Best ways to buy bitcoin
In an October survey conducted by Finder [1], a financial website, it was found that 27.2 million Americans invest in crypto. Bitcoin holders make up 36% of that population.
With all the crypto buzz, this number represents less than 5% of the entire American population.
So why is that the case? The numbers certainly do not reflect Bitcoin’s popularity, as some people do not know how to buy Bitcoin. Other people think they can’t invest because it costs over $16,000.
It is straightforward to buy Bitcoin, and you can also purchase a share of Bitcoin for as low as $50.
In this article, we will talk about the different ways you can buy Bitcoin. Read along as we take you through the Bitcoin ride!
What is Bitcoin?
Bitcoin is a decentralized digital currency without a central bank or single administrator. It is transferred between users on the peer-to-peer bitcoin network.
Network nodes verify transactions using Bitcoin through cryptography. These transactions are then recorded in a public distributed ledger called a blockchain. Anyone can view all the transactions involving Bitcoin by looking at the ledger.
Bitcoin was initially developed as an alternative to Fiat currency (bills) for transactions. However, it has now evolved into a store of value, thus making it a viable investment option. This is evident from its dramatic growth over the past decade.
How does Bitcoin work?
Bitcoin is a deflationary cryptocurrency. It was created to be scarce. Only 21 million bitcoins will ever exist, and more than 19 million have already been mined as of November 2022. This means that 91.5% of all the bitcoins that will ever exist are already in circulation.
A Bitcoin is created when it is successfully mined. To mine Bitcoin, a complex set of mathematical problems are solved to verify transactions in the cryptocurrency. When this is done, the miner will receive a predetermined amount of bitcoins as a reward.
Bitcoin has been established as the gold standard. It is the leading cryptocurrency by price, market cap, and trading volume.
What to look for when buying Bitcoin?
Since Bitcoin has been on the news, many people have hopped on the bandwagon with little to no knowledge. As a beginner trying to invest in Bitcoin, you need to look for ways that’ll give you fair advantages, such as:
1. Fees
Transaction fees depend on the speed you need to complete your transactions, the size of the transaction, and the traffic.
You can target periods of low traffic if you want to pay lower fees for non-urgent transactions. Most Bitcoin transactions happen in the US, so avoiding transactions in the morning can help you avoid traffic. If you’re a non-US resident, you should consider time zones.
You will be charged service fees if you make use of exchanges. Suppose you are looking for low service fees; you may need to compare the fees of different exchanges.
2. Educational resources
Even though it’s been over a decade, Bitcoin and the Blockchain are still considered new concepts.
You must learn more about Bitcoin and cryptocurrency to make the best decisions. You may encounter significant financial loss if you don’t know better. There are a plethora of learning materials on the internet you can learn from, this blog inclusive.
3. Bonuses
If I were a beginner in Bitcoin investment, I’d be on the lookout for bonuses. Many exchanges offer sign-up bonuses and trading bonuses to new users. Bonuses allow you to invest more with less.
While these bonuses may be advantageous, they shouldn’t be the sole reason you choose an exchange. It would help if you also looked at service fees and security factors. The number of cryptocurrencies on the exchange might also be important if you intend to also invest in altcoins.
What is a Bitcoin Exchange?
“Bitcoin exchange” is often used interchangeably with “crypto exchange.” It is a digital marketplace where anyone can buy or sell Bitcoin [2] and other cryptocurrencies (altcoins). Using a Bitcoin exchange, you can trade your Bitcoin for Fiat or altcoins and vice versa.
How does a Bitcoin Exchange work?
The services provided by Bitcoin exchanges are similar to those offered by financial institutions that handle currency exchanges. Bitcoin exchanges match buyers with sellers for trades to materialize. With Bitcoin exchanges, you can trade your Bitcoin for Fiat or altcoins and vice versa.
Like regular exchanges, a Bitcoin exchange has the (market) makers and the takers. The makers add liquidity to the market by expanding the order book.
On the other hand, Makers set “limit orders” to buy or sell when specific price conditions are met. The takers take away liquidity from the market. They set market orders which immediately trade at the current price conditions of the market.
Bitcoin exchanges give incentives to makers, such as lower service fees and, sometimes, rebates. This is why taker fees are higher than maker fees when transactions are made on Bitcoin exchanges.
