How to Buy Bitcoin for Beginners & Build Your First BTC Portfolio

Buying Bitcoin is no longer a niche endeavor. There’s a good chance you know someone who has invested in Bitcoin or at least heard stories of people getting rich from buying it early. No wonder you want to learn how to buy Bitcoin. After all, Bitcoin has outperformed nearly every other asset class over the last decade. While past performance does not guarantee future returns, Bitcoin’s storied history makes it an attractive investment to help diversify your portfolio. You can take advantage of Bitcoin's excitement and the prospects of its future adoption to build financial independence and potentially grow wealth through a strategic, low-risk entry into BTC investment without feeling overwhelmed or making costly Bitcoin annual returns mistake.

This guide will walk you through the basics of buying Bitcoin and give you a foundation to build on as you explore Bitcoin investment strategies. One resource to help you in this endeavor is Bitcoin Magazine Pro's Bitcoin analysis, which offers actionable insights to help you reach your financial goals.

How to Buy Bitcoin for Beginners

btc on cash - How to Buy Bitcoin for Beginners

Buying Bitcoin can seem overwhelming at first, especially for beginners. However, the process isn’t as complicated as it may seem. Here’s how to buy Bitcoin in a few simple steps.

With the price of Bitcoin hitting an all-time high above $99,000 in November 2024, beginner Bitcoin investors may be looking to research the digital asset to determine if it is the right fit for their investing style and financial goals. CoinGecko. “Bitcoin (BTC).”

Getting Started with Bitcoin: A Guide for New Investors

Investing in Bitcoin (BTCUSD) can seem complicated, but it isn’t. It only requires an account at a service provider or a Bitcoin exchange and a way to store your purchases safely.

Bitcoin investors need a BTC exchange account, personal identification documents (if they are using a Know Your Client (KYC) platform), a secure internet connection, a payment method, and a personal digital wallet outside the exchange account. Valid Bitcoin payment methods include bank accounts, debit cards, and credit cards. Getting Bitcoin at specialized ATMs and via peer-to-peer (P2P) exchanges is also possible.

What Should You Consider Before Buying Bitcoin?

Like any investment, there are considerations to weigh before buying Bitcoin. Understand that the balance of your Bitcoin wallet is public information. Anyone can see how much Bitcoin is in your wallet and how many transactions have occurred. What they can’t see is who owns the wallet. When someone purchases with Bitcoin, their public wallet address is shown next to the transaction on the blockchain.

This level of privacy is much better than what you get with traditional financial systems. But you should know that Bitcoin is still traceable. For example, if you buy Bitcoin, and transfer it to your wallet, and later use some of that Bitcoin to make a purchase, there’s a chance that someone could track the transaction back to you. This is especially true if you ever convert your Bitcoin back to traditional currency through an exchange.

Understanding Bitcoin’s Pseudo-Anonymous Nature and KYC Regulations

You are only pseudo-anonymous. Bitcoin transactions are more traceable than cash because they are available for public viewing. However, it is complicated to determine who is transacting unless the address is associated with an exchange account, which is required if the user wants to convert their Bitcoin to fiat currency.

This is because you must provide identification when you create an account on a regulated exchange that can convert Bitcoin. This is called Know Your Client (KYC) and is required by law in many countries to assist law enforcement’s efforts to combat money laundering and terrorism financing.

Necessary: Before buying Bitcoin, check out the legal, regulatory, and tax status of purchasing it where you live.

How to Buy Bitcoin: Step-By-Step Guide

Buying Bitcoin may initially seem tricky, but it’s pretty simple once you know the steps. Let’s walk through the process:

1. Choose a BTC Exchange or Trading Platform

There are many exchanges and apps, each with its trading features. Some popular ones include:

Binance
Bybit
MEXC
OKX
Coinbase

When picking an exchange, consider fees, security, and whether it’s legal in your country. It’s like choosing a bank. You want one that’s trustworthy and meets your needs.

Ensure that the trading platform accepts your desired payment methods. Some allow you to use credit cards, while others may only support bank transfers. Also, search for an exchange with an easy-to-use interface and responsive customer service. If you still need more assistance, you can check our detailed guide on the best BTC exchanges in the world.

2. Create an Account and Deposit Fiat or Bitcoin

Once you’ve chosen an exchange, it’s time to set up your account. This process is similar to opening a new bank account. You’ll need to provide some personal information and verify your identity. This is called the KYC procedure. This step is essential to follow anti-money laundering rules.

After your account is set up, you’ll need to add money. This is called making a deposit. You can do this with regular funds (fiat currency) like:

You must utilize a credit card or link a bank account to make a fiat deposit. You can also use third-party payment providers like:

MoonPay
Simplex
Banxa
Google Pay
Apple Pay

Each exchange has rules about minimum deposit amounts and fees. Make sure you understand these before you start. It’s always wise to start with a small amount until you’re comfortable with everything.

