How to Invest in Bitcoin

investing in bitcoin

Thinking of investing in Bitcoin?

This post will outline everything you NEED to know to make your first purchase.

Buying Bitcoin seems hard, but we make it easy.

We’re going to explain:

Quick Info - Top Exchanges

  • Popular Exchanges
  • Coinbase
    • High liquidity and buying limits
    • Easy way for newcomers to get bitcoins
    • "Instant Buy" option available with debit card
  • Coinmama
    • Works in almost all countries
    • Highest limits for buying bitcoins with a credit card
    • Reliable and trusted broker
  • eToro
    • Supports Bitcoin, Ethereum & 15 other coins
    • Start trading fast; high limits
    • Your capital is at risk.

    This ad promotes virtual cryptocurrency investing within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in most EU countries, no EU protections & not supervised by the EU regulatory framework. Investments are subject to market risk, including the loss of principal.

How to Buy Bitcoin | Step-by-Step

Buying Bitcoin is actally incredibly easy in 2021. Below we have outlined each step in the process. You’ll know exactly what you are doing and why.

What You Need Before Starting

There are several items you should have ready to go before step 1 below.

You will also want to determine the following:

Step One: Find an Exchange

transaction id


There are several factors to consider when finding an exchange to buy Bitcoin.

First, you need to make sure the exchange you want to use services your country.

Most exchanges only serve a select few countries because each country has its own laws the exchange must comply with. Some exchange focus on the EU. Others just North America.

Second, you need to make sure the exchange also accepts your form of payment.

If you want to pay with credit card, for example, you’ll need to find an exchange that allows that. Perhaps you just want to wire the exchange money or use something like apple pay.

Few exchanges accept every form of payment, so its worth doing a little research before signing up.

Thankfully, we’ve already done that research for you! We’ve compiled 1000’s of exchanges from all over the world.

All you need to do is input your country and the payment method you’d like to use and we will only show you exchanges that match both!

It’s that easy.

Check out our exchange list to find your ideal match!

Or find some of our favorites who serve many countries below.

  • Popular Exchanges
  • Coinbase
    • High liquidity and buying limits
    • Easy way for newcomers to get bitcoins
    • "Instant Buy" option available with debit card
  • Coinmama
    • Works in almost all countries
    • Highest limits for buying bitcoins with a credit card
    • Reliable and trusted broker
  • eToro
    • Supports Bitcoin, Ethereum & 15 other coins
    • Start trading fast; high limits
    • Your capital is at risk.

    This ad promotes virtual cryptocurrency investing within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in most EU countries, no EU protections & not supervised by the EU regulatory framework. Investments are subject to market risk, including the loss of principal.

Step Two: Sign Up and Go Through KYC

transaction id


This step is pretty self-explanatory.

All you need to do is create an account on the exchange you chose in step 1.

After signing up, you probably won’t be able to do much until you go through the KYC (Know Your Customer) process.

It’s pretty simple though since you already prepared your ID and other items.

Somewhere on the website interface you should see something about “verifying your account” or “getting verified”.

You may have to do this as part of the sign up process as well. It really just depends on how your exchange does things.

Either way, you will likely be asked to take a picture of your government issued ID (front and back).

The exchange may also ask you for a selfie while you hold your ID. Some even ask that you write the date and the name of the exchange on a piece of paper and hold that in the picture as well.


transaction id


It can be kind of awkward to do on your own, so you can also ask a friend to take the picture for you.

Verification can take anywhere from 10 minutes to a week, depending on the exchange and how backed up verification staff are.

If you need to get verified quickly, make sure that when you choose an exchange, you look for ones with same day verification, like Coinmama.

There are often multiple levels of verification. Higher levels mean you can make bigger purchases or have access to lower fees. Sometimes both.

To get higher levels or tiers of verification, its usually just a matter of supplying the exchange with more information about you.

These can come in the form of:

Why Do Exchanges Do KYC?

The exchanges enforce KYC because they want to tie a real identity to each purchase. In short, they are complying with regulations put on them by your government.

There’s really no way around it, and if you try to use a fake ID, you could get in big trouble.

If this process bothers you, we will cover some alternatives to buying Bitcoin in a section below.

Step Three: Set Up a Payment Method

transaction id


Now that you’ve got your account and completed KYC, its time to set up your payment method.

These days, many exchanges use services like plaid to quickly and securely connect your bank account to your exchange account.

