How To Buy Bitcoin | Ultimate Guide To Buy BTC
Bitcoin was the first cryptocurrency ever created and is still the most valuable in today’s market. As the pioneering digital asset has matured over the years, it has somewhat stabilised in terms of volatility, yet due to the deflationary and secure nature of its design, still holds a great attraction to both short and long-term traders alike.
In this guide, we will strive to allay any concerns or uncertainty you may have, so that you may enter the world of cryptocurrency armed with knowledge, understanding and confidence. We will provide all the latest information, tips and steps to buy Bitcoin.
5 Steps to Buy Bitcoin with eToro Now
Buying any cryptocurrency with eToro is easy, simply follow the steps below:
Sign up for free with eToro, entering your details in the required fields.
Fill out the questionnaire, this is both educational for you and eToro.
Click 'Deposit', you'll then be asked how you want to fund your account.
Choose your required payment method, follow the simple steps to link your payment.
Enter the amount you want to deposit and you're good to go!
Our Recommended Platform to Buy Bitcoin
If you are reading this guide to learn about the entire process involved with buying Bitcoin, continuing to the end of the page will provide you with all the information you could possibly need. However, you may already be aware of most of these processes and simply require a helping hand to point you in the direction of where to buy Bitcoin.
To save you some time, we have selected one of the top platforms to buy Bitcoin at the moment so you can skip ahead and dive straight in.
Where to Buy Bitcoin in 2021
There are more ways to profit from cryptocurrency investment than actually having to purchase Bitcoin and store it in a wallet. Trading on the price movement of Bitcoin through a CFD (Contract for Difference) is a very lucrative approach for many experienced traders. Futures trading also allows you to stipulate a price to be realised at a particular future date and earn a profit based on the accuracy of your prediction.
For this reason, it is important to have a strategy in mind before you buy your cryptocurrency. Setting particular goals for the short or long-term will help you decide which kind of platform you should approach to acquire Bitcoin.
For those of you who believe that Bitcoin will appreciate in the future and have no plans to sell the investment in the short or even mid-term, then an exchange platform would be better suited to serve your needs. A cryptocurrency exchange will provide you with a means to buy and even store your Bitcoin over a long period of time.
Exchanges will always provide you with a wallet on the platform. Storing cryptocurrency here won’t incur any costs whatsoever and offers a high degree of convenience. However, these built-in wallets are non-custodial and are therefore vulnerable if the platform were to suffer an attack or go into insolvency. Therefore, it is crucial that you select a reputable and regulated exchange that offers greater security.
If you want to purchase Bitcoin and hold on to it for a year or more, it is advisable to withdraw the funds from the exchange into your private wallet. Details on how to download a software wallet along with instructions on how to transfer your BTC will be given later in the guide.
For those of you who want to see quicker returns, you would be far better suited to a reputable online broker where you can enter into a CFD or futures contract. Here, you will be able to invest in the price movement of Bitcoin without having to buy and store the underlying asset (some selected brokers have taken a step ahead and offer the possibility to buy and store real Bitcoins).
Any retail trader who is wishing to take this approach should make sure that they understand the mechanisms involved and properly set their risk management limits.
How to Buy Bitcoin With a Broker
Selecting the right broker is critical to the success of your Bitcoin investment. There are many online brokerage platforms to choose from, but not all are regulated. Like any online platform, the reputation of a particular broker will be well publicised, with the history of the company made available to you. User testimonials can also offer you an insight that will help you select a broker you can feel confident with.
When choosing a platform, factors such as a simple, effective user-interface, security, and any other unique selling point should be considered.
1. Register With the Broker
Registering an account is a very quick and easy process. On eToro for example, you merely need to decide on a username, provide your email address and select a strong password. Your password protects your account and should contain 6-20 characters with at least one capital letter, number, or symbol. Some brokers also offer the option to sign up using an existing Facebook or Google account to simplify the process even further.
2. Verify Your Identity (KYC Process)
The required documents to verify your identity depend on the selected broker. Brokers can take up to 24 hours on average to check them, but the process is usually automated and much faster.
Whichever broker you choose—if they are reputable and regulated—you will be required to go through a standard KYC (Know Your Customer) process. This will involve providing an official ID, such as a passport or driving license, proof of residence, and maybe even proof of income. This practice may feel a little tedious but ultimately provides greater protection both for you and the broker.
