Learn How to Buy Bitcoin in 2021
Bitcoin (BTC) is one of the most popular cryptocurrencies but most amateur investors are confused about how to buy Bitcoin in 2021. The pioneer of these digital assets has beaten many mainstream investment vehicles in its short history and has also become the preferred asset for many institutional investors. Bitcoin is easily available on most platforms for purchase but it is important to carry out due diligence before investing and learn all that you can.
This guide will discuss the major payment processes involved in buying Bitcoin and it will also explain how to make your first purchase.
Buy Bitcoin in 3 Quick Steps
Select a suitable regulated exchange or broker and register your account. This is the first step. On most platforms, you will be required to provide a username, email address and phone number to open an account. Click on the verification link sent through email and your registration process will be completed.
Once the account is registered successfully and verified, it is time to deposit funds. Most platforms accept major payment methods such as bank transfers, credit/debit cards, and other third-party payment processors like PayPal. Bank transfers are slow but least expensive while credit cards are quick but will involve extra costs.
Once the account is funded, you can begin trading. Check the preferred fiat/crypt pair to trade. Bitcoin is the most popular currency and is paired with almost all fiat and crypto options. So select a suitable pair, specify the amount of Bitcoin you wish to buy/sell and start trading. You could also select a limit order to ensure you buy at a better price level.
What are the Best Places to Buy Bitcoin?
There are several exchanges available where you can trade Bitcoin with ease. It is important to trade on regulated exchanges as these platforms abide by KYC practices and ensure security for their users. Below we will list some of the best exchanges for buying Bitcoin.
What Should You Consider Before Buying Bitcoin?
Before buying Bitcoin, you should carefully research and select an appropriate platform, and then select a wallet for storing your purchased tokens. Let’s discuss these in detail below.
- Choosing an exchange: It is important to research different exchanges in terms of fees and services offered before you select an option. Different portals are suited for different investor profiles and it is important to find out the various expenses charged such as deposit and withdrawal fees, and account maintenance charges before you select an exchange.
- Choosing a wallet: Leaving funds on an exchange is always risky. Therefore, you must select an appropriate wallet to store your purchased bitcoins. Hardware wallets are the safest, but a little more expensive, while software wallets are free, but vulnerable to security threats.
- Research the coin of interest: It is also important to research the various price indicators and price history of Bitcoin before you buy it. Bitcoin is a volatile currency and you must ensure you research and learn about what moves its price before deciding when to buy.
5 Steps to Buying Bitcoin on an Exchange
Bitcoin is offered on most exchanges and is very popular among investors. Let’s go over the steps to open an account on an exchange and learn how to make the first Bitcoin purchase.
Step 1 - Open an Account with an Exchange
Register an account by entering your name, email address and phone number. You should be able to register an account within a few minutes. However, there is an extra step involved here. All regulated exchanges will require you to verify your new account by agreeing to complete a KYC procedure. This is an additional step to ensure the platform remains safe for all users. You will need to submit additional information such as a driving license or a utility bill to prove your identity and address. Some exchanges may also require a video KYC to prove that the account details match the documents.
Step 2 - Fund your Account
The next step is to deposit funds into your account to buy Bitcoin. Most exchanges provide support for major payment methods such as credit/debit cards and bank transfers. You can also link your existing bank account with the exchange to avoid filling in details each time you need to deposit funds. Some exchanges may also support Skrill or PayPal but check with your selected exchange and find out if the preferred payment method is supported by the platform before you begin.
Step 3 - Buy Bitcoin
Once the funds hit your account, it is time to make the first purchase. Simply head over to the exchange dashboard and select Bitcoin with your preferred fiat pair such as US dollar or Euro depending on your area of residence. This will open a new tab where you can click on the buy button, specify the amount of BTC you wish to buy and then click buy. Check all the details once and ensure that they are correct before you continue.
Step 4 - Set up a Wallet for Safe Storage
It is important to store your bitcoins in a safe wallet to prevent losing them to theft or hacks. Some of the major types of wallets are:
Desktop wallets: These are computer programs that can be downloaded onto a desktop computer. They remain online and are vulnerable to hacking attempts.
Mobile wallets: These are apps that can be downloaded onto a mobile or tablet device but these wallets are also hot/online and are therefore not very secure.
Hardware wallets: These resemble USB devices and store assets in an offline environment. They are expensive but are the most secure option for storing BTC.
Step 5 - Safely Store your Bitcoin
Most platforms will provide you with an in-built wallet where your purchased tokens will be stored automatically. However, exchanges have been hacked in the past and you will lose access to all your bitcoins in such cases. Sometimes, the exchange may also declare bankruptcy and you will be left at a loss. So it is important that you gain control of your tokens by moving them to a personal wallet. Simply head over to the exchange wallet or balance section and input your wallet address, then click on transfer and move your purchased bitcoins to your own wallet for additional safety and security.
Ways to Buy Bitcoin on an Exchange
Different platforms will provide different payment methods depending on the region of operation and jurisdiction regulations. Some of the most popular methods supported on most exchanges are discussed below.