This allows you to easily transfer fiat to the exchange using inexpensive ACH transfers (or your country’s equivalent).

But perhaps you’ve decided you want to use Paypal or applepay or one of the many other payment processors out there. Perhaps you want to use your credit or debit card.

Regardless of what payment method you want to use, the exchange should make it pretty simple to follow the steps on screen and get it set up.

Step Four: Buy Bitcoin

transaction id


Now we can finally do what we set out to do - buy Bitcoin!

Depending on your exchange, this will happen in one of two ways.

  1. You are buying from the exchange itself
  2. You are buying from other users on the exchange

By far, the easist is the first option.

The exchange will tell you a price and you will pay it. That is that. Simple.

If the exchange lets you trade with other users on the platform, things can get a little more complicated.

  • Popular Exchanges
  • Coinbase
    • High liquidity and buying limits
    • Easy way for newcomers to get bitcoins
    • "Instant Buy" option available with debit card
  • Coinmama
    • Works in almost all countries
    • Highest limits for buying bitcoins with a credit card
    • Reliable and trusted broker
  • eToro
    • Supports Bitcoin, Ethereum & 15 other coins
    • Start trading fast; high limits
    • Your capital is at risk.

    This ad promotes virtual cryptocurrency investing within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in most EU countries, no EU protections & not supervised by the EU regulatory framework. Investments are subject to market risk, including the loss of principal.

In this case, sellers offer Bitcoin at prices they are willing to accept. And Buyers offer to purchase Bitcoins at prices they are willing to accept.

You can either accept a sellers offer or create your own offer as a buyer.

There are also different kinds of ‘orders’ you can make. These are:

For instance, if the current price of spot price of Bitcoin is $10,000, and I make a market buy order, I agree to pay anyone selling at the current market price $10,000.

Alternatively, if the current price of Bitcoin is $10,000 but I only want to pay $9,000 maximum, I can set a limit buy order for $9,000 and my order will only go through if someone offers to sell a Bitcoin for $9,000 or less.

Market orders are very similar to walking into a store and paying whatever price is on the tag.

Limit orders are more like walking into a store and haggling with the store owner over price.

If you’ve set a market order, you will have your Bitcoins almost immedietely. If you set a limit order, it may take some time (and technically you may never get them if the price never hits your limit).

Step Five: Withdraw Your Bitcoin

transaction id


Now that you’ve bought your Bitcoin, it’s really good practice to withdraw them to a wallet you control.

Some exchanges will not let you buy any Bitcoin until you give them a withdrawal address anyway. If so, then you will have to complete this step at the end of Step four above since you can’t even make the order without doing this.

That said, most exchanges just hold the Bitcoin for you after your purchase. And they will continue to do so indefinetely.

There are a number of reasons you don’t want to leave coins on an exchange.

Here are just a few:

As with anything valuable, hackers, thieves, and scammers will all be after your bitcoins, so securing your bitcoins is necessary.

Which Wallet Should I Choose?

If you’re serious about investing in bitcoin and see yourself buying a significant amount, we recommend using Bitcoin wallets that were built with security in mind.

Here are some of our favorite wallets

COMPARISON

ledger nano x folded

Ledger Nano X

  • SCREEN:
  • RELEASED: 2019
  • PRICE: $119
ledger nano s illustration

Ledger Nano S

  • SCREEN:
  • RELEASED: 2016
  • PRICE: $59
trezor model T

TREZOR T

  • SCREEN:
  • RELEASED: 2018
  • PRICE: $159
Trezor One

TREZOR One

  • SCREEN:
  • RELEASED: 2013
  • PRICE: $59

There are really two kinds of wallets: cold and hot wallets

Cold Wallets vs Hot Wallets

Cold wallets are offline storage of your coins.

They are meant to be inacessible to hackers and more secure for long term holding and saving.

Hot wallets are typically internet connected wallets that are easy to use, but less secure. They are meant to be used to store small amounts of Bitcoins to be used in everyday spending scenarios.

Think of a Cold Wallet like a savings account and a hot wallet as your billfold for petty cash.

Unlike your bank though, your control the money and no one else. That is, so long as you keep the wallets under your control.

If you leave $5,000 worth of gold coins with a friend, your friend could easily run off with your coins and you might not see them again.

Because Bitcoin is on the internet, they are even easier to steal and much harder to return and trace. Your Bitcoins are only as secure as the wallet storing them and how well you manage that wallet.

