buy bitcoin
Investing in Bitcoin ( BTC ) may seem complicated at first, but once you break it down into its components, it becomes simpler. For example, investing in Bitcoin or trading BTC requires a service or trading account, while alternative secure storage methods are recommended.
A cryptocurrency trading account, personal identification documents using a Know Your Customer (KYC) platform, a secure internet connection and payment methods are all requirements for ambitious Bitcoin investors. It's also a good idea to keep your personal wallet separate from your trading account.
Bank accounts, debit cards, and credit cards are all acceptable payment methods for purchasing Bitcoin. BTC can also be obtained through Bitcoin ATMs and peer-to-peer (P2P) transactions. However, starting in early 2020, Bitcoin ATMs gradually required government-issued identification.
Additionally, Bitcoin is incredibly volatile, but if you're willing to take the risk, make sure you know what you're getting into and develop a crypto investing strategy. Also, make sure you're not investing out of a fear of missing out.
This article will answer the most common questions such as How do I invest in Bitcoin? What is the best way to buy Bitcoin? How do I buy Bitcoin using PayPal? How to buy Bitcoin using a credit card?
Before you buy Bitcoin
Investing in Bitcoin may seem difficult at first, but it becomes easier once it's broken down into steps. As the trustworthiness of exchanges and wallets continues to increase, buying Bitcoin is becoming easier and easier. But before you buy Bitcoin, you need a place to store it.
In the world of cryptocurrency, that place is called a “wallet,” and crypto wallets come in many forms. Different types of wallets offer BTC owners a variety of security, storage, and access options. The five main types of BTC wallets are desktop wallets, mobile wallets, online wallets, hardware wallets, and paper wallets.
However, it's important to mention that your wallet doesn't technically store your Bitcoins. Instead, it holds the private keys, which are essential for accessing Bitcoin addresses and being able to spend funds. These digital keys are required to sign transactions, and if a user loses them, they essentially lose access to their Bitcoins.
wallet type
desktop wallet
Desktop wallets are installed on the user's computer, providing control over the funds they send to that wallet, and there are thick desktop wallets and thin desktop wallets. Thick desktop wallets allow users to fully download the relevant blockchain and provide independent and secure management of their funds. Thin wallets, on the other hand, do not require users to download blocks and can be easily downloaded onto portable devices.
Mobile Wallet
The main advantage of mobile wallets is that users’ funds are always available. By scanning the QR code, it can become a convenient way to pay for goods. In some cases, users can take advantage of their smartphone's near-field communication feature, also known as NFC, which allows them to simply tap their phone to a reader without having to enter any information.
A common feature of all mobile wallets is that there is no need to run a full Bitcoin node. This is because a full Bitcoin node must download the entire blockchain, which is constantly growing and requires a lot of storage space.
Online wallet
With a web-based wallet, the user's private keys are stored on an online server controlled by someone else and connected to the internet. While it allows people to easily access their funds from any device almost anywhere in the world, there is always the risk of the servers being hacked or even the organization running the service taking control of your Bitcoins. Generally speaking, there are many factors to consider when buying and managing Bitcoin.
Hardware wallet
Hardware wallets are specialized portable devices that store private keys offline. There are several different types of hardware wallets, but they all allow users to carry any amount of money in their pocket.
paper wallet
A paper wallet is two pieces of information represented by characters and a QR code generated using a designated service. One of them is a wallet address that can be used to receive BTC. The other is the private key through which you can spend the Bitcoins stored at that address.
more choices
Other Bitcoin storage features also exist. Multi-signature or multi-signature wallets require confirmation from multiple sources to move or access funds. Some entities also offer Bitcoin escrow services, managing their customers’ Bitcoin storage for them.
How to buy Bitcoin in four steps
The number of ways to own BTC is constantly increasing, allowing people to choose the option to buy the cryptocurrency that best suits their needs. So, if you want to know how to invest in Bitcoin, follow the steps discussed in the following sections.
Choose a cryptocurrency exchange
Every new potential Bitcoin buyer will find a host of different exchanges vying for their business. Choosing the right one depends on many different factors, with its location probably being the most important.
Exchanges around the world fall under different government jurisdictions and require different know-your-customer and anti-money laundering practices, depending on the region involved. That’s why – to open an account and start trading on some centralized exchanges – you have to provide personal information, depending on the exchange and your location.