Centralized And Decentralized Exchanges
There are two kinds of Bitcoin exchanges — Centralized and Decentralized Exchanges. As you can already guess, they operate differently.
Centralized exchanges (CEX) are owned and controlled by a central organization. Just like banks, they act as custodians of your assets and have control over them.
However, Decentralized exchanges (DEX) are independent of authorities and central organizations. Instead, they are run by smart contracts, which ensure that certain conditions are met before a trade can happen.
Below are the features of both exchanges in the table below.
| CENTRALIZED EXCHANGE (CEX) | DECENTRALIZED EXCHANGE (DEX) |
| Centralized exchange controls access to all assets | The users have exclusive control over assets |
| Availability depends on the company responsible for the exchange | Always available to its users |
| Requires KYC | It doesn’t require KYC |
| Most have anti-money laundering measures in place | No anti-money laundering measures |
| Bitcoin can be traded with Fiat and other cryptos. | Can not trade to Fiat currencies |
| Higher liquidity due to more users | Lesser liquidity |
Top 3 Crypto Exchanges
These are the leading market force among the hundreds of global Bitcoin exchanges [3].
1. Coinbase
Coinbase was established in 2012 and has since established itself as one of the best places investors can purchase Bitcoin.
Coinbase has over 73 million registered users with 8.8 million monthly visitors. The exchange holds 11.3% of the crypto market cap.
Pros:
- Access to over 170 cryptocurrencies.
- Available in over 100 countries.
- High level of security.
Cons:
- Limited features in most countries.
- The transaction fees are higher than other exchanges.
2. Binance
Binance is a great platform for trading Bitcoin. It was established in 2017 and is one of the most popular exchanges in the world. Alongside Bitcoin, it provides a great selection of altcoins.
It has fewer active users than coinbase but still boasts the largest trading volume of any crypto exchange.
Pros:
- It has no or low trading fees.
- It offers over 350 cryptocurrency trading.
- It has good security measures.
Cons:
- The US version is limited in features and the number of cryptocurrencies available.
- It’s inaccessible in 4 states in the US.
3. Kraken
Kraken is one of the most secure Bitcoin exchanges. It is the only exchange with a banking license, thus increasing its trustworthiness. The service is available in most countries and boasts high standards.
Pros:
- You can trade with any amount you want. There are no minimum deposits.
- You get lower fees the more you trade.
- Large selection of cryptocurrencies.
Cons:
- It’s inaccessible in some parts of the US states.
- The options for funding accounts are limited.
- US citizens have no access to futures trading.
4 Other ways you can buy bitcoin
Crypto exchanges provide an easy avenue for purchasing Bitcoin. However, there are other means of buying Bitcoin aside from exchanges. They include:
1. Financial apps
Some financial apps now offer cryptocurrency services. You can use these apps to buy, sell or hold Bitcoin. The most notable among these apps include PayPal, Cash App, and Venmo. Even though you can buy Bitcoin easily through these apps, they do not allow you to withdraw your Bitcoin to exchanges and wallets.
PayPal charges service fees according to the number of transactions. Below you can see the charges for the various transaction value classes.
| Purchase or Sale value | Service Fees |
| Above $1,000 | 1.5% |
| $200 – $1,000 | 1.8% |
| $75 – $200 | $2.49 |
| $25 – $75 | $1.99 |
| $5 – $25 | $0.99 |
| Below $5 | $0.49 |
2. Trading apps
Apps like bull and Robinhood are known for providing a platform for their users to trade stocks. Their selling point is that they offer commission-free stock trading services.
These trading apps now allow buying and selling Bitcoin and some other services. The good thing is that the commission is free. However, they charge spread markup fees.
Webull users will have to pay a markup equivalent to 1 percent of the price. The markup prices for Robinhood haven’t been clearly stated.
3. Traditional brokers
Traditional brokers typically act as intermediaries between an investor and a stock exchange. However, some conventional brokers now offer cryptocurrencies like Bitcoin and Ethereum as part of the investment opportunities.
Traditional brokers like TradeStation and Interactive Brokers are good examples. With both brokers, Bitcoin investors can trade the actual Bitcoin currency and futures. The price swings and volatility of crypto markets make Bitcoin futures viable. This option is perfect for individuals that want to profit from Bitcoin without owning it.
