September 8, 2021

How to Invest in Bitcoin

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Bitcoin is the most popular cryptocurrency in the world. So how can you buy it? Review the simple process of how to buy Bitcoin in this guide.

In the last decade, the price of Bitcoin has gone from roughly $100 to $60,000+.

Wondering how to get in on the action? The good news is, buying Bitcoin isn't all that hard.

No matter what stage you're at in your crypto journey, with this step-by-step guide, you'll be buying Bitcoin in no time.

How to Buy Bitcoin in 4 Easy Steps

Luckily, buying Bitcoin has gotten much easier over the years. Here's how to buy the popular coin in just four steps.

Then, stick around to learn what you can do with your bitcoin, including where to keep it and other ways to invest.

Is it worth investing in Bitcoin? While not without risk, Bitcoin can be a worthwhile investment due to it's real-world use cases and potential for growth. No other cryptocurrency has the name recognition of Bitcoin, and there is always a possibility that it could reach new highs.

#1. Choose a Trading Platform

Cryptocurrencies SupportedTransaction Fee
Coinbase50Greater of Minimum Flat Fees or Variable Fees (1.49%+) by Location and Payment Method.
Minimum Flat Fees:
  • < $10: $0.99
  • $10.01 - $25: $1.49
  • $25.01 - $50: $1.99
  • $50.01 - $200: $2.99
Learn More
eToro26 (24 in the US)FreeLearn More
BlockFiBitcoin, Ethereum, Litecoin, Chainlink, PAX Gold, USDC, Binance USD, PAX, GUSD, BAT, DAI, UNINoLearn More
Gemini42($0.99 - 1.49%)Learn More
Crypto.comBTC, CRO, ETH, XRP, LTC, EOS, XLM, USDC, ATOM, LINK, XTZ, BCH, VET, ICX, ADA, ENJ, ALGO, KNC, NEO, DAI, PAXG, BAT, COMP, OMG, MANA, QTUM, CELR, MKR, UNI, YFI, BAND, EGLD, WBTC, AAVE, DOT, REN, ONT, LRC, CRV, ZIL, GRT, BNT, KSM, SKL, NEAR, SNX, BAL, STX, DOGE, UMA, FLOW, SAND, ZRX, FIL, THETA, ANKR, MATIC, CHZ, OCEAN, WAVES, RLY, STORJ, HOT, 1INCHTiered Maker-Taker Fee Structure based on 30-Day Trade Volume from 0.04% to 0.4% with discounts from 10% to 100% for staking CROLearn More

The first and most important step is to choose a platform where you'll buy your Bitcoin.

Trading platforms and cryptocurrency exchanges vary widely in features, price, and accessibility. Here are few factors that you should keep in mind when choosing an exchange:

  1. Fees: While the market price of a Bitcoin is roughly the same everywhere, exchanges charge different fees for trading.

    This can include: transaction fees, deposit and withdrawal fees, bank or wire transfer fees, trading commissions, and the bid/ask "spread" charged by most exchanges. (The spread is the difference between the price the seller asks for and the price the buyer pays.)

    Here's a sample of the trading commissions and withdrawal fees you can expect from popular exchanges:

    PlatformTrading CommissionsWithdrawal Fees
    eToroNoneNone ($30 minimum withdrawal)
    GeminiUp to $2.99 for transactions $200 or less; 1.49% for >$20010 free coins per month
    BlockFiNone1 free crypto and 1 free stablecoin per month
    Kraken0% to 0.26%Varies per coin
    iTrustCapital1%None
    RobinhoodNoneWithdrawals not supported
    Binance0.1% trading fee; 0.5% instant buy and sell feeVaries per coin

  2. Ability to withdraw: With many exchanges, you can withdraw your Bitcoin once you buy it. Other platforms, like eToro and Robinhood, only allow withdrawals in USD.

    If you want more flexibility, whether to switch platforms or use your coins, make sure your platform lets you withdraw Bitcoin.

