A Simple Guide to Buying Bitcoin
Investing in Bitcoin (BTC) might be one of your crypto 2022 goals. For your convenience, we have broken this down into 4 simple steps. In previous posts we covered What is Bitcoin? and Top 5 Truths About Bitcoin and How It Works (in case you need a refresher). This guide will build off that foundation with a few practical insights on exchanges, payment, storage and more.
1. Choose a Crypto Exchange
Cryptocurrency exchanges are the most convenient option since they offer a large variety of features and a list of cryptocurrencies for trading.
Cryptocurrency exchanges will allow you to buy, sell and hold cryptocurrency. A known best practice is to select an exchange that allows users to withdraw crypto to their own personal wallet.
There are many types of cryptocurrency exchanges and the most popular exchanges are the centralized ones that follow laws requiring users to submit identifying (KYC - Know Your Customer) documentation.
Here are some of the most popular centralized exchanges:
2. Verify and Connect Your Exchange to a Payment Option
After you choose an exchange, you will need to gather personal documents (e.g., driver’s license, social security number, etc.)
The information requested will depend on where you live and the laws there.
Once your KYC documentation has been verified, you will be prompted to connect a payment option.
At this point you can connect your bank account directly, or use a debit card or credit card. There are varying fees for deposits via a bank account, debit, or credit card and you should look at the pros and cons of each option. Generally credit and debit cards incur higher fees but may be faster in getting funds into your exchange account. Note that there is generally a limit (e.g., $2,500) for debit and credit card transactions whereas wire transfers can be much larger. Here is a linked resource outlining associated fees: 2021 Crypto-Exchange Fee Comparison | CoinTracker
3. Buy Crypto
You can buy bitcoin or another listed cryptocurrency after choosing an exchange and connecting a payment option.
Cryptocurrency Exchanges offer a number of order types and ways to invest. Most of them offer both market and limit orders.
Market orders are transactions meant to execute as quickly as possible at the current market price.
Limit orders set the maximum or minimum price at which you are willing to buy or sell
For most people beginning their crypto journey, market orders are recommended.
Some exchanges also offer a way to set up automated investing — i.e., recurring purchases every day, week or month.
Step 4: Safe Storage
Most of the centralized exchanges mentioned above are properly regulated and in reality, are quite secure. That being said, some of the exchanges have been “offline” during highly volatile events which is something they have been heavily criticized for. Being true to the Bitcoin ethos would suggest that once you have purchased your cryptocurrency you should withdraw it to your own wallet. For beginners, leaving crypto in an account at the exchange is typically advisable until an investor fully understands the pros and cons of self storage on their own personal wallet. We will discuss more in upcoming articles—stay tuned.
As always, do you your own research and have fun!