This brings us to the topic of exchange types. There are several different types of crypto exchanges – centralized exchanges, decentralized exchanges or DEXs, and peer-to-peer exchanges. Centralized cryptocurrency exchanges are online platforms where you can create an account with login details of your choice. You must also provide certain personal information, depending on the exchange and region.
On a centralized exchange, you can send funds to the platform in the form of cryptocurrency or bank account funds, and can use those funds to conduct transactions on the platform, including buying and selling Bitcoin. Depending on the exchange, you can trade several different crypto asset types on one major platform. However, one problem with this model is that technically you are not holding the funds while they are on the exchange.
DEX, on the other hand, allows you to trade from your wallet. Essentially, a DEX consists of a collective liquidity group of different assets on the blockchain on which the DEX resides. For example, Ethereum-based DEXs facilitate the trading of Ethereum-based assets. Bitcoin itself cannot be traded on Ethereum-based DEXs, although certain workarounds exist.
Peer-to-peer or P2P trading is also an option for buying and selling Bitcoin. There are several platforms available to facilitate such transactions, offering escrow services to protect both parties and their funds.
In addition to local cryptocurrency exchanges, customers can also buy Bitcoin on PayPal. However, the platform does not allow users to send their Bitcoins outside the platform ecosystem, nor does it allow users to control their private keys.
Confirm payment method
Exchanges also differ in the payment methods they accept. For example, most of the big platforms allow you to link your bank account for wire transfers, as well as your debit or credit card. Some accept PayPal payments, and Coinbase also accepts Apple Pay.
When you first sign up for an account and register a payment method, you must verify your identity no matter what option you choose. For example, in the United States it is common to scan a state-issued ID, such as a driver's license or ID card.
Depending on your jurisdiction and the platform you choose, you may also need to provide scans of other documents, such as your passport and proof of address.
place an order
After you are verified and have money deposited into your account, you can start buying Bitcoin. This method varies depending on the exchange you choose, some exchanges allow you to buy or sell Bitcoin by pressing the "Get" or "Sell" button and entering the amount you want to buy (or sell) currency.
Generally speaking, most cryptocurrency exchanges offer at least three basic order types: market, stop, and limit orders. Click on the Buy, Trade or New Order button on the exchange's home screen to execute any of these options. After that, you will be able to select one of the three options mentioned above before pressing the "Submit" button.
Store your Bitcoin
While large exchanges are becoming more secure, the industry continues to be plagued by hacks and fraud. This is why Bitcoin investors with large sums of money should consider storing their Bitcoins themselves. Experienced traders with strong cybersecurity skills may prefer to have their own wallet, as this allows them to transfer cryptocurrencies anytime and anywhere without being tied to an exchange.
Related: Bitcoin Wallets for Beginners: Everything You Need to Know
How to buy Bitcoin using PayPal
This may come as a surprise, but no matter which exact transaction method you use, buying Bitcoin through PayPal is still not easy, depending on where you are in the world. The exchange avoids using these payment methods and instead requires users to connect their bank accounts. Most private sellers also tend to be wary of such transactions, preferring hard cash.
This is because of what's called a "chargeback." Most transactions made with a credit card or PayPal can be easily reversed by simply calling the card company. Bitcoin transactions are irreversible, and since it is difficult to prove that any goods changed hands in a Bitcoin transfer, this payment method is generally avoided.
You need to create a PayPal account before you can buy cryptocurrencies. If you already have a PayPal account, all you need to do to buy Bitcoin is click the "Cryptocurrency" button and select BTC.
You will need available funds, a linked debit card or a linked bank account to make a purchase. You can spend $1 less or $100,000 more per week. Like many other cryptocurrency exchanges, PayPal charges fees for buying and selling cryptocurrencies, which fluctuate based on the amount purchased.
The following table lists PayPal encryption fees:
How to buy Bitcoin with a credit card
You can buy Bitcoin with a credit card on several cryptocurrency exchanges, but you'll need to pay transaction fees. Trading fees are how cryptocurrency exchanges make money, but using a credit card can cost you more. If you choose to purchase Bitcoin using a credit card, you may need to pay broker fees.
Additionally, if the exchange is located outside the United States, your credit card may be charged a foreign transaction fee for each purchase. This fee can range from 1% to 3% of the total purchase price.
The ability to purchase cryptocurrency using a credit card is also subject to the policies of the credit card issuer. For example, American Express restricts the use of their cards to purchase currencies, but temporarily allows the purchase of cryptocurrencies.
