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Since its launch in 2009, Bitcoin has experienced tremendous growth: from October 2013 to early June 2021, for example, its value increased by almost 30,000%. And while this growth alone is incredible, some analysts say the value of Bitcoin could rise even more as cryptocurrencies and the blockchain technology that powers them become more common and integrated into people’s daily lives.
With Bitcoin buying comes a major buyer, however, beware: although it has seen huge highs, it has also fallen to devastating lows.
After peaking at nearly $ 20,000 in 2017, for example, its value plummeted to only about half until 2020. Although its upward trend since then, it remains a very significant investment. volatile and an inappropriate tweet from Elon Musk can decimate his value. This is why experts do not recommend that you invest more than a small percentage of your money in Bitcoin.
That said, if you still want to get in on the action, here’s how to buy Bitcoin yourself.
How to buy Bitcoin in 4 steps 1. Choose a crypto exchange
To buy Bitcoin or any cryptocurrency, you will need a crypto exchange where buyers and sellers meet to exchange dollars for coins.
There are hundreds of exchanges out there, but as a beginner you’ll want to go for one that balances ease of use with low fees and high security. Be sure to check out our top picks for the best crypto exchanges, like Coinbase, Gemini, and Binance.US if you don’t already have an exchange in mind.
Make sure to check if your exchange has a Bitcoin wallet built into its platform; otherwise, you will have to find one of your own. You can also choose to buy your crypto on a platform like Robinhood, Paypal, or Venmo, although buying crypto this way often means you can’t withdraw your coins and move them to another platform. . If you want to keep your crypto in another wallet, you will need to sell your holdings and then buy them back on another exchange.
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2. Decide on a payment option
After choosing an exchange, you need to fund your account before you can start investing in Bitcoin. Depending on the exchange, you can fund your account by wire transfer from a checking or savings account, PayPal, bank transfers, a cryptocurrency wallet, or even a credit or debit card.
Keep in mind, however, that platforms may charge higher transaction fees for certain funding options. For example, Coinbase doesn’t charge a fee if you wire transfer from a bank account. However, it charges $ 10 on wire transfers and 2.5% of the transaction amount if you use PayPal.
Things get even more expensive if you use PayPal or a debit card to make a direct purchase of cryptocurrency, instead of funding your account and then using the transferred money to make your purchase: Coinbases’ fees. amount to 3.99% of the transaction amount. Credit card transaction fees on other platforms are often at least as high.
Since the fees reduce the amount of money you can invest (and therefore also the amount of money you need to grow and accumulate), it usually makes sense to use wire transfers from a bank account. rather than other methods. Additionally, if you use a credit card to purchase cryptocurrency, it will usually count as a cash advance and be subject to a higher interest rate than you pay on regular fees. In addition, going into debt to buy volatile investments is extremely risky.
3. Place an order
Once your account is funded, you can place your first order to buy Bitcoin. Depending on the platform you are using, you may be able to buy it with the push of a button or you may need to enter the Bitcoins (BTC) ticker symbol. You will then need to enter the amount you wish to invest.
Once the transaction is completed, you will own a portion of a Bitcoin. This is because it takes a large initial investment to buy a single Bitcoin now. If the current price of Bitcoin was $ 38,000, for example, you would need to invest that much to buy Bitcoin. If you invested less, say $ 1,000, you would get a percentage, in this case 0.026%, of a Bitcoin.
4. Select a secure storage option
The crypto exchange you are using probably has a built-in Bitcoin wallet or at least a preferred partner where you can keep your Bitcoin safe. Some people, however, don’t feel comfortable leaving their crypto connected to the internet, where it can be more easily stolen by hackers.
Most of the major exchanges have private insurance to reimburse customers if this happens, and increasingly they also store the majority of customer assets in what is known as an offline cold store. If you want ultimate security, you can store your Bitcoin in an online or offline Bitcoin wallet of your choice. But keep in mind that if you are withdrawing crypto from an exchange, you may need to pay a small withdrawal fee. Additionally, if you are using a third party crypto wallet custodian, you may also be permanently unable to access your coins if you lose the private key that serves as the password for your wallet. This has excluded some Bitcoin millionaires from their fortunes.
Sell Bitcoins
When you decide that you are ready to sell your Bitcoin, you can place a sell order through your exchange, much like you did when you originally purchased your BTC. Most exchanges offer multiple types of orders, so you can decide to sell only when Bitcoin hits a certain price, or you can place an order that goes through immediately.
You can choose to sell your entire Bitcoin holdings or just a specified amount. Once the sale is complete, you can transfer the money to your bank account. Your exchange, however, may have a retention period before you can transfer to your bank account. This is not a cause for concern; it just takes some time to make sure the transactions are clear.
When you sell your Bitcoin, you can make a profit. If you do, you will be liable for capital gains tax, as sales of cryptocurrency must now be reported on your taxes.
Should you buy Bitcoin?
Especially when the price of Bitcoin skyrockets, investing in popular cryptocurrency can be tempting. But even though it has the potential to be a lucrative investment, you need to be careful – it’s an incredibly volatile buy that experts don’t recommend you allocate a large percentage of your investment to.
If you are unsure whether investing in Bitcoin or other cryptocurrencies is a good idea for your needs, consider meeting with a financial planner who can help you determine where cryptocurrencies fit into your investment strategy. .
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