Best Cryptocurrency Exchange Fees

How To Buy Bitcoin – Forbes Advisor

How To Buy Bitcoin
Written by publisher team

Editorial note: We earn commission from partner links on Forbes Advisor. Panels do not influence editors’ opinions or ratings.

Since its launch in 2009, Bitcoin has experienced tremendous growth: from October 2013 to early June 2021, for example, its value increased by about 30,000%. And while this growth alone is incredible, some analysts say the value of bitcoin could rise even further as cryptocurrencies and the blockchain technology that underpins them become more pervasive and integrated into people’s daily lives.

Buying Bitcoin comes with one major buyer caution, though: Although it has seen massive highs, it has also fallen to devastating lows.

After hitting nearly $20,000 in 2017, for example, its value has plummeted and gone up to no more than half of that through 2020. Although it’s been trending higher since then, it’s still a very volatile investment, And an ill-timed tweet from Elon Musk could take it down. That is why experts do not recommend investing more than a small percentage of your money in Bitcoin.

With all 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 cryptocurrency 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, but as a beginner, you’ll want to pick one that balances ease of use, low fees, and high security. Be sure to check out our top picks for the best cryptocurrency exchanges, such as Coinbase, Gemini, and Binance.US if you don’t already have an exchange in mind.

Be sure to check if your exchange has a Bitcoin wallet built into its platform; If not, you will need to find one of your own. You can also choose to buy your cryptocurrency on a platform like Robinhood, Paypal, or Venmo, although buying crypto this way often means that you can’t withdraw your coins and transfer them to another platform. If you want to hold the cryptocurrency in a different wallet, you will need to sell your holdings and then buy them back on a different exchange.

Start investing in Bitcoin today with Coinbase

Buy and sell the most popular cryptocurrencies

2. Select the payment option

After choosing an exchange, you must fund your account before you can start investing in Bitcoin. Depending on the exchange, you can fund your account through bank transfers from a checking or savings account, PayPal, wire transfers, a cryptocurrency wallet, or even a credit or debit card.

However, keep in mind that platforms may charge higher transaction fees for certain financing options. For example, Coinbase does not charge any fees if you make a 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, rather than fund your account and then use the transferred funds to make the purchase: Coinbase fees rise to 3.99% of the transaction amount. Credit card transaction fees on other platforms often reach at least that high.

Since fees reduce the amount of money you can invest (and thus also the amount of money that has to grow), it makes sense to use electronic transfers from a bank account rather than other methods. Additionally, if you use a credit card to purchase cryptocurrency, it will generally be charged as a cash advance and subject to a higher interest rate than you would pay on the regular fee. Moreover, borrowing to buy volatile investments is very 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 purchase it by clicking a button, or you may have to enter the Bitcoin (BTC) ticker code. You will then have to enter the amount you want to invest.

When the transaction is complete, you will own a file part Bitcoin. This is because it requires a large upfront investment to buy one Bitcoin now. If the current Bitcoin price is $38,000, for example, you would need to invest a lot to buy Bitcoin. If you invest less, say $1000, you will get a percentage, in this case 0.026%, of Bitcoin.

4. Select the Safe Storage option

The cryptocurrency exchange you use will likely have an integrated bitcoin wallet or at least a preferred partner where you can keep your bitcoins securely. However, some people are not comfortable leaving their cryptocurrency online, as hackers can steal it more easily.

Most major exchanges have private insurance to compensate clients should this happen, and they are increasingly storing the majority of client assets in so-called offline cold storage. If you want absolute security, you can store your Bitcoin in an online or offline Bitcoin wallet of your choice. But keep in mind that if you take the cryptocurrency out of the exchange, you may have to pay a small withdrawal fee. Additionally, if you use a third-party crypto wallet custodian, you may also not be able to permanently access your coins if you lose the private key that acts as your wallet password. This has left some Bitcoin millionaires out of their fortunes.

sell bitcoin

When you decide you are ready to sell your Bitcoin, you can place a sell order through the exchange, just like you did when you originally bought BTC. Most exchanges offer multiple order types, so you can decide to sell only when Bitcoin reaches a certain price, or you can place an order that gets executed instantly.

You can choose to sell your entire Bitcoin holdings or just sell a specific amount. Once the sale is completed, you can transfer the money to your bank account. However, your disbursement may have a holding period before you can make a transfer back to your bank account. This is not cause for concern. It takes some time to make sure that the transactions are clear.

When you sell your Bitcoin, you can make a profit. If you do, you will be safe from capital gains taxes as cryptocurrency sales must now be reported for your taxes.

Should you buy bitcoin?

Especially when the price of Bitcoin is skyrocketing, it can be tempting to invest in the popular cryptocurrency. But while it can potentially be a profitable investment, you should be careful: it’s an incredibly volatile purchase and experts don’t recommend allocating a large percentage of your investment dollars to it.

If you’re not sure if investing in Bitcoin or another cryptocurrency is a good idea for your needs, consider meeting with a financial planner who can help you figure out where cryptocurrencies fit into your investment strategy.

About the author

publisher team