How To Buy Bitcoin
How to buy Bitcoin - a complete guide
Learn how to buy Bitcoin (BTC) with a Debit / Credit Card. Quick and easy. Lowest fees. Follow our step-by-step instructions and get started in 5 minutes.
Bitcoin has seen a meteoric rise in popularity among both individuals and some of the worlds top investors. This increase in demand has continued to push the price of Bitcoin higher, increased volatility while also causing some unexpected delays in the Bitcoin network. And while many are buying Bitcoin for pure speculation, the general idea is that many are investing in Bitcoin for its unique benefits over traditional fiat currencies.
Buying bitcoin can be a great way to diversify your investment and get your toes wet in the cryptocurrency space. But it is also important to remember that all investments in cryptocurrencies such as Bitcoin come with their unique risks and challenges. Like all cryptocurrencies, Bitcoin in its nature is experimental and subject to a lot more volatility than many traditional investments, such as stocks.
There is a limited quantity of Bitcoins, and there is currently no sign that demand will decrease, but rather the opposite. Have you been thinking of buying Bitcoin but put it off because you thought the price was too high? Then you are not alone. Just keep in mind that someone else probably also thought the price was too high at $1, $10 and even 100 dollars.
We believe that Bitcoin is here to stay, just like many others all around the world. But remember, always learn and understand Bitcoin before you decide to invest. We have many free beginner-friendly guides here on KrispCrypto to help you learn more about Bitcoin and help you get started.
Buy Bitcoin in 4 steps
1. Decide where to buy bitcoin
The first step is to decide where to buy your Bitcoin. We recommend that you open an account on Binance. Follow this link, enter your information, and click on “Start Trading“! →
There are also several other cryptocurrency exchanges to choose from. Many will charge a percentage of the purchase price, often referred to as a fee. We suggest that you do your due diligence to find the right one for you. Some of the best Bitcoin exchanges include:
- Etoro: The best crypto exchange on the market. Etoro offers both a secure, easy to use interface, 24/7 trading and some of the lowest fees on the market. It also only takes 3 minutes to get started! (Read our full Etoro review.)
- Coinbase: This is a popular choice for bitcoin, in part because you can quickly link your bank account. Coinbase also offers access to other cryptos such as Ethereum, Litecoin and Bitcoin Cash. On each transaction, Coinbase charges a spread of about 0.5%, plus a fee. The fee is the higher of a variable percentage based on region and payment type. (Want to know more? Read our Coinbase review.)
- Binance: One of the world’s biggest crypto exchanges by volume for all cryptocurrencies, Binance charges a 0.1% fee for all crypto trades, plus a fee on withdrawals. (Read our Binance review.)
2. Where to store your bitcoin
Generally, you can store Bitcoins in two types of digital wallets, a hot wallet or a cold wallet. Hot wallets usually offer faster transactions, while cold wallets often include extra security measures to help you keep your Bitcoin wallet safe with the downside of longer transaction times.
Cold wallet
A cold wallet is a small, encrypted device that allows you to store and carry your bitcoin, similar to a USB stick. Cold wallets can cost as much as $100 and are viewed as way more secure than your ordinary hot wallet.
Cold wallet providers include:
- Trezor: Offers small, key-size cold wallets ranging from around $80 to $170.
- Ledger Nano: Designed like a thumb drive, Ledger Nano has cold wallets ranging from about $60 to $120.
When creating accounts for your digital wallets and cryptocurrency exchange, use a strong password and always activate two-factor authentication.
Hot wallet
With hot wallets, your bitcoins are stored at a cryptocurrency exchange or a hot wallet provider. You can then easily access your bitcoins through an app or computer on the internet. Most crypto exchanges offer a free bitcoin hot wallet where your bitcoin purchases are automatically stored. Many prefer to hold their bitcoin using a third-party hot wallet provider, also typically free to use.
Why would you decide to pick a wallet from a provider other than a crypto exchange? Although many consider blockchain technology behind bitcoin more secure than traditional electronic money transfers, bitcoin hot wallets are an attractive target for hackers. It is not unusual for even big crypto exchanges to suffer from security breaches, and the recent $600 million stolen from the Poly Network proves that point.
