You’d have to have been hiding under a rock for a long time if you had not heard about Bitcoin by now. The revolutionary financial innovation is taking the world by storm and all the biggest players finally want in on the action and find ways to buy Bitcoin.
Whereas institutional investors need grandiose custodial solutions like those recently announced by Bakkt and others, buying Bitcoin (BTC) for everyday folks like us is incredibly easy. It doesn’t matter whether you want to try and ride the waves of volatility to become a master trader or just want exposure to the internet generation’s store of value, follow the below tips to learn how to get started with the evolution of money as we know it.
Buy from a Friend
The easiest way to get hold of some Bitcoin for a first-time buyer is to already know someone who has some. They’ll likely sell you a few dollars’ worth to help you get your head around this revolutionary technology. Who knows, they might even gift you a small amount to help spread the word and get more people involved.
Whether you’re going to buy your first satoshis (the smallest measure of BTC) from a friend you work or go to school with, or you’d rather use one of the below solutions, it’s important to first set up some form of storage. The most basic solution that offers a reasonable level of security is a desktop or mobile wallet.
Both these storage solutions provide users with their own private key. This is very important. Whoever knows the private key to the wallet in which your Bitcoin is stored can access your funds at any time. If you don’t know your own private key (as is the case with exchanges and online wallets), you don’t really own your Bitcoin!
Once you’ve got wallet and backed up its private key securely, you can go ahead and make your first purchase from your friend or one of the below suggestions. If you’re going with the first option, just give them the wallet’s public address (never the private key) and pay them the dollars, euros, or pounds for the amount you’re buying. They’ll transfer your BTC and you should see it appear in your wallet shortly after.
If you’re looking to expand your Bitcoin holdings or you don’t know anyone who can sell Bitcoin directly to you, don’t worry. There are loads of other options. There are now several big, trusted names that you can buy Bitcoin from. However, you still need to transfer it to a wallet that only you know the private keys of. This is the most important lesson you will learn in all of cryptocurrency!
Buy from a Brokerage
One of the easiest ways to buy Bitcoin apart from a friend is by using a brokerage. These services are set up to provide simple buying and selling options but lack the complexity of a proper exchange. They’re an ideal way to get access to a bit more Bitcoin than you could from a friend, but they are not made for those wanting to trade for profits.
There are a few downsides to brokerages though. The first is that they are infamous targets for hackers. This means that once you make a purchase you MUST get your Bitcoin into your own wallet as soon as possible (immediately).
The major drawback with brokerages is that you pay for how convenient they are. They often allow you to buy with credit and debit cards but do charge a large premium for the service.
Buy from a Peer-to-Peer Marketplace
Peer-to-peer marketplaces are another way to buy Bitcoin easily. Services like LocalBitcoins are great because they allow you to buy Bitcoin instantly and often by presenting minimal forms of identification. That said, this is starting to change as more traders are being scammed by users claiming to have had their card details stolen.
Another great thing about peer-to-peer marketplaces is that they support the widest range of deposit options. You can even buy using PayPal, Neteller, Skrill, and other eWallet-type accounts.
That said, they do suffer in terms of the mark-up charged by individual traders. There are usually loads of offers to sell Bitcoin with the most commonly used payment methods (debit cards), and this promotes competition which leads to lower premiums. However, if you want to use a riskier method of payment, you can often pay 10-15% on top of the current price of Bitcoin. Clearly, this isn’t great if you want to buy a lot of Bitcoin.
Buy from an Exchange
Finally, you can buy from an exchange. Exchanges are primarily used for trading (buying low and selling high). There are, however, “hybrid” exchanges that act as both a brokerage offering simplified purchasing options and a trading platform loaded with advanced tools.
One of the few examples is CEX.IO, the big-name Bitcoin exchange with years and years of experience in the crypto market. CEX.IO allows users to benefit from numerous deposit methods, including credit/debit cards and wire transfers (which are free, by the way). Being a so-called “hybrid” exchange, CEX.IO leaves it to your choice to either opt for the brokerage or trading functionality. As the name implies, an instant-buy (brokerage) option provides for purchasing Bitcoin in a few clicks – the process is accomplished via a credit card as a rule. When it comes to trading, CEX.IO offers a high-volume marketplace for performing buy/sell deals among the users. The fees for both options vary though, so it’s better to check them before joining the platform.
However, the exchanges which allow you to actually buy Bitcoin using traditional currencies usually require that you submit a lot of documentation to abide by the “know your customer” and “anti-money laundering” legislation in the country they’re licensed in. This is something of a drawback to some users.
However, such exchanges usually offer the lowest rates. They often have very low trading fees and deposits can be free when using certain methods. These are often not instant though, so you will have to wait a while for funds to hit your account.
Such low rates and fees do make an exchange an attractive option for those wishing to seriously splash their cash on Bitcoin. What’s more, you can use the advanced features at exchanges to trade different cryptocurrencies for profits, if you’re that way inclined.
Although they’re by far the cheapest (apart from buying from a friend) way to buy some Bitcoin, the length of time it can take to get fully verified and the somewhat limited deposit options supported at exchanges can be frustrating.