How To Invest On Bitcoin

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 7 minute read

In recent years, Bitcoin and other cryptocurrencies have risen in prominence as investment options, with Bitcoin at the forefront as the first and currently most valued of these digital currencies. Even though Bitcoin’s volatility has shaken the investment world, more and more people are including Bitcoin in their portfolios.

Buying Bitcoin may be done in a number of different methods, each with its own set of benefits. This is true whether you are a casual investor or someone trying to diversify their portfolio by including Bitcoin. Here, we’ll explain how to get your hands on some Bitcoin, as well as several safe ways to keep it.

A Beginner’s Guide to Purchasing Bitcoin

Bitcoin’s original intent was to facilitate direct monetary transactions between users. Hundreds of businesses have sprung up in the past decade offering Bitcoin exchange services, as well as facilitating Bitcoin trading and storage solutions.

The Bitcoin network was created to function as a means of exchange via a decentralized payment system, but it has proven challenging to embrace owing to technological barriers and the difficulties of onboarding new members. In fact, until recently, even “purchasing Bitcoin” required a number of processes, which scared off most investors.

There has never been a better time to invest in cryptocurrency, since Bitcoin can now be purchased with only a few touches on your mobile device. Buying Bitcoin is really simple, and the methods are all laid out here for you.

  1. Choose Where to Buy Bitcoin

Seeking to remain incognito? Security? fees that are somewhat low? Possibility of simple operation?

While it’s never been simpler to acquire Bitcoin, it’s crucial that you weigh the pros and cons of each method before making a final decision. Peer-to-peer (P2P) swap sites and decentralized exchanges provide greater privacy, while centralized exchanges and payment applications streamline the purchasing process. Also, Bitcoin ATMs are springing up all over the place.

Soon, we’ll have additional information about the most common choices. Where and how you choose to acquire Bitcoin will determine what identification and verification methods may be required of you.

  1. Add a Payment Method

There are a number of different ways to pay for Bitcoin, and this number varies depending on where you choose to buy Bitcoin. Connecting your bank account and depositing funds by ACH or wire transfer is possible when utilizing a centralized exchange (the norm). You may use a linked debit or credit card to make purchases on some markets.

Most reputable markets employ a third-party service provider to link to your bank, letting you quickly and easily enter your banking information and choose the account you wish to link.

You can only use other cryptocurrencies to buy Bitcoin on a decentralized exchange, so you’ll need to link your digital wallet to the site before you make a purchase.

Buying Bitcoin on a P2P exchange necessitates making a direct purchase from another user and paying with the suggested payment method, which is often a payment software like Payoneer.

  1. Make a Purchase

As soon as you have your payment method linked, you will be able to make an order for Bitcoin. The process of buying Bitcoin from many different exchanges is as easy as filling out an order form, specifying the amount of Bitcoin you want to buy in your local currency, and clicking the “Buy” button.

Limit and stop-loss orders are an additional feature offered by some cryptocurrency exchanges. This feature lets you choose a target price for Bitcoin, at which point the exchange will execute the deal. It’s possible that some Bitcoin retailers may allow you to set up automatic monthly payments, allowing you to spread out the expense of your Bitcoin purchases over time.

After an order has been placed and fulfilled, payment will be processed and the Bitcoin will be sent into your wallet. Your Bitcoin will often be sent to an exchange-issued cryptocurrency wallet in your name.

  1. Put your Bitcoin in a Crypto Wallet.

Even while Bitcoin is resistant to cyber threats, the exchanges and apps you use to manage your Bitcoin are not. More than $3 billion worth of cryptocurrency was stolen in 2021.

Keeping your Bitcoin in your own possession is considered the most secure option because the cryptocurrency was designed around the concepts of autonomy and decentralization. Nobody’s interested in your keys or money. For Bitcoin, you can use one of two primary varieties of electronic wallets:

  • Hot Wallets
  • Hardware Wallets (Cold Storage)

How to Purchase Bitcoin Through a Cryptocurrency Exchange

To get Bitcoin, one has just to visit a cryptocurrency exchange. Cryptocurrency markets may be either centralized or decentralized.