  3. Security: A good trading platform should be upfront about which security measures they take features to keep your assets and info safe. For exchanges that store your coins (this includes most exchanges), be sure to find out how they store your coins.

    "Cold storage" is best. This means your coins are stored offline, which makes it harder for hackers to get to them.

Here are a few popular exchanges to check out:

  • Coinbase, one of the most popular crypto trading platforms in the U.S. This exchange is popular with new traders and crypto beginners, though it's known for higher fees.

  • Gemini is an all-in-one platform to buy, sell, manage and store your crypto portfolio. They're known for prioritizing security and government compliance.

  • Binance.US is the U.S. arm of Binance, the largest crypto exchange in the world. Binance.US fees are much lower than some other crypto exchanges.

  • Crypto.com is a one-stop shop for everything crypto, offering a full service exchange on top of crypto features like interest-earning accounts.

For more exchange options, check out our full guide to the best Coinbase alternatives and best crypto exchanges overall.

#2. Create an Account and Get Verified

Once you've chosen your trading platform, you'll get started by creating an account. While the process may vary slightly from one to another, the broad strokes are generally the same.

You'll need to provide some personal identifying information to create your account. Some exchanges may ask for your:

  • Name
  • Address
  • Contact information
  • SSN

Most legitimate platforms will comply with KYC (Know Your Customer) standards, as well as AML (Anti-Money Laundering) laws, which may require you to provide photos of yourself as well as your government-issued ID, for example, a driver's license or passport.

Some platforms will let you sign up without verifying, but you'll need to complete the verification process to trade or to deposit and withdraw funds.

Depending on the platform, verification can take anywhere from minutes to a couple of days.

#3. Fund Your Account

Before you can trade, you'll need to fund your account. Funding options vary between exchanges. Typically, you can fund your account via bank transfer and wire transfers.

Some platforms will also let you pay via credit or debit card. However, you should be aware that card purchases are likely to incur higher fees than other options.

Overall, ACH bank transfers are most likely to be the cheapest option for account funding on most platforms.

Many exchanges have a minimum required deposit (for example, Coinbase has a minimum of $25), so be sure to fund your account according to what your exchange requires.

#4. Start Trading

Now that your account is funded, you're ready to invest in Bitcoin. From here, the process is simple. On most platforms, you'll find Bitcoin listed on the front page, along with other popular coins like:

Follow through to the Bitcoin page, and you'll likely get a look at historical and current prices, as well as useful data like market cap, trading volume, circulating supply, and recent trading activity. There's typically a Buy/Sell button, which you'll click to start the process.

Given the high price of a single Bitcoin, you'll probably be able to buy fractional shares on any popular exchange. You can either enter the dollar amount you wish to purchase or the number of Bitcoins.

Some platforms have special trading options, like recurring buys. These are ideal for people using a dollar-cost averaging strategy.

Other platforms allow limit buys, which allow you to set a price you'd like to buy at (presumably lower than the current one), and if the market price ever reaches it, your purchase will be executed automatically. That way, you don't have to miss out on price changes that happen when you aren't able to trade.

Where should I store my Bitcoin?

Most crypto enthusiasts advise against keeping your coins stored on the exchange. After all, if the exchange gets hacked, you could lose everything.

However, as exchanges establish better security protocols and acquire insurance policies to reimburse users in the case of a loss, storing on an exchange might not be so bad.

Here are the main options for storing your crypto:

On the Exchange:
This option used to be frowned upon, but more exchanges are offering high-level security. For example, Gemini keeps the majority of their cryptocurrency stored offline in cold storage. And Binance has a secure asset fund to pay users in the case of a breach.

This is ultimately the simplest option, and certainly the most convenient, but some experts will still argue that it poses an unnecessary risk.

It's worth keeping in mind that certain non-custodial exchanges, like Coinmama, don't have the option to keep your crypto with them. You'll need a wallet of your own to make a purchase.

