If you are new to cryptocurrency investments, then your first purchase would most likely be the most popular cryptocurrency- Bitcoin. However, there are vital things you should know or have before you buy and sell Bitcoin. Of all these things, these are the most important ones:
- A cryptocurrency exchange account
- A Bitcoin address
- Internet-connected devices
- Means to verify your identity
- A payment method
Buying and selling Bitcoin is not as complex as people say. It takes only a few simple steps. Find out how to buy and sell Bitcoin without any hitch.
Disclaimer
- Ensure that you familiarise yourself with the regulations in your country before you purchase Bitcoin, Bitcoin cash, or other cryptocurrencies.
- Note that certain countries prohibit their citizens from buying and selling Bitcoin.
- Note that investing in cryptocurrencies carries some risk, and you can lose your invested capital without proper education. Kindly carry out due diligence.
Before we go into the details of buying and selling Bitcoin, let’s take a brief look at the cryptocurrency history.
Bitcoin: Distrust to Advocacy
Despite being mocked as a Bubble by some of the world’s most influential people, Bitcoin looks to have won. Some of these ex-doubters have publicly claimed to have Bitcoin in their investment portfolio. Elon Musk, Mark Cuban, and Twitter founder Jack Dorsey have confirmed owning Bitcoin and do not plan on selling anytime soon. Institutional investors, including Microstrategy and Square (now Block), have also been at the forefront of consistently buying Bitcoin. Similarly, cryptocurrency has become so important that governments, central banks, and financial authorities deemed it necessary to meet over (See tweet above). While this development might look good, let’s remind you that it was never a walk in the park for Bitcoin.
In 2009, when Satoshi Nakomoto made the Bitcoin Whitepaper public, many people took it as a joke. The talk about a “financial revolution” and “solution to the traditional banking system loopholes” was only taken seriously by probably less than 3% of the world’s population. At the same time, no one would have predicted that the same coin that was mocked would disrupt financial markets, and neither would anyone could have assumed that it would offer a hedge against constant raging inflation. As the future would have it, here we are today- looking to Bitcoin to save drowning economies and collapsing organisations.
Bitcoin Price History: 2018-2022, source: Trading View
In terms of its price, Bitcoin has not disappointed, moving from a mere $105 in 2013 to over $69,000 in 2021. Despite the dips, no traditional investment has been able to produce the kind of ROI Bitcoin has.
Buying Bitcoin
You’re probably confused about making your first Bitcoin purchase as a new investor. Interestingly, there is no one way to buy Bitcoin. In this article, we will explain one of the most common ways that crypto investors use to buy Bitcoin. So, think of buying Bitcoin like trying to open a bank account. You’d likely need a bank to register with and a bank account to deposit money. It’s similar to buying Bitcoin. However, you need something different in this case, but some perform a similar function to the banking terms we mentioned earlier. To buy Bitcoin, you need a crypto exchange where you would get a crypto exchange account and a cryptocurrency wallet that will provide you with a Bitcoin address. To buy Bitcoin, follow the simple steps, and you’d have purchased Bitcoin in no time.
How to Purchase Bitcoin
In all honesty, there are different ways to purchase Bitcoin. However, we would focus on the most common (maybe simplest) way to buy Bitcoin, which is buying via a cryptocurrency exchange. We suggest that you carefully follow and understand these processes, so you don’t miss out on any part.
Step 1: Select and Register on a Cryptocurrency Exchange
The first part of your journey to making your first purchase is to identify a particular exchange that you would love to register on. While most crypto exchanges offer fantastic services and processes for buying Bitcoin, they differ in a few ways. In many instances, you might find it easier to buy Bitcoin on centralised cryptocurrency exchanges (we will explain this part later in the article). You can look through platforms like Binance, Gemini, FTX, or Coinbase to see if any fit what you expect.
Step 2: Verify Your Identity
Although not all crypto platforms require that you verify your account before buying Bitcoin, most do. For those that don’t, you might later need to be able to purchase any amount of Bitcoin you desire. The inability to do this might limit how much Bitcoin you may be able to buy. Apart from your ID, these platforms can require you to provide other means of verification, like a document to confirm your physical address. All these procedures ensure that users are adequately protected, and the rate of fraudulent activities is sufficiently reduced.
