How to Buy Bitcoin: The Ultimate Guide

May 19, 2020

How to Buy Bitcoin: The Ultimate Guide

 
So, you’ve delved into the wonderful world of bitcoin, you’ve finally got your head around the maze of concepts and you feel ready to purchase some bitcoin. But how do you buy bitcoin? 

True to character, when it comes to bitcoin there is not one simple answer to this question. But do not fear, in this post we’ll offer our recommendations for the safest and most secure ways to store and buy bitcoin. We’ll help you understand which bitcoin wallet to use and where you can buy bitcoin, as well as earn bitcoin. 


If you want to buy bitcoin - you have two major decisions to make: 


  • Choosing a bitcoin wallet
  • Choosing where to buy bitcoin from 

What is a bitcoin wallet?

You can think of a bitcoin wallet as a ‘bank account’ for bitcoin. Your wallet allows you to receive, store and send bitcoin. They come in a variety of forms with varying levels of access and security options. 


Wallets hold your private keys and your bitcoin address. 


Your bitcoin address is a string of 26-35 alphanumeric characters that are unique to your wallet. This is the address people will use to send you bitcoin. 


Private keys are the password to your wallet. Also known as a ‘seed phrase’, your private keys are a collection of random words that give you access to your bitcoins.

 

Types of bitcoin wallet

 

Hardware Wallet 


Hardware wallets are physical electronic devices that hold your private keys. This offline environment is considered the most secure option for storing your bitcoin. They are operated via USB with a desktop or via NFC on mobile. Your keys are fully protected even when plugged into a malware-infected computer. Hardware wallets are the safest and most secure type of bitcoin wallet. 


The downside to hardware wallets is that they come at a price. But it’s a relatively small price to pay to safely secure your bitcoins! We recommend using  Ledger or  Trezor. With both these wallets - you can access your bitcoin with a pin but you’re also given a 12-24 word seed that acts as your private key.


NOTE: Make sure you do not write down your seed words on any sort of cloud storage, google drive or dropbox. These can be hacked and if anyone gets access to your seed words, they can take control of your bitcoin. We recommend writing it down on paper and storing it somewhere safe.  


For more experienced users we recommend using  Coldcard. Coldcard is an ultra secure, bitcoin-only, open source hardware wallet. Your private keys are stored in a dedicated security chip and are not held on the main micro flash chip. It can be used without ever touching a computer by using a battery pack. Coldcard uses a MicroSD card slot that allows truly offline signing by using PSBT (partially signed bitcoin transactions). Coldcard is only suitable for more technical users.


Mobile Wallet 


Mobile wallets are a convenient and popular solution. They are a good option for new users or for people who are trading and spending bitcoin on a regular basis. If you opt for a mobile wallet we’d recommend using  Blockstream Green. It’s considered one of the most secure and user friendly mobile wallets available. They use dual private keys - one held by the user and one by their servers to maximise security. The interface is easy to use and it is compatible with iOS, android and desktop. 


Desktop Wallet 


A desktop wallet runs on your operating system - such as Windows, Linux and Mac OS. They offer autonomy and control but can be risky in terms of security because they’re vulnerable to hacking. If you’re only buying a small amount of bitcoin and want to use this type of wallet,  Electrum is the most popular and easy to use.


Web Wallet 


Web wallets are accessed through a browser and store the user’s wallet on a server owned by a third party. Your wallet is reliant on this third party server. They tend to take control of the bitcoin keys from users in exchange for ease-of-use.


Paper Wallet 


The key controlling bitcoin can even be printed on paper, wood or metal as a QR code. They have the security benefit of being completely offline. To ensure complete security - some people use a brand new computer that is not connected to the internet to print paper wallets. However this is an advanced method and it can be easy to lose your bitcoin so only use this kind of wallet if you are confident in your technical abilities. 


