Key takeaways
- Bitcoin is a decentralized cryptocurrency that is popular for investment.
- There are multiple methods that you can use to purchase Bitcoin, including centralized and decentralized crypto exchanges, credit and debit cards, bank transfers and PayPal.
- Bitcoin wallets securely store Bitcoin. Wallet types include hardware, software and browser wallets.
- The security of your Bitcoin is important. Transfer your Bitcoin to a self-custodial wallet for added security.
Bitcoin, the pioneering cryptocurrency created by the anonymous person or group known as Satoshi Nakamoto, revolutionized the financial landscape with its decentralized, peer-to-peer (P2P) network. Since its inception in 2008, Bitcoin (BTC) has gained immense popularity and is often dubbed “digital gold” due to its finite supply of 21 million BTC and its role as a store of value.
Unlike traditional currencies controlled by central banks, Bitcoin operates on a decentralized ledger technology called blockchain, ensuring transaction transparency and security. But, its importance extends beyond just an investment asset. Bitcoin represents a shift toward decentralized finance (DeFi), offering an alternative to conventional banking systems, promoting financial inclusion and empowering individuals with greater control over their assets.
As the most recognized and valuable cryptocurrency, understanding how to buy Bitcoin is essential for anyone looking to participate in this evolving digital economy. If you want to buy Bitcoin, this article will walk you through the process, from purchasing BTC, selecting a wallet to hold and securing BTC assets.
Did you know? The maximum number of Bitcoin that will ever be created via mining is 21 million. As of year-end 2023, about 1.4 million Bitcoin were yet to be mined. This finite supply is one reason why some people believe Bitcoin will increase in value over time.
What to know before buying Bitcoin?
Imagine Alice is planning to buy her first car. Alice will not just walk into the nearest dealership and purchase the first vehicle she sees. Instead, she will research different models, understand financing options and learn about necessary maintenance. Similarly, before buying Bitcoin, it’s crucial to understand the landscape and prepare adequately.
For instance, suppose Alice is a newcomer to the world of cryptocurrency. She heard about Bitcoin’s potential for high returns and wants to invest. However, before jumping in, Alice spends time learning about Bitcoin’s volatility, researching different purchasing methods, and understanding the importance of securing her digital assets. This preparation helps her make informed decisions, minimize risks and maximize her investment potential.
Is this your first interaction with Bitcoin? Read on to learn how to purchase Bitcoin.
Step 1: Choose a crypto wallet
Before purchasing Bitcoin, you need a crypto wallet to hold and store BTC. A cryptocurrency wallet refers to a physical medium, device service or application that allows users to store, manage and transact with cryptocurrencies. Unlike a physical wallet that holds cash, a crypto wallet holds private keys — secure digital codes known only to the owner — that give users access to their cryptocurrency holdings and enable them to sign transactions.
There are different types of crypto wallets, including hot and cold wallets. Each type offers varying levels of security and convenience, so choosing the one that best suits your needs and security preferences is important.
Cryptocurrency wallets come in different forms:
- Cold wallet: Physical devices designed to securely store digital assets offline, making them less sensitive to online threats than hot wallets, which are constantly connected to the internet. These include:
- Hardware wallet: Physical devices that look like USB keys, store Bitcoin offline and offer high security. You only need to connect to the internet when you need to manage or transact with your BTC.
- Paper wallet: Private and public keys are printed onto paper (maybe accompanied by QR codes for ease of transacting). Since paper is fragile, careful storage is necessary to prevent damage, tear and loss. - Hot wallet: Software applications installed on computers or mobile devices. While hot wallets improve accessibility by design, their constant connection to the internet makes them more susceptible to cyber threats. Common types of hot wallets include:
- Mobile wallet: These are hosted by exchanges like Coinbase and Binance and are accessible from any device with an internet connection. They provide flexibility but lower security compared to hardware wallets.
- Web wallet: Browser extensions like MetaMask give users complete control of their crypto assets. However, they are more susceptible to hacking attempts because they are connected to the internet.
Step 2: Select a crypto exchange
A cryptocurrency exchange is an online platform where you can buy, sell and trade Bitcoin and other digital assets. These exchanges function as intermediaries, connecting buyers and sellers while providing a secure transaction environment.
