Cryptocurrency is digital money that is easy to use for payments and other financial transactions. Bitcoin was the first cryptocurrency, introduced in 2009. Today, there are more than 7,500 cryptocurrencies but Bitcoin is by far the most popular with about 63% of the market share.
What You Need To Buy Bitcoin
You’ll need some form of a digital wallet to buy Bitcoin. A digital wallet works like a checking account for cryptocurrency like Bitcoin. You use it to make deposits, withdrawals, and payments. Digital wallets have a public security key (sometimes used interchangeably with “address,” though they’re slightly different) which works like a checking account number—it’s the destination for your bitcoin transactions. And when you’re ready to make those transactions, your wallet has a private security key that works like a PIN—it’s unique to you and gives you access to your bitcoin.
Just like there are different types of checking accounts, there are different types of wallets for cryptocurrency:
- Desktop digital wallets store security keys on your personal computer and can only be used from that device. They have different features for security. A couple of popular desktop wallets are Coinbase and Exodus.
- Mobile digital wallets can be used from any mobile device (like your smartphone or tablet) and the security keys are online. Two popular mobile digital wallets are Robinhood and SoFi Invest.
- Paper wallets use a printed QR code as the private security key. Paper wallets are easy to control and secure. If you lose your QR code or accidentally destroy it, however, you can’t recover it and you lose access to your bitcoin.
- Hardware wallets are USB devices that store transactions and security key information. Hardware wallets like Trezor and Ledger can help you send and receive bitcoin in secure ways.
Wallets allow you to store bitcoin as well as send and receive the currency from anyone in the world.
Some crypto exchanges offer wallets, but you can also use them without a wallet. If you choose the latter, the exchange manages your private keys for you to facilitate transactions.
It is very important to keep your private key secure because anyone who has access to it can access your bitcoin.
How To Buy Bitcoin With Cash or a Credit Card
Whether you have a digital wallet or not, you can buy and sell Bitcoin through a cryptocurrency exchange. Cryptocurrency exchanges facilitate Bitcoin and other transactions between buyers and sellers, just like a stock exchange does. For example, current prices and transactions are posted continuously just like with stock trading.
When you open an account with an exchange, the process is similar to opening a bank account. You’ll have to provide personal information and identification. You'll also need to link a credit card or checking account to pay for your purchases.
When your purchase of Bitcoin is complete, the exchange deposits your bitcoin into your wallet. Exchanges like Coinbase automate the use of keys and addresses; you don’t have to do anything but tell the exchange how much bitcoin you want to buy or sell.
There are hundreds of exchanges to choose from. Some exchanges are built for active traders and others are better for beginners. If you're buying Bitcoin for the first time, Binance and Coinbase offer education and all of the tools that you need to get started.
Exchanges charge commissions—transaction fees for credit cards, debit cards, and bank transfers—as well as markups on Bitcoin to U.S. dollar conversions. For example, Coinbase charges between $0.99 and $2.99 depending on the size of the transaction. These charges can add up pretty quickly, so be sure you understand them.
How To Buy Bitcoin at a Crypto ATM
Cryptocurrency ATMs can be used to purchase small amounts of Bitcoin with cash, credit, or debit cards. Crypto ATMs are available in many major cities and many other locations. The process is very simple.
The machine asks you to provide the key to your digital wallet; you’ll most likely provide a QR code your wallet generates. Select how much Bitcoin you would like to purchase, and load the cash into the machine. If you don’t have a digital wallet, the ATM likely has the ability to create a paper wallet for you on the spot.
Most crypto ATM providers don't require personal identification for smaller transactions. Coinflip ATMs, for example, will require you to provide a state-issued ID for all transactions of $901 or more. While crypto ATMs are very convenient, they can be expensive. Crypto ATMs charge transaction fees and they don't necessarily have competitive exchange rates.
Once you’ve bought Bitcoin, you can keep it as an investment or use it to buy products like you would with cash or a credit card. Several retailers, such as Overstock.com, GameStop, and Nordstrom now accept Bitcoin as a form of payment.
How To Keep Your Bitcoin Secure
Your bitcoin may be stored digitally and requires a private key to authenticate transactions, but it is still vulnerable to hackers and thieves. Consider these steps to protect yourself:
- Always make sure your transactions are completed on secure networks and devices.
- Consider using virus software and a VPN, which make it harder for hackers to break in.
- Use strong passwords for your accounts and change them often.
- Consider using offline wallets like paper and hardware wallets.
- Be on the lookout for email phishing scams.
- Backup your wallet.
The Best Way To Buy Bitcoin
The best way to buy bitcoin depends on what you want to accomplish. If you are just getting started, a mobile digital wallet and ATMs are a great way to handle small purchases and conversions to cash.
If you're planning on larger transactions, or want to hold Bitcoin for investment purposes, online may be a better way to go for lower fees, better exchange rates, and tighter security. However, you should also consider keeping bitcoin on offline wallets in the same way you’d keep $100,000 in the bank instead of your pocket.
While Bitcoin and other cryptocurrencies have become more popular, remember that there are no current fraud protections like there are for credit cards and bank accounts. Whether you are a beginner or an experienced investor, security should be a top concern.
- You can buy Bitcoin using a credit card, bank account transfer, debit card, or cash.
- Mobile digital wallets and ATMs are an easy way for beginners to buy Bitcoin.
- Always protect your private security key.
- Make sure you understand all of the fees and markups that come with buying Bitcoin and other cryptocurrencies.