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How to Buy Bitcoin: Step-by-Step Guide

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Bitcoin launched in 2009 and has since experienced significant growth, which probably means that everyone's heard of it by now. Analysts expect the value of the cryptocurrency to rise even further as widespread adoption of the currency and the blockchain technology continues.

But how do you buy Bitcoin? Here’s how to buy bitcoin:

  1. Select a broker or crypto exchange site.
  2. Create an account and verify your identity.
  3. Make a deposit.
  4. Place your bitcoin order.
  5. Store the bitcoin.

Buying Bitcoin isn't complicated, but you'll need guidance for the first time you do it. If you want to learn all the details, make sure to continue reading. I'll cover everything you need to know in the article below!

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1. Select a Broker or Crypto Exchange Site

Before buying a cryptocurrency, you first need to choose where you're going to conduct your transactions. You'll need to select either a broker or a crypto exchange to work with. Both let you purchase Bitcoin, but there are differences between the two.

Let’s take a quick look at these differences.

  • Cryptocurrency exchange: This platform usually has low fees but advanced trading systems, which may be overwhelming for a new investor. Examples include Coinbase and Gemini.
  • Cryptocurrency broker: This platform offers simple, accessible interfaces that do the trading for you. You don't want to choose "free" options, as they could sell your data to the market. They're convenient, but you might have issues moving your Bitcoin to another platform later. Examples include SoFi and Robinhood.

You'll need to think about what you want. Do you want to manage your Bitcoin assets, or would you rather have someone else do that for you? Once you've made your choice, you're all set to move onto the next step.

If you want the differences between brokers and exchanges broke down further, this YouTube video can help you:

Click to play

2. Make an Account & Verify Your Identity

Once you've chosen a platform to conduct transactions, you need to sign up for an account on their website. Some sites will have you verify your identity to avoid bots creating accounts in other people's names.

You won't be able to buy the cryptocurrency until you complete the verification process. 

The site might ask for your driver's license, state-issued ID, or passport. They may even ask you to upload a recent picture of yourself to make sure that it matches your ID. You'll need to make sure the site is official and secure first.

Keep in mind that you won't be able to skip out on this step, as it is essential to meet regulations set in place by the government, and it keeps you safe in the world of Bitcoin.

Because of this crucial step, you’ll need to also remember that the sites you do business with must be very secure and not cloned copies of cryptocurrency sites. The reason for this is that you might unknowingly give your private information to scammers who want to steal your identity.

3. Make a Deposit

When you have your account set up, you can make your first deposit. You'll need to have funds available in your account before you can buy Bitcoin. 

There are several different ways that you might do this, depending on your broker or exchange site:

  • Wire transfers
  • Debit and credit cards
  • Linking your bank account

Always make sure that your bank allows for the purchase of Bitcoin because some don't and will stop a transaction. 

Additionally, credit card companies charge a lot of fees when you buy cryptocurrency. The company likely views them as a "cash advance," which gives the purchase a higher interest rate.

No matter what method you decide to use, it's going to take a few days for the funds to appear in your account. You'll need to wait for the money to show up before you can start buying Bitcoin online. As soon as it does, you can make a purchase.

If you're nervous about buying Bitcoin, it will help if you did more research into it first. 

I recommend that you read The Only Bitcoin Investing Book You'll Ever Need from Amazon.com. The book comes from Freeman Publications and covers everything you'll want to know, including how to buy Bitcoin in less than five minutes, how to automate purchases, and much more.

4. Place Your Bitcoin Order

Once the money appears in your account, it's finally time to place your first Bitcoin order. 

Bitcoin has a ticker symbol of BTC, which is how the currency appears online. You'll need to decide what fraction of the cryptocurrency you'll want to buy, as many beginners don't purchase a whole coin.

Depending on the platform you go with, you can set recurring purchases. Your broker or exchange site should have many different options for you to browse through.

You'll also have the choice to purchase the Bitcoin through a cryptocurrency ATM or a peer-to-peer system. With the first option, you buy and sell through an ATM-like system. However, you’ll want to be more careful with peer-to-peer, as you interact with other, real people online.

5. Store the Bitcoin

Finally, you need to know how to store your Bitcoin purchase. 

You can do this with a hot or cold wallet. Hot wallets have fast transactions, but cold wallets offer more security for your assets at the cost of taking more time.

Overall, you'll need to choose between the two before you make your purchase. Keep in mind that you likely won't have an option with a broker, as they choose where to store the funds for you.

If you need more help understanding what a crypto wallet is, make sure to watch this brief YouTube video. It also explains the differences in hot and cold wallets for you:

Click to play

Let’s now discuss a quick breakdown of all the storage options you have for Bitcoin.

Hot Wallets

A hot wallet stores Bitcoin in the cloud, so you can access it from any device you already have at home. Most platforms will offer hot wallets for free, especially since your purchase is going there automatically. 