Not your keys not your coins


It is possible to own bitcoin without having your own private keys and bitcoin wallet. Exchanges such as Coinbase will store your bitcoin for you. But remember - not your keys, not your coins. We believe in this so strongly we’ve even printed it on a  t-shirt


When your bitcoins are held by a third party you are not guaranteed ownership. Exchanges have been hacked on multiple occasions. For instance in  May 2019 Binance lost 7,000 bitcoins in one go. You also have no control over your bitcoin if the exchange crashes, is stopped by regulators or goes out of business. 

Where can I buy bitcoin?

Once you’ve decided which bitcoin wallet is right for you, it’s time to buy some bitcoin. There are a number of exchanges out there to choose from. When it comes to choosing an exchange or a medium of buying bitcoin there are a couple of things you need to consider:


  • Ease of use - how experienced or technical are you? If the answer is ‘not very’ you may choose an option with slightly higher fees in exchange for a more user friendly interface. 
  • Buying limits - are you buying a lump sum or do you want to make regular payments? Some exchanges have buying limits in place so consider how much you want to purchase.
  • Supported countries - some methods may not be available in your country. Do research into the best exchange available for you. 
  • Fees - fees affect the total amount of BTC you’ll receive. Naturally, you’ll want the lowest fees possible when buying bitcoin. However, do weigh this up against all the other factors. 
  • Exchange rate - the combination of fees and exchange rate will determine the price you pay. Do your due diligence to make sure you’re getting a good rate. 
  • Accepted payment methods - do you want to pay with debit or credit card, paypal, wire transfer or cash? Most exchanges accept a wide variety of payment methods but do check before making your decision. 


Broker Exchanges


Using a broker site is probably the most straightforward way to buy bitcoin. It’s a great option for people who are new to the space. A broker is a middleman for selling bitcoin. They allow you to buy bitcoin at a set price. They tend to have relatively high fees but are simple to understand, allowing for quick and smooth transactions. 


CashApp


If you live in the USA, CashApp is one of your best options. CashApp offers a simple and secure way to buy bitcoin online. They are a highly reputable company and have the added benefit of familiarity as lots of people in the US already use their other services. 


There is a buying limit of $100,000 BTC per week but there is no limit to how much can be sold. CashApp charges a 1.75% transaction fee and you may also be subject to a volatility fee. 


The relatively low fees combined with simplicity and ease of use make CashApp a popular exchange for buying bitcoin. Plus CEO Jack Dorsey views bitcoin as a “long term path towards greater financial access for all” - and it’s always nice to support a company that aligns with your own beliefs.


Coinbase 


Coinbase is one of the biggest and most widely used bitcoin broker exchanges. It serves more than 30 million customers and is available in  over 100 countries. While Coinbase is a popular and easy to use exchange service, we do have some reservations about recommending this company.


Coinbase charges 1.49% transaction fee every time you purchase BTC. This fee goes up to 3.99% when you buy bitcoin with a credit card. They also charge a Coinbase Fee which is determined by region, product feature and payment type. The details of which can be  found here. There is a buying limit of $25,000 daily for verified customers. 


There are a number of issues surrounding Coinbase. They tend to crash whenever there is price volatility - as we saw recently  just days before the bitcoin halving. Coinbase also uses AML and KYC practices. They have a reputation for tracking spending and closing or freezing accounts. Plus their attempt to patent blockchain technology does not sit well with the  open source philosophy of bitcoin


Having said that - it serves a purpose as an easy to use exchange to quickly buy bitcoin. Just make sure you transfer your bitcoin into your private wallet as soon as possible. Remember: not your keys, not your coins!


Trading Platforms 


A trading platform is an online marketplace that allows traders to buy and sell bitcoin. The trading platform acts as an intermediary between buyers and sellers. They typically have lower fees than brokers. However, they are not as simple to use as some of the aforementioned brokers.  


Kraken


Kraken is one of the most reputable and trusted crypto trading platforms on the market. They store most of their digital assets safely in cold wallets and always maintain full reserves. Kraken enables users to safely and securely buy and sell bitcoin. 


Kraken has the great advantage of offering very low fees. Trading fees are determined by your 30 day trading volume. Low deposit and withdrawal fees will also apply. You can find the  full details here.


