How (and Where) to Buy Bitcoin
Bitcoin: the supposed “magical money of the internet” that has been attracting attention from idealists to speculators all over the world. Perhaps you have heard of this technology that many claim is the new, revolutionary form of currency, set to disrupt the current financial structures.
Or, maybe you’ve heard that Bitcoin is the digital version of gold: a form of sound money that holds its value better than fiat currency.
Regardless, after doing some research, you may be wondering how to buy Bitcoin; where to buy Bitcoin; as well as the different methods of paying for Bitcoin.
From a distance, the Bitcoin world may seem to be a little overwhelming to anyone that wants to simply buy Bitcoin, but fortunately the process is relatively easy and everything you need to know can be found below.
What You Need To Know Before Buying Bitcoin
In the early days of bitcoin, it was seen as a currency that could liberate people from corrupt governments and central banks looking to print money.
But today many investors see BTC’s rapid price appreciation – up more than 300% in 2021 – has been driven by speculators betting on its future value rather than any real underlying change in demand for bitcoin.
There exists both digital and physical real-world locations that one may use to buy Bitcoin, depending on their preferences. A simple search of “Bitcoin Exchanges” will bring up a long list of various websites that host a Bitcoin exchange.
Centralized vs Decentralized exchange
But which one should you go to? To answer this, one should first know the difference between a Centralized exchange, and a Decentralized exchange. Always be sure to read up on an exchange to verify their reputation.
A Centralized exchange is perhaps the most common type of exchange, where a sort of “middleman” is used to exchange funds from fiat to Bitcoin. Another common characteristic of these exchanges is the option of different trading pairs, allowing a user to exchange Bitcoin (and sometimes other cryptocurrencies) for other cryptocurrencies (much like using USD for buying/selling stocks, this would be equivalent to using Bitcoin to buy other cryptocurrencies, and to sell back into Bitcoin).
However, it is important to note that some of these centralized exchanges do not offer a fiat on-ramp, which means that the purchase of Bitcoin using cash will not be possible. If this happens to be the case, it would require you to transfer the Bitcoin (or other cryptocurrencies) you already own onto the exchange.
These markets trade much like the Forex markets, as they are open 24/7, allowing a trader to time the market for the best possible prices. A small-percentage fee is taken by the exchange for each trade. For the most part, centralized exchanges are easy to use, and offer advanced trading tools and high liquidity, but often requires a little skill to be able to trade consistently for a profit.
A Decentralized exchange is similar to a centralized one, except for the fact that no middleman is used in the process. The decentralized exchange essentially “swaps” one currency for another currency, often using the process of smart contracts. These exchanges are fairly straightforward, though they may lack some of the features that a centralized exchange offers, namely the ability to trade margins.
These exchanges are often not as prone to price manipulation that is often seen on centralized exchanges, and the risk of the exchange being hacked is much lower, though liquidity is often lower. Because these exchanges often do not require Know-Your Customer credentials, the user has more anonymity.
Since these exchanges do not use a middleman, the user is entirely in control of their own funds. If you need to buy a large amount of Bitcoin, there exists online brokers that will allow you to buy as much (or as little) Bitcoin as you would like.
Oftentimes, these brokers will also allow you to set up a recurring buy schedule so you can buy a set amount every day, week, month, etc. While these brokers are extremely easy to use, they often will not allow you to transfer the Bitcoin to your wallet for a few days. Usually, after about 3-5 days, the user is able to withdraw and deposit into their wallet (or another location).
If you do not have access to an internet connection, there are physical Bitcoin ATMs that are in-place all around the world. These function much like a standard fiat ATM, and will guide you through each process. For the most part, you will need to have a Bitcoin wallet beforehand, which you can scan into the ATM.
After inputting your fiat and entering how much you would like exchanged, the ATM will exchange your money into Bitcoin and send it to the wallet address that you scanned. Be sure to wait to see that your purchase of Bitcoin is confirmed and in your wallet before you leave (this could take 10 minutes or so).
After this, the Bitcoin in your wallet from the ATM is yours. ATMs are very straightforward and provide a simple ease-of-use to anyone attempting to buy Bitcoin. Much like standard fiat ATMs, the Bitcoin ATM will charge a fee, but unfortunately this can range at a premium of 5-15% above the actual price of Bitcoin. Actual ATM locations can be found on the internet, as more ATMs are being installed worldwide every day.
