A Guide to Buying and Using Bitcoin for Online Purchases

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While it can be hard to tell whether Bitcoin will go up or down in value or whether it is the future of currency or just a flash in the pan, one thing that is for sure is that Bitcoin is available to buy and sell right now. You can also use it for purchases if you’re creative enough and if you plan in advance for whom will take your bitcoins.

If you’re one of the many who are curious about how this cryptocurrency is bought, sold, and used, keep reading.

Key Takeaways

  • Bitcoin is a cryptocurrency that can be traded or used to make purchases online with enough advance planning.
  • Bitcoin wallets don’t come with any government guarantees. You won’t get your money back if your bitcoins are stolen or otherwise lost.
  • Buying bitcoins is quite expensive, but you don’t have to buy them whole. You can purchase them in increments as small as a hundred-millionth, called a "Satoshi."
  • Bitcoin is still a new technology, subject to some extreme value swings on occasion, so proceed cautiously.

Get Bitcoin With a Virtual Wallet

Bitcoin is meant to be an entirely anonymous platform, like the way cash works in the physical world. You are supposed to be able to buy and sell things on digital platforms without financial details or records being exchanged.

In reality, it doesn’t work that way for most people. For the average person to buy and sell Bitcoin, they have to use what is called a "Bitcoin wallet."

There are several companies that offer Bitcoin wallets, with Coinbase being one of the more popular options. To use Coinbase, you must give the company some personal details, including your email address and your name, and the ability to link to your bank account.

A Bitcoin wallet doesn’t come with any kind of government guarantees, so if Coinbase goes under, or if your bitcoins are lost or stolen, you have very little recourse, meaning you will probably never get your money back.

Purchase Bitcoin Electronically

It can be pricy to buy one single bitcoin. In 2021, the cryptocurrency hit a record high of nearly $68,000 per BTC. You don’t have to buy whole bitcoins. Just like you can use a fraction of a dollar (a penny, nickel, dime, or quarter), you can use and buy a fraction of a bitcoin. The smallest fraction that can currently be bought or sent is a hundred-millionth of a bitcoin, called a "Satoshi," after the mysterious founder of the cryptocurrency.

You can purchase Bitcoin directly through one of several crypto platforms such as Coinbase, Crypto.com, Voyager, Binance, KuCoin, Kraken, Gemini, Poloniex, Upbit, Webull, Hodl, or Robinhood (to name just a few), in whatever fraction or whole amounts you choose.

Many wallets charge a small bank transfer fee and then another fee on your purchase, so be sure to take that into consideration when you buy.

Buy Bitcoin Locally

This is a piece that many people who are new to Bitcoin don’t know about. You can buy Bitcoin locally through a site called LocalBitcoins.com, which allows you to meet people in person at public places and exchange cash for Bitcoin. It seems strange, but it’s no harder than a Craiglist transaction. Always use caution, though, as there have been Bitcoin scams in the past.

Shop Online and Pay With Bitcoin

A limited number of retailers take Bitcoin in exchange for goods and services, but unlike its reputation, they are often regular, run-of-the-mill companies, not black market operations. Currently, some Shopify store owners (under a variety of brands) take Bitcoin, as do Overstock.com and Newegg. There are others, as well, but it’s really a hit-or-miss scenario. If a store takes Bitcoin, you can use it just like a credit card to pay for products and services.

The Bottom Line

Because Bitcoin exists mostly outside of government regulation, it poses more risk than dealing with banks and government currency. However, it’s not hard to buy or sell, although the value can fluctuate wildly.

You can also use Bitcoin to make a limited amount of purchases, mostly on the web.

If you decide to dabble in Bitcoin, it’s important to know that you can lose money if the value drops. Understand that it’s still a very new technology, and even the best futurists aren’t sure what’s going to happen with it. It’s a good idea to use the philosophy of “Buyer beware” when it comes to Bitcoin.

Why Does It Take So Long to Buy Something With Bitcoin?

Bitcoin relies on a blockchain process to verify transactions, but there are a few factors that impact the amount of time this process takes. In general, when an uptick in network activity crowds the system, it will take longer (and cost more) to carry out Bitcoin transactions. When there are fewer Bitcoin transactions to process, they will likely clear quickly and with fewer fees. Keep in mind that these transactions are different from the brokerage transactions that execute in trading apps. Brokerage trades can execute much more quickly with more control over fees.

How Do You Buy Bitcoin With PayPal?

You can buy, sell, and hold cryptocurrency like bitcoin within your PayPal account. Simply log in and find the crypto tab at the top of the page. From there, you can use your existing PayPal funding methods to trade Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. Venmo, which is owned by PayPal, has a similar process for trading crypto.

How Much Bitcoin Should I Buy?

This is, of course, a highly personal question that is best discussed with your financial advisor. As a general rule of thumb, you might want to think of your Bitcoin allocation as one of your most volatile and risky pools of money. Putting something like 5% of your investment funds toward these types of risky assets gives you some exposure without endangering your entire portfolio. However, others enjoy taking more risks in markets, so they may decide to increase their holdings. Others may decide that such a risky asset isn't worth buying at all.