How to Buy Bitcoin

The following article is for educational purposes, not investment advice

By Grant Kurz
ConsultaBit, Founder & CEO

Introduction

Bitcoin was first introduced to the world through Satoshi Nakamoto’s whitepaper on October 31st, 2008. Since then, Satoshi’s vision transformed numerous industries and spread Bitcoin across the world without the involvement of traditional financial institutions.

Within the following Bitcoin guide, you will learn how to buy Bitcoin through a Bitcoin exchange and through an alternative solution, specifically, a Bitcoin wage. You will also learn about Bitcoin wallets, Bitcoin wallet security, as well as gain resources for further information on how to store your Bitcoin.

Let’s get started!

Step 1: Understand Bitcoin Exchange Risks

According to Investopedia, a Bitcoin exchange is a digital marketplace where traders can buy and sell Bitcoin using different fiat currencies (USD, Peso, etc.) or altcoins (Ethereum, Litecoin, etc.).

Indeed, some Bitcoin exchanges allow you to buy Bitcoin with fiat currency, whereas other Bitcoin exchanges only allow for the trading of cryptocurrencies.

In order to buy Bitcoin on an exchange, you will need to find an exchange accepting fiat currency payment methods such as a bank account link (ACH payment), wire transfer/bank transfer, or debit card/credit card. For your convenience, a list of Bitcoin exchanges has been compiled in Step 2: Choose a Bitcoin Exchange.

Although Bitcoin exchanges have been a driving force in expanding Bitcoin globally, they have their risks. These risks include hacked funds, insolvency, scam exchanges, as well as imposter websites. A prominent and recent example for a hacked Bitcoin exchange is the largest hack in blockchain history of 500 million dollars on Coincheck in Japan.

The lesson is clear: perform due diligence when choosing a Bitcoin exchange to buy Bitcoin. As you are deciding on which Bitcoin exchange to use, be sure to check for prior customer reviews and additional sources before determining whether you wish to proceed with a specific Bitcoin exchange.

In order to reduce exchange risks, setting up a Bitcoin wallet is recommended to store your funds instead of letting the Bitcoin exchange hold them for you. Bitcoin wallets will be introduced to you and resources for further exploration will be shared in Step 8: Get a Bitcoin Wallet.

Now that Bitcoin exchange risks have been introduced, we will show you how to acquire Bitcoin through two methods. The first method will be through a Bitcoin exchange and the second method will be through getting paid in Bitcoin.

Let’s move forward with a step-by-step guide on how to buy Bitcoin from a Bitcoin exchange.

Step 2: Choose a Bitcoin Exchange

First, we will choose a Bitcoin exchange.

For your convenience, a list of exchanges dependent upon your country’s location has been compiled for your consideration below.

Please be aware that the following list of exchanges are not endorsements, nor does the list contain every existing exchange. When visiting a Bitcoin exchange, check the spelling of the Bitcoin exchange’s website address to verify that you are at the correct website to avoid imposters attempting to steal your confidential information. Upon verification, bookmark the Bitcoin exchange for future usage.

North America

United States of America

  1. https://www.coinbase.com
  2. https://www.kraken.com
  3. https://gemini.com
  4. https://www.bitstamp.net

Canada

  1. https://www.kraken.com
  2. https://www.bitstamp.net

Mexico

Europe

  1. https://www.bitstamp.net
  2. https://www.bitcoin.de
  3. https://www.coinbase.com
  4. https://bitonic.nl
  5. https://www.bitpanda.com

Asia

South Korea

  1. https://upbit.com
  2. https://www.bithumb.com
  3. https://www.korbit.co.kr
  4. https://coinone.co.kr
  5. https://www.gopax.co.kr

Japan

Singapore

  1. https://www.coinbase.com
  2. https://gemini.com

Hong Kong

Alternative Resource for Bitcoin Exchanges

If the above list of Bitcoin exchanges is not suitable for you, consider the following resource while performing due diligence: https://bitcoin.org/en/exchanges.

Step 3: Sign Up

Before you’re able to buy Bitcoin, you will need to sign up after selecting your Bitcoin exchange of choice.

Numerous Bitcoin exchanges must follow legislation in order to deal with fiat currencies, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) laws.

One basic element of these laws is to identify and verify the identity of customers. These laws are in place to prevent fraud, money laundering, terrorist financing, and identity theft.

Therefore, you may be required to provide your identity, as well as verify your identity via alternative methods such as photo ID.

