How to Buy Bitcoin

You can buy Bitcoin through exchanges and stockbrokers, or from other owners. Regardless of where you get it, consider the risks of investing in digital assets.
Andy Rosen
Kevin Voigt
By Kevin Voigt and  Andy Rosen 
Edited by Andrea Coombes Reviewed by Michael Randall

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Buying Bitcoin is often the first step that investors take into the world of cryptocurrency. And it can be an unfamiliar landscape for someone used to traditional financial products.

The value of Bitcoin — the world’s first and most popular cryptocurrency — has risen from about 6 cents in August after its launch to an all-time high of over $68,000 in November 2021. Since then, its value has dropped to about $17,000 in December 2022 amid the widespread crypto crash. Like all cryptocurrencies, Bitcoin is speculative and subject to much more volatility than many tried-and-true investments, such as stocks, bonds and mutual funds.

» Learn more: What is cryptocurrency?

Frequently asked questions

Bitcoin can be a risky investment, so it's important to think carefully about your goals and your strategy before you decide.

That said, there are some basic guidelines. One common rule of thumb is to invest no more than 10% of your portfolio in individual stocks or risky assets like Bitcoin. And as always, it's a good idea to make sure you understand what you're investing in.

If you're not ready to put a large amount of money at risk, you can start small and still get a good grasp for how the process works. Many crypto exchanges have minimum purchases of $10 or less.

Cryptocurrencies are digital assets that are usually created using a cryptographic computer networking technology called blockchain, which makes it possible to exchange them without the need for a central authority such as a bank. Cryptocurrencies are traded on public exchanges, but they are generally not subject to the same regulations as stocks and other traditional investment products.

Bitcoin is the dominant force in the market for cryptocurrencies, but there are thousands of other cryptocurrencies — some reputable, some not. Different cryptocurrencies are often designed for different purposes. For instance, Bitcoin was developed as a payment system.

Some other cryptocurrencies, such as Ethereum, are used to carry out more complex transactions. Some, such as Dogecoin, were created as jokes but have attracted investor interest anyway.

If you're thinking about buying Bitcoin or any cryptocurrency, there are a few ways to think about the risks and potential rewards. Bitcoin is a bet both on the cryptocurrency space itself and the specific technology behind Bitcoin. Both are relatively new and untested, and neither is guaranteed to reach the potential some of its proponents anticipate.

If you believe in the ideas behind cryptocurrency in general, but you're not convinced that Bitcoin is the ultimate expression of those concepts, you might want to consider a more diversified portfolio of cryptocurrencies.

For investors who are ready to buy Bitcoin, here are a few things to consider before getting started:

Have information you may need handy. Setting up a cryptocurrency account takes minutes, but you'll need to provide some information, including your Social Security number and the number to your bank account, debit card or credit card to fund your Bitcoin account. Some providers also may require you to have a picture ID. Record and safeguard any new passwords for your crypto account or digital wallet (more on those below).

Don’t take on credit card debt to make the purchase. Although some providers allow you to purchase Bitcoin by credit card, it's best to avoid taking on high-interest debt to invest in a risky asset like Bitcoin. If the value of Bitcoin sinks, you could get stuck with big losses.

» Learn more: Is Bitcoin safe?

Understand investor protections. Or in this case, the lack thereof: Bitcoin and other cryptocurrency investments are not insured by the Securities Investor Protection Corporation for exchange failures or theft, a protection that traditional stock brokerage accounts enjoy on up to $500,000. Some exchanges provide private insurance, but that doesn’t protect against individual online breaches, such as someone stealing your password.

Use a secure, private internet connection. This is important any time you make financial transactions online. Buying Bitcoin while at the coffee shop, in your hotel room or using other public internet connections is not advised.

While Bitcoin's price has appreciated dramatically at times, not every person who has bought it has gotten a piece of those gains. Because cryptocurrency markets in general are very volatile, it's nearly impossible to find the "right time" to buy or sell — the price could soar moments after you sell, or plummet as soon as you buy.

How to buy Bitcoin in 4 steps

  1. Decide where to buy Bitcoin. Cryptocurrency exchanges like Coinbase and a few traditional brokers such as Robinhood can get you started investing in Bitcoin.

