You’ve heard of Bitcoin in the news, you’ve done some research and now you’re curious about buying a little of this magical Internet money (or financial freedom/sovereignty as I call it). Good on you! Welcome to my “How to Buy Bitcoin” guide.
Note: there are two main ways described in this post, (1) through a Bitcoin ATM/Local Bitcoins; or (2) through a reputable cryptocurrency exchange. However, both involve withdrawing to your own personal hardware wallet.
How to Buy Bitcoin:
- Why Buy Bitcoin?
- Get (and Set-Up) a Hardware Wallet
- Bitcoin ATM or Local Bitcoins
- Sign Up for a Reputable Cryptocurrency Exchange
- Fund Your Account
- Place a Buy Order
- Remove Your Bitcoin from the Exchange
- Conclusion – How To Buy Bitcoin
Why Buy Bitcoin?
Bitcoin is a new, uncorrelated asset that has been growing at an exponential rate and has periodic parabolic moves up. Yes, it crashes and loses a ton of value from time to time; however, owing to its parabolic/exponential growth patterns, whenever it crashes after a huge run-up it is always significantly higher than it’s previous low and sometimes higher than its previous high.
That being said, Bitcoin still only has roughly 40 million bitcoin addresses (at the time of writing, early September 2019). And keep in mind that people typically have multiple bitcoin addresses (I know that I have at least 3). So there are less than 40 million people holding Bitcoin right now, that will only grow exponentially. And there are much less than 21 million bitcoin available (around 3-4 million are permanently lost, and many large entities have hundreds of thousands of Bitcoin each). This makes the real available supply of Bitcoin very low on a global perspective.
So why buy bitcoin? Well, its mathematically digitally scarce and very few people own it right now. Time to get in to now. Moreover, no government can censor or stop your Bitcoin transactions. It is the ultimate financial sovereignty.
Get (and Set-Up) a Hardware Wallet
Bitcoin only gives you financial sovereignty and independence if YOU hold the private keys. If you do not have the Bitcoin private keys in your possession then it is very easy for someone to steal or dictate your withdrawal and usage of the cryptocurrency.
For that reason I recommend a cold hardware wallet. It keeps your bitcoin private keys offline and protected. Here is my review of the top cryptocurrency hardware wallets.
Briefly, I would recommend my top 3 choices for hardware wallets:
Ledger Nano X (or Ledger Nano S) – the most reputable and well regarded hardware wallet on the cryptocurrency market right now. The Ledger Nano X is the newest model with Bluetooth capabilities to improve mobility, however, you can disable the Bluetooth features if that makes you uncomfortable.
Trezor Model T – The Trezor hardware wallet is an excellent cryptocurrency hardware wallet, with simple, clean design and easy to use touch screen on the device to verify transactions and addresses. The Trezor wallet also supports a password manager function.
BitBox – the bitbox is one of my favourite, simple, hardware wallets. It has limited cryptocurrency support (primarily bitcoin and ethereum). But it is based on Swiss design and security principles, is durable, clean and simple to use.
Choose the hardware wallet that is right for you! Then you are ready to choose a cryptocurrency exchange.
Bitcoin ATM or Local Bitcoins
The more anonymous way to purchase Bitcoin is through a Bitcoin ATM in your community or through the Local Bitcoins website.
Bitcoin ATMs are generally anonymous in that you do not need to provide an ID or social insurance number or verification. There is no paper trail with bank wire transfers or interact eTransfers etc. It is just you and cash into the Bitcoin ATM, with a direct deposit into your hardware wallet. However, the limitation to Bitcoin ATMs is that it handles cash so if you want to make large purchases then it becomes more difficult or dangerous to be carrying around so much cash.
Local Bitcoins is a website that also allows mostly anonymous Bitcoin purchasing/selling. All the website requires is a username, email and password. Then you meet up locally with people who hold Bitcoin. This can be settled in cash, however, for many medium to large purchases people request Interact eTransfers etc. so that makes it less anonymous as there is a paper trail connected to you.
The benefit of both Bitcoin ATMs and Local Bitcoins is that the Bitcoin is directly sent to your hardware wallet and they can be anonymous.
Sign Up for a Reputable Cryptocurrency Exchange
Cryptocurrency exchanges used to be rare finds and believe it or not, there used to be only a HANDFUL! Yes, back in 2011 – 2013/2014 time frame there were not many exchanges to choose from. However, since 2015 we’ve seen steady growth in both the number and quality of cryptocurrency exchanges.