3. Place a Buy BTC Order

Once your account has funds, you can order to buy Bitcoin (often abbreviated as BTC).

There are usually two main ways to buy:

Market Order: This is like saying, “I want to buy Bitcoin right now at whatever the current price is.” It’s quick and straightforward, but the price might change slightly between clicking “buy” and when the order goes through. This is generally called price slippage and is very little or often negligible. It depends on exchange liquidity and trading volume.

Limit Order: This is more like saying, “I want to buy Bitcoin, but only if the price reaches X amount.” You set the price you’re willing to pay, and the order will only go through if Bitcoin reaches that price. This can be useful if you’re trying to get a specific deal, but it might take longer or not happen at all if the price doesn’t reach your set amount. When you’re ready to buy, you’ll need to figure out how much Bitcoin you want. You do not have to buy an entire Bitcoin; you can purchase parts of one. For example, you can buy $100 worth of Bitcoin, regardless of how many Bitcoins you receive.

Once you’ve made these options, double-check everything and finalize your purchase. The exchange will process your order, and you will shortly become a Bitcoin owner.

4. Transfer Bitcoin to an External Wallet

After buying Bitcoin, transferring it to an external Bitcoin wallet is highly suggested. Keeping your Bitcoin on an exchange exposes it to hacking or platform failure threats. An external wallet provides increased protection for your Bitcoin and gives you complete control over your assets.

There are several sorts of wallets accessible, including:

Hardware wallets
Software wallets
Paper wallets

You’ll only need the Bitcoin deposit address from your external wallet to send Bitcoin.

How to Buy Bitcoin (BTC) with PayPal

Currently, PayPal allows certain users, specifically those with PayPal Balance accounts and eligible business account holders, to buy Bitcoin.

You must follow these simple steps on the PayPal mobile app to purchase Bitcoin through PayPal.

Step 1: Go to the “Accounts” section of the app. From there, select “Bitcoin”. This will take you to the BTC section, where you can start your Bitcoin purchase.
Step 2: Tap “Buy” to initiate the transaction. You’ll then be prompted to choose the amount of Bitcoin you wish to purchase. PayPal gives you several options regarding the frequency of your purchase. You can decide whether to make it a one-time transaction or prefer recurring purchases.

The frequency options include:

Daily
Weekly
Biweekly
Monthly

Purchases will default to one-time purchases if you do not want recurring ones.

Step 3: Once you’ve selected the amount and frequency, you’ll be asked to choose a starting date for your transaction. After that, tap “Confirm” to proceed to the next step. You’ll be shown a summary of your order, where you can review all the details. If everything looks correct, tap “Next” to move forward.
Step 4: After confirming your order, you’ll need to select your payment method. PayPal allows you to use the payment options linked to your account, such as your bank or credit card. Once you’ve chosen the preferred payment method, tap “Next” to authorize the transaction.
Step 5: Finally, you’ll be asked to confirm and schedule the purchase. Tap “Authorize and Schedule,” and the transaction will be finalized. If you opt for a one-time purchase, your Bitcoin will be purchased immediately. If you select a recurring option, the app will schedule future purchases according to your chosen frequency.

Note: Many Bitcoin exchanges like Binance, OKX, and Bybit also allow you to buy Bitcoin using PayPal through their P2P marketplace.

How To Buy Bitcoin With a Credit Card

Many Bitcoin exchanges allow users to purchase Bitcoin using credit cards. This option provides ease of use, as most people are familiar with credit card payments.

The process is straightforward. Make sure the exchange accepts credit card payments. Binance and KuCoin are the two most popular platforms. Enter your credit card details and link them to the exchange, deposit funds into your exchange account, and place a buy order for Bitcoin.

Be aware that using a credit card to buy Bitcoin often incurs higher fees than bank transfers or other forms of payment. Some platforms charge a percentage of the transaction amount as a fee.

Different Ways to Buy Bitcoin (BTC)

Bitcoin ATMs offer a straightforward method to purchase Bitcoin using cash or, in some cases, a debit card. While these machines function similarly to traditional ATMs, the process is somewhat different.

Here’s a detailed guide on how to navigate a Bitcoin ATM effectively.

Found a Bitcoin ATM in a Nearby Area

Your first task is to find a Bitcoin ATM. Websites like CoinATMRadar can be helpful. Check the transaction fees and limits beforehand, as these can vary by machine.

Set Up Your Wallet

Before making a purchase, you need a BTC wallet capable of receiving Bitcoin. This could be a software or hardware wallet, depending on your preference for security. Have your wallet’s QR code or public key accessible, as the machine will need this information to transfer your Bitcoin.

