How To Buy Bitcoin (A Beginner’s Guide)
You’ve seen the post on social media about Bitcoin. You’ve watched Bitcoin news stories that were wedged in between stories about Trump’s latest Tweets and North Korea being an angry country. And you’ve probably thought, how do I buy Bitcoin? Maybe you’ve even researched how to buy bitcoin but came up short on a full understanding. This is why I decided to create a simpleton’s guide on how to buy bitcoin.
It is easier than you think to buy Bitcoin, but that doesn’t make it any less risky. As it stands, you are best buying high-return ETF’s, such as this BOTZ Artificial Intelligence ETF, and S&P Vanguard ETFs, if you are planning for long-term retirement strategies. But that doesn’t mean that buying Bitcoin is a bad move. In life, risk can equate to reward, the key is tempering the associated risk in a way that it doesn’t wipe out your livelihood if things collapse.
So let’s understand some basic concepts to start. I am going to avoid being extremely technical here, although I always suggest further technical reading once you have a grasp on the Bitcoin investing concept. I also want to note that I have a how to buy Litecoin beginner’s guide, as well, for those who are interested. Also, if you have arrived here debating Ethereum vs. Bitcoin, check out my should I buy Ethereum or Bitcoin debate.
How To Buy Bitcoin: Do I Need To Be Extremely Rich?
Before we go through the process of your initial buy, let’s talk about how much money you need to buy Bitcoin. The answer is, not much, or as much as you’d like. This is the number one confusing aspect about Bitcoin that tends to sway people against investing in Bitcoin. But it is a point of contention that’s truly misunderstood.
Let’s start by looking at the current Bitcoin price. As of my writing this article, the price is roughly $5,222.00. But you are likely seeing a much different number on this Bitcoin news widget which is pulling its current price.
Let’s just pretend that price is $5,000 / Bitcoin for sake of proving a point. For many people, tossing $5,000 at a risky investment is just not practical, nor wise. Unless you can place $5,000 on the chopping block without losing sleep over losing it, you would be best served not to do such. When it comes to high-risk investing, which is what Bitcoin is, your investment should reflect a denomination which you are OK with losing. In this way, the risk doesn’t effectively harm your well-being if things go sour.
And due to this logical investment approach perspective, many people feel the entry to Bitcoin investment is out of reach. This is not true. Because you don’t have to buy a full Bitcoin, you can invest in partial Bitcoin and receive exactly the same return on investment (or loss, keep in mind). If you want to buy $100 in Bitcoin, you can do that. And you will exponentially fall and rise as Bitcoin price fluctuates.
But Buying Bitcoin At Low Prices Wouldn’t Be Worth The Time?
Um, not true, either. Bitcoin is now at over $5,000 (again, please refer to my widget above for exact Bitcoin price). At one time, Bitcoin was $100 for a single Bitcoin. If you’d bought two Bitcoins, you’d have $9800. There are some investment gurus who feel that Bitcoin could rise to $100,000 per Bitcoin in 10 years. Buying $100 in Bitcoin today would yield you a rather serious return on investment if that day ever comes to fruition. Now, there are other financial gurus who predict that Bitcoin collapses, so you could lose $100 forever.
Now, when you read headlines from financial gurus predicting Bitcoin crashes, it is important to verify their position in the matter. Some gurus feel that Bitcoin will crash forever, meaning, you lost the whole bill. Some feel it will crash temporarily and then rise again (this is often the case and not a big deal for those who invest in Bitcoin for the longterm).
In conclusion, anyone can afford to buy Bitcoin, it is a matter of how much you want to invest.
Where To Buy Bitcoin
Now that you’ve decided how much you want to invest in Bitcoin, you need to decide where to buy Bitcoin safely and securely. Please do not just read this section and buy, make sure you read the entire article so you understand some of the potential risks (technical risks).
Some quick notes:
- You can research the top Bitcoin exchanges, I am going to give you the one I use. I get no credit from them for it, but if you do use them, you can get credits for inviting others. I AM NOT GETTING CREDIT HERE, their program works via email invites, not using codes on websites.
