How to Buy Bitcoin – Easy Steps to Get Bitcoins (2017)
So, you’re thinking of buying Bitcoin? There are many ways to obtain and hold Bitcoin. So many, in fact, that you may get confused at first. Don’t worry! With this article, we will help you grasp the ins and outs of Bitcoin buying and storage.
Bitcoin is a relatively new currency that is valid only in the virtual world of the Internet. It has been on the market for less than a decade but has gained immense popularity at a pace comparable to the Internet itself during the 1990s. Given the ever-increasing demand, more people would like to operate with this unique cryptocoin. However, many of them are confused about how and where to buy it.
If you are among those who feel Bitcoin is worth it but don’t really know how or where to buy it, we are here to guide you on the right path.
Step #1 – Get a Bitcoin Wallet
To start with, you will need a Bitcoin Wallet, which is where you store your Bitcoin. The name itself should help you a lot in visualizing it – it’s virtual, but a wallet just as your real one. No matter what type of Bitcoin transaction you make, you will store it in your personal wallet. It’s pretty much like having a wallet with dollars that move in and out.
Speaking of Bitcoin Wallets, there are many options out there. If we continue with our analogy, you can choose from leather wallets to metallic safes with multiple security features. Don’t worry! You are not supposed to have a single wallet for all the transactions – you can get more.
There are four main types of wallets:
- A hardware wallet that involves a special device attached to your PC.
- An internet service – in this case, you can access your wallet via the browser.
- A “safe” service that stores your Bitcoin securely online and offline. It is an application that needs to be installed on your computer or mobile phone.
- A paper wallet – this one is like a card with the printed Bitcoin keys on it that are offline from the PC.
Keep in mind that each of the options has, in theory, some risks or weak points. Just like a real wallet, it can be stolen, for example. If you keep it on your PC, you should make sure your HDD is regularly backed up to safeguard against corruption of your drive. If you opt for the online wallet alternatives, you should know that they apply different security measures against hacks. The advantage of the paper wallet is that it cannot be hacked, but it can be stolen or lost like a regular wallet. We’d say that going for the most reputable and popular wallet service would be the best decision.
Here are some examples of the best Bitcoin Wallet services: Coinbase, Blockchain, Trezor, Exodus, Trazor Nano, Copay, Mycelium, Bitcoin Wallet, and Airbitz, GreenBitz. Get Started by creating your first Bitcoin wallet!
For your convenience, we have created a separate guide to choosing a Bitcoin Wallet. You can find there a comparison table, pros and cons, and a detailed review of each wallet service. Click here to read
Before getting into the actual places where you can buy Bitcoin to store in your wallet, we should mention one important thing: each Bitcoin Wallet is assigned its own unique number. It is also called a Bitcoin address. Let's see what the Bitcoin address looks like.
Regardless of where you started your wallet, its address will consist of 30-34 letters and numbers.
Example of a Bitcoin address: 14sScGvSjGtxNbqFUoStoXN7eXydaN1JMM
The Bitcoin address is used as a payment prerequisite. You will need to specify the number in order to transfer funds or receive payments. In other words, this number is like a bank card number, only for Bitcoin.
Note that the Bitcoin address differs from the login used to enter the Bitcoin Wallet or the private and public key (though they are mathematically related to the latter ones). It often happens that people confuse these by specifying the login instead of the Bitcoin address, due to which the payment cannot be conducted.
Step #2 – Buy Bitcoin and add it to your Bitcoin Wallet
After successfully registering for a wallet service, you can go hunting for Bitcoin. There are several options and methods by which you can get it. Here are the most popular ones:
- Trading platforms
- Exchange services
- Buying and selling directly (OTC trading) – LocalBitcoins, Meetup
We’ll examine each option separately. We will also tell you about Bitcoin ATMs and buying in a retirement account, which is doable, especially in the USA.
The trading platform for Bitcoin acts as an exchange - it would help if you think of it as something like the New York Stock Exchange. It is worth mentioning that many trading services offer Bitcoin Wallets too. All participants in the exchange can replenish their accounts and offer others to buy or sell a certain amount of currency at a certain price. The latter is called opening a position or placing an order.