Input Your Purchase Amount

Select the “Buy Bitcoin” option and specify the cash amount you wish to convert into Bitcoin. The ATM will display the current exchange rate and applicable transaction fees, allowing you to review the total cost before proceeding.

Scan Your Wallet Address

The next step involves scanning your wallet’s QR code using the ATM’s scanner. This step ensures the Bitcoin is sent directly to your wallet. Double-check the wallet address for accuracy, as Bitcoin transactions are irreversible.

Insert Cash

With your wallet address confirmed, proceed to insert cash into the machine. It automatically converts the cash into Bitcoin based on the prevailing exchange rate. Be aware that transaction fees for Bitcoin ATMs can be significant, often ranging from 5% to 10%, much higher than online exchanges.

Confirm Your Transaction

After cash insertion, finalize your purchase by pressing the “Buy” or “Confirm” button. Due to the Bitcoin network's congestion, the machine will process the transaction, which may take several minutes to complete.

Verify Receipt in Your Wallet

Once the transaction is processed, the purchased Bitcoin will be sent to your wallet. Depending on network activity, the coins might take some time to appear. After confirming the complete transaction, store your Bitcoin securely in your wallet.

Buy Bitcoin on BTC Exchanges

Bitcoin exchanges are the most common platforms used to buy Bitcoin. However, not all exchanges function the same way. You can purchase Bitcoin on centralized exchanges, peer-to-peer (P2P) platforms, decentralized exchanges (DEXes), and even through mainstream brokerages.

Centralized Exchanges

These platforms act as intermediaries, providing a user-friendly interface and advanced security features. Although convenient, they require you to trust the platform with your funds and personal data. This means they are the custodial BTC platforms.

Peer-to-Peer (P2P) Platforms

P2P platforms like Paxful mean buying Bitcoin person-to-person without any middleman. These platforms act as facilitators but don’t control the transaction.

You and the seller agree on terms, and the transaction is processed without intermediaries. P2P platforms offer greater privacy but may require more caution due to the direct interaction with other individuals. This entire P2P process is based on the “Escrow” system.

Decentralized Exchanges (DEXes)

On decentralized exchanges like Uniswap or PancakeSwap, you can buy Bitcoin without a centralized authority. DEXes operate on smart contracts and allow direct trading between you and another party.

These exchanges provide higher privacy and reduce the risk of hacking, but they can be more complex to navigate, especially if you are a beginner.

Mainstream Brokerages

Mainstream brokerages, like Robinhood or eToro, have also integrated Bitcoin trading into their platforms. While they don’t offer the same range of features as specialized exchanges, they provide an easy way for those familiar with traditional investing to enter the Bitcoin market. Many platforms limit your ability to withdraw Bitcoin to external wallets.

How to Store the Bitcoin You Buy

storing bitcoin - How to Buy Bitcoin for Beginners

When you buy Bitcoin, you purchase a ticket to the Bitcoin network. This ticket shows that you own a certain amount of Bitcoin recorded on the blockchain. Your ownership is recorded safely on the blockchain, and to access your Bitcoin, you’re given two keys: a public key and a private key. Your public key is like your bank account number. It’s safe to share with others who want to send you Bitcoin.

This key is used to encrypt your information. Your private key is like the password to your bank account. This is the key you’re storing and safeguarding. Without it, you cannot access your Bitcoin. Someone else can easily steal your Bitcoin if they obtain your private key. Your bitcoin isn’t stored in a wallet. Instead, a wallet stores your private key. When choosing a wallet to store your Bitcoin, consider the different types and their security features.

Types of Storage: Custodial vs. Non-Custodial

There are generally two categories of storage, custodial and non-custodial, and four types of wallets:

Desktop wallet: A program that resides on your computer. It's not the safest storage method.
Mobile: A program that is hosted on a mobile device. Not very secure.
Hardware: A device similar to a USB drive. Secure, depending on if it is connected and how it connects to another device.
Web-based: A wallet that is hosted by a web service. It's not secure, as you're letting someone else store your keys for you.

Whether a wallet is connected to or resides on the internet determines whether it is a hot or cold wallet.
Using a top-rated Bitcoin wallet with cold storage abilities can help increase your Bitcoin security.

Custodial Wallet

A third party, such as an exchange like Coinbase, manages a custodial wallet. In this arrangement, the custodian stores your private keys for you, guaranteeing their safety and sometimes providing insurance on holdings up to a certain amount.

Custodial wallets like these have been the target of many attacks since users began using their services; exchanges have taken measures to harden their services, such as moving users' keys into enterprise-level secure data storage so they cannot be accessed. Custodial wallets can either be hot or cold.