The process of setting up these transactions is very similar to linking and verifying your bank account via ACH (Automated Clearing House), if your preferred exchange and credit card provider allow it.
Some Alternatives to Buying Bitcoin
Bitcoin can also be purchased using the following methods:
Cryptocurrency ATM
Bitcoin ATMs are already popping up in cities around the world, and their numbers are growing. However, these machines often charge trading fees that are much higher than those commonly seen on cryptocurrency exchanges.
To use a Bitcoin ATM, find a machine in your desired area on the Internet. You must open an account with a Bitcoin ATM provider online or in-person at an ATM. Opening an account is typically subject to Know Your Customer (KYC) compliance, which may involve providing an identity scan and personal details, then waiting for approval.
Once you show up in person, you deposit cash into a Bitcoin ATM and either scan your mobile wallet QR code or receive a paper receipt with a code and instructions on how to transfer Bitcoin funds to your wallet.
Bitcoin ATMs are unlikely to appear in countries where Bitcoin is banned or outlawed.
investment trust
An investment trust is a form of collective investment in which investors' funds are pooled together through the sale of a fixed number of shares, which may present some trust issues when launched.
The Grayscale Bitcoin Trust (GBTC) is the first-ever publicly traded Bitcoin-related investment vehicle that gives people exposure to the cryptocurrency without directly buying or storing it. GBTC invests exclusively in Bitcoin and derives its value from the price of BTC. Grayscale also offers different investment products for other crypto assets.
Additionally, there are a number of Canadian Bitcoin exchange-traded funds (ETFs) – the first of which was the Purpose Bitcoin ETF, launched in 2021 by Purpose Investments. Purchasing a Bitcoin ETF also gives buyers exposure to Bitcoin through mainstream financial channels, although the type of investment product is different from GBTC.
Purchasing shares of certain companies can also be a possible Bitcoin investment exposure. For example, business intelligence company MicroStrategy has allocated billions of its capital to Bitcoin.
Although users may wonder whether Bitcoin shares are available or wonder how to buy Bitcoin shares, such a classification does not technically exist. However, you can buy shares of companies related to Bitcoin, such as companies focused on BTC mining, or buy shares of companies investing in Bitcoin.
gift card
Bitcoin can be used to purchase gift cards. The gift cards themselves can also be traded for BTC. All you need to do is purchase a gift card from any retailer, log into some platforms where sellers accept gift cards and complete your purchase.
Always be wary of scammers, pay attention to the seller's reputation, and other common internet safety measures. In general, awareness and caution are crucial for any activity in the crypto space.
How to safely invest in Bitcoin
Before you want to invest in Bitcoin, consider the following:
Legality and protection issues
Overall, Bitcoin has attracted the interest of law enforcement agencies, tax authorities, and legal regulators. They are trying to understand how cryptocurrencies fit into existing frameworks and what guidelines are in place. The legality of your Bitcoin activities depends on who you are, where you live, and what you do with your assets.
Related: Cryptocurrency Tax Guide: A Beginner’s Guide to Filing Crypto Taxes
It’s also worth remembering that cryptocurrency exchange protection and security measures, as well as their legality, vary from platform to platform. Different Bitcoin storage methods also have pros and cons, which must be considered before committing money to cryptocurrency investments.
Bitcoin ownership
The safe practices for protecting your Bitcoins depend on the type of storage you choose, and each storage type has its preferred practices for how to buy and keep your Bitcoins. Researching these practices, and what type of storage is best for you, is an important part of Bitcoin ownership. Bitcoin can offer fewer restrictions than traditional siled finance, although this ability also comes with responsibilities.
Should I invest in Bitcoin?
Before looking for the best place to buy Bitcoin, you should ask yourself the following questions:
Do I have a good understanding of what I’m investing in and how the Bitcoin and cryptocurrency markets work?
Is the level of risk acceptable to me?
Is it much more expensive now than it was just a few months ago? Why do I want to buy something? Is it just because it's more expensive that way?
Is there any evidence that prices will continue to rise?
If I acquire it now and sell it at a higher price later, who do I think will buy it from me at a higher price?
Why, if an asset was so valuable, did I give up on it when it was so much cheaper?
Have I convinced myself that I am somehow “informed”?
If you don't know the answers to these questions, investing is usually not a wise idea. If you decide to buy BTC, make sure you are not investing your life savings in it.
