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Buying Bitcoin for Beginners
Buying your first Bitcoin
In the realm of digital finance, Bitcoin stands tall as the pioneer and most widely recognized cryptocurrency. If you're venturing into cryptocurrencies for the first time, buying Bitcoin can seem like a daunting task, but it’s actually easy to buy Bitcoin. Storing and using it requires more focus. We'll walk you through the essential steps to buy Bitcoin securely and confidently.
Key Takeaway
You’ve got to get in the game. This means buying a small amount of Bitcoin. Magic starts to happen because everything else you need to learn about Bitcoin and crypto becomes more interesting. When you have skin in the game you are more serious.
Understanding Bitcoin
Before diving into the process of buying Bitcoin, it's crucial to understand what it is and how it works. Bitcoin is a decentralized digital currency, meaning it operates independently of any central authority, such as a government or financial institution. Transactions are recorded on a public ledger called the blockchain, which ensures transparency and security. Not all blockchains are the same and understanding how Bitcoin works makes it easier to understand how other blockchains are different.
Per Satoshi Nakamoto, inventor of Bitcoin: A Peer-to-Peer Electronic Cash System:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.”Â
Does that resonate with you?
It should, considering everyone has witnessed the shenanigans of the worldwide Great Recession of 2008. It helps to have conviction for the thing you are investing in. Some people started hearing about huge gains in Bitcoin and the crypto market and asked, “How can I get some?” without knowing or caring about anything else but the gains. Your overall success with Bitcoin will stem from your Why and the same thing is true with any asset. Your why, the big reason you think the asset is valuable, dictates how long you hold, whether you panic sell and so on. How to buy Bitcoin for beginners is the place to start building your way into a crypto portfolio.
Satoshi puts it like this:
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve...”
To be successful with Bitcoin, crypto education is key. Crypto requires following a process of “learn, use, repeat” – a method that’s crucial to getting in the game while weaving in risk, security, and tax in the right order as you go along your journey. But if you spend too much time learning, you’ll miss getting in the game and having the chance to experience how crypto works.
Key Takeaway
The best way to learn is to apply a balanced method of learn, use, repeat.
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Get in the Bitcoin game
Some finance apps like Robinhood, CashApp and PayPal already offer Bitcoin services. If you have one of those apps, you’re minutes away from buying Bitcoin without needing some of the steps below. Just go to the app, find the Bitcoin section and click Buy. Shazam, you’re in the game.
If you’re still in the beginning stages of buying Bitcoin, here are seven tips to help you get started:
1. Choose an amount.
Getting in the game means investing an amount that works for you. For example, you can easily burn up $50-$100 on a meal with a couple people so it’s hard to go wrong putting $100 into Bitcoin. Remember the saying: Never invest more than you can afford to lose. Your first Bitcoin purchase should be well below that threshold test.
Key Takeway
The value of getting in the game is in taking action - not in the amount you invest.
2. Select a reliable exchange.
Choose a reputable centralized cryptocurrency exchange to buy Bitcoin. This may be challenging depending on your jurisdiction. Centralized exchanges are online platforms where you can buy, sell, and trade cryptocurrencies. When selecting an exchange, consider factors such as:Â
- Security
- Fees
- Payment methods
- User interface
Some popular cryptocurrency exchanges include Coinbase, Binance, Kraken, and Gemini. These exchanges operate in the U.S. and various other jurisdictions. These platforms offer a user-friendly interface, robust security features, and a variety of payment options. It's essential to do your research (DYOR), which applies to all things crypto.
Key Takeaway
Centralized exchanges are the best place to start because they are your fiat currency.
(i.e., USD, Euro, etc.) on- and off-ramp.
3. Verify your identity.
Before you can start buying Bitcoin on most exchanges, you'll need to verify your identity to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. This typically involves providing personal information, such as your name, address, and government-issued ID. This is essentially like opening a bank account from a KYC perspective.
Key Takeaway
Scan your passport and driver’s license or similar ID card both front and back. Save the scans as both JPEG image file and PDF and save to a “KYC Folder.” You’ll need this info again for other exchanges so do the work upfront.
While the verification process may seem intrusive, it's required by regulations. Once your identity is verified, you'll typically have access to higher transaction limits on the exchange.
4. Deposit funds.
After completing the verification process, you can deposit funds into your exchange account to buy Bitcoin. Most exchanges support various payment methods, including bank transfers, credit/debit cards, and even PayPal in some cases. Choose the payment method that's most convenient for you and follow the instructions provided by the exchange to make a deposit.Â
Keep in mind that some payment methods may incur additional fees or have longer processing times than others. It's essential to review the fee structure and processing times for each payment method before making a deposit. There could be a trade-off between funds availability and fees.
5. Place an order.
With funds deposited into your exchange account, you're ready to buy Bitcoin. On the exchange platform, navigate to the trading section and locate the Bitcoin trading pair, typically listed as BTC/USD or BTC/EUR, depending on your preferred fiat currency. Depending on the user interface, there may be a simple instant-buy feature for Bitcoin with a button to select the funds already deposited. This is a spot or market purchase.
If you are presented with different types of orders, including market orders, limit orders, and stop orders, just choose a market order. A market order will execute immediately at the current market price, while a limit order allows you to set a specific price at which you want to buy Bitcoin. The strategy is to get in the game so a market or spot purchase is the way.
6. Secure your Bitcoin.
The marrow of crypto is self-custody and taking control of your own funds. This is where some advanced skills come into play after you’re past the crypto for beginners phase. You got in the game with a small amount, so the risk of loss is fairly low. Keep in mind these are the next steps and a topic for additional education on wallets, risk and security.
Wallets come in various forms, including software wallets, hardware wallets, and mobile wallets. Each type has its advantages and disadvantages in terms of security and convenience.
7. Get educated.
Finally, as you embark on your journey into the world of Bitcoin and cryptocurrencies, it's essential to stay informed and educated about the market. Keep up to date with the latest news and developments in the cryptocurrency space through reputable sources, such as cryptocurrency news websites, forums, and social media channels.
Related: Crypto Advice for Beginners
Buying Bitcoin as a beginner may seem intimidating at first, but with the right knowledge and guidance, it can be straightforward. Remember to invest only what you can afford to lose and always conduct thorough research before making any investment decisions.Â
As always your goal is to get a Crypto Bullseye™.
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