AML and KYC regulations are essential for the mass adoption of crypto, and the more companies are encouraged to have these in place, the more positive the impact will be on not just Bitcoin, but the entire cryptocurrency industry. This also helps to secure your funds even further, because withdrawals are allowed only for payment methods owned by the user.
3. Deposit Funds With Your Preferred Payment Method
Once you have selected the broker that is right for you and verified your account, you are free to choose from a range of payment methods to fund your account. The main points of consideration for payment methods are:
For example, many people prefer to use PayPal for its convenience and low-cost, but this option is not always available. Others prefer to make a credit card payment to buy Bitcoin, willing to pay a little extra for a quicker transaction time. You should carefully think about the factors listed above to ensure that you choose a payment method that suits you the most.
4. Open a Position to Long/Short Bitcoin
Example of a trading position to buy Bitcoin on eToro.
Before you open a long or short position on Bitcoin, it is important that you understand the difference between the two. Investors who focus their efforts towards one specific position type are often described as bulls or bears.
Those who believe that the price of Bitcoin will continue to climb and plan to earn from this value appreciation enter a long position, where they will sell their investment at a later date. Think of a bull using its horns to toss its target into the air.
Conversely, investors who open a short position are betting on Bitcoin’s market price going down. If you short Bitcoin and its price goes down, you'll get instant profits. Think of a bear wrestling it's target down to the ground.
Once you understand these principles, it is possible to utilize both long and short positions for trading Bitcoin.
While trading through an online broker such as eToro or Plus500, it is important to take a little time to set your risk management limits, such as stop-loss/take profit. Some brokers—like eToro—allow you to own your Bitcoins and store them in your personal wallet, so you'd be buying Bitcoin through a regulated investment platform with high-security standards.
5. Close Your Position
As briefly mentioned in the step above, proper risk management is very important. Taking care of settings such as the stop loss or take profit before you begin will allow your positions to be closed automatically, while still placing you in full control of your trades.
Having these limits in place does not mean that you are fully dependent on automation. Situations and scenarios can arise where you would wish to close your position early, irrelevant of your stop loss/take profit settings. You may feel satisfied with the earnings that you have accumulated for instance or feel that you can get ahead of the losses before you drop to a level where the position is closed automatically.
It is advisable to learn all you can about closing your position through the educational resources available on the platform or this website.
How to Buy Bitcoin With an Exchange
Buying Bitcoin directly from an exchange is often preferred by those who intend to hold on to their investment for a significant amount of time. These include investors who believe in the long-term price discovery of BTC, and those who wish to support the network and the community.
You will want to make sure that you select the right exchange that serves your needs and provides competitive rates for your purchase and withdrawal. While it is true that some exchanges have slightly higher fees in place than others, there are sometimes good reasons for this. For example, an exchange may charge a little more for added layers of security or faster transactions times.
Regulatory status is also a consideration when selecting your exchange. It is important to understand that not all cryptocurrency exchanges adhere to the best practices set by leading financial authorities, and therefore have no real oversight. By choosing to transact through an exchange that is regulatory compliant, your investments will be afforded a level of protection that would otherwise not be made available to you.
1. Set up a Bitcoin Wallet
Before you get started, you are going to want to set up a wallet to receive your purchased BTC. This may seem a complicated process for those who are new to the world of cryptocurrency, but it is actually quite straightforward and the whole process shouldn’t take you more than half an hour to complete.
Depending on your strategy and needs, you’ll run into three different paths:
Exchange/Online wallets: this is probably the riskiest approach to keep your funds; however, some exchanges have stepped up and now provide enhanced security measures to secure your funds. Users managing smaller amounts and trading actively might want to keep their Bitcoin available on their exchange wallet.
Desktop wallets: some users get the official Bitcoin wallet or any other desktop wallet that offer some benefits such as access to their private keys and good reputation.
Cold wallets: also known as hardware wallets, they’re perfect for the long-term players who want to save bigger funds for larger periods of time. These devices use top standard security features like protocols, hardware chips and certifications (e.g., the Ledger Nano features a CC EAL5+ certification level). They are essentially portable vaults where you can store your BTC securely; however, you need to make an additional investment to buy the physical device.
Users have their share of accountability when it comes to securing their Bitcoin funds, and they must follow best-practices such as 2FA or using different passwords for each of their accounts. Here you can learn more tips to protect your crypto wallets.
Bitcoin Core, Exodus, TREZOR One & Ledger Nano are some popular Bitcoin wallets choices.