Here are a few hot wallet providers that we recommend:
- Coinbase: One of the most popular bitcoin exchanges offers a free online hot wallet and guarantees losses due to security breaches or hacks, employee theft, or fraudulent transfers.
- Electrum: Software that supports your bitcoin to be stored on either a laptop or desktop.
- Blockchain: Blockchain is an online hot wallet, but unlike Coinbase, Blockchain is not a bitcoin exchange and is a less attractive target for hackers.
3. Make your first bitcoin purchase
After connecting your new bitcoin wallet to the bitcoin exchange you have decided to use, the last step is the easiest, determining how much bitcoin you want to buy. While bitcoin made headlines in January and July by soaring past $40,000, you can buy and sell bitcoin for partial shares, with each share of bitcoin known as Satoshis. To put it another way, 100 million Satoshis make up one Bitcoin. This means that your initial investment could be as low as, say, $10.
4. Manage your new bitcoin investment
If you like the thought of day trading, one alternative is to buy bitcoin and then sell it if and when its value increases. Keep in mind that day trading requires a lot of experience, capital and does come with the added risk of losing your investment. If you see a future for bitcoin as a digital currency, perhaps your investment plan is to buy and hold for the long haul.
What Is Bitcoin?
Bitcoin was built in 2009 following the economic recession of 2008. Bitcoin was designed to be an electronic peer-to-peer cash system and has over time attracted crypto-curious investors as a form of store-of-value currency, similar to gold.
Fiat money (like the U.S. dollar) is backed and monitored by the government that issues it. On the flip side, Bitcoin is self-regulated through its peer-to-peer technology, which uses encrypted information that is transferred directly over the network and verified between the sender and receiver. This system creates a currency backed by code rather than items with physical value, such as gold or silver, or by trust in central authorities like the U.S. dollar or the British pound.
The history of Bitcoin
Since Bitcoins launch in 2009, it holds the title of the first cryptocurrency. The concept of blockchain technology had been around for decades and even discussed in academic papers, but a whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” helped turn cryptocurrency into reality.
Since its launch, Bitcoin has swiftly increased in value over time along with the ever-growing interest in the technology. In 2011, the price of one Bitcoin reached $1. By 2021, it passed a new record high of $62,000 and has seen a short drop since then.
How does Bitcoin work?
Each bitcoin is a unique file stored in a digital wallet on a smartphone or computer. To understand how cryptocurrency works, it often helps to understand these three terms:
- Blockchain: Bitcoin is powered by an open-source code referred to as the blockchain. The blockchain creates a shared public ledger where all transactions are “blocks” and are connected to the code, which creates a permanent record of all transactions on the blockchain. Blockchain technology is nowadays the core of more than 10,000 cryptocurrencies that have developed in Bitcoin’s track.
- Private and public keys: All bitcoin wallets contains a public key and a private key, which work together to enable the owner to initiate and digitally sign transactions, giving proof of authorization.
- Bitcoin miners: Independent miners help run the blockchain network to confirm the transaction using high-speed computers, typically within 10 to 20 minutes. For their efforts, miners receive bitcoin as a thank you for the work that they contribute.
Advantages of Bitcoin
Bitcoin has some advantages as a currency and became mainstream for many different reasons, varying from visionary to capitalistic. Let’s take a look at some of the most well-known benefits of Bitcoin.
1. Decentralized currency management
In its decentralized network and the limited number of coins available, Bitcoin often is seen as a utopian version of our current fiat currency. Many suggest that by getting rid of central banks and governments, bitcoin can maintain its value better over time. By removing these entities, some mean that Bitcoin can return power to the people.
2. Anonymous or semi-anonymous transactions
The near anonymity of Bitcoin is also a big focus for many bitcoin advocates. Some bitcoin supporters like that the government or other authorities cannot easily trace who uses the currency and what they spend it on. However, this anonymity also means that bitcoin can be used for criminal activities and makes it near impossible to recover stolen funds.
3. Hard or impossible to counterfeit
Bitcoin’s popularity is also due to a uniquely practical matter. It’s hard to counterfeit bitcoin because the blockchain ledger system is self-controlled with the help of millions of miners that verify each transaction over and over.