The cost at which users agree to sell and buy Bitcoin eventually sets the quotation, which is always moving up and down. The price is constantly changing depending on many factors - even a joke about a Bitcoin collapse can affect the price by several hundred dollars.
GDAX (Global Digital Asset Exchange), operated by Coinbase, is one example of the many trading services where you can buy Bitcoin. Here is how we do it:
- First, we need to deposit fiat money to the exchange (by fiat money, I mean regular money like USD, EUR, GBP, and others). In the case of GDAX, it can be done by linking your bank account to your new account with the exchange and replenishing it via a wire transfer. However, some exchanges can accept e-wallets like PayPal, Skrill, and more. The deposit methods differ from service to service.
- After the funds show up on our balance at the stock exchange, we need to participate in the bidding. To do this, we can place an order, focusing on the current rate. Remember: you should place a Buy order when you want to buy Bitcoin with your currency, and place a Sell order when you want to sell Bitcoin for fiat money.
- After we have bought Bitcoin with our money, and decide we want to get out of the market, we can withdraw it to our Bitcoin Wallet. There is a commission for withdrawal that you should consider. If you don’t withdraw your Bitcoin to the wallet and keep it on the exchange, its value can increase or decrease based on market conditions.
Exchange services allow you to convert money into Bitcoin and back at the internal rate. This method of buying a cryptocurrency is quite the same as the one described above. Some of the best exchanges are Poloniex, Coinbase, Kraken, Cex-IO, Blockchain info, and CoinMama. Note that many exchanges offer Bitcoin Wallet services as well. In fact, Coinbase has to offer exchange services, Bitcoin Wallet solutions, and trading services via its GDAX product – so don’t get confused about that. The same company can offer the full spectrum of solutions.
The process goes the same: get started by creating an account, deposit money, and then exchange it for Bitcoin, which you can later store in your Bitcoin Wallet. It’s straightforward and easy; just make sure you deal with a reputable exchange service!
Keep in mind that each exchange service has special regions that it covers, so check if your location is included.
Buying and selling directly (OTC)
In this case, you need to find someone who wants to sell you Bitcoin and then negotiate a good price, which is usually slightly lower than on the exchange. That’s because both the seller and the buyer save on commissions. You will be the first to transfer the necessary amount of money and then wait for the equivalent in Bitcoin.
There are specific sites where Bitcoin buyers and sellers can directly meet. One of the best-known examples is LocalBitcoins.
You may also run a search on Meetup to find if there is a Bitcoin group in your region.
Mining – is it worth it?
Since the blockchain system behind Bitcoin needs constant support and monitoring, there are the so-called miners, who check if everything is right with the transactions. In exchange for their effort, the miners are paid with new Bitcoin, which adds to the Bitcoin supply. Thus, mining is a process in which one can generate Bitcoin without buying it. This sounds great! Could you try it then?
Well, it was possible until recently, but the competition got stiff, so today the mining process is monopolized by groups and services that have powerful mining-related technology (known as ASIC). This suggests that mining individually is not worth it, and you shouldn’t bother dreaming about it as a good option.
Bitcoin ATMs are quite a recent development, but their popularity is increasing at a fast pace due to their convenience. Basically, you have an ATM where you can insert your money and then get a paper with the codes or just scan the mobile wallet QR code.
You should expect a commission fee from 3 % to 8%.
If this method seems convenient for you, check for Bitcoin ATMs near your location!
Buying in a retirement account
You can even invest in Individual Retirement Accounts (IRAs). There are cryptocurrency IRA options that are quite the same as the rest of the IRAs, which are typically invested in stocks or bonds.
BitcoinIRA is the only service through which you can invest in retirement by using cryptocoins.
The bottom line
Even if there are multiple options to buy and store Bitcoin, there is nothing complicated about it. You just need a Bitcoin Wallet and a reliable exchange service to make the deal. Moreover, there are many providers that offer both the Bictoin Wallet option and the exchange solutions.
Delve into our next article to find out about the best Bitcoin Wallet services that suit your needs.