You'll need to set up another wallet if you don't want to use the free one given to you.

Many Bitcoin users prefer to transfer out of their hot wallet to another wallet. Hackers tend to target hot wallets since they know they don't have as much protection and offer a higher "reward." 

Remember, you're not storing your money in a bank, so you'll want to keep this in mind as you choose a wallet.

Cold Wallets

Cold wallets are encrypted and usually have a fee associated with them. However, they're much more secure than hot wallets and still allow you to access your Bitcoin from anywhere.

Although it isn't free, this option is still very convenient and takes longer to process your purchases.  If you're willing to be patient, then this is the better option of the two wallets. 

It's safer, especially if you take precautions and use two-factor authentication. To avoid issues, it's also essential to update your password to a new, complex one each month.

Paper & Hardware Wallets

There is a third option for you to consider, which is a physical wallet. This method is highly secure, although many people find it inconvenient. Your platform generates keys for you to use, which you then print, write down, or save to a hard drive, so you won't want to lose these keys.

The best option with a physical wallet key is to laminate it and store it in a safe location at home. 

You'd probably only want a paper wallet for long-term investment plans since you can't quickly sell Bitcoin stored in this manner.

A hardware wallet stores your keys in a USB drive. This option is exceptionally secure, as hackers and viruses can't reach it unless you leave it plugged into your computer. You'll want to remove the drive once the key is on it and store it in a safe. 

Overall, hard drive wallets are another long-term, secure option for Bitcoin investors.

Are There Other Ways to Buy Bitcoin?

There are other ways that you can purchase Bitcoin. If you're nervous about investing due to the volatile nature of cryptocurrency, you do have a few additional options. These methods are indirect but can still help you make a profit.

The other ways you can buy bitcoin is through ETFs or by investing in companies that have connections with Bitcoin. ETFs (exchange-traded funds) allow you to buy different currencies in one purchase. If you choose to invest in companies, you benefit from owning stocks. 

When Bitcoin does good, so do the businesses linked with them.

Overall, you'll want to consider how comfortable you are with buying Bitcoin. The market surrounding the currency is very dramatic and can change at any moment. 

For example, posts on the internet can drastically change the value of a Bitcoin, for better or worse.

Buying Through PayPal

PayPal is an extremely popular platform, which now allows people to access Bitcoin. 

It's not as convenient as using a broker or exchange site, but it still works. Plus, many people interested in investing and finances already own a Paypal account.

There are two main methods to using Paypal to buy Bitcoin:

  • Buying Bitcoin directly through Paypal.
  • Using Paypal to buy Bitcoin from another platform.

I recommend that you use the first option because it's more convenient. Not every platform you find online is going to allow you to purchase Bitcoin through a Paypal account

However, Paypal does have services in place for you to buy the currency directly through their website.

How to Sell Bitcoin

Now that you have Bitcoin, you'll likely want to sell it at some point to make a profit. 

You can always sell the cryptocurrency on the platform where you bought it. However, you can also make use of peer-to-peer sites and exchange platforms.

Selling Bitcoin isn't difficult and is a lot like the process you went through to purchase it. 

Keep in mind that the changes are safer but will likely charge you a fee. Additionally, you might not get the profit right away, as there are probably withdrawal limits in place. You'll want to check the rules of the platform you use.

Even if withdrawal limits are in place, you'll still receive the money from the sale. You'll need to be patient until the funds are available to you.

What is Bitcoin?

Bitcoin is the apex decentralized digital currency known for its cheap transactions and transparency of payments. All transactions are on a public ledger and anyone can access that public ledger, or a blockchain, which keeps the transactions transparent.

Bitcoin is also the first virtual currency and has met wide acceptance since its release. You can use cryptocurrency to buy a variety of goods or services, without the involvement of a bank.

Why Bitcoin Exists

Bitcoin was created by an unknown programmer using the name Satoshi Nakamoto. The coin exists to provide users with another payment system they can use online, and the biggest draw at the time of its release was that there were no banks involved. 

However, the cryptocurrency still worked just like any other form of payment.

That was in January of 2009. Today, you can still use Bitcoin to shop online, although not everywhere accepts it. The price of a single Bitcoin is also very high, so many people own smaller portions of the currency. 

For instance, you could own 0.1 Bitcoin, which might be about $1,000.

Final Thoughts

Those are all the steps to buying Bitcoin. 

The process is easy, although it can feel overwhelming the first time you attempt to do it. If you keep this guide handy, you're sure to have a much easier time purchasing your first round of Bitcoin.

Overall, you'll want to learn as much about cryptocurrency as you can. With advances in technology, many people expect Bitcoin to grow even more popular. Plus, the value of the cryptocurrency is likely to go up.

Want to invest in Bitcoin in your IRA account?

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A secure platform that makes it easy to buy, sell, and store cryptocurrency like Bitcoin, Ethereum, and more.

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