Chances are that you are here trying to learn how to buy bitcoin because you are scared of missing out. FOMO – the fear of missing out – is what it is called in slang terms.
The Bitcoin (and crypto) market has basically exploded over the last few years. With Bitcoin’s price largely trending in the “right direction” recently, many people have made a lot of money. And it is still far from being too late to jump on that bandwagon right now. There is a lot of room left.
But if you have decided to hop on the train, you have a lot to learn about it first. Bursting into uncharted territory like this without essential education is almost certain to lead to you having your fingers (and wallet) burnt.
So before I move on to show you how you can buy Bitcoin, let’s have a quick overview first. What is Bitcoin anyway, and what purpose does it serve?
So, what is Bitcoin?
Unless you are living under a rock, you have heard the name bandied about. Bitcoin used to be hush-hush. It had something of a negative reputation due to its status as the central currency of the Dark Web.
But over the years, that cloak has slipped. Bitcoin is more mainstream these days, and everyone and their grandma wants to get in on the action.
Before we dive, it is important to understand what cryptocurrency is. Cryptocurrency, or crypto for short, is a digital currency that is encrypted and operating on a decentralized system. It works using a technology known as the Blockchain.
Cryptocurrencies are virtual in nature. What that means is that unlike paper or metal money, you can neither see nor touch them. You cannot hand them over physically in exchange for goods or services.
There are a ton of different cryptocurrencies in existence right now. Every day, new ones are thrown into the mix. But Bitcoin is generally accepted as the major cryptocurrency.
It was created in 2009 by an anonymous person or persons going by the alias Satoshi Nakamoto. The purpose of the creation of this cryptocurrency was decentralization, to eliminate the need for intermediaries like banks and governments.
And that is why it has served as the currency of the Dark Web for so long. Transactions that are carried out through Bitcoin are encrypted, and the components such as addresses cannot be easily linked to actual personal identities.
Bitcoins are stored by their users in digital wallets. A wallet is something like a virtual bank account. Like a regular bank account, it will allow users to send or receive Bitcoins or to use them in exchange for goods and services.
These wallets can exist either in the cloud, or in the Bitcoin owner’s computer.
How to Buy Bitcoin
So now that you know what Bitcoin is, we will now look at the steps involved in actually buying it. Because it is virtual and decentralized as earlier mentioned, you cannot simply work into a bank or currency exchange and ask to buy Bitcoins.
But don’t worry, it is really not a complicated process. At least it won’t be, once you have followed our well broken down guide.
1. Register with a Digital Currency Exchange
An exchange is a business that allows customers to buy and sell bitcoins. An exchange lets you convert fiat money like the dollar, or altcoins, into Bitcoin. It acts as a broker, allowing deposits and exchanges, and takes a fee for the service it provides.
There are a lot of Bitcoin exchanges to choose from. In the United States, they include Coinbase, Coinmama, Gemini, Kraken, Binance, eToro, and CEX.IO.
Bitcoin exchanges do not all operate the same, and there may be significant differences to take note of. It is important to study reviews of various exchanges before making a decision, learning their strengths and weaknesses.
When you have chosen the exchange that you think will best serve your purpose, the next step is to register on it. This process requires transparency, and your exchange will require that you submit some personal information.
The information required varies from exchange to exchange. It may also depend on your geographical location or region. The Know Your Customer (KYC) process may require your full name, residential addresses, phone number, social security number, and ID like a driver’s license.
You will be asked to verify your email address and to use 2-factor authentication to help ensure the privacy of your account.
2. Create a Wallet
It is important to understand that an exchange is different from a bitcoin wallet. Basically, a wallet is a software program that allows you to store your Bitcoin.
Of course, considering that Bitcoin is only virtual, it is not actually stored in the wallet. What is stored there are the private keys that are used to access your private Bitcoin address and transaction signatures.
The Bitcoin wallet is entirely private – as long as you make sure that it remains so. It is very important that you maintain the privacy of your wallet by using strong passwords. Additionally, you must keep all sensitive information to yourself.