Before internet Bitcoin exchanges came into existence, people would often meet in person to buy Bitcoin from someone else. These types of exchanges can still take place, as long as you trust the person you are buying from will not try to rob/scam you. Meeting in a public place will help ensure that you have a safe transaction, but more often than not, it is much safer to either buy from an ATM or from an online exchange.
How Long Does it Take to Buy Bitcoin?
The actual process of buying Bitcoin does not take very long at all. Once a user is registered onto an exchange, it is simply a matter of inputting the correct amounts desired and hitting the “Buy” button. The amount of time it takes to actually have the Bitcoin in your possession is determined by the type of exchange you used.
For example: A centralized exchange does offer instant buys, but centralized exchanges are often used by traders to time the market for the best price possible. If you attempt to put a lower purchase price, you will inevitably wait until the price reaches that price level. Conversely, if you purchase at market price on a centralized exchange, you will purchase immediately (though a lower price may come even seconds to minutes later).
Decentralized exchanges take a matter of minutes, after inputting the correct amounts and waiting on transaction confirmations. As mentioned previously, the confirmation time on ATMs can reach up to 10 minutes. Often, it takes longer to sign up for an exchange than it does to actually purchase Bitcoin.
How Can I Tell What the Exchange Rate/Price Is?
After looking at different exchanges, you may notice that the going-rate price of Bitcoin will likely be different across the gamut of exchanges.
Why is this? The short answer is that there is no official price of Bitcoin at any moment. Every exchange has a different amount of liquidity and volume. Some exchanges will base their prices off of an aggregate of different exchanges.
The way to ensure that you are getting the best price (or a price you are comfortable paying) is by going to a resource such as CoinMarketCap or CoinGecko. These resources will allow you to compare prices across a list of different exchanges.
In general, it is best to try not to “time” the market, as the price changes every second. Many people use dollar-cost-averaging, which is essentially buying small amounts at a time to average out the total cost, instead of buying as much as you can all at once.
Different Payment Methods for Buying Bitcoin
Purchasing Bitcoin can be done with a variety of different payment methods including cash, credit/debit cards, and bank transfers. The most common way for purchasing Bitcoin on the internet is using a credit/debit card, as this tends to be the most familiar for anyone that has made a purchase on the internet.
Usually, the transactions are instantaneous, but are high in transaction fees. Bank transfers are also very easy, but will require you to link your bank account. Bank transfers also offer lower transaction fees, but take longer to process than credit/debit cards.
Credit/Debit and Bank transfers are also not very private, as your personal information will be required to complete the transaction. Cash is also a common way to buy Bitcoin, offering more privacy than the previous options, though usually with a 5-15% fee above the market price.
How to Buy a Partial Bitcoin
Looking at the price of Bitcoin, one may wonder how they will ever afford to buy a Bitcoin. Here’s the good news: You don’t have to buy a whole Bitcoin at once. In fact, you can buy as much or as little as you want.
One (1) whole Bitcoin is equivalent to 100,000,000 satoshis (a unit named after the infamous creator of Bitcoin, Satoshi Nakamoto). Taking this into account, you should theoretically be able to buy .00000001 of a Bitcoin (or 1 Satoshi), though at the current prices, 1 Satoshi is worth less than even 1/2 of 1 cent ($0.01) USD.
To buy a partial Bitcoin, either enter the amount you are willing to buy, or the amount of money you are willing to spend, and the exchange will convert the number for you. After confirming that the numbers on your buy order look correct, hit the “Buy” button, and you have successfully bought a partial Bitcoin.
If you have any concerns or fear about not acquiring enough Bitcoin (due to the inherent limited supply of 21,000,000 Bitcoins to ever be in existence), but are worried about the fact that you do not have enough funds for one whole Bitcoin, realize that the every-day average user of the internet will generally buy a little at a time. Never invest more than you are willing to lose.
While the world of Bitcoin can be a little overwhelming, the truth is that it is fairly easy to buy and acquire Bitcoin. Whether you want to buy on the internet or go to a physical location, there are methods available that will facilitate an easy process. Since the purchase of Bitcoin has inherent risk (possible loss of money, scams, hacks, etc.), please make sure to always do your due diligence in researching any exchange that you may use to verify the exchange’s reputation.
We are still early in the cryptocurrency scene, and at times it may seem like the Wild West of the Internet. With the proper precautions, patience, and a willingness to learn, any user can take advantage of this wonderful asset, and acquire some Bitcoin for themselves.
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