Bitcoin is in the news today more than ever. Thanks to skyrocketing prices and roller coaster dips, everyone and their dogs are interested in learning how to buy and sell Bitcoin.
As the most popular form of cryptocurrency (and the blockchain technology that powers it), Bitcoin enjoys worldwide acceptance and has a growing number of applications. If you want to take advantage of that, though, you first need to know how to buy Bitcoin and what to do with it when you have.
Step 1: Find a reliable Bitcoin wallet
Digital “wallets” store Bitcoin until you are ready to spend them or exchange them for another currency. Wallets range in terms of features, platforms that accept them, and level of security, so it’s essential to choose one that works for you — though probably steer clear of the one evangelized by John McAfee.
For those just getting started, your best bet is to use the wallet that’s automatically provided to you on our recommended exchange, Coinbase. However, it’s also a good idea to set up a wallet that’s not linked to a crypto-exchange to ensure you’ll have ready access to your Bitcoin even in the event of overwhelming traffic or site closure.
Here are our recommended options:
Exodus: An all-in-one offline application with support for several cryptocurrencies, including Bitcoin, Exodus is free to use, has built-in shape-shift trading, and includes some simple graphing tools to help you visualize your cryptocurrency portfolio.
Mycelium: This one is a popular mobile wallet known for being compatible with more advanced tech, like Trezor hardware wallets (for maximum security) and Tor.
Bitcoin Core: A free and open-source choice that serves as a Bitcoin node, Bitcoin Core does an excellent job at verifying payments, only accepting payments from valid blockchains.
For a look at a few other of our favorite wallets, here’s a more in-depth guide to the best Bitcoin wallets.
Note: Although an online wallet is excellent for your first Bitcoin purchase, if you find yourself with many valuable cryptocurrencies because of trading or an upswing in value, store 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 on an exchange. There are a lot of exchanges out there with varying performances. Some are less trustworthy than others, and some are limited, so it’s crucial to pick the right exchange. We recommend using Coinbase, though there’s no harm in checking out the competition using a Bitcoin exchange comparison site.
Signing up for a Coinbase account is easy. However, you will need to provide your birth date, legal name, last four digits of your social security number, your primary reason for using Coinbase, your primary source of income, employment status, and home address. This process also involves two-step verification with your phone, though you can currently add a photo to gain $5 of Bitcoin for free. These rules are essential to follow as they allow the site(s) to comply with know-your-customer regulations and FTC/IRS guidelines.
Although Coinbase alone will allow you to buy and sell Bitcoin, it’s also worth signing up to its linked exchange platform, Coinbase Pro, which will give you greater control over your purchases.
If you would prefer a more direct route in buying Bitcoin, you can opt to use a peer-to-peer service such as LocalBitcoin or BitQuick. They offer a more extensive array of payment options and let you purchase Bitcoin directly from a seller without the exchange middleman. If you do opt to use these and to trade in person, only meet in a safe place.
Step 3: Select your payment method
Exchanges accept a variety of payment options, though one should be wary of scam sites. Coinbase allows bank accounts, Visa and Mastercard debit cards, and wireless transfers for payments — though one payment solution must be linked to your account before you can make a trade. Coinbase recently added PayPal as an option for transferring Bitcoin, though there are certain caveats.
Note: Bitcoin ATMs allow you to exchange Bitcoin in compatible wallets for cash. These ATMs are available in a limited number of cities and provide an alternative to withdrawing money using an exchange. Again, most exchanges and online wallets will not deal directly with cash.
Step 4: Buy some Bitcoin and store them in your wallet
Exchanges provide you with information on how many (or how much of a) Bitcoin you can buy for specific sums of money. However, Bitcoin prices can vary dramatically by exchange and moment to moment because of its volatile nature. That means that even if you have a lot of money to burn, you’ll probably be buying a fraction of a Bitcoin. There’s nothing wrong with that, and for most people, this is the route they’ll go down, as few but the wealthy can afford to purchase several Bitcoins in one go.
To make your first trade, input the amount of Bitcoin you want to buy in the provided field and click the buy button. Coinbase or Coinbase Pro will make a standard market buy order, which will purchase Bitcoin at the best market rate. Alternatively, you can place a limit order, which lets you set a price you’re willing to pay for a certain amount, and a trade will only happen if that amount shows up at that price.
Once you’ve made your purchase, your newly gained Bitcoin will transfer into your Coinbase wallet for storage. You should then seek the option to transfer these funds to the address of the Bitcoin wallet you have created. You must pay a small fee to move the funds out of the exchange, but that is part and parcel of Bitcoin transfers. Fortunately, the cost of such transfers is much lower than it has been historically.
Just so you know, Bitcoin transfers can be somewhat sporadic. Unlike other currency trades, the transaction needs to be recorded and affirmed in the blockchain when you buy Bitcoin funds. It can take a couple of hours (or more during busy trading times) to complete a Bitcoin transfer, so you might want to plan ahead to allow enough time.
Step 5: Get ready to use it
You might plan to sell your Bitcoin at a profit or spend it online, but no matter what you want to do with it, it helps to be flexible when it comes to timing. Bitcoin’s value can fluctuate wildly, so planning your endgame early on is crucial. Prepare now by setting up a seller account on an exchange or figuring out how to buy what you want with it before the time comes to make a purchase. That way, you won’t be in a panicked rush to complete your transactions when the time comes.
This list of compatible online stores can help give you an idea of places to spend your bitcoin. You might want to research potential fees or issues before spending or trying to transfer any Bitcoin.
Source: Digital Trends