How To Buy Bitcoin - Bitcoin USD

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.

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 $3,237 in December 2018 to the five figures. 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.

Is Bitcoin right for you?

Bitcoin can be a risky investment, so it's important to think carefully about your goals and your strategy before you decide. While Bitcoin's price has appreciated dramatically over time, 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.

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. If you're new to investing, find out more about how to invest money. If you do decide to buy bitcoin, there are also some technical and logistical decisions you'll have to make.

It's also a good idea to make sure you understand what you're investing in. Here are some basic things to know.

  • What's a cryptocurrency? 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.
  • How does Bitcoin fit in? 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.

How to buy Bitcoin in 4 steps

  • Decide where to buy Bitcoin. Cryptocurrency exchanges like Coinbase and a few traditional brokers like Robinhood can get you started investing in Bitcoin.
  • Think about how to store your cryptocurrency. Are you going to keep your Bitcoin in a hot wallet or a cold wallet?
  • Make your purchase. Figure out how much you want to invest in Bitcoin.
  • Manage your investment. Determine your long-term plan for this asset.

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 several cryptocurrency exchanges. Many offer dozens of cryptocurrency choices, while others simply have Bitcoin and a handful of alternatives. They carry a variety of different fees and consumer protections, so do your diligence before choosing.

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.

Of the online brokerages and cryptocurrency exchanges that NerdWallet reviews, the following currently offer Bitcoin.

2. Decide how to store Bitcoin

Bitcoin can be stored in two kinds of digital wallets: a hot wallet or a cold crypto 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.”

There are many hot wallet providers, offering a range of wallet types. Here are a few:
  • Coinbase: Also a popular Bitcoin currency exchange, Coinbase offers free online hot wallets and insures losses due to security breaches or hacks, employee theft, or fraudulent transfers.
  • Electrum: Software that allows your bitcoin to be stored on your laptop or desktop computer.
  • Blockchain: Like Coinbase, Blockchain is an online hot wallet; unlike Coinbase, Blockchain isn’t a currency exchange and is considered a less attractive target for hackers.
  • Mycelium: A mobile-only bitcoin wallet, with versions available for Android or iPhone users.
Although some hot wallet providers offer insurance for large-scale hack attacks, that insurance may not cover one-off cases of unauthorized access to your account.

4. Manage your investment

If you like the idea of day trading, one option is to buy bitcoin now and then sell it if and when its value moves higher. But if you see a future for BItcoin as a digital cryptocurrency, 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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