Many people utilize centralized exchanges like Coinbase to buy Bitcoin and store their assets in the exchange’s custody. The cryptocurrency exchange also allows customers to transfer their cash to their personal electronic wallet.

One may pick from a plethora of centralized exchanges, some of which are more reliable and safe than others. You’ll need to perform the following in order to purchase Bitcoin through an exchange:

  1. Create an exchange account.
  2. Check your identification.
  3. Make a deposit (bank account, wire transfer, etc.)
  4. Make a purchase

Safe deposit boxes and even insurance on Bitcoin and fiat money assets are typically offered to consumers by virtual currency exchanges. However, the exchange will control the private keys to your Bitcoin if you store it there, and if the exchange goes bankrupt, you might lose your Bitcoin.

If you want to buy Bitcoin anonymously while maintaining full control of your cash, a decentralized exchange is the way to go. In a decentralized Bitcoin exchange, you may buy Bitcoin instantly and anonymously. The downside is that only digital currencies like Bitcoin are accepted for payment.

The following is a step-by-step explanation on how to buy Bitcoin through a decentralized exchange:

  1. Make a digital or physical wallet.
  2. Put cryptocurrency into your wallet, such as a stablecoin.
  3. Register your wallet with the exchange.
  4. You may exchange your cryptocurrency for Bitcoin.

Your Bitcoin will be sent to your cryptocurrency wallet as soon as the transaction is complete.

How to Purchase Bitcoin Using PayPal

There are a growing number of reputable payment gateways that support in-app cryptocurrency purchases, with PayPal being among the most widespread. Using the PayPal mobile app or “Pay with PayPal” on a cryptocurrency exchange like eToro, you may easily purchase Bitcoin.

Bitcoin purchases made using the PayPal app need the usage of a connected debit card or bank account, or the use of available funds in a PayPal account. To use PayPal, you must first agree to their terms of service and provide personal information such as your name, address, and Social Security number.

If you want to buy Bitcoin, you may do so after enabling crypto purchases in your account settings. Your PayPal balance will be updated after a successful purchase, but you will be unable to withdraw the Bitcoin.

How to Purchase Bitcoin Using a Credit Card

You may use a credit card to acquire Bitcoin, but only if you do it through a linked exchange or payment app. Payment gateway providers like MoonPay and other large centralized exchanges generally accept credit card purchases.

You’ll need to sign up for an account, verify your identification, and link your card to the app before you can make a purchase, much as when you use your bank account to buy something. It’s not without drawbacks to use a credit card to buy cryptocurrency.

  • High Prices. When purchasing Bitcoin with a credit card, most exchanges and services impose a steep transaction fee. This can be at least 5%.
  • May Be Considered a Cash Advance. Certain credit card issuers, like American Express, consider the purchase of cryptocurrency to be a cash advance and assess extra costs accordingly.
  • You must pay interest on purchases. Credit cards are a kind of revolving debt, with interest rates that can exceed 25% APR if the monthly balance is not paid in full.

Credit card purchases of Bitcoin are possible, but the large associated costs may nullify any potential savings.

Bottom Line

Now more than ever, you can buy Bitcoin with only a few taps of your screen, thanks to the proliferation of convenient applications that make buying and storing cryptocurrency a breeze.

Cryptocurrency exchanges simplify the process, but there are costs associated with buying and selling. Even if services like Robinhood and PayPal make it possible to purchase Bitcoin, keep in mind that doing so prevents you from retaining physical control of any Bitcoin you purchase.

There are a number of options for acquiring Bitcoin, but the safety of your funds should be your top priority. If you are a long-term investor, securing your Bitcoin in a reliable hardware wallet is a terrific way to keep it safe from thieves and prevent it from being easily spent.

Not your keys, not your coins, remember that. If you keep your coins on a brokerage or other platform, they are not technically your own, and you might lose them if the service goes bankrupt.

To sum up, Bitcoin has achieved global notoriety, and while its price has been volatile, it is likely to remain a major financial tool for the foreseeable future. Do not make reckless financial commitments.

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