchanges simply provide an online platform for buyers and sellers to transact with each other. Also, while crypto brokers set the price, exchanges do not set the price; the market does through the forces of demand and supply.
How to Sell Bitcoin
If you've decided to sell your coins, it is important to understand how exactly to go about the process. Selling Bitcoin is easier now than it ever has been, and it is even likely to become even easier in the future.
There are four main ways of going about this: via exchanges, direct trades, selling in-person and via P2P platforms.
We’ve discussed some of these methods earlier in this guide. However, you can read further about selling your bitcoins here.
Best Practices: Staying Safe When You Buy and Sell Bitcoin
There are a number of standard safety procedures you must inculcate to ensure your safety as a crypto investor or trader. Some of them are:
Congrats! You’re now equipped with all you need to know to start buying and selling bitcoins!
Do you love our guide? We’ll love to hear from you! Drop a comment or two below.
FAQs
What’s the best place to buy Bitcoin?
Cash App, Coinbase, eToro, Bisq, Gemini and Binance are some of the best places to buy Bitcoin.
What Is the Best Way to Buy Bitcoin?
The best way to buy Bitcoin is from a licensed and regulated cryptocurrency exchange. After purchasing bitcoins, you are advised to store your bitcoin in a digital wallet to ensure the safety of your cryptos as even the best exchanges are vulnerable to hacks.
How Do I Buy Bitcoin Stock?
Bitcoins are not yet traded as stocks. If you want to invest in Bitcoin through the stock market, then you can invest in Bitcoin-linked exchange-traded funds (ETFs) such as the ProShares Bitcoin Strategy ETF (BITO), the first U.S. Bitcoin-based ETF. BITO is traded on the New York Stock Exchange (NYSE) Arca, an electronic securities exchange in the U.S. where exchange-traded products (ETPs) and equities are listed. You can also invest in bitcoin mining companies or crypto exchanges such as Coinbase that are listed on stock exchanges.
How Do I Buy Bitcoin on Robinhood?
You can purchase Bitcoin or other cryptocurrencies on Robinhood using an iOS, Android, or web-based device. These are similar steps you’ll need to take to complete your Bitcoin purchase on Robinhood. You can learn more here.
Should I Buy Bitcoin Now, and How Much Should I Buy?
To decide whether to buy Bitcoin now, check out for market updates. Is Bitcoin currently doing well in the market? What has been the performance of the cryptocurrency and other digital assets in the last few days, weeks and months? The quantity of Bitcoin you decide to buy, among other things, depends on your purchasing power and the level of risk you’re willing to take.
How Do I Buy Bitcoin Anonymously?
Purchasing Bitcoin on a BATM (as described in the article) is done anonymously. You can also buy Bitcoin anonymously on platforms, such as BitQuick, Paxful and ShapeShift by using a card or bank transfer.
What Is a Custodial Wallet?
Custodial wallets are wallet services offered by a centralized business organization such as a cryptocurrency exchange. These platforms help their users manage their private Bitcoin keys.
What Is Bitcoin mining?
As a Bitcoin investor or enthusiast, you should know about Bitcoin mining. Bitcoin mining is the process whereby new transactions are added to the Bitcoin network to create new bitcoins. This is done by computer owners around the world who solve complex puzzles to get (‘mine’) bitcoins.