4. Surging popularity
Let’s not forget that Bitcoin has become increasingly popular because of the hype surrounding the cryptocurrency. Since the value of bitcoin fluctuates so much, investors can hop in and make (or lose) money. This hype and the limited supply of coins has driven the price of bitcoins much higher over the last decade, and it continues to fluctuate significantly. This year alone, bitcoin quickly rose to its all-time high of $65,000 and just as quickly plummeted to $29,000.
Disadvantages of Bitcoin
Bitcoin suffers from some notable disadvantages that are crucial to its design, notably, the limited number of coins in circulation and its overall market volatility. Let’s take a closer look at bitcoins disadvantages.
1. Bitcoin devours energy
Hundreds of thousands of computers are required to verify all the transactions on the blockchain, and all of these computers need a lot of energy to work. Producing all this electricity is often expensive and simultaneously pollutes the environment, for what some critics say is a currency with little usefulness.
A study in the technology journal Joule from July 2019 noted that cryptocurrency mining produced around the same carbon emissions as the levels of the country of Jordan or Sri Lanka. Moreover, a recent article from May 2021 in Harvard Business Review says that Bitcoin’s electricity consumption is about 0.55% of the total global production, in line with a small nation such as Malaysia or Sweden.
2. The limited supply of coins
By bitcoins very nature, the quantity of coins is limited, and that poses a serious problem on adopting Bitcoin as a currency. In effect, the limited supply means that there is no way to ever increase the supply of money, opening an economy to negative deflationary spirals, which were more common when economies ran purely on the gold standard. This concern is a key cause why the gold standard was abolished.
This would become a major concern when and if consumers and others hoard the currency during tough economic times. When money doesn’t move hands, it slows the economy and without a central authority, the economy could run into a deflationary spiral. This means that consumers don’t spend money because the same item could be cheaper tomorrow, creating a devastating economic spiral.
3. Paying taxes on Bitcoin
The current laws on cryptocurrency are often hard to follow in many countries around the world which makes it hard to use. Most countries require you to self-declare any transactions in a cryptocurrency such as bitcoin on your annual tax return. This can be difficult, especially if you make hundreds of transactions a year. You must keep track of all your records when buying and selling bitcoin as well as the price to avoid any unwarranted tax liabilities.
4. A volatile currency is worthless
Imagine going to a grocery store where the prices shifted up or down every day, sometimes by 10% or more. This flaw with bitcoin is one of the reasons why it would be essentially useless as a day to day currency. While volatility makes Bitcoin interesting for investors and traders, it renders it all but useless as a currency. Consumers need to know what a currency can buy them when making purchases. If they believe that the price of bitcoin will increase, there’s little reason for them to use it as currency.
What is Bitcoin mining?
Bitcoin miners can be private individuals or fullscale operations running high-speed computers which independently verify each transaction on the blockchain. Once a chunk of transactions are confirmed, they are added in “blocks” of transactions to the ever-growing “chain,” which has a comprehensive, public and permanent record of every bitcoin transaction made since its creation.
Miners receive payment in bitcoin as a reward for their efforts to help run the network of transactions. The bitcoin payment serves as an incentive to ensure miners continue to contribute and independently verify each transaction without a centralised entity.
The independent network of miners also reduces the risk for fraud or other false information to be recorded on the blockchain as miners need to verify the authenticity of each block of data before it’s added to the blockchain, in a process known as “proof of work.”
What to consider before investing in Bitcoin
Like any investment, bitcoin comes with risks and potential rewards. Compared to traditional types of investments such as stocks, bitcoin is especially risky.
Here are some things to think about before you invest:
- We never suggest investing all your life savings in Bitcoin. Generally, you do not want to invest more than 10% of your portfolio in risky assets such as Bitcoin.
- It’s best to view Bitcoin investments a bit like gambling, so only invest a small amount of your disposable income.
- Never invest more than you can afford to lose. All investments have risk, and if you are not ready to possibly lose your entire investment, reconsider your investment.
- If you don’t have a lot of money left at the end of each month, it is best to avoid crypto and focus on saving your money until you are ready.
About the author
Gustav Eriksson
Gustav Eriksson is a cryptocurrency investor and founder of KrispCrypto. He has been a cryptocurrency investor for over ten years and loves personal finance.