Investing in bitcoin is no joke, and securing your investment should be your top priority.

This is why we really recommend cold wallets over hot wallets whenever possible - they are easier to keep safe.

Best Wallets for Withdrawing

Some of our favorite cold wallets can be found below:

Ledger Nano X

ledger nano x
The Ledger Nano X, the only bluetooth hardware wallet worth owning

Ledger is a Bitcoin security company that offers a wide range of secure Bitcoin storage devices. We currently see the Ledger Nano X as Ledger’s most secure digital wallet. Read more about the Ledger Nano X.

Trezor

trezor model t
The full color touch screen Trezor T hardware wallet

TREZOR is a hardware wallet that was built to secure bitcoins. It generates your Bitcoin private keys offline. Read more about TREZOR.

But, if you want to withdraw your coins now while you wait for your cold hardware wallet to arrive, we suggest using zengo.

Best Hot Wallet

zengo logo

Easy to use mobile wallet

Visit Website

ZenGo is a multi-cryptocurrency wallet for iOS and Android.

How to Withdraw Your Coins

Now that you’ve got a wallet, here is how to withdraw the coins from the exchange.

First, open your wallet and find an option to “receive”


Second, copy the address given


Third, on your exchange where you bought your coins, select the “send” option.

coinbase home page


Fourth, there should be a field to input your wallet address copied in step 2. Paste it there.

input recipient address


Finally, confirm you want to send (withdraw) your coins.

After that, you should receive a confirmation with a transaction ID of some kind. Here is what that might look like.

transaction id
What a transcation ID looks like (the number starting with "804")

Alternative Ways to Buy Bitcoin

Meetups

transaction id


Meetups are a great way to buy Bitcoin without having to do any KYC.

What you do is join various Bitcoin meetups in your area. After you attend a few meetings, ask around if anyone is willing to sell some BTC.

Bitcoin ATMs

transaction id


Bitcoin ATMs are another way to buy Bitcoin without KYC, though this is becoming less and less true.

Even most Bitcoin ATMs these days require a phone number from you.

Certianly, this is less intrusive than most exchanges, but its still personally identifying information.

Usually though, you can buy small amounts at a time (less than $100 usually) and do that over and over again.

Keep in mind that Bitcoin ATMs have incredibly high fees (sometimes as high as 20%!)

Should I Buy or Mine Bitcoin?

The Bitcoin mining industry has grown at a rapid pace.

Mining, which could once be done on the average home computer is now only done profitably using specialized data centers and hardware (known as ‘ASIC’s’).

The latest round of Bitcoin hardware—dedicated ASICs—has co-evolved with datacenter design, and now most computation is performed in specialized ASIC datacenters....

These datacenters are warehouses, filled with computers built for the sole purpose of mining Bitcoin. Today, it costs millions of dollars to even start a profitable mining operation.

A view from inside a very organized mining farm

Bitcoin miners are no longer a profitable investment for new Bitcoin users.

If you want a small miner to play around with mining, go for it. But don’t treat your home mining operation as an investment or expect to get a return.

  • Popular Exchanges
  • Coinbase
    • High liquidity and buying limits
    • Easy way for newcomers to get bitcoins
    • "Instant Buy" option available with debit card
  • Coinmama
    • Works in almost all countries
    • Highest limits for buying bitcoins with a credit card
    • Reliable and trusted broker
  • eToro
    • Supports Bitcoin, Ethereum & 15 other coins
    • Start trading fast; high limits
    • Your capital is at risk.

    This ad promotes virtual cryptocurrency investing within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in most EU countries, no EU protections & not supervised by the EU regulatory framework. Investments are subject to market risk, including the loss of principal.

Final Thoughts

It’s important to understand how Bitcoin works before investing any money.

Bitcoin is still new and it can take months to understand the true impact Bitcoin can have on the world.

Take some time to understand Bitcoin, how it works, how to secure bitcoins, and about how Bitcoin differs from fiat money.

The above information should not be taken as investment advice. It is for general knowledge purposes only. You should do your own research before buying any bitcoins.

FAQ

When is the right time to buy?

Buy Bitcoin

As with any market, nothing is for sure.

Anyone’s guess is just about as good as anyone else’s when it comes to predicting near term Bitcoin prices.

