How to Buy Bitcoin?
Although Bitcoin has become very popular over 2018, for many people it's still very difficult to get involved with. For a non-technical person it's difficult to understand what Bitcoin actually is, nevermind how to go about buying it.
Below we go through what Bitcoin is, and how to buy it.
What is Bitcoin?
So a currency like the US Dollar is what's called a 'fiat currency', where a government has declared that money to be legal tender. Bitcoin is what's called a 'cryptocurrency' or sometimes a 'digital currency'; more on this below.
Now the US Dollar isn't the only fiat currency. The Euro and British Pound for example are other fiat currencies. In the same way, Bitcoin isn't the only cryptocurrency. There are many thousands of them, although in 2018 Bitcoin has the largest market cap (where if you add up the value of every Bitcoin, the total is more than any other cryptocurrency).
New Bitcoin is created through a process called 'mining'. We posted a guide explaining this process here. The number of Bitcoin that exist is limited to 21 million in total, where over time this mining process generates less and less new Bitcoin until it gets near to 21 million.
What determines Bitcoin's price?
Since Bitcoin is a cryptocurrency it exists online with no physical coin to exchange. This is similar to fiat currencies like the US Dollar, where the US Dollar isn't actually backed by anything in the real world. It used to be backed by gold, where the supply was limited by how much gold the US government had, but when it switched to 'fiat' this was no longer the case. A US Dollar note, say a $10 bill, is just a representation of this virtual 'fiat' money. So like the US Dollar, the value of 1 Bitcoin depends on the 'perceived' value by everyone that uses it.
This value is determined through websites where you can buy and sell Bitcoin, these are called 'Bitcoin exchanges', sometimes also called 'cryptocurrency exchanges' if they support coins other than Bitcoin. At any point in time if lots of people want to buy Bitcoin it will push the price up, and it lots of people want to sell it the price is pushed down.
How do I buy Bitcoin?
To buy Bitcoin you need to create an account on a Bitcoin exchange. There are hundreds of exchanges available. For a beginner, we would recommend you use one of these exchanges:
- CEX.IO (this is an affiliate link)
These exchanges are very user friendly, so you should be able to signup and buy Bitcoin easily. Be aware that often in exchange for ease-of-use you pay high fees, where you may be paying as high as 7% in commission for the above websites.
If you want to buy Bitcoin with much lower fees, you might find one of the below exchanges useful. Be aware that these are more complex to use (although there are lots of tutorials available on YouTube):
- Coinbase Pro
What do I do once I've bought Bitcoin?
Once you own Bitcoin you can do lots of things with it. You can just hold it and hope that the value goes up, or perhaps try trading or mining. See this guide for ideas on what to do next!
If you want to buy a different cryptocurrency, Ethereum or Litecoin for example, you can either buy it using your Bitcoin, or using a fiat currency like US Dollar if there are trading pairs available. Generally the less well known a coin is, the less likely it is that there'll be a fiat trading pair for it. If there isn't a fiat trading pair, you may have to use a crypto to crypto exchange such as Binance. We've researched a number of coins here if you're not sure where to start.
Risks when buying Bitcoin
You might be buying Bitcoin with the hope of earning lots of money and retiring early, but you need to be aware that this is a high risk investment. Some specific risks when buying Bitcoin:
- Bitcoin's price could drop to $0 in certain scenarios (e.g. if the US government bans it, if there's a large hack on the Bitcoin blockchain, if someone with lots of Bitcoin sells it all at once, etc.).
- If you store your Bitcoin on an exchange and the exchange is hacked, you may not get it back. Often exchanges aren't regulated in the same way as banks, where if your bank account is hacked you'll get your money back up to a certain amount. See this guide for suggestions on keeping your Bitcoin safe.
DISCLAIMER: This site cannot substitute for professional investment or financial advice, or independent factual verification. This guide is provided for general informational purposes only. Bitcoin Kit is UK-based and not regulated by the FCA (Financial Conduct Authority). The group of individuals writing these guides are cryptocurrency enthusiasts and investors, not financial advisors. The ideas presented are our analysis, learning & opinions on a range of cryptocurrency topics. Trading or mining any form of cryptocurrency is very high risk, so never invest money you can't afford to lose - you should be prepared to sustain a total loss of all invested money.
This website is monetised through affiliate links. Where used, we will disclose this and make no attempt to hide it. We don't endorse any affiliate services we use - and will not be liable for any damage, expense or other loss you may suffer from using any of these. Don't rush into anything, do your own research. As we write new content, we will update this disclaimer to encompass it.
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Never invest money you can't afford to lose.
All information on this website is for general informational purposes only, it is not intended to provide legal or financial advice. We encourage you to consult your own legal & financial advisors before making any cryptocurrency-related purchase.