Note: You automatically get a Bitcoin wallet once you register on a cryptocurrency exchange platform. This Bitcoin wallet is where your Bitcoin is safely stored.
Step 3: Choose a Payment Method
Once you have completed verification, you can decide to start buying Bitcoin. Depending on the platform you sign up with, you will be provided with several payment options. Payment methods can range from bank transfers to credit or debit card payments. You should also note that these platforms can charge you a specific price in transaction fees to deposit money. That said, it is also crucial that you confirm if your country’s regulations allow buying cryptocurrencies via debit cards or bank transfers. We consider this critical because some regions have specific rules concerning trading Bitcoin.
Step 4: Purchase Bitcoin
Immediately after you have chosen a payment method and your deposit is confirmed, you can proceed to make a buy order. You can decide to purchase any amount of Bitcoin you want and have it safely stored in your Bitcoin wallet.
Besides buying via a payment option, you can also exchange other cryptocurrencies for Bitcoin on these crypto platforms. While this system may seem a bit advanced, you can do yourself a favour by understanding how you can also buy using methods like spot trading.
It’s possible that you might be a bit confused at this point. You, however, don’t need to worry. Let’s assure you that purchasing cryptocurrency is no herculean task. We will explain every term that might seem brand new to you. First, let’s start with what cryptocurrency exchanges mean.
Cryptocurrency Exchange: What Is It?
Remember that opening a bank account requires you to sign up with one bank. Yes? Now, think of a cryptocurrency exchange like a bank, but a bank where you can buy Bitcoin. To put it clearly, a cryptocurrency exchange facilitates buying and selling of cryptocurrencies. In other words, we can define it as a platform that acts as an intermediary between buyers and sellers of Bitcoin and other cryptocurrencies. However, note that cryptocurrency exchanges are way different from traditional financial institutions. Buying and selling Bitcoin on crypto exchanges does not happen physically, as you make every transaction online. As long as your device is connected to the internet, you can access crypto exchanges.
It would also interest you to know that some crypto exchanges offer trading of stocks, other digital assets, and fiat currency but since we are focused on Bitcoin trading, let’s leave it at that. That said, two kinds of platforms offer crypto exchange services. Certain exchanges are decentralised, while others are centralised exchanges.
Decentralised Exchange
As the name implies— decentralisation. A decentralised exchange is one where you can buy Bitcoin without the interference of a middleman. Commonly called DEX, a decentralised exchange allows you to buy and sell Bitcoin via a peer-to-peer system. You should also note that having a decentralised exchange account does not allow you to facilitate trades between Bitcoin and a fiat currency. Some of the most popular decentralised exchange cryptocurrency exchanges include Uniswap, Pancakeswap, and 1inch exchange.
Centralised Exchange
Unlike decentralised cryptocurrency exchanges, Centralised Exchanges (CEXes) are controlled by a central authority. So, if you plan to buy Bitcoin via a centralised exchange, know that you would be accountable to a central power. While DEXes do not require you to undergo Know Your Customer Processes (KYC), centralised exchanges do. In opening a crypto account to trade Bitcoin on a CEX, you would be subject to processes to verify your identity.
In most cases, these exchanges require you to provide your national ID, driver’s licence, or international passport. In addition, certain exchanges might ask for proof of your physical address or something similar. These serve as security measures to protect you from breaches or fraud when buying Bitcoin. Centralised exchanges also offer a two-factor authentication method to protect Bitcoin and other cryptocurrency buyers. Centralised exchanges are more user-friendly than decentralised ones as they provide various payment options for most people. You can buy Bitcoin via your credit card, debit card, PayPal, bank transfer, etc.
Are you thinking of buying Bitcoin on a centralised exchange? Here are our top five platforms to use.