Visit your Bitcoin exchange of choice and follow the steps to sign up with the above factors in mind.

Step 4: Setup Two Factor Authentication (2FA)

Your wealth is a prime target for hackers. Two factor authentication makes a hacker’s job substantially more difficult by requiring a secondary authentication mechanism as opposed to only an email and password. Any reputable exchange provides 2FA as a login option. As an aside, 2FA is invaluable for securing your email address and bank account.

Go to your exchange’s settings and follow the steps to setup 2FA. If the option exists to utilize an authenticator, then consider one of the most popular authenticators called Google Authenticator.

Alternative options exist, such as text message and email two factor authorization. However, text message 2FA is less secure than the alternative methods due to sim card swap hacks, where a hacker gains possession of your device’s text messages by gaining ownership of your sim card via social engineering your phone company.

Step 5: Set Your Payment Method

Next you will need to determine your method of payment.

Payment methods vary by country; however, you may expect to pay via:

  1. Wire transfer/bank transfer
  2. Debit card/credit card
  3. Bank account link

A wire transfer/bank transfer tends to be the best option for those seeking to deposit a larger sum of fiat currency into a Bitcoin exchange for a flat fee. Domestic wire transfers/bank transfers typically complete within 1-3 business days. International wire transfers, however, may take 5 business days or longer.

Debit cards and credit cards are usually instantaneous yet result in higher fees. For instance, Bitstamp charges a 5% fee with each card purchase. Alternative exchanges may charge even higher fees, so keep an eye open for your Bitcoin exchange’s fee structure if you decide to use a debit card or credit card.

Linking your bank account with your exchange of choice allows for you to continuously deposit and withdraw fiat currency between your exchange and bank account easily. For exchanges such as Coinbase, the option is free and typically takes only 1-3 business days for fund transfer. However, the option does not exist for every exchange nor for every country. Please perform due diligence before linking your bank account with an exchange as some exchanges may get hacked or be scams to steal your bank credentials.

Once you have set your payment method with your Bitcoin exchange of choice, you are now ready to buy Bitcoin.

Step 6: Buy Bitcoin on the Exchange

Buying Bitcoin (BTC) on an exchange can be a confusing process, so we’re going to show you a step-by-step example for how to buy Bitcoin with a beginner’s method on Coinbase, as well as an intermediate method on Coinbase Pro.

If you want a free $10 in Bitcoin after buying or selling $100 or more on Coinbase, then go to the following referral link to sign up on Coinbase: https://www.coinbase.com/join/kurz_oy.

Before proceeding, please be aware that Bitcoin is divisible by up to 8 decimal places, so you may buy a fraction of a Bitcoin. For example, you may buy .00000001 of a Bitcoin. However, exchanges may require fewer decimal places for Bitcoin purchases.

Beginner’s Method

The beginner’s method has a higher fee than the intermediate method but will encounter less complexity. If you wish to buy Bitcoin fast, this is the route to go.

If you would like to pay a lower fee or if your exchange of choice does not provide this type of method, please skip to the next section: Intermediate Method (Market Order and Limit Order).

Let’s proceed with the beginner’s method:

  1. Click Trade on Coinbase’s navigation menu to open the ‘Buy Bitcoin’ form
  2. Click the Buy tab on the top left of the form
  3. Enter the amount of fiat currency you wish to spend for Bitcoin
  4. Select Bitcoin from the list of cryptocurrencies
  5. Choose your desired payment method from the Pay With section
  6. Click Preview Buy
  7. Verify the details of your order from the new window (the amount of Bitcoin being purchased will display here)
  8. Click Buy Now

After completing the above steps, you will now own Bitcoin on your exchange.

Although an exchange such as Coinbase can hold your Bitcoin, we recommend storing your Bitcoin in a Bitcoin wallet as explained in Step 8: Get a Bitcoin Wallet.

Intermediate Method (Market Order and Limit Order)

The intermediate method will introduce two common exchange definitions: Market Order and Limit Order.

A Market Order allows you to buy your desired amount of Bitcoin instantly and at the lowest selling price on the exchange’s ledger. This method is preferred if you want to buy Bitcoin quickly.

A Limit Order allows you to buy Bitcoin at a specified price and quantity. Since you are creating an order on the ledger, you will have to wait for someone to buy from you at your set price. The advantage with a Limit order is the potential to buy Bitcoin at a lower price than with a Market Order.

Please note that a Limit Order tends to be more complex and takes longer than a Market Order.