2. Choose and Join an Exchange That Offers Bitcoin
As mentioned, there are many leading exchanges to choose from. Some popular exchanges to buy Bitcoin include Coinbase, Binance, Coinmama and CEX.io. Be sure to check their key features and information to select the best fit for your needs.
Please bear in mind that depending on the exchange regulation and requirements, the registration process might differ. Some of them follow KYC standards, while others just ask for basic information, such as your name and email address. We recommend regulated exchanges as a safer venue to buy Bitcoin.
3. Choose Your Payment Method for Buying Bitcoin
Now that you are confident with your selection of exchange, it is time to choose how you wish to pay for Bitcoin. The recommendations we have given above allow direct payments from a credit or debit card to buy BTC. You may receive a call from your bank the first time that you make the attempt to ensure that the purchase was intentional.
Another approach is to attach a bank account to your exchange account to add and withdraw funds seamlessly. This way, you can always ensure you have some fiat currency ready, should the opportune moment to buy Bitcoin arise.
Whichever payment method you choose, it is wise to go through an exchange that requires verification so that you can be sure you are obtaining your Bitcoin from a reliable source.
4. Place an Order to Buy BTC
Bitcoin is the leading cryptocurrency, so there is no need to buy any other altcoin in order to acquire it. You can buy Bitcoin directly through your chosen exchange. So long as you have properly set up your payment method, you merely need to place an order.
First, select your fiat currency before declaring how much you are willing to spend. An automated calculator will inform you exactly how much Bitcoin you will receive in accordance with current market prices. Now you simply submit the purchase request. If you have activated 2FA to your account, you may be asked for the authentication code before your request is granted. The funds should show in your account within minutes.
Here’s an example of how to place an order to Buy Bitcoin through an exchange (Binance). Some exchanges make the process smooth and you will only need to specify the amount that you want to invest. Before making the purchase, check the order preview for the Bitcoin price and fees to make sure you’re getting BTC at a competitive rate.
5. Safely Storing Your Bitcoin
Withdrawing your Bitcoin to store in your private wallet is also very straightforward. It is worth noting, however, that this step is not necessary and is mainly intended for those who have a long-term strategy in mind. If you intend to trade your Bitcoin on a short-term basis, you are better to leave your investment in the non-custodial wallet provided freely by the exchange, thereby avoiding any withdrawal fees.
If you do need to transfer the funds to your wallet, you will need to have your public key on hand. Simply input this address into the ‘recipient address’ field of the withdrawal request and select the amount of Bitcoin you would like to transfer.
If you have enabled 2FA (2 Factor Authentication), you will need to provide an additional code to initiate the request. It is also worth noting that many exchanges, such as Binance, will not allow a withdrawal request within a 24-hour period of the initial purchase.
Should You Buy or Trade Bitcoin?
Buying a coin and trading a coin is not the same thing, and trading a coin through an exchange is again, different from trading through a broker. You need to have a clear vision of your strategy to ensure that you select the right trading environment.
What’s the Difference Between a Bitcoin Exchange and a Broker?
An exchange facilitates the trade between different cryptocurrencies. In fact, an exchange wishes to encourage the trade between altcoins and the leading cryptocurrency Bitcoin. If your goal is to receive a good exchange rate while acquiring different assets and expanding your portfolio, then a recommended exchange is the arena for you.
Conversely, if you want to earn a passive income through the volatility that the cryptocurrency market experiences, then you would be better to go through an online crypto-broker. These companies, when properly regulated, offer a safe and secure means to earn money through CFDs and futures contracts. Many leading brokers also allow leverage to be applied to your trades. This amplifies your initial investment many times over, maximising potential returns.
Long Vs Short Term Investment
As mentioned, there is a fundamental difference between short and long-term investments. To surmise, a long-term investment would usually involve holding Bitcoin for a significant period of time, and so, buying and storing the coins through a reputable and recommended exchange is the way to go.
For those who are not interested in long-term price discovery or supporting the ethos that Bitcoin was founded upon, a short-term strategy may be a wiser course of action. This will involve registering to a reputable and recommended broker to bet on the price movements of Bitcoin. This approach is useful for those who do not want the added complications of setting up a wallet and keeping an eye out for distant developments in the crypto world.
What Are the Pros and Cons of Buying Bitcoin?