5 Centralised Crypto Exchanges to Buy and Sell Bitcoin
1) Binance
According to Statista, Binance is the highest daily trading volume cryptocurrency exchange. The 24-hour daily volume was at an insane $8.30 billion as of this writing. Founded in 2017 by Chinese billionaire Changpeng Zhao, many credible crypto experts regard Binance as the best for a beginner to buy Bitcoin. Binance has become the leading crypto exchange globally despite launching behind many exchange services. The platform also provides a hassle-free method for users to buy Bitcoin with several payment methods to back it up.
Want to buy Bitcoin using Binance? Watch this detailed tutorial on how to start:
2) Coinbase
Coinbase is one of the most reputable platforms to buy Bitcoin; operating in over 100 countries across all continents, Coinbase has repeatedly proven to be an excellent crypto exchange for users worldwide. The platform was one of the first crypto exchanges to be popular, as it was founded in 2012 by Brian Armstrong and Fred Ehrsam. Interestingly, Coinbase provides an avenue to earn crypto through educational resources, while buying Bitcoin is as seamless as you can imagine on the Coinbase website and mobile application.
Although Coinbase is an excellent cryptocurrency exchange, it has some disadvantages. Its cons include high transaction fees and fewer coin pairs than other exchanges.
3) FTX
After just launching in May 2019 by MIT graduates— Sam Bankman-Fried, and Gary Wang, FTX has surprisingly become one of the best exchanges for buying Bitcoin. The platform has surpassed other platforms in this short period to become the second-largest crypto exchange in trading volume after Binance. With a 24-hour trading volume of $1.30 billion at this writing, FTX seems to have captured the hearts of Bitcoin investors and traders.
In addition, the platform rides on its user-friendly interface and non-complex methods in acquiring and retaining millions of users monthly. Recently, the FTX team has shown immense belief in Bitcoin’s future, as the CEO plans to integrate the Bitcoin Lightning Network on its platform.
4) Kraken
According to Kraken, it is more than just a Bitcoin trading platform. It boasts that it is the best place to learn, buy and sell Bitcoin and other cryptocurrencies. One of the reasons we love the platform is how great it is for beginners to use. Besides that, the platform only charges low transaction fees and offers solid security measures. Kraken also offers advanced trading features and mainly focuses on crypto trading, with less priority to fiat. However, its downside is that verification could take a long time, and the user interface isn’t as excellent as the others. Still, it is one of the best crypto platforms to buy and sell Bitcoin.
5) Crypto.com
Crypto.com says its mission is to foster the transition from fiat currencies to cryptocurrencies. So, no wonder it is one of the leading cryptocurrency exchanges to buy Bitcoin. With an incredibly user-friendly website and app, Crypto.com offers users the opportunity to buy Bitcoin without losing an arm. Additionally, transaction fees on the platform are cheap, and the users can trade over 250 cryptocurrency pairs. However, many users say it could improve its customer service as the platform presently lags in that aspect. Besides that, the platform is a good start for you to purchase your first Bitcoin.
Now that you know where you can start buying Bitcoin, let’s move further to something fundamental— cryptocurrency wallets to get your Bitcoin address.
Getting a Bitcoin Wallet
Let’s take it a step back. Recall how related banking can be similar to trading Bitcoin and comparing a cryptocurrency exchange to being identical to a traditional bank? Of course, yes? Now, think of crypto wallets as bank accounts. However, in crypto, you can have several cryptocurrency wallets with each cryptocurrency wallet for each coin. However, since our focus is on Bitcoin, we will be focusing on getting a Bitcoin wallet that provides you with your unique Bitcoin address. Let’s quickly give you an example of what a Bitcoin address looks like and how it compares to a bank account number.
Bank account number- 0125470042
Bitcoin address- 3PUNBHS9zt2eUdJHb97vBCZDNhsDM5cMaj
So, instead of having a bank transfer from account to account, you have a Bitcoin wallet to send Bitcoin from one address to another. A Bitcoin address is usually between 26 and 35 characters, and getting one isn’t difficult at all. In the same way, as you get your account number from a bank, cryptocurrency exchanges provide you with a Bitcoin wallet that hosts your Bitcoin address. However, that is not the only way to get a wallet, as they are different wallet types. Such wallets can include a hardware wallet, which can also be called cold wallets, and a software wallet, which are hot wallets. Let’s briefly explain what these crypto wallets mean.