If you would like to use a Limit Order, please skip to the section: Buy Bitcoin with a Limit Order.

Buy Bitcoin with a Market Order

An example for creating a Market Order will be shown below with Coinbase Pro, which is the cryptocurrency trading platform for Coinbase with exchange functionality.

An image with the correct options selected for initiating a Market Order will follow the subsequent steps:

  1. Click Select Market, then choose your currency and Bitcoin pair
  2. Select Buy under Order Form
  3. Choose Market
  4. Enter the amount of money you wish to spend for Bitcoin
  5. Click Place Buy Order

How to buy Bitcoin on Coinbase with a market order

Placing the Market Order will complete your Bitcoin order instantly and you will then own Bitcoin.

Although an exchange such as Coinbase can hold your Bitcoin, we recommend storing your Bitcoin in a Bitcoin wallet as explained in Step 8: Get a Bitcoin Wallet.

Buy Bitcoin with a Limit Order

An example for creating a Limit Order will be shown below with Coinbase Pro, which is the cryptocurrency trading platform for Coinbase with additional functions such as the Limit Order.

In this example, a Limit Price will be set at the highest bidding price to ensure the fastest order for your Bitcoin. However, you may set a Limit Price lower than the highest buy order to increase the quantity of Bitcoin you will receive for your money. Moreover, a lower Limit Price may be beneficial if the exchange is extremely active since it may be hard to set your buy order before the price decreases. If you decide to set your buy order below the highest bid then you may require a longer time to get your Bitcoin, as well as run the risk of the Bitcoin price rising away from your bid due to market volatility.

With these factors in mind, let’s move forward.

An image with the correct options selected for initiating a Limit Order will follow the subsequent steps:

  1. Click Select Market, then choose your currency and Bitcoin pair
  2. Select Buy under Order Form
  3. Choose Limit
  4. Enter a Bitcoin price in your currency for your buy order in the Limit Price field
    • Alternatively, click inside the Limit Price field and then click from the range of Bitcoin buy prices to automatically enter a price to the amount field
  5. Enter the amount of Bitcoin you would like to receive by clicking max (all your money in the exchange) for Coinbase Pro to perform the calculation for you
    • Alternatively, enter the amount of Bitcoin you would like to buy through dividing the amount of money you wish to spend by the Bitcoin price minus the fee, to 8 decimal places
      1. Coinbase Pro Example: $800÷$9,809.47-($800×Coinbase Pro Fee of 0.5%)=0.08114608 BTC
      2. Note 1: Coinbase Pro’s calculation is approximate, not exact
      3. Note 2: Alternative exchanges perform the calculation for you automatically. Please be aware for your exchange of choice.
  6. Click Place Buy Order
  7. Wait for a seller to fill your order (the duration depends on how active the exchange is at the time)
    1. If the Bitcoin price rises, consider waiting for the price to fall since the market often fluctuates due to volatility and the price may decrease for your order to be filled
    2. Alternatively, consider repeating from step 4 to step 7 if the Bitcoin price continues to rise above your bid price

How to buy Bitcoin on Coinbase with a limit order

After your Limit Order is filled, you will then own Bitcoin.

Although an exchange such as Coinbase can hold your Bitcoin, we recommend storing your Bitcoin in a Bitcoin wallet as explained in Step 8: Get a Bitcoin Wallet.

Step 7: Consider an Alternative Solution - Get Paid in Bitcoin

According to Bitcoin.org, an international method for acquiring Bitcoin is through Bitwage. Although not an exchange, Bitwage allows workers across the world to receive a Bitcoin wage with a fraction or whole of each paycheck depending on the user’s choice. Just like Satoshi Nakamoto, your employer does not need to know you are involved with Bitcoin.

Bitwage uses dollar cost averaging which reduces volatility risk and saves time that would be spent on a Bitcoin exchange.

The benefits are especially strong for remote workers in countries with banking instability. Traditional payroll and invoicing services through bank-to-bank international wire transfers typically requires 3-5 days and can take over 2 weeks if you’re in a country with banking complications such as within Brazil. With Bitwage, the same transfer to the remote worker from Brazil will receive the Bitcoin or fiat currency within 1-2 days.

Before getting paid in Bitcoin, you will first need to sign up.

After signing up with Bitwage and following the instructions, you will receive your desired portion of your paycheck or invoice directly into your Bitcoin wallet.

Please proceed to the next step to learn about Bitcoin wallets.