Non-Custodial Wallets

Non-custodial wallets are those you use to store your keys with no one else involved. Non-custodial wallets can also be either hot or cold.

Hot Wallet

Hot wallets are software that store your keys and connect to the internet. These wallets create vulnerability by generating the private keys needed to access Bitcoin.

While a hot wallet is how most users access and make transactions in Bitcoin, they are vulnerable and can be hacked. It's estimated that about 17% of the bitcoin that will ever be in circulation has been lost, such as:

Misplaced
Keys forgotten
And so on

Cold Wallet

A cold wallet (also called cold storage) is a wallet that is not connected to the internet; therefore, it holds far less risk of being compromised. These wallets are also called offline wallets or hardware wallets.

The Safest Bitcoin Storage

Of all the options available for storing your keys and securing your Bitcoin, the safest methods will always be those you manage yourself without a connection to the Internet.

Commercial Non-Custodial Cold Wallets

You'll find many options, such as the Ledger Nano X or Trezor Model T. These are usually USB connection-type drives that connect to your device. When used safely, these commercial storage methods are safer than storing your keys in the wallet on your connected device.

Many of these wallets store your private key and come with software that works parallel to your wallet device or program. This lets you view and use your holdings without entering your private keys.

Understanding Hardware Wallets and Their Security Features

You might find some with Bluetooth or other wireless options when choosing one of these products. These are also safe if you can disable the connectivity after using them if they don't automatically do so.

The vulnerabilities of these wallets are the software and connections used on your device or storage media and the fact that you have to connect them to a device with a connection to use them. Commercial cold wallets are also called hardware wallets.

Alternative Non-Custodial Cold Wallets

Several methods are safe from hackers and thieves, and you can use them to secure your Bitcoin keys. USB drives can be used as effectively as a commercial wallet if you encrypt and safeguard them. Disconnect them when they're not being used, store them in a secure place, make a backup, and only use them on one device for one purpose: keeping your keys.

Paper Wallets: A Traditional Yet Cautious Approach to Storing Keys

One of the original ways to store keys was to write them down on paper and place them in a safe. This is still a secure method; however, ink can bleed, paper can deteriorate over time or be lost, or someone can steal it. If you choose this method, you should ensure only trusted people have access to the safe and periodically check on the paper.

Some users used QR code generators, printed the keys and QR codes on paper, and stored them in safes. This can still be done, but you're allowing additional software access to your keys. Don't use websites that generate codes or anything for you. You never know how your information is being stored and used on a website, and they are notorious for being hacked or hijacked.

Security Precautions

Backup

Back up your entire Bitcoin wallet early and often. In case of a computer failure, a history of regular backups may be the only way to recover the currency in the digital wallet. Be sure to include all the wallet.dat files and store the backup in multiple secure locations (like on a USB, CD, or another removable device). Ensure you use a strong password on the backup and encrypt it.

Software Updates

Keep your software up to date. A wallet running on non-updated software can be a soft target for hackers. The latest version of wallet software will have updated definitions and fixes in place, thereby increasing the safety of your bitcoins. Consistently update your mobile device or computer operating systems and software to make your bitcoins safer.

Multi-Signature

The concept of a multi-signature (multi-sig) has gained some popularity; it involves transaction approval from several people (like three to five) for it to occur. This limits the threat of theft as a single controller or server cannot carry out the transactions (i.e., sending bitcoins to an address or withdrawing bitcoins).

The people who can transact are decided in the beginning. When one of them wants to spend or send bitcoins, they require others in the group to approve the transaction. This is also called a shared wallet and should be used with caution. If you can use multi-sig, ensure you know and trust the other people before joining the wallet.

Seed Phrases

Seed phrases are randomly generated words that act like a master password for your wallet. They are also called:

Recovery phrases
Mnemonic phrases
Seed phrases

These phrases allow you to recover your keys if you lose your storage devices or access. Your keys are encrypted, and a series of words are generated from that encryption that gives you access to your wallet.

A seed phrase might look like this: spare snake rather a window lab bless night west industry trap jacket absurd detect inspire need robot to lift elevator able volcano one memory link goat. These words are easier to memorize and/or write down and store than the 64-digit hexadecimal keys. You can even purchase a titanium stamping kit to preserve and secure your seed phrase in your safe.

Using Your Bitcoin

When you decide to use your Bitcoin, the best way is to transfer only the amount you want to use from cold storage to your hot wallet. Once you're done, move any remaining bitcoin back into cold storage. Anyone can see your hot wallet's public address and the amount you have stored in it.

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How to Buy Bitcoin for Beginners & Build Your First BTC Portfolio

Jan. 24, 2025