- Buy Bitcoin with Cash: You can purchase Bitcoin with cash through peer-to-peer exchanges but it is always risky dealing with unregulated platforms.
- Buy Bitcoin with Credit Card/Debit Card: Bitcoin can be bought with credit and debit cards. Credit cards are quick and secure but expensive to use.
- Buy Bitcoin with Bank Transfer: You can buy Bitcoin through bank transfers but this method is slow and may take a week or more to process sometimes.
- Buy Bitcoin with PayPal: It is possible to purchase Bitcoin directly with PayPal in the US but this option is not available in all countries.
- Buy Bitcoin with crypto: If you have another altcoin such as Ethereum or Cardano, you can exchange it for Bitcoin. Since BTC is the most popular cryptocurrency, it is paired with all altcoins.
Why Buy Bitcoin?
Buying allows you access to the actual asset. Here, you purchase the actual token and have full control over it. You can use it to purchase goods or services or store it in a wallet to benefit from its long term rise in value. Trading is another activity where you do not buy the actual asset but simply trade investment instruments such as futures, options and contract for differences (CFDs). These instruments are known as derivatives since they derive their price from another underlying asset such as Bitcoin (if you are trading Bitcoin) but you do not get access to the actual tokens here. You simply trade BTC’s price through these instruments.
Buying Bitcoin has some advantages such as few risks since you do not need to monitor the market prices constantly and can simply store it for safekeeping and benefit from its long term rise. Trading is risky and requires technical knowledge of various price indicators unlike buying the coin which is relatively simple.
Who Should Buy Bitcoin?
The following class of investors should buy Bitcoin.
- Investors who wish to buy and hodl the tokens for a long time.
- Investors who cannot trade actively but still want to benefit from BTC’s price rise.
- Investors who wish to use BTC for purchasing goods or services.
- Amateur and occasional users who do not have sufficient technical knowledge of trading.
Strategies for Buying Bitcoin
Buying strategies for Bitcoin need a lot of patience but they are less risky. These strategies aim at benefiting from the long term price rise while ignoring short term fluctuations. Some of these buy approaches are discussed below.
Buy and Hodl
The buy and Hodl strategy involves buying Bitcoin and storing it or holding it in a safe wallet. It is essentially a buy and ‘forget’ kind of strategy. Here, your main motive is to hold on to the tokens and sell them at a higher price after a few months or years. Remember that it took years before the initial buyers of BTC saw a magnificent price rise. Buy and Hodl tests your patience but it is the least risky approach since you don’t need to monitor the markets on a daily basis but can patiently wait for your opportunity to sell.
Dollar Cost Averaging
This strategy involves buying a small but fixed amount of BTC over a period of time. Here, you buy Bitcoin in small instalments, say $100 per month spread over three years. In this manner, you divide your entire investment into small sums of money. The cost of purchase will vary over the three years and you will get more bitcoins when the price falls and less when the price rises but over a period of time, the final average price will be to your advantage. This is a good strategy since nobody can estimate the right price for entry and you can sometimes get stuck in an investment if you buy at a very high price.
How to Sell Your Bitcoin?
To sell your Bitcoin, transfer it first to an exchange. To do this, access your wallet and input the exchange wallet address, transfer the BTC by clicking on the send button. The BTC should reflect in the exchange wallet in a few minutes. Then, click on the sell tab on your exchange dashboard and select a suitable fiat pair such as US dollar. Input the number of bitcoins you wish to sell and you could even select a target sell price by selecting a limit order. Once you are satisfied, click on the sell button to complete your transaction.
Expert Tip on Buying Bitcoin“ Now that you know all about buying Bitcoin, here is an extra tip for you. You could research and learn about arbitrage buying and selling that involves buying Bitcoin on one platform and selling it on another for quick profits. Since there is a considerable price difference among different platforms, you can use it to your advantage to gain small amounts of profits that could be reinvested into your initial investment. ”- VantagePointTrading Team
Buying vs. Trading Bitcoin
There are a few key differences between buying and trading Bitcoin, and the approach you choose will depend on your preferences. Examine each option more closely using our comparison:
Summary and Key Takeaways
Identify a suitable payment method depending on your needs and budget. Then employ some popular strategies such as buy and hodl or dollar cost averaging to ensure a successful investment.
You can either choose to buy the asset to benefit from its long term rise or trade BTC to exploit its price volatility for a regular income.
Finally, ensure proper risk management by transferring your purchased BTC into a secure wallet.
Frequently Asked Questions
Yes. Most regulated platforms will insist on identity verification as part of KYC compliance.
There are many online resources available. Many veteran investors share their strategies on social media such as Twitter and Facebook.
Hardware wallets can be bought easily online through sites like Amazon. Popular hardware wallets cost about $100-200.
Yes. Most platforms will charge a transaction fee for every buy/sell transaction. Then, there will be extra deposit or withdrawal fees. The banking network you use may also charge some fees for the transfer of funds.
No. The crypto market never sleeps. You can buy BTC anywhere and at any time of the day. Most exchanges work 24X7.