Bitcoin(and other cryptocurrency) Buying Guide for Beginners
Follow our tutorial on bitcoin buying to avoid unexpected losses and you will join the ranks of the bitcoin pioneers who get rich everyday by simply collecting this wonderful virtual currency!
If you already own bitcoin, this article’s not for you – though you’d probably have appreciated it when you were first starting out. This one goes out to anyone who’s yet to dip a toe into the world of cryptocurrency, but is seriously considering it. Over the course of this guide, you’ll discover the best ways to buy cryptocurrency, what to buy, where to buy it, and where to store it.
It’s Never Too Late to Buy Your First Bitcoin
As the adage goes, the best time to get into bitcoin was eight years ago and the next best time is today. With one bitcoin divisible to 100 million places, there’s more than enough to go around, enabling first-time buyers to acquire as much or as little as they please. And don’t feel you’re obliged to buy bitcoin either – there’s a whole world of cryptocurrency out there, including coins with specific features such as maximizing privacy.
Some people purchase cryptocurrency for investment purposes, others to facilitate private online purchases, others use crypto as a sort of savings account, and others as a hedge against inflation that is devaluing their national country. There’s no ‘right’ reason to buy cryptocurrency; even if you’re simply curious about the technology underpinning it, purchasing a small amount of crypto is the best way to understand it.
Depending on where you live and who you associate with, you’ll hear a lot about certain cryptocurrencies in particular. In developing nations such as Venezuela and Nigeria, for instance, Dash seems to be unusually popular. Many Asian countries are big on ripple (XRP) and ethereum (ETH). Here are Bitcoin.com, we’re fond of bitcoin cash (BCH), which is cheap and fast to send, but we also enable people to purchase bitcoin core (BTC) and offer a popular mobile wallet that supports both.
What to Know Before You Buy
While it is no one’s place to tell you what to buy, there are some coins you should probably avoid as a first purchase. Be wary of any cryptocurrency you’ve been recommended that’s ‘certain’ to go up in price or that promises a ‘guaranteed return’. Just because a friend made spectacular profits off a particular coin doesn’t mean you should follow their example – in fact, it’s often a sign that you should steer clear.
If you are pondering dipping a toe into the waters of cryptocurrency – a move that is likely to be followed by full immersion – you’re hopefully doing so for reasons other than to ‘get rich quick’. While it is likely that certain crypto assets will appreciate in value significantly over the coming years, others will stagnate or may even die off altogether. For every chart looking like this:
There are five that look like this:
Cryptocurrencies are still relatively new, and as such can be volatile. As a general rule, the smaller the market cap of the coin (i.e the price per coin multiplied by its total circulating supply), the higher the volatility. This is because small market cap coins have much lower liquidity, meaning that even a modest buy or sell order can alter its price, and have a smaller community of users. Bitcoin, on the other hand, can be regarded as the gold standard of cryptocurrency, having been there from the start and boasting millions of users.
So you’ve decided you want to purchase some bitcoins or other cryptocurrency. Sounds simple enough, but what now? An important decision to make is what, exactly, you want to do with thebitcoins you obtain. You can buy bitcoins either directly fromano ther person or from an exchange. Currently, the most reputable exchanges in the United States are Circle and Coinbase. Signing up with these exchangesmeans you will have to follow the relevant regulations, namely the KnowYour-Customer (KYC) and Anti-Money Laundering (AML) regulations. This
means there will be some level of identity verification, typically a scanned
government ID and a bill that proves your place of residence.
Either exchange, Circle or Coinbase, will link up to your bank account,
credit card or both. Once verified, you can then purchase bitcoins. They are
usually delivered into your account almost instantly, though it has been known
to take a few days if either exchange finds the purchase suspicious or if it is a
Both exchanges—and most others that enable fiat-to-bitcoin transactions—
will provide you with what is called a web wallet. In the case of these kinds of
exchange, they are acting as Bitcoin banks. They will hold your private keys—
the unique and randomized set of characters that allows the holder to send
bitcoins from a particular wallet—for you, and although you are free to send
the bitcoin wherever you like, either exchange could theoretically lock your
account. If either exchange goes insolvent, then your bitcoins are likely lost.
Despite that remote possibility, many users still hold their coins on these
exchanges. Coinbase and Circle don’t appear to be going anywhere soon. Both
have had millions in venture capital cash funneled into them and both aim to be
the leaders in the Bitcoin space for decades to come.
In any case, the benefit of web wallets is the convenience they offer. They
are easily accessible from a PC or cell phone and both have very friendly UIs
(user interfaces). The downside is a sacrifice in privacy and security. Twofactor
authentication is available for both services and is highly recommended.
