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Buying Bitcoin is often the first step that investors take into the world of cryptocurrency — and right now, more investors may be looking to take that step: After a lengthy price slump, Bitcoin is up over 160% in 2023.
But buying even a more mainstream cryptocurrency like Bitcoin can feel like an unfamiliar landscape for someone used to traditional financial products. The good news: There are many ways to buy Bitcoin and other cryptocurrencies, from stockbrokers to dedicated exchanges and even in-app purchases in some crypto-linked applications.
Before you dive in, it's worth thinking about your appetite for risk. 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?
6 ways to buy Bitcoin
Two of the most common ways to buy Bitcoin include Bitcoin wallets and centralized crypto exchanges. But you can also purchase Bitcoin through some traditional online brokers, as well as a select few money transfer apps. First, decide how much Bitcoin you want to buy. While a single Bitcoin costs tens of thousands of dollars, the cryptocurrency can be bought and sold as fractional shares, so your initial investment could be as low as, say, $25.
Here's an overview of how to buy Bitcoin:
1. 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. Cryptocurrency exchanges where you can purchase bitcoin include Gemini, Kraken, Coinbase and Crypto.com.
» View our list: The best crypto exchanges and platforms
2. 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 WeBull, TradeStation and Fidelity.
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3. Bitcoin ATMs
These work like normal ATMs, only you can use them to buy and sell Bitcoin. They are often placed in locations where you might find normal ATMs, such as convenience stores. Before you carry out a transaction, make sure you look at the fees you'll be charged, and have a plan for where to send the Bitcoin once you buy it.
4. 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. There are a handful of other ETFs that hold Bitcoin futures contracts or the stock of companies that own a lot of Bitcoin or cryptocurrency (or are connected to those industries).
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 sometimes trades at a premium — which 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.
5. Peer-to-peer money transfer apps
Cash transfer services like PayPal, Venmo, or Cash App allow their users to purchase Bitcoin using the apps. You can purchase, store, send and sell Bitcoin directly through the apps, which is convenient if you're used to those interfaces.
6. Wallet software
Some crypto apps, such as games, crypto wallets or other online services that use blockchain technology, allow users to buy and sell digital assets directly within their app.
If you're using cash in one of these apps, you may wind up using a third party service such as MoonPay to fill your order. Such services can cost a bit more than regular exchanges, but offer some advantages in the form of quick, relatively painless transactions.
How to store the Bitcoin you buy
If you're purchasing Bitcoin, you'll need a place to keep it.
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.
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.”
» Compare: Best exchanges to store your cryptocurrency
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.
» Get started: Our list of the best crypto wallets
What to do with the Bitcoin you buy
Bitcoin can function either as an investment or a medium of exchange. So you can either spend it, trade it or hold it. If you're spending Bitcoin, there are a handful of retailers and digital services that allow you to use crypto as payment.
If you're investing, it's good to think about what kind of investor you want to be. 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 may create a complex tax situation.