Similar to a stock exchange, crypto exchanges provide a regulated medium for acquiring Bitcoin, which would otherwise be more complex and less accessible, requiring P2P transactions that come with higher risks and difficulties. They are essential for purchasing Bitcoin because they offer various services, including:
- Setting market prices.
- Ensuring liquidity.
- Providing tools for trading and storing cryptocurrencies.
Selecting a reputable exchange is important for ensuring the safety of the investments, accessing reliable customer support, and benefiting from user-friendly interfaces and comprehensive security measures. Popular crypto exchanges include Binance, Kraken, Crypto.com and Coinbase.
Did you know? Around 20% of Bitcoin, valued at approximately $140 billion, is lost forever because individuals forgot their passwords. Make sure to secure your keys and seed phrases.
Various ways to purchase Bitcoin
The number of options to acquire and own BTC is continually increasing, allowing you to choose the best method for your preferences and needs. The sections below discuss some of the ways to purchase Bitcoin online.
Method 1: Buy Bitcoin from a crypto exchange
Crypto exchanges may require users to comply with Know Your Customer (KYC), registration, two-factor authentication (2FA) and other security requirements. However, the exact steps and procedures may vary slightly depending on the selected cryptocurrency exchange.
Once you have the crypto wallet set up and KYC checks completed, the following will help you understand how to buy BTC from a crypto exchange:
Step 1: Deposit funds using one of the following methods
- Bank transfer: Cost-effective but may take a few days to process.
- Credit or debit card: Instantaneous but may incur higher fees.
- PayPal: Only available on limited platforms.
Step 2: Purchase Bitcoin
- Navigate to the trading section and look for “Buy/Sell” or “Trade” on the exchange.
- Select Bitcoin from the list of available cryptocurrencies.
- Enter the purchase amount you want to buy.
- Check the transaction details and confirm the purchase.
You may choose to keep the purchased BTC on the exchange or move it to a personal wallet. For the latter, enter the wallet address in the exchange’s withdrawal section and confirm the transfer. Remember the crypto mantra: Not your keys, not your crypto.
Method 2: Buy Bitcoin with a credit card
To buy Bitcoin with a credit card, use crypto exchanges that accept this payment method, such as Coinbase or Binance. Remember that using a credit card often incurs higher fees than bank transfers.
The process involves entering your card details, specifying the purchase amount and completing the required verification steps. Bank credit card fees for transactions via this route are usually high.
Unfortunately, not all credit cards allow customers to buy Bitcoin and other cryptocurrencies. While Mastercard and Visa allow customers to purchase cryptocurrency, many banks do not permit Bitcoin purchases via credit cards. This is due to regulatory requirements of the banking systems in the countries where they function.
Since bank policies and country-specific regulations vary, users may need to check with their credit card service before making a purchase.
Method 3: Buy Bitcoin with payment apps
PayPal, which has more than 431 million active accounts globally as of the first quarter of 2024, first launched cryptocurrency services in 2020 to increase cryptocurrency’s utility in digital commerce. Buying Bitcoin directly through PayPal offers a convenient method for acquiring cryptocurrency, particularly for users in the US.
Additionally, you can use Bitcoin to pay merchants that support PayPal transactions. As of June 2022, PayPal also allows United States-based users to withdraw their Bitcoin to third-party hardware wallets. This is important because it gives users more control and security over their assets.
Are there any purchase limits? The platform supports high purchase limits of up to $100,000 per week with no annual cap but keeps withdrawals limited to $10,000 per week. So, how much will this cost? Transaction fees vary, ranging from $0.49 to 1.80% of the purchase.
Here’s how to buy BTC via PayPal:
Step 1: Sign up to create a PayPal account by completing all required documentation or login to an existing account.
Step 2: Click on “Finances” at the top left, then select “Crypto” (available only to supported locations).
Step 3: Click on “Bitcoin” and then on “Buy,” and enter the purchase amount to specify the amount of Bitcoin to buy.
Step 4: Select your preferred payment method and click “Next.”
Step 5: Check the conversion rate and transaction fee.
