Crypto trading and investing have become extremely popular and profitable recently, especially since the pandemic. The crypto market is filled with tens of thousands of cryptocurrencies and crypto-assets. However, most people new to the market want to target the popular options.
Cryptocurrencies are quite volatile, and most new investors want to opt for the more secure options like bitcoin and ethereum because they have a known history of rising in value despite being volatile. However, after assessing the risk, many people are confused about how to buy bitcoin.
Today, we will discuss "how can I buy bitcoin" to help you understand the buying process of bitcoin, and by extension, other cryptocurrencies as well. If you can buy bitcoin, you'll be able to buy other crypto assets in the same way.
How Can I Buy Bitcoin?
Whether you want to become a crypto trader, investor, or HODLer, here are the steps you need to follow to buy bitcoin and other cryptocurrencies.
Step 1- Create an Account with a Centralized Exchange (CEX)
Investment firms and banks are not selling cryptocurrencies yet, so you can't buy bitcoin through them. You need a centralized exchange or CEX, a crypto trading platform where you can trade fiat currencies (dollars) for virtual currencies like bitcoin.
While there are plenty of CEXs to choose from, the most popular options are Coinbase and Gemini. Once you choose a CEX, you'll have to create an account on their platform.
Your CEX may ask for details like your ID, email address, Social Security number, and source of income. Upon completion, most CEX platforms will give you a unique exchange wallet to make transactions on the crypto trading platform.
Step 2- Fund Your Exchange Wallet/ Account
Most popular CEXs allow you to link your debit card or bank account directly to your exchange wallet. You can use these options to fund your exchange wallet. There is often a fee for transferring money into your exchange wallet, so check before trying.
You can transfer your investment capital all at once, or you can slowly "drip" fund your exchange wallet in ant number of transactions. As a beginner in crypto trading and investing, it is best to start with a small amount to get the hang of things first.
Step 3- Trade Your Dollars for Bitcoin
Once your exchange wallet is funded with capital, you can place an order for bitcoin and trade your dollars for bitcoin. This process is slightly different for every exchange but mostly straightforward. Typically, popular crypto trading platforms like Coinbase ask you to enter the number of dollars you want to exchange for bitcoin.
This transaction is a simple "market order" made at the ongoing exchange rate for USD to BTC. However, you may have to account for any fees charged by the CEX for the transaction.
Another way is to place a "limit order," where you set the price at which you want to buy bitcoin. Once bitcoin reaches that price, the CEX will automatically buy it for the amount of dollars you mentioned earlier.
Step 4 - Follow Best Practices for Safe Storage
Most crypto traders and investors leave their bitcoin and other crypto assets in the CEX account or exchange wallet. It is convenient and mostly safe, but not foolproof. Centralized exchanges may get hacked and lose your investments, which is why it is best to practice safe storage for your cryptocurrencies.
You need to transfer your bitcoin and other crypto assets to a private crypto wallet for the best security. Often, CEXs give you a private crypto wallet, but the best practice is to opt for a third-party crypto wallet that gives you a higher level of security.
An even better option is to opt for offline storage on an offline storage device or wallet. This is known as "cold storage" and makes it impossible for anyone to hack your cryptocurrencies without physical access to your storage device.
However, you must research your crypto trading platform beforehand because some do not allow private or offline storage. Hence, you cannot move your cryptocurrencies from the exchange wallet/account to a private wallet or storage device.
There are other ways to buy bitcoin, but they aren't necessarily the best, even if they are more convenient. For example, if you have a digital payment account on Venmo, PayPal, or Cash App, you can directly buy bitcoin from these platforms.
However, they often charge high transaction fees, don't offer many cryptocurrencies (but they do offer bitcoin), and do not allow you to transfer your cryptocurrencies to a private wallet or cold storage device.
As convenient as it may be to buy bitcoin using Venmo, especially for new investors and beginners, you won't be able to move your investment to a more diverse or established CEX later.
When buying other cryptocurrencies, you can use the same four steps mentioned above to buy and secure your crypto investments. However, as a beginner, it is best to opt for the top cryptocurrencies like bitcoin and ethereum, at least till you learn enough to dabble in a more diverse crypto portfolio.
Moreover, if you want to hold on to your crypto assets for long, these top two currencies are the best option for you. They are more stable, safer than other crypto assets and altcoins, and readily available on most CEX.
However, if you want to invest in a particular cryptocurrency, you'll have to check first if it is available on your choice of CEX. Just make sure you understand the risks involved with speculative assets, crypto trading, and investing in lesser-known cryptocurrencies.
As a rule of thumb, you should never invest more money in cryptocurrencies than you are comfortable losing. This market is volatile with speculative assets, so you need to be careful. However, bitcoin is a relatively safer option that most experts recommend as an investment option.
It is an excellent option for beginners investing in cryptocurrencies and those new to crypto trading. It is widely known as digital gold because of its scarcity, rising popularity, and long-term growth potential.