Bitcoin is in the news today more than ever. Thanks to skyrocketing prices and roller coaster rides, everyone and their dogs are keen to learn how to buy and sell Bitcoin.
As the most popular form of cryptocurrency (and the blockchain technology that powers it) is Bitcoin now recognized worldwide and has a growing number of uses. However, if you want to take advantage of this, the first thing you need to know is how to buy bitcoin and what to do with it when you have bitcoin.
Would you like to mine Bitcoin instead? It is not advisable, but it is still possible. Here is how.
Step 1: Find a Reliable Bitcoin Wallet
Bitcoin is stored in digital “wallets” until you are ready to spend it or exchange it for another currency. Wallets vary in terms of features, platforms they accept, and level of security. So it’s important to choose one that works for you – although you should probably stay away from the one evangelized by John McAfee.
For those who are just starting out, it is best to use the wallet that is automatically provided to you on our recommended Coinbase exchange. However, it is also a good idea to set up a wallet that is not connected to a crypto exchange to ensure that you can access your Bitcoin instantly, even if there is overwhelming traffic or the website closes.
Here are our recommended options:
Exodus: Exodus is an all-in-one offline application with support for multiple cryptocurrencies, including Bitcoin. It’s free to use, has built-in shape change trading, and includes some simple graphing tools that you can use to visualize your cryptocurrency portfolio.
Mycelium: This is a popular mobile wallet known to be compatible with more advanced technologies like Trezor hardware wallets (for maximum security) and Tor.
Bitcoin Core: Bitcoin Core is a free, open source option that acts as a Bitcoin node. They do an excellent job of verifying payments and only accept payments from valid blockchains.
To take a look at some of our favorite wallets, here is a more in-depth guide to the best Bitcoin wallets.
Note: While an online wallet is great for your first Bitcoin purchase, if you are confronted with a lot of valuable cryptocurrencies due to trading or appreciation, keep it in an offline “cold storage” wallet for maximum protection.
Step 2: choose the right bitcoin trader
The best place to make your first Bitcoin purchase is with an exchange. There are a lot of exchanges with varying levels of performance. Some are less trustworthy than others, and some can be very limited. Therefore, it is important to choose the correct exchange first. We recommend using Coinbase, though it doesn’t hurt to check out the competition using a Bitcoin exchange comparison site.
Signing up for a Coinbase account is easy, but you’ll need to show some ID. This could include sending a copy of your photo ID and possibly sending a live image of your face via webcam. It is imperative to follow these rules as they allow the websites to know the rules that your customers are aware of.
While Coinbase alone allows you to buy and sell Bitcoin, it’s also worth signing up to the linked exchange platform Coinbase Pro, which gives you better control over your purchases.
If you prefer a more direct route when buying Bitcoin, you can use a peer-to-peer service like LocalBitcoin or BitQuick. They offer a wider range of payment options and allow you to buy Bitcoin directly from a seller without the intermediary. If you want to use these and trade in person, you should meet in a safe place.
Step 3: Choose your payment method
Exchanges accept a variety of payment options, although one should beware of scam sites. Coinbase allows both bank account and credit or debit card transfers for payments, although a payment solution must be linked to your account before you can make a trade. Coinbase recently added PayPal as an option for transferring Bitcoin, although there are certain restrictions.
Note: Bitcoin ATMs allow you to exchange Bitcoin for cash in compatible wallets. These ATMs are available in a limited number of cities and offer an alternative to withdrawing money through an exchange. Again, most exchanges and online wallets won’t handle cash directly.
Step 4: buy bitcoin and keep it in your wallet
The exchanges tell you how many (or how much) Bitcoin you can buy for certain sums of money. However, due to its volatility, Bitcoin prices can vary dramatically depending on the exchange and moment to moment. That means you’ll likely buy a fraction of a bitcoin even if you have a lot of money to burn. There is nothing wrong with that, and for most people, this is the route they will go as few but the rich can afford to buy multiple bitcoins at once.
To make your first trade, enter the amount of Bitcoin you want to buy in the space provided and click the Buy button. Coinbase or Coinbase Pro is a standard market buy order where Bitcoin is bought at the best market price. Alternatively, you can place a limit order that allows you to set a price that you are willing to pay for a certain amount. A trade will only take place if this amount is displayed at that price.
Once you have made your purchase, your newly acquired Bitcoin will be transferred to your Coinbase wallet for safekeeping. You should then seek the option of transferring those funds to the address of the Bitcoin wallet you created. You have to pay a small fee to remove the money from the exchange, but that’s an essential part of Bitcoin transfers. Fortunately, the cost of such transfers is much lower than in the past.
Just a note: Bitcoin transfers can be made sporadically. When buying bitcoin funds, unlike other forex trades, the transaction must be recorded and confirmed on the blockchain. The transfer process can take a while (approximately an hour or two), especially during busy trading hours. It is a good idea to plan your transfers accordingly before boarding.
Step 5: get ready to use it
Whether you want to sell your Bitcoin (hopefully for a profit) or use it to buy goods or services, you can always do so. Bitcoin’s value fluctuates widely, so it is important that you plan your endgame early. Prepare now by setting up a seller account on an exchange or finding out how to use it to buy what you want before the time to buy. That way, you won’t panic about completing your transactions at a specific time.
We have compiled a list of compatible online stores to give you an idea of where to spend your Bitcoin. Do your research by reading reviews and fine print before buying or exchanging bitcoin.