When you make a Bitcoin purchase, that Bitcoin is sent to your wallet. In this wallet, you can manage your Bitcoin and send some out to someone else using the recipient’s address. When you send out Bitcoin, it is sent from your wallet to the recipient’s wallet.
Types of Wallets
- Web wallets, which allow you to send and receive Bitcoins using a web browser.
- Desktop wallets, which are installed directly on your computer. You must take care with this type of wallet, as corrupt wallet software may lead to the complete loss of your Bitcoins.
- Mobile wallets. As hinted by the name, this type of wallet is designed for mobile phones.
- Hardware wallets, which store Bitcoins on a physical device that is connected to a computer through a USB port.
- Paper wallets, which store bitcoins on a piece of paper.
The first three wallets are called hot wallets. They are online in nature and require internet-connected devices like desktops and smartphones. They are generally free and so are more popular. On the flip side, are not as secure as cold wallets…
… which comprises hardware wallets and paper wallets. The content on these wallets is harder to access by cybercriminals, and so they are considered safer.
Many Bitcoin exchanges come with personal wallets for their customers. Be that as it may, it is important that you create your own wallet outside that provided by the exchange, especially if you need to hold a large amount of Bitcoin.
3. Link Your Payment Method to the Exchange
There are various methods that you can actually pay for the Bitcoin that you want to buy. After you have picked and registered with an exchange, you should connect the payment option you prefer to the exchange.
Say you prefer to transfer directly from your bank to the exchange. In this situation, you will be required to link your bank account details, such as the bank name and your account number.
Alternatively, you may prefer to go with the debit or credit card route. As before, you will be required to provide the relevant information.
There are other payment options you may decide to opt for, like Paypal or digital tokens.
Again, it is important to make some research before you decide what payment option to opt for. Bank Transfers, for example, may not be an ideal solution for you if your bank frowns on cryptocurrency transactions. And yes, that is a thing. They can also be notoriously slow.
4. Buy the Bitcoin You Need
With an exchange, wallet, and payment option in place, you can now place an order to buy Bitcoin. The exchange that you decide on will almost definitely come with walk-throughs and tutorials. Even as a newbie, you are unlikely to find this a complicated process.
On exchanges like Coinbase, you will see a Buy/Sell label in the top menu. Make sure that you select Bitcoin as the cryptocurrency that you are interested in and assign a payment option.
Next, enter the amount of Bitcoin you want to buy and then click Preview Buy. This will bring up a summary of your purchase, including the fees you will pay for the transaction.
When you click on Buy Now, the Bitcoin will be sent to your wallet.
What if You Would Rather Not Use an Exchange?
A cryptocurrency exchange is the most popular method of buying bitcoin. But it is not the only way.
There are a variety of reasons that you may prefer not to use a traditional exchange when you want to buy bitcoin. These include the high fees attached by some exchanges. Whatever the reason, you may decide to use P2P exchanges or Bitcoin ATMs instead.
Regular exchanges make the process of bitcoin exchanging completely anonymous. That means that you have no idea who you are actually purchasing the Bitcoins from.
Peer-to-Peer exchanges, on the other hand, have a more personal feel. You may call up a person who has bitcoin for sale and completing the transaction with an exchange from his/her wallet to yours.
Alternatively, you may join forums, social media groups, or other platforms where transactions are carried out.
It is important to note that this comes with its attendant risks. Transactions of this nature are usually not conducted under the secure umbrella that an exchange like Binance will provide.
Bitcoin ATMs let you pay money for bitcoins which are then transferred directly to the wallet that you provide. They are becoming increasingly popular these days.
Summary
The cryptocurrency industry is experiencing a huge boom in [year], and you don’t want to miss out. Owning some Bitcoin can only be a good thing.
It may seem like a tedious process, especially to a complete newbie. But I’ve got you covered. This guide answers the question of how to buy Bitcoin, covering all the bases.
For other useful guides on everything finance, please explore the website.