Throughout its history, Bitcoin has generally increased in value at a very fast pace, followed by a slow, steady downfall until it stabilizes.

Use tools like our Bitcoin price chart to analyze charts and understand Bitcoin’s price history.

Our Bitcoin price chart

Bitcoin is global, and therefore less affected by any single country’s financial situation or stability, good or bad.

For example, speculation about the Chinese Yuan devaluing has, in the past, caused more demand from China, which also pulled up the exchange rate on U.S. and Europe based exchanges.

We’ve also seen bull markets in Bitcoin in the United States result in large arbitrage events in markets with much less liquidity due to capital controls, such as Korea. In the case of Korea, these were known as the ‘Kimchi Premium

As Igor Makarov and Antoinette Shoar note in Trading and Arbitrage in Cryptocurrency Markets,

The daily average price ratio between the US and Korea between December 2017 to February 2018 reached 40% for several days...We estimate that during this period a minimum of $2 billion of potential total arbitrage profits were left on the table. In contrast, the price deviations between exchanges in the same country typically do not exceed 1%, on average.

Makarov & Schoar, Economists, Harvard and MIT

Getting Bitcoin into Korea to take advantage of the large premium was incredibly easy. The issue was getting your fiat out of the country after you sold.

The Kimchi Premium was one of the largest arbitrage events seen in our lifetime

Ironically, such controls only fed the Bitcoin price even further, as individuals realized Bitcoin could do what fiat could not: make cross border payments in any amount without permission from any regulatory authority.

All of these examples illustrate how global chaos is generally seen as beneficial to Bitcoin’s price since Bitcoin is apolitical and sits outside the control or influence of any particulate government.

COVID19 was one such example of global Chaos boosting Bitcoin, as the Federal Reserve proclaimed an 'ample reserves regime'.

When thinking about how economics and politics will affect Bitcoin’s price, it’s important to think on a global scale and not just about what’s happening in a single country.

How much does it cost to buy one bitcoin?

While there is no one price for Bitcoin, most markets with decent liquidity share similar prices

You can check the current price on a number of sites. They often expres the price over time in a chart like the one below:

Is It Worth Investing in Bitcoin?

This really depends on whether or not you beleive Bitcoin has a future AND that it fits your investment goals. It’s best to consult a financial advisor and see if adding Bitcoin to your portfolio is good for you.

We are not financial advisors. We do not give any financial advice.

Always talk to a FINRA certified financial advisor before making any investments in Bitcoin

What is the best investment strategy for buying Bitcoin?

If you want to invest in Bitcoin, the best strategy for investing will again depend on your needs and lifestyle. Your financial advisor will be the best person to talk to.

That said, some people like to use a strategy called ‘dollar cost averaging’. With this strategy, you buy a little at a time every day, week, or month, etc. Its up to you to decide how frequently and in what quantity to buy. The important thing is to keep the dollar amount the same each purchase. This helps to avoid going “all in” at a high price. Ask your financial advisor about this strategy if you are curious. There a tons of services that cater to this strategy, including Swan, and CashApp

These DCA services let you set your investment strategy on auto-pilot

What is the minimum amount of Bitcoin I can Buy?

Bitcoin investors can theoretically buy 1 millionth of a Bitcoin, but most exchanges have minimum buy amounts they enforce themselves. You may need to spend as much as $10 or more depending on the crypto exchange. Buying small amounts of Bitcoin will result in higher fees.

Coinmama requires you buy at least $50 worth of Bitcoin

Are there Bitcoin Investment Plans?

The closest thing to a bitcoin investment plan would be something like the Grayscale Bitcoin Trust, which is similar to a Bitcoin ETF.

grayscale bitcoin trust

In this arrangement, the trust owns a pool of Bitcoins and then sells shares of that pool of Bitcoins to investors. This is very similar to traditional investments.

You can also opt for a Bitcoin or crypto IRA which allows you to use 401k money to buy Bitcoin for your retirement. iTrust capital is our top pick for a Bitcoin IRA brokerage account.

Bitcoin IRAITrust Capital IRA Get an ITrust IRA

ITrust Capital is an IRA custodian based out of Irvine California.

itrust home page

iTrust boasts the only Bitcoin IRA that allows crypto trading 24/7 within their IRA. Asset custody provided by Curv.

  • 24/7 platform trading
  • Ability to sell bitcoin in the account
  • 4.8 stars on trustpilot out of 180 reviews
iTrust features