Cold Wallets
A cold wallet is a wallet type that is not connected to the internet. Popularly called hardware wallets, cold wallets provide a more secure way to store your Bitcoin. While they are mostly connected to software, a user’s hardware wallet is hardly compromised. This remarkable feature is due to the offline private keys required to access the wallet. Unlike a digital wallet like MetaMask, which requires a private key and can be breached, a cold wallet’s private key is securely stored offline. Examples of the most reliable cold wallets include the Ledger Naso S, Trezor Model One, and SecuX V20. If you intend to store your Bitcoin on these hardware wallets safely, you can get them on their respective official websites.
Hot Wallets
A hot wallet is an online wallet that runs on internet-connected devices. While a hot wallet is a digital wallet, it is not always a hosted wallet on a centralised crypto exchange. In addition, not all hot wallets are encrypted with a private key. So, if your Bitcoin wallet is hosted on a centralised exchange, you do not have a private key. In one way, the Bitcoin you might own might not be yours. Hence, the phrase— Not your keys, Not your coins.
Although hot wallets have the tendency to be compromised since they run on the internet, you can make your Bitcoin wallet more secure with simple additions. Unpredictable passwords and two-factor authentication can help you facilitate trades more securely. Some of the most common hot wallets include Trust Wallet, MetaMask, Electrum, Edge Wallet, and several crypto exchange wallets.
Other Ways to Buy and Sell Bitcoin
Apart from the methods mentioned earlier, there are a few other ways to buy Bitcoin. These methods may not be as standard as others; they are also very legitimate. In fact, millions of people engage these processes in accepting Bitcoin. Now, let’s look at two other common ways.
Buying Bitcoin via a Peer-to-Peer Network
As the name suggests—peer-to-peer, it simply describes a method of buying Bitcoin among independent parties as long as they own and have a Bitcoin address. Commonly called P2P, the peer-to-peer method of purchasing Bitcoin is straightforward as the other medium. The exciting part of using P2P is that it does not matter if your Bitcoin wallet is on a decentralised exchange or a centralised one. As much as the trading parties can agree on a fee, a Bitcoin transaction can occur. However, centralised crypto platforms have found a way of edging decentralised ones to increase users using this method as platforms like Binance and Kucoin have integrated an active peer-to-peer section on their respective websites and apps. In turn, this system has improved the user base of these platforms.
The Binance Academy clearly explains P2P trading in this video:
Outside the walls of a centralised crypto platform that has a method of regulating users, the P2P way comes with specific risk, as fraud can easily happen.
Buying Bitcoin from a Crypto Brokerage
Buying Bitcoin from a crypto brokerage platform is unlike buying from an exchange. While cryptocurrency exchanges facilitate buying Bitcoin at regular market prices, you can only purchase Bitcoin on a crypto brokerage at the broker’s price. Let’s say that the current market price of Bitcoin is $30,000; a broker might decide to place its own at $30,500 per Bitcoin. In addition, a crypto brokerage platform usually charges users a specific transaction fee for using the platform. However, it is also suitable for beginners as using it is similar to registering on a cryptocurrency exchange platform. Some of the top crypto brokerages include eToro, Robinhood, and Uphold.
Selling Bitcoin
Selling Bitcoin is almost the same process as buying it. It’s the simple opposite of the buying process. So, instead of creating a buy order, you create a sell order. Most exchanges just require users to follow the same procedures used to buy.
However, you should take note of the differences involved. Rather than depositing via your bank account or PayPal, selling Bitcoin means you already have one or a fraction of it. Let’s explain two ways to sell Bitcoin that you already own.
Selling Bitcoin for Fiat
To sell Bitcoin for fiat like the United States Dollar (USD) is simple. Most exchanges have a cryptocurrency with the same value as the dollar, mostly called Tether (USDT). You should convert your Bitcoin to USDT and withdraw it to your bank account. In most cases, you receive the equivalent in your local currency.