Step 8: Get a Bitcoin Wallet

As mentioned earlier in this guide, using an exchange runs a risk of losing your funds due to hacks, scams, and insolvency. Thus, it is recommended to learn about Bitcoin wallets and wallet security types, as well as utilize a Bitcoin wallet for securing your Bitcoin.

As an introduction, a Bitcoin wallet allows you to send, receive, and store Bitcoin. This is made possible with the Bitcoin wallet’s private key and public key.

A private key is to be kept secret. If someone has your private key, they can spend your Bitcoin and the action is irreversible. You can think of a private key as the credentials to your bank account. If you lose your private key, you lose your Bitcoin. There is no one you may call to recover your Bitcoin as there is no central authority. Keeping your private key safe and secure is of the utmost importance.

A public key acts as your Bitcoin’s “account”. A public key is where you can send Bitcoin to receive into your “account” or where you can send Bitcoin to someone else’s “account”. In other words, you can send Bitcoin to someone else’s public key (account/address) or someone can send Bitcoin to your public key (account/address). For instance, you would send Bitcoin from your exchange of choice to your Bitcoin wallet’s public key. If someone else has access to your Bitcoin wallet’s public key, they can’t steal your Bitcoin. However, they could see how much you own in that Bitcoin wallet.

The private key and public key are inexplicably linked. Moreover, you can use your private key to find your public key if you were to lose it, but not the other way around.

Two types of wallets are important to understand: a hot wallet and a cold wallet.

A hot wallet is a Bitcoin wallet that is connected to the internet in some way, such as through a mobile wallet, desktop wallet, or an online wallet. The hot wallet is fundamentally less secure than a cold wallet as internet access provides a route for hackers to your Bitcoin wallet. A hot wallet is typically used for spending money such as cash in a physical wallet.

A cold wallet is a Bitcoin wallet that is not connected to the internet, such as a hardware wallet or an offline wallet (the links provided do not contain endorsements, please perform due diligence). The cold wallet is also known as cold storage, which is safer than a hot wallet because there is no internet access for hackers to exploit. One may think of a cold wallet as a savings account, typically used for storing larger sums of Bitcoin. If you have a hardware wallet, spending from this type of cold wallet is secure even if you connect the device into a computer with internet access as long as you have set up the device properly. Storing your cold wallet in multiple locations is recommended since your cold wallet can be destroyed or lost by natural means (fire, earthquake, floods, etc.).

For more information, consider the following resource for a list of Bitcoin wallets (please note we do not endorse any Bitcoin wallet, perform due diligence): https://bitcoin.org/en/choose-your-wallet.

In addition to the list of Bitcoin wallets, please consider the following resource for more information on Bitcoin wallet security: https://bitcoin.org/en/secure-your-wallet.

Conclusion

Upon completion of our Bitcoin guide, we have learned how to acquire Bitcoin utilizing two methods and gained insight into Bitcoin wallets and Bitcoin wallet security.

The first method was through a Bitcoin exchange. We first introduced Bitcoin exchange risks in order to avoid common pitfalls for new members of the Bitcoin community. After disclosing the risks, a step-by-step guide was provided on how to buy Bitcoin with multiple techniques consisting of a beginner’s method and an intermediate’s method (market order and limit order).

The second method was through Bitwage, where workers across the globe can get paid in Bitcoin and receive a salary in Bitcoin. Advantages of Bitwage were also introduced, such as a reduction in international transfer time of 3-5 business days with traditional financial institutions to 1-2 days with Bitwage. Moreover, advantages were shown to further increase for workers in countries with banking inefficiencies, where traditional bank-to-bank international wire transfers can take over 2 weeks to process. With Bitwage, the same transfer to a country with banking complications would only take 1-2 days by leveraging the Bitcoin network.

For both methods of acquiring Bitcoin, setting up a Bitcoin wallet was highly recommended. The two types of a Bitcoin wallet were covered, including a hot wallet and a cold wallet. Moreover, the concepts of public keys and private keys were introduced as well.

Thank you for reading. We hope our Bitcoin guide, How to Buy Bitcoin, helps you buy Bitcoin safely while increasing your thirst for cryptocurrency knowledge as you join the global community.

About the Author

Grant Kurz, Founder & CEO of ConsultaBit

Grant Kurz is the Founder and CEO of ConsultaBit, a blockchain consultancy and software development company. ConsultaBit equips users with tools, education, and guides within the cryptocurrency and blockchain community. Grant believes cryptocurrencies and blockchain will have a defining force in the 4th industrial revolution.