Transparency is always important when considering any form of investment and the same holds true in terms of those who are looking to buy Bitcoin. Like any form of investment, there are both benefits and possible drawbacks to examine;
- Relative stability: The overall global supply of Bitcoin is low when compared to other traditional forms of currency. This is important, as it signifies that its value will not be subject to sudden and unpredictable changes. Bitcoin is not directly tied to traditional financial markets, meaning other assets could fall because of external circumstances, whereas Bitcoin is less likely to.
- Decentralisation: Bitcoin is not governed by any type of central bank, so if a national institution (i.e. the Bank of England) decides to raise interest rates, there will be no direct impact on the value of Bitcoin. As noted in the previous point, values may rise and fall, but due to decentralisation, Bitcoin’s value fluctuations are at least one-step removed.
- Position: Bitcoin is considered to be the benchmark cryptocurrency, which is why other holdings often trade against it. You can think of this in the same way as to how the fiat world values other assets (such as gold and oil) based on the value of the USD.
- Anonymity: Much like other cryptocurrencies, Bitcoin’s stored within a secure cryptocurrency wallet. These wallets have no personal data attached and can’t be traced back to the individual that set them up. This was one of the original appealing aspects of Bitcoin, as well as cryptocurrencies as a whole.
- Ease of trade: If you need to buy Bitcoin as a means to offset losses within long-term sectors such as precious metals or blue-chip stocks, the ease of trade is vital. Happily, a growing number of online investment platforms recognise Bitcoin as a valid form of investment. Bitcoin can also be traded against fiat currency (BTC to USD, for example).
- Short term volatility: The volatility associated with the Bitcoin sector can be unpredictable on occasion. This may cause novice investors to incur substantial losses within a short period of time. This is also why only the most modern trading platforms should be employed in order to remain one step ahead of the curve.
- Lack of regulation: Bitcoin is not overseen by well-known governing bodies such as national trading commissions. This opens up the possibility that speculators or those investing on margin might drive the price up or down, causing deliberate volatility that other investors will not be able to predict or offset. In these circumstances, the value of Bitcoin could suddenly plummet.
- Relative youth: As it has only existed since 2009, Bitcoin is a relatively new form of investment. As the underlying mechanics are still being developed, it is always wise to perform a significant amount of research before making any move towards investment.
What Are the Fees and Commissions Involved When Buying Bitcoin?
Much like any other form of the underlying asset and trading vehicle, those who wish to purchase Bitcoin will need to take into account the associated transaction fees. These can generally be broken down into a handful of primary categories:
Transaction fees can be common on some exchanges when you buy bitcoins. Market makers (those who create a new Bitcoin order that cannot be immediately matched by another seller or buyer) will normally incur lower fees than a “taker” (those who place instant orders that can be immediately fulfilled). Transaction fees can likewise be offered at a flat rate per execution or they might lower as the amount of the trade increases.
These are another way for exchanges and trading platforms to earn a slight income off of account holders. The good news is that these will vary between different providers. It is worth mentioning that hubs which do not charge any type of deposit fee could very well hike up their withdrawal charges or the fees associated with each transaction.
Many traders are likely to encounter some type of withdrawal fee if they wish to sell a Bitcoin holding. For example, some providers will charge a variable rate (normally between 2% and 4%). Others might have fees which are capped at a specific amount regardless of the size of the trade. A handful of cryptocurrency exchanges are not associated with any type of withdrawal fee. Still, keep in mind that third-party charges such as those implemented by e-wallets such as PayPal may still apply.
Commissions and Spreads
There may be times when spreads or commissions are attached to a transaction anytime you buy BTC. Spreads are often encountered by those who are enacting CFD (contract for difference) trades in order to speculate on a rising or falling market. The spreads themselves can vary depending upon the provider. Average spreads of 80 pips are generally considered amenable for most transactions. Those who are involved with leveraged positions should keep a close eye on the spread, as small movements can often have a considerable impact on profit and loss margins. Commissions might also be charged on a per-trade basis although a growing number of providers are offering commission-free positions in order to keep abreast of the growing competition.
3 Tips to Buy Bitcoin
So, now that you’ve learned so much about the process of buying and trading Bitcoin, let’s provide you with a quick list of tips that people often fail to consider.
Choose the Right Time and Do Your Own Research
Do not take any single source as the absolute truth on how Bitcoin is going to perform and what developments will come to pass. Try to take the opinions of multiple experts and news sites to form your own ideas and inform your decisions. This will help you to identify moments of great opportunity. Professional investors also like to have a look at the technical outlook for trends and key levels to buy and sell, so a technical analysis always increases your chances to make a profitable purchase.