“Two-factor authentication” is a term used to describe any security system that
requires two pieces of information: a password and something else. That
“something else” is often delivered via text messaging or through the popular
cell phone apps Authy and Google Authenticator.
Now that we have bitcoins, what do we do with them? If you plan to buy a
significant number of bitcoins, you will likely want to move them to someplace
more secure than Coinbase and Circle. There are multisignature web wallets
out there that provide a bit more security while still being convenient to users.
Coinkite and BitGo are two popular ones that have impeccable security
measures. BitGo, which is what I have experience with, will give you several
options on how to determine your key. It can be randomly generated through
your browser, a third party can generate it, you can have an app—currently
iOS-only—generate it, or you can generate it yourself. Using the third-party
service will mean you can recover the key if you lose it. However, this will
require that you trust the third party to protect the key properly.
All of the above options are fairly straightforward, other than the offline
generation, i.e., generating an encrypted key while not connected to the
Internet. In that case, you’ll want to find some BIP32 key generator software. I
suggest bit32.org. You generate your key following the instructions, grab the
BIP32 extended key and copy it into BitGo. For best security, this last step
should be done on a computer other than the one you normally use.
Now that you are armed with a multisignature web wallet and have some
control over the private keys, the next step is sending that wallet bitcoins from
your Circle or Coinbase wallet. Simply grab the “public key”—the key you are
free to give out to the public and that allows people to send you bitcoins—
which starts with a 3 and will look something like
3Bi1fhng5LfoDzue5MTfGw9PgHNKKgRkVt. (Your Circle or Coinbase public
key, which by default is not multisignature, will look similar but will start with
a 1.) Click “send” or “send bitcoins” in your Coinbase or Circle wallet, and
then copy your BitGo, Coinkite, or paper wallet address into the “To:” space
and click “send.”
From there, you can send or receive bitcoins to any other Bitcoin address
while still keeping your bitcoins reasonably secure. This is acceptable for
medium-sized amounts of money—whatever amount that means to you—that
you may want to spend but don’t want to quickly turn back into fiat.
Recently, Coinbase started its own multisignature wallet service called the
Vault. It is a user-friendly option that allows you to give keys to other people
or yourself. BitGo has a few more years of experience—and reputation—in the
space, but it is a viable option.
If and when you want to cash those bitcoins into fiat, your options will be to
either sell them to a person directly for cash (I do not recommend accepting
PayPal or any other reversible transaction unless you plan to sell bitcoins as a
business) or to put it back into Coinbase or Circle and sell it there, where the
cash will be put directly into your bank account after a few banking days.
I will cover the actual process of buying and selling bitcoin for cash—and
other payment methods—in detail in Chapter 10.
For long-term savings, printing out a “paper wallet” is a good idea. To do
this, the software with the best combination of security and usability is, in my
opinion, bitaddress.org. It creates Bitcoin addresses based on random actions
you perform in your browser—moving the mouse, typing keys, whatever—then
allows you to create an address from that. For a more secure wallet, it is
recommended that you download the software itself (a link is provided on the
site that lets you do this).
After that, simply print out the wallet and use your previously created web
wallet to send bitcoins to the public address that was created for your paper
wallet using the QR code (or by manually entering the public address).
There is, of course, the option of doing everything yourself; that is what
Bitcoin is all about, after all: money without third-parties. By downloading
your own copy of Bitcoin Core—about which we will talk more in a moment
—and the blockchain, you can have a Bitcoin wallet that is as secure as the
computer you put it on and help secure the Bitcoin network while you are at it.
This is called a local wallet. A local wallet that is disconnected from the
Internet is called an offline wallet and is often referred to as “cold storage.”
It isn’t exactly a user-friendly process and is not something that I recommend
someone does for their first Bitcoin wallet. That said, it is something every
Bitcoin user should do at least once if they plan on holding Bitcoin long-term.
Anyone planning on saving large amounts of money with an eye toward saving
for retirement should absolutely create a local wallet and offline wallet—if not
putting the long-term savings in a paper wallet.