Others, like Robinhood, don't allow withdrawals at all, begging the question: Who actually owns your Bitcoin?

In a Hot Wallet:
This would be considered the intermediate level of security. A hot wallet is a software program or app that lets you store your crypto online for easy access, but is vulnerable to the same risks as an exchange.

The wallet is your own, but the potential to be hacked is still there.

The Coinbase Wallet is one example of a popular hot wallet, which doesn't require you to hold a Coinbase account. Binance recommends using a third-party app called Trust Wallet.

In a Cold Wallet:
The preferred method of storage for many traders is in a cold, or hardware wallet, such as those made by Trezor and Ledger.

By taking your coins offline, you have much better security from theft or hacks. Just be sure not to share your private keys.

And for those with large balances, don't post about it online. No amount of cybersecurity is going to save you if a determined criminal breaks into your house with a $5 wrench.

What Should I Do with My Bitcoin?

You bought your first Bitcoin! Now what? Here are a few options for your next steps:

  1. Hold on to it. Many traders hold Bitcoin in anticipation of a price increase. Then, they can sell it later at a profit. Just be aware that selling at a profit will result in capital gains tax.

  2. Use it as a currency. Some businesses allow you to pay for goods and services in Bitcoin.

    There's also a growing number of ways to spend cryptocurrency in real-time through cards and apps.

  3. Put it in an interest-earning account. Platforms like BlockFi interest-earning accounts with rates much higher than those at traditional banks.

    And if you should find yourself in need of cash but are not looking to sell, they also offer crypto-backed loans, which help you avoid the taxes incurred by selling your coins.

The Risks of Owning Bitcoin:
It's important to keep in mind that while buying Bitcoin at the right time has made some people extremely rich, it's a very risky asset. The same volatility that has allowed some to see profits in the millions has the potential of turning a lot of money into none just as quickly. Never invest more than you're willing to lose.

Other Ways to Invest in Bitcoin

Besides brokers and exchanges, there are a few other ways to get your hands on Bitcoin.

Bitcoin ATMs
Bitcoin ATMs allow you to buy and sell Bitcoin at physical kiosks, just like traditional ATMs, with more than 7,000 currently spread around the U.S. They tend to be subject to extremely high fees, however.

Platforms such as Bitquick, Bisq, and LocalBitcoins.com help to facilitate peer-to-peer Bitcoin sales, but such transactions may pose a higher risk than buying directly from an exchange.

Bitcoin Futures
If you are not interested in owning Bitcoin directly, but perhaps see the potential growth in value in the industry, there are a couple of options:

  • Crypto-Related Businesses: For example, Nvidia, which makes the GPUs (graphical processing units) required to mine cryptocurrency, or PayPal, which recently added the option to buy and sell certain coins.

  • Crypto ETFs (exchange-traded funds): ETFs are a risk management tool used by investors to spread their money across a range of related investments. Unfortunately, there aren't any available just yet, despite a lot of public interest.

    The SEC has blocked several attempts to establish crypto ETFs in the past, but it's possible that they will change their standing in the future.

What's the difference between a cryptocurrency exchange and a cryptocurrency broker?
Crypto brokers sell cryptocurrency directly to users, and they are the ones who set the prices on their platforms. On the other hand, crypto exchanges facilitate trades between two parties: a seller and a buyer. Since these platforms have many people buying and selling to one another, the prices are reflective of what people are willing to pay.

Bottom Line

Whether you're an expert trader or a complete beginner, you're just a few steps away from buying your first Bitcoin. After choosing the platform that's right for you, you'll get verified by providing some personal information.

Then, you can quickly fund your account via bank transfer or a number of other methods, and start trading. A little research, and you'll own your first Bitcoin in no time.

Jeremy Harshman is a protector of art and writing at CreditDonkey, a crypto comparison and reviews website. Write to Jeremy Harshman at jeremy.harshman@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

eToro USA LLC; Investments are subject to market risk, including the possible loss of principal.

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