Another way to sell Bitcoin for fiat is to sell to another buyer on a crypto exchange. Remember that we said some crypto trading platforms have peer-to-peer sections. So, you can find a buyer who meets your requirements and sell your Bitcoin directly while you get fiat. However, there is a slight difference between selling directly on the exchange and selling on the P2P platform. The difference is that a buyer can set his own price above or below market price with P2P while selling for USDT, and withdrawing means you’d be selling at the exact market price.
Similarly, you can sell to another buyer outside an exchange or sell on a brokerage platform. In the same vein, brokerages will charge you a fee for your transaction, while the same risks apply to selling to a random person outside the platform.
Selling Bitcoin for Another Cryptocurrency
This method of selling Bitcoin is somewhat advanced. However, it’s not difficult to grasp. So, think about when you want a shoe, but you have no money and only a shirt worth the same amount. So, instead of selling your shirt for cash, you exchange it for the shoe. Many people will call it “trade by barter.” Well, it is similar. In selling Bitcoin for another cryptocurrency, you only need to find a pair and exchange it.
Let’s assume you want some Ethereum (ETH) and have Bitcoin. So, instead of selling your Bitcoin for fiat and later buying ETH with the fiat, you got from your Bitcoin sale, you simply find the BTC/ETH pair and sell Bitcoin for Ethereum. You can do the same if you intend to sell Bitcoin for another cryptocurrency. If Bitcoin is not paired with the currency you desire, you can always navigate another process to sell it. You only need to find a cryptocurrency that pairs with Bitcoin and your desired coin and follow a simple procedure.
Imagine you want to sell Bitcoin Litecoin, and you can’t find the BTC/LTC pair, but both pair with USDT. You need to get the BTC/USDT pair and sell Bitcoin while you sell UDT for Litecoin. It is as simple as that. The process can be a little complex for some exchanges, but a few minutes of practice can make the technique very easy.
How Does Bitcoin Work?
Unlike what you know about regular money, Bitcoin is not owned by anyone or controlled by the government, central bank, or certain organisations. Bitcoin was designed for any two people to be able to transact without worrying about cross-border hindrances or any authority. So, we can define Bitcoin as a digital asset that uses a peer-to-peer network (the blockchain) to validate transactions among its users.
To understand how Bitcoin works, you need to understand the blockchain. The blockchain serves as a public record for every Bitcoin and other digital assets transaction. It also serves as a system for storing information securely. Together with the role of the blockchain, Bitcoin needs the help of miners and public (or private keys) to work. The functions of the private or public keys are to ensure that transferring ownership of Bitcoin is done securely while the mining process ensures that Bitcoin transactions are adequately verified.
So, in creating a Bitcoin that has value, miners use specialised computers to add blocks of transactions to the Bitcoin blockchain. After which, the public and private keys ensure that transactions are initiated and confirmed. This process helps in transferring ownership of Bitcoin from one person to another. In recent times, Bitcoin has become one of the most popular ways people make transactions. The reasons for this development are not far-fetched. Here are a few ones to note.
- Bitcoin is open, safe, and secure.
- Bitcoin transactions work globally.
- Bitcoin is simple, private, and flexible.
- Bitcoin is available to the unbanked.
- Bitcoin transaction fees are way cheaper than traditional banks.
Buy and Sell Bitcoin: Key Takeaways
To cap it all, let’s remind you that you don’t have to break a neck to buy and sell Bitcoin. However, it still doesn’t take away the fact that it’s a little more complex than buying other digital assets. But following the steps that we’ve highlighted in this article will save your hours or trials and errors. Let’s summarise the steps again, so you do not pass over anyone.
- Choose a cryptocurrency exchange and register an account.
- Ensure to follow the verification process to activate your account.
- Select a suitable payment method.
- Place an order for Bitcoin.
