Bitcoin is in the news today more than ever. Thanks to skyrocketing prices and rollercoaster 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 is now widely accepted around the world 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.
Want to mine Bitcoin instead? It’s not advisable, but it is still possible. Here’s how.
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 you should 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 a lot of valuable cryptocurrencies because of trading or an upswing in value, make sure to 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 whole lot of exchanges out there, with varying performance. Some are less trustworthy than others, and some can be quite limited, so it’s crucial to pick the right exchange in the first place. We recommend using Coinbase, though there’s no harm in checking out the competition by using a Bitcoin exchange comparison site.
Signing up for a Coinbase account is easy, though you will need to provide some form of identification. That may involve sending a copy of your photo ID and potentially also sending a live image of your face via webcam. These rules are essential to follow as they allow the site(s) to comply with know-your-customer regulations.
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 plan to trade in person, make sure to meet in a safe place.
Crypto Head’s bitcoin buying guide will provide you step by step process to buy Bitcoin in Australia.
Step 3: Select your payment method
Exchanges accept a variety of payment options, though one should be wary of scam sites. Coinbase allows both bank account and credit or debit card 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, due to its volatile nature, Bitcoin prices can vary dramatically by exchange and from moment to moment. 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. On Coinbase or Coinbase Pro, this will be 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 new Bitcoin will transfer into your Coinbase wallet for storage. You should then seek out the option to transfer these funds to the address of the Bitcoin wallet you have created that’s off the exchange. You will have to pay a small fee to do so, but that is part and parcel of Bitcoin transfers. Fortunately, the cost of such trades is far from their peak.
Important note: Bitcoin transfers can be a bit sporadic. Unlike other currency trades, when you buy Bitcoin funds, the transaction needs to be recorded in the blockchain and affirmed. Said transfer process can take time, especially during busy trading hours. It’s not uncommon for a trade to take an hour or two to complete, so you may not want to immediately leap over to your account and start moving funds around.
Step 5: Get ready to use it
Whether you plan to ultimately sell your Bitcoin (hopefully at a profit) or use it to purchase something, be ready to do so at a moment’s notice. The value of Bitcoin fluctuates rather wildly, so it is crucial to have your end game planned out early on. Be prepared by setting up a seller account now, or figure out how to buy what you want with it before you set out to make a purchase. That way, when the time comes, you’ll not be in a panicked rush to complete your transactions.
Disclaimer: Always read reviews of exchanges before buying bitcoin.