- There are security risks and ways to cut down on those risks, that’s in the next section.
I use Coinbase to buy Bitcoin. So to start, you’d sign up for an account with them here. I suggest you wait on this until you finish the article. No reason to rush. Also, make sure you read my how to transfer Bitcoin from Coinbase to Trezor security article after your first purchase.
Creating a Coinbase account is rather simple and seamless. You agree to terms. You will at some point need to verify an address or ID. Without doing so, you can’t transfer money out of your Bitcoin wallet and into your bank account. This means if you want to cash out, you can’t. This also seems to affect your weekly Bitcoin purchase amounts (yours will likely show $200 a week, then maybe $500 a week after you verify). I’m not going to get too deep here, because once you are signed up, Coinbase will alert you on ways to raise your minimum Bitcoin buy-ins. To be honest, the lower buy limits not only benefit Coinbase from an initial risk perspective but probably you, as well, considering you are a new buyer.
Once you have created the account, you can also download the app on your smartphone and I suggest that you do.
The first thing you will be greeted with is the Bitcoin price. And welcome to the ride. The price of Bitcoin fluctuates by the second. You may at this point decide you simply don’t have the heart health for this venture and that’s certainly OK.
Let’s look at a few other items:
- You will see Litecoin and Ethereum. You will have options to buy these competitor Cryptocurrencies as well. But this isn’t an article about those, so please ignore those for now.
- You will notice you have wallets for each Cryptocurrency. This means you have a Bitcoin wallet. It should have $0 in it because you just opened the account and haven’t purchased any Bitcoin yet.
To get started, you simply click the Bitcoin price on the app. You will then see an option to BUY BITCOIN. Through this process, you will choose an amount you’d like to invest. You will choose a method to pay for this. You will also be charged a fee for the purchase (yes, Coinbase makes money, also). I’m not going to get into fees because that’s something that Coinbase could change. But just know, if you opt to invest $100 in Bitcoin, your actual invest will be less by a small amount.
Let’s look at the desktop Coinbase interface.
When you first log in using the desktop, you will see the Bitcoin price dominantly displayed. You will see the prior month’s price trend. The bottom left is your portfolio. This is where you will see your various wallets, including Bitcoin, Ethereum, Litecoin. Again, we are only talking Bitcoin right now. The wallet will represent your actual cash value you have invested in Bitcoin. If you bought Bitcoin yesterday, that wallet number will either be more or less than what you invested. I’m not expanding the screenshot to show my wallets because that’s personal. You can expand the dashboard to display Bitcoin trends for a week, or a year, or even an by the hour.
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On the bottom right side, you can keep track of your buys and dates they occurred.
The top nav bar will feature the Buy/Sell button. Similar to the App, you can click this and set up your first buy. But don’t do that yet, please read the next section.
Coinbase and Bitcoin Security Issues
You really need to understand this aspect of things before you buy.
- Coinbase Two-Step instructions
- Backing up Coinbase Bitcoins to Trezor Bitcoin Wallet
- Using Coinbase Vault
Bitcoin is not like bank cash, it is not insured. Additionally, Bitcoin purchases do not have refund capabilities as part of their innate security DNA. If someone hacks your Coinbase account and steals your Bitcoins, say farewell to them forever. If someone hacks Coinbase from a universal standpoint and steals your Bitcoins (and everyone else’s while they are in there) say farewell to your investment.
What I just wrote might be enough to turn off a new investor and that’s certainly understandable. Let’s talk about ways to cut down on the risk of getting our Bitcoin investments stolen.
First and foremost, turn your Coinbase account on to two-step authentication. To be honest, you should always do this with any account that allows it (Facebook, GoDaddy, Lastpass, etc). Two-step means that each time you log in to Coinbase, a text message will go out to your smartphone. You will input this code into Coinbase. Then Coinbase will allow you access. Yes, this means a few more second will be used up during the Coinbase log in experience, but well worth it. If you don’t want to turn on the two-step, I honestly dissuade you from even opening the account. That’s just not a smart approach. You should do this BEFORE you first investment.