Still, do not forget that there are a few other ways to buy and sell Bitcoin, which we discussed. If the other different ways suit you, do not hesitate to strictly follow the process for a successful Bitcoin transaction.
People Also Ask
Even though we might have answered some of your questions, you may be in the dark over some other ones. So, we’ve dedicated this section specially to give responses to further inquiries you might have. Read on.
Is It Easy to Buy and Sell Bitcoin?
Buying and selling Bitcoin is not complicated. Although it may be a little daunting for complete beginners, know that the process is simple. As long as you follow the steps we explained above, you will find the process very easy.
Is Buying and Selling Bitcoin Legal?
In some countries, trading Bitcoin is legal. In some, it is not. What we suggest is that you ensure to confirm the crypto regulations in your region before buying Bitcoin. This part is necessary so that you do not lose your money to authorities or have your bank accounts blocked from making any transactions.
Who Created Bitcoin?
The physical identity of Bitcoin’s creator is presently unknown. However, he is recognised under Satoshi Nakamoto’s name and launched the Bitcoin network publicly on the 9th of January, 2009.
Why Do I Need Bitcoin?
In this age, everyone needs Bitcoin. Bitcoin makes it easy to send money via the internet without worrying about government restrictions. In addition, you can send Bitcoin from country to country, and the process only takes a few minutes, unlike traditional banking, where you might need to wait for days before the transaction validates
Why Do I Need to Verify My Identity Before Buying Bitcoin?
When you buy Bitcoin from a crypto exchange, know that it is a business regulated mainly by the government. Hence, you need to go through the Know Your Customer (KYC) process as stipulated by the laws in your region. This process protects you and other users from cases of fraud and possibly money laundering activities.
Can I Buy Bitcoin and Sell It for Cash?
Of course! You can buy and sell your Bitcoin for cash in your local currency. Whether you decide to trade via a broker, exchange, or a peer-to-peer system, you can always trade your Bitcoin for cash. However, we implore you to familiarise yourself with the process of selling before you attempt it.
How Much Bitcoin Can I Buy?
Many newbies think that they need to be able to afford 1 Bitcoin before they can buy, but it’s not true. You can buy a fraction of a Bitcoin or any amount you can afford. However, that is not to say that you can purchase Bitcoin worth one cent, but you can always buy 0.005 BTC, 0.02 BTC, and the like.
Can I Buy Bitcoin from My Bank?
As of this moment, you can not buy or sell Bitcoin with your traditional financial institution. However, we will not rule out the possibility in the future as several banks could someway integrate cryptocurrencies into their system someday. For now, you can only buy Bitcoin from a cryptocurrency exchange and the other methods we highlighted.
Can Bitcoin Make You Rich?
While many people may have claimed that Bitcoin made them rich, we can’t assure you that you would get the same result. We, however, won’t deny that some could have held Bitcoin since it was less than $100 and made insane ROI from it. The question is if it will be the same for you. We can tell you that cryptocurrencies are volatile— you can lose money the same way you can potentially earn significant profits.
Where Can I Buy Bitcoin Apart from Crypto Exchanges?
You can buy Bitcoin outside a crypto exchange as long as you have a Bitcoin wallet. You can buy Bitcoin using a broker or from another Bitcoin owner. Recently, PayPal has added Bitcoin to its app so that you can buy Bitcoin on PayPal too.
How Much Do Exchanges Charge for a Bitcoin Transaction?
Different exchanges charge different amounts for Bitcoin transactions. On a few occasions, it could depend on the volume of Bitcoin traded. However, we can confirm that crypto exchanges like Binance, Coinbase, and FTX charge between 0.1% and 1% no matter the volume traded.
Important Risk Disclosure
While Bitcoin and other cryptocurrencies offer a better way to transact, you should not get too excited about the opportunities. Remember that cryptocurrencies are highly volatile, and the market can sometimes be unpredictable. So, buying Bitcoin does not automatically mean that you would get a positive ROI on your investment. Also, note that Bitcoin trading or investing is not a get-rich-quick scheme. So, we suggest that you consult with a financial advisor and invest only money you can afford to lose.