Step 6: Click “Buy now” to complete the transaction. The Bitcoin will be available in the user’s PayPal digital wallet.
Another method is Cash App, which is available in the US and United Kingdom and enables individuals to transfer and receive money, pay bills, file taxes and invest in stocks. Cash App also offers the convenience of payments via debit cards.
The app makes buying Bitcoin easy, making it a simple option for those based in regions where it is available.
Here’s how to buy BTC via Cash App:
- Step 1: To get started, you’ll need to link a bank account or debit card to your Cash App account.
- Step 2: Navigate to the Bitcoin section within the app, choose how much BTC you want to purchase, and complete the transaction.
Cash App also lets you send Bitcoin to other Cash App users and withdraw it to a Bitcoin wallet. But remember to check the current costs and purchase limits, as these can vary.
Method 4: Buy Bitcoin with a bank transfer
Using a bank transfer to buy Bitcoin is a cost-effective method, though the funds may take a few days to clear. First, select an exchange that supports bank transfers and deposit funds from your bank account into your exchange account.
Once the funds are available, you can purchase Bitcoin by navigating to the trading section of the exchange. Select Bitcoin and complete the transaction. This method is preferred for its lower fees and straightforward process despite the longer transaction times.
Other ways to buy Bitcoin
Other methods of purchasing Bitcoin include Bitcoin ATMs, peer-to-peer platforms or in-person exchanges and Bitcoin ETFs.
Bitcoin ATMs
Bitcoin ATMs are quite similar to regular ATMs. You might need to enter your phone number to receive a verification code or scan a government-issued ID, such as a driver’s license. After that, you simply insert cash, and you’ll get Bitcoin sent to your wallet via a QR code.
Peer-to-peer platforms or in-person exchanges
For those who prefer a more personal approach, buying Bitcoin via peer-to-peer platforms or in-person exchanges offers an alternative. P2P platforms like Bisq or Bybit connect buyers and sellers directly, facilitate transactions and provide escrow services to ensure security.
In-person exchanges, which are common in countries such as Georgia, Argentina and Australia, involve meeting someone face-to-face to trade Bitcoin for cash or other forms of payment. To avoid scams, exercise extra caution, meet in a secure office or safe public place, and verify the transaction carefully.
Bitcoin ETFs
The cryptocurrency market continues to evolve, with new ways to invest in Bitcoin emerging. One such way is through spot Bitcoin exchange-traded funds (ETFs). These are like traditional investment funds, specifically designed to track Bitcoin’s price. They let you invest in BTC without buying and storing it yourself.
On Jan. 10, 2024, the US Securities and Exchange Commission approved 11 spot Bitcoin ETFs from BlackRock, Vanguard, Franklin Templeton, Valkyre, Fidelity Investments, Invesco Galaxy, ARK Invest, Bitwise, Grayscale, Hashdex and VanEck.
These ETFs are traded on stock exchanges, offering a regulated and accessible way for investors to participate in the Bitcoin market. By staying updated on these advancements and following best practices, you can confidently enter the world of cryptocurrency and make informed investment decisions.
Did you know? Several public companies have invested heavily in Bitcoin. Tesla, MicroStrategy and others have made large-scale investments that have been well publicized.
Security best practices for buying Bitcoin
Buying Bitcoin involves several steps, from choosing a wallet and exchange to securing assets. This guide will help you navigate the process confidently and safely.
- Do your own research: Research crypto exchanges to ensure they have good reputations and strong security. Be mindful of crypto regulations in the country of residence and transaction.
- Strong passwords: Use complex passwords and enable 2FA.
- Software updates: Keep your wallet and related software updated.
- Stay informed: Follow the latest security practices and market trends. Study price movements and events affecting the crypto and Bitcoin market.
Buying Bitcoin is a journey that involves careful planning, research and attention to security. Whether using traditional exchanges, mobile apps or peer-to-peer platforms, understanding each step is important — from selecting a reliable wallet to choosing the right purchase method.
By staying informed and following best practices, investors can confidently navigate the complexities of the cryptocurrency market, making informed decisions that align with their financial goals.
Written by: Shailey Singh