Comparing Costs to Buy Bitcoin
The simple act of comparing costs between exchanges and brokers before committing to any transaction has the potential to save you a lot of money but is something that many people forget to do.
It is important to understand whether these costs are applied to your fiat currency or a portion of your Bitcoin. If you are expected to pay a percentage of BTC, then the current market price should also be considered, as this determines the real-world value of the fee.
Safety and Security
Surprisingly, safety and security are also, too often overlooked. For that reason, we have mentioned the importance of this point several times throughout the guide. Security protocols, regulation and overall safety not only protect your investment but potentially your private personal data as well. Make sure that these things are in place before you commit any money to the platform you intend to use.
What Is the Best Payment Method to Buy Bitcoin?
Buy Bitcoin with Cash: For obvious reasons, this is probably the riskiest way to purchase Bitcoin and for good reason – You need to withdraw your hard-earned money in cash, find a seller of Bitcoin, meet them and pass over your cash. Obviously, this is heavily reliant on trust but there are websites out there such as LocalBitcoins that aim to facilitate and regulate this process.
Buy Bitcoin with Credit Card: Many exchanges and brokerages support credit and debit cards, but not all of them do. This is mainly down to the difficulty of directly purchasing cryptocurrency with fiat currency, as there aren’t any real systems that enable a smooth transfer from one to the other. Larger exchanges and brokerages offer a way to purchase via Credit/Debit card by holding your funds in escrow whilst it finds a seller.
Buy Bitcoin with Bank Transfer: Surprisingly, this is the most common form of payment method for cryptocurrency purchase. This is due to the strict KYC processes of most exchanges and brokerages, and also how easy it is to transfer funds from one bank account to another. This works in a similar way to other payment methods by holding your funds in escrow until you find a buyer unless you purchase with a brokerage.
Buy BTC with crypto: For those who want to acquire Bitcoin using altcoins such as Ethereum.
Buy Bitcoin with PayPal: Buying Bitcoin with PayPal is slightly complicated, but it is actually possible to purchase Bitcoin with PayPal. Some exchanges offer a way to purchase directly via PayPal, whereas others have a more convoluted system that has multiple steps to eventually finalise a purchase.
Other Ways to Buy Bitcoin
We have now provided you with the most common and practical ways to buy and trade your very own Bitcoin, and hopefully, you feel much more prepared than you did before.
We will conclude with options that are a little less known, but equally viable methods of acquiring Bitcoin.
P2P (Peer to Peer) exchanges allow for the transfer of Bitcoin between wallet addresses, and the fees are often the lowest available, although this does depend on network congestion at the time that the transaction is initiated.
Another option is mining. This is where ASIC (Application Specific Integrated Circuits) are used to secure new blocks to the Bitcoin chain by solving complex mathematical problems. When this is achieved, a miner is rewarded with an allotted amount of Bitcoin. ASICs are very powerful computers dedicated to a single purpose. The process is not cheap, and the industry is competitive.
Bitcoin ATMs allow you to change your cash for Bitcoin directly. The number of these machines has been steadily increasing, and their use affords a high degree of anonymity.
So, there you have it. You are ready to begin your Bitcoin journey. Just remember that we have already taken the time to select a shortlist of Bitcoin exchanges and Bitcoin brokers so that you don’t have to. These are the companies that, in our professional opinion, are the most reputable and reliable around.
Frequently asked questions
Yes you can. Purchasing Bitcoin through one of our recommended exchanges does not incur fees.
There are now many vendors and merchants that accept Bitcoin as a form of payment, and even charge less if you are using BTC to complete your transaction. You can also trade Bitcoin through CFDs or simply hold on to them and wait for the value to appreciate.
Only you can decide this. Our advice is to fully digest the information given in this guide and learn all you can to better inform your trade decisions.
Bitcoin is split into tiny fractions named Satoshi’s to allow for real-world spending. That said, exchanges and brokerage platforms often have a minimum spend limit which will be made clear on their respective websites, but you can easily get small fractions of BTC. In fact, 1 Satoshi accounts for a one hundred millionth part of a single Bitcoin (0.00000001 BTC.)
There have been some countries that have banned the use and purchase of Bitcoin in the past, but today, Bitcoin is becoming much more widely accepted. This has been a question of politics. In most countries, buying Bitcoin is completely safe and legal.
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