Interactive Brokers charges $10.02 for every Bitcoin futures contract and a commission of 0.12 – 0.18 percent on direct Bitcoin trades.
TradeStation’s cryptocurrency trading commissions lie between 0.05% and 0.3% percent. It also attracts a fee of $1.50 per contract for futures.
4. Bitcoin ATMs
Yet another option exists for purchasing Bitcoin, albeit an expensive one. Bitcoin ATMs allow you to buy and sell crypto using cash or debit cards. However, you still require a wallet address to complete a transaction.
The commissions for using a Bitcoin ATM range from 9% to 12% of your Bitcoin purchase.
After buying Bitcoin, what comes next is storage or safekeeping. This is especially important for long-term investors who want to hold rather than trade. Investors who have purchased Bitcoin from exchanges can transfer their Bitcoin to Bitcoin wallets.
What are the differences between Bitcoin Exchanges and wallets?
Bitcoin wallets are just like your regular wallets. You put and store your money in them. If you need to make a purchase, you take out money and give it to the other person, who most likely will put that money in their wallet.
Bitcoin wallets are software or hardware designed to store, send and receive Bitcoin. They have a private key and a passphrase to ensure high security. You have complete responsibility for this private key. Thus, you have to keep it safe to keep your wallet and funds secure.
Bitcoin can be transferred between wallets using wallet addresses. Wallet addresses are random numbers and letters generated to identify a wallet. Without a valid wallet address, you can’t send or receive Bitcoin.
How do wallets differ from Exchanges?
| Bitcoin Exchanges | Bitcoin Wallets |
| Facilitates Bitcoin trading to Fiat or other cryptocurrencies | Stores your Bitcoin for safekeeping. |
| You have no control over your private key. | You have complete control and responsibility over your private key. |
There are two broad classes of wallets — Hot wallets and Cold wallets.
Hot wallets
Hot wallets refer to Bitcoin wallets that require internet access to function. They are referred to as software wallets and can exist as mobile apps, PC software, or web extensions.
Pros:
- Easy and convenient to use.
- It is suitable for beginners and regular traders who wish to make quick and frequent transfers.
Cons:
- Because they operate on the internet, they are vulnerable to hackers.
- It is not recommended for long-term storage of large amounts of Bitcoin.
- US citizens have no access to futures trading.
Cold wallets
Cold wallets are hardware wallets that are used to store Bitcoin offline. They use a physical device resembling a thumb drive or hard drive. Bitcoin wallets that are not connected to the internet are typically safer.
Pros:
- Impervious to hacking and online attacks.
- It suits investors looking to store a large amount of Bitcoin over a long period.
Cons:
- It is less convenient and not beginner friendly.
- It is expensive.
What are the best ways to purchase bitcoin?
There is no best way to buy Bitcoin. However, Depending on your goals, you can select an exchange that suits you best. Below is a summary of the best deals for different purposes.
| Quality | Exchange |
| Cheapest place to buy Bitcoin | eToro, Bitstamp |
| The safest way to buy Bitcoin | Coinbase, Gemini |
| The easiest way to buy Bitcoin | eToro |
| The fastest way to buy Bitcoin | Bitcoin ATMs |
| Best ways to buy Bitcoin with PayPal | Binance |
| Best place to buy Bitcoin with credit/debit card | eToro, Coinbase |
| Best ways to buy Bitcoin with your bank account | eToro, Coinbase |
| Best ways to buy Bitcoin anonymously | Localbitcoins, LocalCryptos, Paxful |
Frequently Asked Questions
How do I buy bitcoin legally?
As long as crypto isn’t banned in your country, you can buy Bitcoin from any exchange available in your location. You can also buy directly from a person outside a business.
Is Bitcoin a good investment in 2023?
Bitcoin has already proven itself over the past decade to be a viable investment. Even with the bear market, many people are interested in Bitcoin, so 2023 might be a solid year for Bitcoin.
Can I buy Bitcoin with little money?
Yes, you can. You can buy Bitcoin for as little as $5.
How much Bitcoin should I buy?
You should buy Bitcoin based on your budget. Some exchanges can allow you to purchase Bitcoin with as little as $5 or $2.
How can I sell Bitcoins for cash?
Make use of a centralized exchange to sell your Bitcoin quickly.