Bitcoin Core and Armory, which offer multisignature services for offline
and local wallets, are the two most popular local wallets. Download them
from their respective sites—currently bitcoin.org and bitcoinarmory.com—and
install the program. Upon launch, you will begin the long (more than 50GB)
download of the Bitcoin blockchain. Once completed, you’ll be a legitimate
part of the Bitcoin network as something called a full node. You will keep a
continually updated version of the blockchain and will propagate transactions
confirmed by miners (more on mining in a later chapter). It isn’t necessary to
be a full node—and doing so will use significant bandwidth—but every node
does help make Bitcoin’s network move smoothly and securely. The software
should handle everything on its own but if you run into issues, make sure port
8333 is open. You will have to check your individual router settings on how to
From there, the process is again pretty straightforward and not unlike using a
web wallet. If you’d like to turn the wallet into an offline wallet, find the
“wallet.dat” file in the program’s folder and move it to a USB stick or similar
.The best and most secure option today is a device called “hardware wallet.”
These are wallets created by various companies that allow people to hold and spend bitcoins with minimal connection to the Bitcoin network. There are currently 3 industry leaders making these type of devices: KeepKey, TREZOR, and Ledger. All three companies latest equipmnet is available in the "Wallets" section of our store.
Here is a list of some of the most popular places people buy bitcoin today, but keep in mind the information from our guide above and think twice, choosing the safest option:
Coinbase is the world's largest Bitcoin broker located in the United States. It works for US and Canadian customers as well as European ones. There are more then 4,800,000 registered users on coinbase, including 45,000 merchants, and 9000 developer apps.
A quick step-by-step guide on how to buy bitcoins with credit card on Coinbase:
- Create account. Open your account on Coinbase.
- Connect credit card. Add your credit card to your Coinbase profile
- Verify ID. Verify your ID with Coinbase.
- Buy bitcoins! Buy bitcoins using your credit card
Bitsquare is one of the safest decentralized bitcoin exchanges out there. Over 60 cryptocurrencies can be traded and you can even purchase btc using a bank transfer, escrow, & trusted 3rd parties
BitQuick is one of the fastest ways to buy bitcoins in the United States using cash deposit. Users can browse a wide range of offers at various prices. Once a desired offer is found, buyers visit a bank to make a cash deposit into the seller's account. Buyers then usually receive their bitcoins within an hour.
Localbitcoins is quite a popular for p2p (person to person) transactions all over the world. Simply put, you interact directly with the guy selling to you. Out of all the bitcoin sites listed here, this is one of the first and most reputed. Escrow and dispute resolution is provided by the site.
Kraken is becoming a reputed bitcoin broker, with many markets served. Europeans love it just as much as Americans because they work well through SEPA, have an easy verification process, and are very knowledgeable when it come to cryptography.
CoinBTM is a New York-based Bitcoin ATM provider with over 30 machines across NY and New Jersey. Check their website for the latest details on locations, fees, and hours.
Located too far from New York City? Not a problem, check for Bitcoin ATMs all over the world on CoinATMradar.com
Paxful get over 2 million monthly visits, with 50% originating from the USA. It’s a peer to peer Bitcoin marketplace connecting buyers with sellers similar to the one above. Over 150 payment methods can be used. Impressive.
GDAX is great for technical traders and offers good liquidity. Deposits are in USD and can be processed just as rapidly as withdrawals. Also happens to be the best ethereum exchange for serious players in this space.
Here are the ways to buy bitcoin, according to a real investor in the digital currency
Before buying any bitcoins, you should create a place where you going to store them -- a wallet to stash your future bitcoins in. Having a wallet allows you to store, send and receive bitcoins. The easiest way to get a wallet is to create a digital wallet on one of the exchange sites like Circle or Coinbase, however since it will always be connected to the internet, there is no 100% guarantee that it will never be hacked and all your precious bitcoins stolen by greedy hackers.
The much safer way is to store your digital cash locally, on your computer’s hard drive. There are desktop wallets available for free downloads like MultiBit. But unless you will only use this computer as a wallet and never connect it to the internet, there is still a risk of it being hacked or deleted by mistake.(As mentioned previously, we offer the SAFEST wallets in our store that are specifically designed to maximize your protection by keeping your precios coins offline, where no hacker could ever get. The 3 most popular such wallets today are Trezor, KeepKey, and Ledger. You can read up more about them on our products page and decide which one is better suited for your needs.)
With a wallet service, you can establish one or more Bitcoin addresses. Your address enables you to receive bitcoins from others. Bitcoin addresses tend to be long and convoluted. For example, mine is 182atsti1S7A2FGw6uaabfExqVKSR9YCps. People don’t need to know anything more than your address to send you bitcoins. No real world addresses necessary.
Once you’re the proud, new owner of a digital wallet, there’s only one thing to do: fill it with bitcoins (or, because they're not cheap, fractions of a Bitcoin).
