how do beginners buy bitcoins?
How to buy Bitcoin online, Bitcoin (BTC) has seen meteoric growth in recent years. In May 2016, you could buy 1 BTC for about $500. As of August 2022, even with all the price drops, a single Bitcoin was still worth around $23,000. That’s growth of approximately 4,500%.
Some analysts believe the price of Bitcoin could rise even further as cryptocurrency and blockchain technology become a bigger part of people’s daily lives. But buying Bitcoin comes with big risks. Along with impressive gains, BTC has also experienced devastating declines.
After almost reaching $69,000 in November 2021, for example, the value of Bitcoin plummeted to around $17,708 in mid-June.
Today, BTC remains a highly volatile asset. According to Kraken Intelligence’s latest Monthly Market Recap and Outlook report, Bitcoin’s annualized volatility last month was slightly higher than its historical average at 61%. But it’s an improvement from June, which saw 91% volatility for BTC.
Any investors who purchased Bitcoin in the past year will have experienced a loss, as the original crypto has slid downward. Those who bought Bitcoin three years ago are looking at more than a 100% return.
How to buy Bitcoin online? If you want to buy Bitcoin, experts recommend that you invest only a small percentage of your net worth.
What Is Bitcoin?
Bitcoin is a decentralized digital currency, which operates without the oversight of banks and governments. It holds the distinction of being the first-ever cryptocurrency, launched in 2009.
In the words of its creator, Satoshi Nakamoto, Bitcoin was created to allow “online payments to be sent directly from one party to another without going through a financial institution.”
Today the entire cryptocurrency market is roughly worth $1.1 trillion, with Bitcoin representing 41% of the market.
While it began life as a payments network, Bitcoin has evolved into an investment asset. Most holders consider BTC a store of value, and it’s often referred to as “digital gold.”
How Does Bitcoin Work?
How to buy Bitcoin online, Bitcoin transactions are verified by crypto miners via a proof-of-work consensus mechanism. Proof of work is a validation process that uses a group of miners to validate each block in the blockchain.
For Bitcoin, this process usually takes up to 10 minutes. That’s much slower than many competing cryptocurrencies, to say nothing of conventional payments networks.
Still, Bitcoin is accepted as a form of payment by some retailers and merchants, such as Microsoft, Overstock and Whole Foods, to name a few.
Where To Buy Bitcoin
How to buy Bitcoin online? To buy Bitcoin or any cryptocurrency, you’ll need a crypto exchange where buyers and sellers meet to exchange dollars for coins.
There are scores of exchanges out there, but as a beginner, you’ll want to opt for one that balances ease of use with low fees and high security. If you don’t already have an exchange in mind, check out our top picks for the best crypto exchanges.
How to Buy Bitcoin
How to buy Bitcoin online? After choosing an exchange, you have to fund your account before beginning to invest in Bitcoin. Check if your exchange has a Bitcoin wallet built into its platform. If not, you’ll need to find one of your own. Once your account is funded, you can place your first order to buy Bitcoin.
Depending on the platform you’re using, you may be able to purchase it by tapping a button, or you may have to enter Bitcoin’s ticker symbol (BTC). You’ll then have to input the amount you want to invest.
If Bitcoin’s current price was around $23,000, you’d need to invest that much to buy 1 BTC. If you invested less, say $1,000, you’d get a percentage of a Bitcoin equal to about 0.043 BTC.
How To Buy Bitcoin On A Crypto Exchange
You can buy BTC on several different crypto exchanges. Here are a few exchanges where you can exchange U.S. dollars for BTC:
Note the terminology of “trading pairs,” such as BTC to Tether (USDT) or USD Coin. In the case of BTC/USDC, bitcoins can be converted into Tether, a stablecoin whose value is pegged to the U.S. dollar. Here are a couple of exchanges that pair BTC to USDC:
How to Buy BTC With PayPal
You might be tempted to buy your Bitcoin on PayPal, but purchasing crypto this way means you cannot move your Bitcoin around easily. According to PayPal’s website: “You can only hold the cryptocurrency that you buy on PayPal in your U.S. personal account. Additionally, the cryptocurrency in your account cannot be transferred to other accounts on or off PayPal. You will not be able to transfer crypto assets from your cryptocurrencies hub to another cryptocurrency wallet.”
For that reason, you might consider another way to buy and store your Bitcoin.
There’s also another way to use PayPal to buy Bitcoin. For example, crypto exchanges like Coinbase and eToro will allow you to link to your PayPal account (as a payment processor) to purchase crypto. In this instance, PayPal is being used as a deposit method to fund your account.
How to Buy Bitcoin With a Credit Card
Investors should consider that platforms may charge higher transaction fees for certain funding options. While you may purchase BTC with a credit card, we strenuously advise against it. That’s because credit card transaction fees on crypto exchanges often run high.
In addition, if you use a credit card to buy cryptocurrency, it generally will count as a cash advance and be subject to a higher interest rate than you pay on regular charges. Moreover, taking on debt to buy volatile investments is extremely risky.
It’s generally advisable to pay for cryptocurrency purchases with cash, or with another crypto you own.
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How Much Bitcoin Should I Buy?
Experts generally agree that cryptocurrencies shouldn’t make up more than 5% of your portfolio. Given its position as the first and largest cryptocurrency, Bitcoin could easily be a sizable portion of those holdings.
There are many reasons why experts believe Bitcoin and other cryptos should only be a small percentage of any investor’s portfolio. One reason is that although cryptocurrencies have been lucrative for some long-term investors and still suffer from extreme volatility.
Store Your BTC
The crypto exchange you use probably has an integrated Bitcoin wallet or at least a preferred partner where you can safely hold your BTC. Some people, however, do not feel comfortable leaving their crypto connected to the internet—a “hot wallet”—where hackers may more easily steal it.
However, many major exchanges have private insurance to reimburse clients if this happens. BTC can be stored in several ways, whether with online or offline storage:
- Hardware Wallets. A hardware device stores the private keys to your assets and allows you to interact with the wallet without exposing your data. Trezor and Ledger are examples of hardware wallets that support BTC.
- Offline storage. Sometimes referred to as “cold storage” or a “cold wallet,” it is considered a safe way to store BTC because this type of storage isn’t accessible via an internet connection. You can keep your crypto on paper using a paper wallet—this will generate a public key and private key for your crypto.
- Software Wallets. Desktop wallets, considered “hot” wallets, are programs downloaded to store your crypto asset. There are also mobile wallets that interface with managing crypto assets. Trust Wallet is an example of a mobile wallet where you can store BTC.
- Crypto Exchanges. Many exchanges that trade BTC will let you store your crypto with their wallets. These crypto exchanges include Coinbase or eToro, to name a couple.
What Can You Buy With Bitcoin?
Once converted from Bitcoin to a fiat currency, Bitcoin users can use their cash to purchase anything they want.
As far as using BTC directly for payments, those options are much more limited. However, here’s a list of a few of the major retailers who do accept Bitcoin as a form of payment:
- Microsoft: This Big Tech company accepts Bitcoin payments at their Xbox store.
- Overstock: The American retailer has a cryptocurrency payment button, which includes Bitcoin, on the company’s checkout page.
- Starbucks: The national coffeehouse doesn’t accept Bitcoin directly in stores but will accept Bitcoin payments through a partnership with the Bakkt app.
- Whole Foods: The supermarket company accepts Bitcoin payments via the Spedn app.
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