You must find the right exchange for you. Some guidelines:
- Must be a legal exchange in your country’s jurisdiction
- Check their AML/KYC policy
- Check their funding options
- Check their withdrawal limits and timelines (important especially for large sums of money/bitcoin)
- Check their security measures and who has access to the private keys
- Check their daily exchange volume (make sure they do not have fake wash trading)
The above is a brief guideline… I have a more detailed review of how to select an appropriate cryptocurrency exchange.
Once you have done your research on which exchange would work well for you, go through their sign up process. This can take a few days.
Fund Your Account
Okay, so now that you have your account on any (or multiple) reputable cryptocurrency exchange(s) you are ready to take some more action. In order to actually purchase Bitcoin you have to fund your account with fiat.
There are typically a handful of ways to fund your account, the most common methods are:
- Interact eTransfer
- Wire Transfer
- Bank Draft
Interact eTransfer is typically the fastest with the lowest fees; however, most banks have a limit of roughly $3,000 per day. That is a pretty high daily limit for most people so unlikely you need to worry about this limit. These transfers to fund your account are typically free on most exchanges.
The Wire Transfer will take time, cost you money and requires a minimum deposit (usually $10,000), but generally has a higher limit (in most cases $100,000 to unlimited).
Bank drafts are riskier in my opinion because once you take out the bank draft that piece of paper IS your money. It usually is mailed so you have to be very careful. I would never mail a bank draft, I would drop it off in person.
Place a Buy Order
Once your account is funded with fiat you are ready to buy some bitcoin!! Converting your fiat to cryptocurrency feels strange initially, but once you’ve done it a few times and you store it yourself you feel very in control of your financial sovereignty. But how do you buy bitcoin? That’s why you’re here!
Finally, how to buy bitcoin – on your cryptocurrency exchange account you place a buy order. There are different types of buy orders:
- Market Order
- Limit Order
Market orders mean that you agree to purchase bitcoin at the market price. These get filled (completed) quickly and are usually fine for small purchases. If you place a market order then the exchange will match your order with any sell orders at a range of market prices. However, if you place a medium to large order, you may end up paying more (or less) for your bitcoin than initially intended (especially on small volume exchanges, hence why I outline using large-volume exchanges in my post on how to choose a cryptocurrency exchange). This happens because as sell orders get filled the market prices will change and if you have a buy order that is simply filling the markets prices you are open to volatility.
I never place market orders as I do not want to unintentionally pay more for some bitcoin than I anticipate. While paying less is nice, I can’t control that. I can control the price I pay with a limit order though.
Limit orders are more preferable (in my opinion – not financial advice). Limit orders do what they sound like: place a limit on your order. On the cryptocurrency exchange, you determine how much bitcoin you want to purchase at your desired price. Then regardless of the market price, as other traders put in sell orders, if your buy order price matches a sell order, then the exchange algorithm matches you and makes the trade.
Market orders tend to be filled faster than limit orders because the cryptocurrency exchange simply matches your buy to any open market seller, satisfying their order book. Whereas limit orders typically can take some time to be filled because the exchange must match your buy price with someone selling for the same price. The length of time it takes depends on the volume of the exchange.
Remove Your Bitcoin From The Exchange
Here is one of the most important parts. Remove your bitcoin from the exchange. That’s right. Exchanges used to get hacked all the time, especially during bull runs as they become very large targets for hackers.
While exchange security is improving every quarter that passes no exchange is perfect and the insurance policies on your cryptocurrency are not the greatest.
Always use one of the top reputable exchanges (i.e. Binance, Bitstamp, Coinbase, Kraken, Gemini, etc), but you should never keep all of your cryptocurrency on a single exchange, nor on a single cold hardware wallet. I never leave large amounts of bitcoin or any other cryptocurrency on a single exchange.
Keeping your bitcoin on your own, personally controlled hardware wallet keeps you in full control of your bitcoin and thus your financial sovereignty.
Markshire Crypto Conclusion – How to Buy Bitcoin
You’ve made it through the post. I’ve outlined the most important steps to buying bitcoin here. It is important to get your hardware wallet prior to purchasing on cryptocurrency exchanges so that you can immediately withdraw your bitcoin to your own hardware device. However, if you are purchasing small amounts of bitcoin it is reasonable to leave some on the exchange until you have enough to warrant buying a hardware wallet (I’d say anything over $1,000 USD is worth a hardware wallet).
In short, get a hardware wallet, sign up for a reputable exchange, fund your account, buy your bitcoin, withdraw that bitcoin to your hardware wallet. HODL.
Let me know if you have any comments or questions on how to buy bitcoin, anything that you might add for our readers or even a hello. Thanks for reading!