Once you've setup the most secure wallet possible, you can buy bitcoins using these two methods:
Method 1: Bitcoin Exchange
This is the most straightforward, yet generally least anonymous option. Bitcoin exchanges allow users to buy and sell bitcoins for local currency at the current market rate. These often require that you link an existing traditional bank account to your Bitcoin exchange account to transfer funds between the two, typically via traditional banking’s automated clearinghouse transfer (ACH) system.
Coinbase is currently the biggest, best known and overall most trusted exchange based out of the U.S. The San Francisco startup doesn’t charge a fee to accept payments from others using your Coinbase wallet. It does, however, charge a 1 percent fee (plus a 15-cent bank fee) to convert Bitcoin into your local currency based on volume, and vice versa. The company does not charge anything for sending or receiving bitcoins “between online wallets, friends, or merchants.
Method 2: Buy from a friend or neighbor
There may be more people in your local area trading Bitcoin than you’d think. Find them by stopping by LocalBitcoins.com and entering your nearest city. The Helsinki, Finland-based service connects you with people in your neck of the woods who trade their bitcoins for USD and dozens of other traditional currencies.You can meet the trader in-person, ideally at a public place. Meeting with a complete stranger is always risky and it is always better to get bitcoins from a known source.
Bitcoin to Other CryptoCurrency Exchanges:
If you need to switch your Bitcoin(and numberous other crypotcurrencies) into another cryptocurrency, the most popular plase at the moment is ShapeShift(shapeshift.io). However, it has been hit with KYI regulations lately so there are the alternatives to the service.
The news that Shapeshift is to move to a full custodial model, requiring KYC for anyone who wishes to swap cryptos, has sparked a wave of protests. Many users have vowed to take their business elsewhere. For cryptocurrency holders seeking a non-custodial exchange, there are several Shapeshift alternatives to choose from, with varying degrees of privacy.
Swapping cryptocurrencies should not require KYC any more than swapping a dollar bill for quarters. Unfortunately, not everyone sees it that way. In transforminginto a custodial exchange, Shapeshift has lost its defining feature that was so pivotal in its success. The vast majority of users didn’t choose Shapeshift for nefarious purposes: they chose it because it was convenient. Having to send money to a cryptocurrency exchange, wait for funds to clear, set a market buy order, cash out, and then complete the withdrawal process simply to jump between cryptocurrencies is a chore. Shapeshift promised to do the same job in minutes, with no questions asked.
Reading between the lines, it appears that Shapeshift’s hand was forced by US lawmakers, likely with the threat of subpoenas and prosecution should it fail to change its business model. That being the case, it should be noted that any other US-based Shapeshift competitor is liable to meet a similar fate when it’s built up enough business to attract the attention of US prosecutors.
Here are the best alternatives to the service avaliable today:
As Shapeshift’s closest competitor, Changelly now has the chance to establish itself as the market leader for cryptocurrency changers. It offers dozens of cryptos including bitcoin cash, ripple, doge, and neo. An email address is required to use the service, but for those who desire their privacy, encrypted email providers like Tutanota are always an option. Changelly is not without its controversies however, with users complaining, in the last 24 hours, that the exchange can hold monero and force KYC before releasing funds. The Prague-based service should therefore be used with caution by anyone wishing to obtain privacy coins or to swap large quantities of cryptocurrency.
Flyp.me has wasted no time in capitalizing on Shapeshift’s demise – or rebrand, rather, since Erik Voorhees’ company isn’t going away: it’s simply transforming into a service that its users didn’t ask or wish for. Flyp.me offers 26 cryptocurrencies including BTC (but no BCH), dash, and LTC, as well as a handful of extremely obscure altcoins. Its daily volume averages around 4 BTC, but has been on the rise in the last 24 hours since news of Shapeshift’s pivot broke. Flyp.me requires no registration – not even an email address. Nor does it use web trackers or third-party analytics.
Changenow resembles Changelly, but seems to ask less questions, and has been operating smoothly since late last year. A wide range of popular cryptocurrencies, including bitcoin cash and monero, is covered, as well as a handful of less popular ones such as pepecoin. Generally speaking, there is no need to register to use the platform or to supply an email address. However there are some exceptions: Changenow “uses an automated risk management system to check all transactions. Each case will be considered individually. According to European AML directives, KYC regulations and platform requirements, we will ask you to provide you a scan of your ID document valid in your country and additional information of the funds origin.”
With over 300 cryptocurrencies covered, Coinswitch boasts an enviable array of digital assets. However, the service is built upon existing platforms including Shapeshift and Hitbtc, and seems to draw most of its trades from Changelly. While its range of altcoins can’t be faulted, Coinswitch would benefit from providing greater clarity on the information it requires from its users.