  2. Think about how to store your cryptocurrency. Are you going to keep your Bitcoin in a hot wallet or a cold wallet?

  3. Make your purchase. Figure out how much you want to invest in Bitcoin.

  4. Manage your investment. Determine your long-term plan for this asset.

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1. Decide where to buy Bitcoin

There are a few different ways to buy Bitcoin and other cryptocurrencies, including exchanges and traditional brokers.

Cryptocurrency exchanges

You can purchase bitcoin from cryptocurrency exchanges. Many offer dozens of cryptocurrency choices, while others simply have Bitcoin and a few alternatives. They carry a variety of different fees and consumer protections, so do your diligence before choosing. Here are a few cryptocurrency exchanges where you can purchase Bitcoin:

Traditional stockbrokers

The choices among traditional brokers that give customers a way to buy and sell Bitcoin are few right now — Robinhood was the first mainstream investment broker to offer Bitcoin (Robinhood Crypto is available in most, but not all, U.S. states). Like its stock-trading platform, Robinhood charges no fees for Bitcoin trades. Other online brokers that offer access to Bitcoin or other cryptocurrencies include:

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Other ways to buy or invest in Bitcoin

  • Bitcoin ATMs. These work like normal ATMs, only you can use them to buy and sell bitcoin.

  • Trusts or exchange-traded funds. The financial firm ProShares launched the first Bitcoin-linked ETF in October of 2021. The fund (ticker: BITO) doesn't invest directly in Bitcoin, however — instead, it invests in futures contracts for Bitcoin. The digital currency assets manager Grayscale Investments also offers Bitcoin trust funds. Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Classic Trust (ETCG) are publicly traded, which means you can buy them through many discount brokers. There are fees, and GBTC often trades at a premium — that means GBTC shares often cost more than Bitcoin, even though Bitcoin is its only holding. Some investors are willing to pay extra to buy Bitcoin through a traditional exchange, without needing to worry about wallets and storage.

  • Peer-to-peer money transfer apps. Cash transfer services like PayPal, Venmo, or Cash App allow their users to purchase Bitcoin using the app. You can purchase, store and sell Bitcoin directly on the application. PayPal and Cash App will even let you send and receive payments using Bitcoin, but Venmo has not implemented this functionality on their app yet.

2. Decide how to store Bitcoin

Bitcoin can be stored in two kinds of digital wallets: a hot wallet or a cold wallet. With a hot wallet, transactions generally are faster, while a cold wallet often incorporates extra security steps that help to keep your assets safe but also make transactions take longer.

Hot wallet

With a hot wallet, Bitcoin is stored by a trusted exchange or provider in the cloud and accessed through an app or computer browser on the internet. Any trading exchange you join will offer a free Bitcoin hot wallet where your purchases will automatically be stored. But many users prefer to transfer and store their Bitcoin with a third-party hot wallet provider, also typically free to download and use.

Why choose a wallet from a provider other than an exchange? While advocates say the blockchain technology behind Bitcoin is even more secure than traditional electronic money transfers, Bitcoin hot wallets are an attractive target for hackers. As Bitcoin.org warns: “Many exchanges and online wallets suffered from security breaches in the past and such services generally still do not provide enough insurance and security to be used to store money like a bank.”

Cold wallet

A cold wallet is a small, encrypted portable device that allows you to download and carry your Bitcoin. Cold wallets can cost less than $100 and are considered much more secure than hot wallets.

When creating accounts for your digital wallets and currency exchange, use a strong password and two-factor authentication.

3. Make your purchase

After linking your Bitcoin wallet to the Bitcoin exchange of your choice, the last step is the easiest — deciding how much Bitcoin you want to buy. While a single Bitcoin costs thousands of dollars, the cryptocurrency (trading symbol BTC or XBT) can be bought and sold as fractional shares, so your initial investment could be as low as, say, $25.

4. Manage your investment

Investors who day trade — a risky investment strategy that involves frequent buying and selling — try to buy Bitcoin low and sell it if and when its value moves higher. But if you see a future for Bitcoin as a digital currency, perhaps your investment plan is to buy and hold for the long haul. Whatever your plan, know that owning Bitcoin creates a complex tax situation.

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