Read this before you purchase Bitcoin or crypto
Bitcoin has been attracting attention from idealists to speculators all over the world, with many people believing it is a “magical” currency that will revolutionize global finance. Perhaps you’ve heard about this technology that many believe is the next big thing in currencies, poised to upend the current financial system.
You may be wondering how to buy Bitcoin, where to buy Bitcoin, as well as the various ways to pay for Bitcoin after learning that it is the digital version of gold: a sound money with greater stability than fiat currency.
The first thing you need to know about Bitcoin is that it is not a company or a stock. Bitcoin is a digital currency and it exists solely in the cyber world. This means you cannot purchase Bitcoin from your broker the same way you would purchase stocks and shares. However, there are a few ways to buy Bitcoin.
What you need to know before buying bitcoin
Bitcoin is very different from the money you carry in your wallet or the shares you own in a company. Unlike fiat currency, which is regulated by governments, no one owns or controls Bitcoin. It is also decentralized, meaning it is not subject to banks or other financial institutions.
This can be good or bad depending on your perspective. On the one hand, it means that no one can tell you what to do with your money and there are no restrictions on how you can use it. On the other, it also means that if you lose your Bitcoin, there is no one to help you get it back.
Another key difference is that Bitcoin is scarce, meaning there will only ever be 21 million bitcoins in existence. This stands in contrast to fiat currency, which can be printed by governments as needed. The limited supply of Bitcoin has led some people to see it as a store of value, like gold.
However, unlike gold, which takes centuries to mined and refine, Bitcoin can be mined relatively easily and new bitcoins are created at a predictable rate. Because of this, some people see Bitcoin as more of a currency than an asset class like gold.
In order to buy bitcoin, you need to find a seller who is willing to sell you bitcoin in exchange for the fiat currency of your choice. You can find these sellers on various exchanges or online marketplaces. Once you have found a seller, you will need to create an account with the exchange or marketplace and deposit the fiat currency that you want to use to purchase Bitcoin.
Once your account is funded, you can then browse the available offers to find one that meets your needs. When you find an offer you like, simply enter the amount of Bitcoin you want to buy and click “submit.” The seller will then release the bitcoins to your account.
Let’s go over some key points to keep in mind when buying Bitcoin.
- Bitcoin is decentralized
- Bitcoin is open-source
- Bitcoin is pseudonymous
- Bitcoin transactions are irreversible
- Bitcoin offers high levels of security
- Bitcoin is not regulated by governments
- Bitcoin is volatile
- Bitcoin is still experimental
- You need a place to store your bitcoins
Centralized vs Decentralized exchange
A key difference between trading Bitcoin and other traditional assets such as stocks, forex, or commodities, is that Bitcoin is decentralized. There is no central authority that controls or regulates the Bitcoin network. Instead, the network is powered by its users. This decentralized structure enables individuals to buy and sell bitcoin without having to go through a bank or other financial institution.
Centralized exchanges are intermediaries that match buyers with sellers. They usually take a fee for their service. Some popular centralized exchanges include Uphold, Coinbase, and Kraken.
In contrast, decentralized exchanges do not require an intermediary to match buyers and sellers. Instead, trades are conducted directly between users (peer-to-peer). Decentralized exchanges are popular for increased privacy, and freedom from government regulation but it doesn’t come without issues. Some popular decentralized exchanges include Bisq, Hodl Hodl, and Paxful.
There are physical Bitcoin ATMs all around the world if you don’t have access to the internet. These work similarly to regular fiat machines, and will walk you through each step. In most cases, you’ll need a Bitcoin wallet already installed on your computer, which you can scan into the ATM.
The Bitcoin ATM will first convert your money into fiat and then send it to the wallet address you scanned. Before you go, wait an estimated 10 minutes to ensure that your purchase of Bitcoin is confirmed and in your account.
Much like standard fiat ATMs, the Bitcoin ATM will charge a fee which ranges 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 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.