Kraken is available worldwide except for: Afghanistan, Cuba, Iran, Iraq, Japan, North Korea and Tajikistan. It also doesn’t accept US traders from Washington state or New York. 


The downside to Kraken is its complex interface. It is not particularly user friendly and therefore can be confusing for beginners. However, their website has lots of support documentation and a great customer care team. It could be worth learning the ropes so you can reap the benefits of this great exchange. 


P2P Platforms 


P2P platforms enable buyers and sellers to communicate directly. P2P platforms offer flexibility in terms of price and payment method. There is an element of risk however as you are sending money to an anonymous seller. Always be cautious and do your own thorough research before handing over any money. 


LocalBitcoins 


LocalBitcoins is the largest peer to peer bitcoin market place in the world by trade volume. Buyers and sellers negotiate on price and trade terms and LocalBitcoins are used as escrow. 


The decentralised nature of this p2p platform aligns well with bitcoin’s ethos. It offers a private way to buy bitcoin because it doesn’t involve a third party or KYC (Know Your Customer). You will only need to provide ID to certain sellers if you are buying a large volume of bitcoin. 


In some countries, this is the only method available for buying bitcoin. In this case you can expect to pay a slight premium. 


DCA


Dollar Cost Averaging (DCA) allows you to buy bitcoin in small amounts at regular intervals. This method is used to smooth out volatility by buying frequently no matter the price. It helps you take a measured approach to investing by taking it slow and steady. 


The DCA method is what inspired the phrase ‘stacking sats’. For those that are new here, sats or ‘satoshis’ are the smallest units of bitcoin (1,000,000 sats is 0.01 BTC). 


If you opt for the DCA method these are our top recommendations: 



(RIP to our favourites  GetBittr)


Want to earn some extra bitcoin?  


While it sounds too good to be true, it’s possible to earn bitcoin back when you spend. If you’re interested in buying bitcoin - you’d be foolish not to take advantage of these great companies and earn some bitcoin simply by shopping online! 


Lolli

 

Lolli makes it safe, simple and fun for everyone to own bitcoin. Lolli is partnered with over 500 top brands. When shopping online with any of these brands, you can get a percentage of the money you’ve spent back in bitcoin.

 

Some examples include: 

Harry’s - 27%

Coursera - 18%

Edemy - 16%

Lonely Planet - 13.5%

Expedia - 5%

Priceline - 5%

Groupon - 4.5%

Nike - 3%

Safeway - 1%

 

All you have to do is  install the Lolli extension on your preferred browser (Use this link to get $10 Free Bitcoin when you shop). When you shop with one of their partnered stores you can activate the extension to get your money back. The bitcoin you’ve earnt will be deposited into your Lolli wallet. It’s a great way to earn bitcoin and there is really no downside!


Fold App 

 

Fold is another great company that gets you cashback when you shop. Earn bitcoin back with companies such as Amazon, Burger King, Domino’s Pizza, Nike, Uber and loads more! 


Fold offers private and secure payment. Your personal information, payment details and transaction data is kept private and you’re not required to turn off ad-blockers or submit to KYC. 


They also offer a fun ‘spin for sats’ wheel. You can spin the virtual wheel once a day to win free sats, exclusive deals and prizes. 


Fold have teamed up with Visa to bring out the first ever bitcoin rewards card. The  Fold card is a visa debit card that earns bitcoin back directly to the app whenever you shop. We are really excited about this product so keep your eyes peeled! 


Both of these companies offer the opportunity to stack sats simply through buying products you were already spending your money on. It’s completely free and a great way to gradually increase your ownership of bitcoin. 


Start stacking sats! 


Take some time to consider which exchange and bitcoin wallet is right for you. The buying process will vary depending on the method you choose. Once you’ve purchased your bitcoin, you'll need to transfer them to your private wallet. Withdraw your bitcoin and send them to your bitcoin wallet address. 


Happy stacking!

 

*Please note this is not financial advise and is for informational purposes only.*


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