Here are those instructions:
- Once signed in, go to Settings > Security (at the top) and click the ‘Verify A Phone’ button (https://www.coinbase.com/settings/security_settings).
- Provide the phone number that you’d like to use and click Next. For the best experience, please use a cell phone. Landlines are not supported for receiving 2FA codes. Note that there will now be a new dialog displayed in your browser to complete verification of this phone.
There are other ways to approach two-step. You can read those options on their support page here.
Now, two-step helps prevent someone from hacking your personal information. Let’s say someone steals your Coinbase log in info and attempts to login, they’d need your phone. This is a reasonable and effective first step to securing your Coinbase account.
Now, for full protection from a global hack, or a situation where someone has access to your Coinbase login information and text messages, let’s get a bit more technical. I know, boring, but you honestly need to understand this.
Bitcoin is blockchain. It is a code. It is not insured. So someone simply needs to push the Bitcoin blockchain out of your account to steal it. This concept is important.
Coinbase is merely an exchange for Cryptocurrency. You don’t have to store your Bitcoin with Coinbase, they just allow you to as a matter of convenience to market their service. So, you can actually store your Bitcoin yourself.
There is a product called the Trezor Bitcoin Wallet, sold on Amazon.
How To Backup Coinbase to Trezor Bitcoin Wallet
Ok, I’m going to avoid being overly technical here. To move your Bitcoins from Coinbase to your Trezor wallet, you need to go into your Coinbase Bitcoin wallet. You click SEND. You will then be able to send to your Trezor wallet. That was overly simple and this article should not serve as an extensive guide for this. I recommend you read my how to move Bitcoin, Litecoin, Etherum from Coinbase to Trezor guide.
I simply want you to grasp the concept of how this process works. From the Trezor Wallet, you can receive Bitcoin (as would be the case with Coinbase transfers to the wallet) and you can send out Bitcoins somewhere else.
Always put your Coinbase account on Two-Step authentication before you make any purchases of Bitcoin or cryptocurrency.
Understand how to back up Bitcoins to a Trezor Bitcoin Wallet
Coinbase Bitcoin Vault
The most secure Bitcoin vault would be the Trezor Wallet. However, Coinbase has an extra layer of security that’s better than just two-step alone, but not as secure as Trezor.
The Coinbase vault does a few great things. For one, it makes sure that all Bitcoin sells are postponed by 48 hours, allowing you to cancel them. In this way, if someone hacked in and moved your Bitcoins, hopefully, you could intercept and cancel the transaction. Another Coinbase Vault layer is forcing all Bitcoin cashouts to be approved by multiple people. Trust your wife, husband, dad? They could serve as an extra layer for all Bitcoin outbound transactions. Coinbase also says that your Bitcoins are stored offline in safety deposit vaults.
Bitcoin is Speculative Investment
Bitcoin is speculative in nature, it will often feel like gambling. When it rises, you might feel the need to rush to buy more. Bitcoin is somewhat addicting and this concept likely fuels the price inflation. This could be a good thing, it could also end in a volatile crash. How many people are investing in Bitcoin because they truly believe that cryptocurrency is the way of the future versus those who are just “gamblers” and speculative investors? We may not ever know. But the price fluctuations do give us a bit of insight into the inner-workings. The crazy ups and downs of Bitcoin suggest many people do trade the currency frequently. This is what props up, or lets down, the overall price. It is important to understand that all speculative investments are risky.
Do you have $100, $500, or even a few grand you don’t mind losing? Bitcoin may well be right up your alley if you do. Otherwise, proceed with a severe level of caution. No one wants to tell their wife or husband that their savings disappeared in an infamous Bitcoin crash.
Author: Jim Satney
PrepForThat’s Editor and lead writer for political, survival, and weather categories.