Bitcoin has exploded over the past several years. By 2024, investment in Bitcoin had created almost 175,000 Bitcoin millionaires1 worldwide. Most analysts believe that this cryptocurrency is here to stay. That said, investing in Bitcoin for the first time can be easy with the right steps and precautions.
How to buy Bitcoin
Here’s how to safely buy Bitcoin in four easy steps.
1. Choose between a crypto exchange or a broker
2. Set up and fund your account
3. Decide where to store your Bitcoin
4. Purchase your Bitcoin
1. Choose between a crypto exchange or a broker
There are many ways to buy Bitcoin, but the two most popular are cryptocurrency exchanges and traditional brokers. Here’s an overview of all four methods:
Cryptocurrency Exchanges. Online platforms where you can trade your assets, like fiat money, for digital currencies.
Traditional Brokers. Some investment brokers offer the option to purchase cryptocurrencies directly through their platforms.
Bitcoin ATMs. These machines allow you to insert cash to buy Bitcoin, which is then sent to a secure digital wallet.
Peer-to-Peer (P2P) Exchanges. Platforms that enable you to buy Bitcoin directly from other holders who set their own prices.
Consider several important factors before choosing your platform. Ensure it is available in your state. Review the fees and minimum requirements to understand the cost of using the platform. Verify if your bank allows deposits to the exchange for seamless transactions. Explore the types of cryptocurrencies offered to ensure the exchange supports the coins you're interested in. Finally, evaluate the security measures in place to safeguard your investments.
There are plenty of different exchanges to choose from, but they not all are created equal. As a beginner, your safest bet is to stick with well-known exchanges.
Our pick for a beginner friendly crypto exchange: Coinbase
Coinbase is a legacy cryptocurrency ecosystem. Founded in 2012 (around the same time as Bitcoin), Coinbase navigated the prestigious Y-Combinator to become a crypto goliath. Now a publicly traded company, it offers many creature comforts you’d find from a big bank. Beyond buying and selling cryptocurrency, notable features include a Visa debit card, a standalone wallet, and staking. It’s a one-stop shop.
Traditional brokers that offer crypto
To buy Bitcoin via a traditional broker, start by choosing a brokerage platform that offers cryptocurrency trading, such as Robinhood, eToro, or Webull. Create an account and complete any required identity verification. Once your account is set up, deposit funds using your preferred payment method, such as a bank transfer or credit card. Navigate to the cryptocurrency section of the platform, select Bitcoin, and specify the amount you want to purchase. Confirm the transaction, and your Bitcoin will be added to your account, where you can hold it or trade it further.
Our pick for a traditional broker that offers crypto: Robinhood
Robinhood is a popular brokerage for active and mobile traders, notable for being the first major brokerage to offer commission-free stock trades. In addition to their commission-free stock trades, Robinhood also offers ETF, options, and cryptocurrency trades and account options with no recurring fees.
Once you decide on an exchange, it’s time to open up an account.
2. Set up and fund your account
Each of the three recommended exchanges has a simple sign-up process: Just visit the exchange’s homepage and click “Get Started.”
From there, you will have to set up your account and verify your identity via KYC, Know Your Customer. This process varies based on where you live and the exchange you choose. Be prepared to provide copies of your driver’s license, social security card, employer information and documentation confirming your address.
After passing the verification process, it’s time to connect your payment method and fund your account. This can be done via Automated Clearing House (ACH) bank transfers, debit cards, credit cards, wire transfers and sometimes even PayPal.
Different exchanges charge varying fees based on the payment method you choose, so do your research.
3. Decide where to store your Bitcoin
While you can technically store your bitcoins on the exchange itself, this is not recommended. If the exchange were to be hacked, you can say goodbye to your money.
For safekeeping, you need a digital wallet. You can store your cryptocurrency in two different types of wallets: a hot wallet or a cold wallet. A hot wallet runs directly on your smartphone, tablet or computer. Your private keys — used to access your cryptocurrency — are generated on your internet-connected device.
This easy access makes it convenient for active trading, but also convenient for hackers. A cold wallet, also known as a hardware wallet, is a physical device that stores your private keys offline. Think of it as a glorified USB drive. Whenever you want to buy or sell Bitcoin, you’ll need to connect your wallet.
This protects you from hackers but is slightly less convenient for regular trading.
If you plan to trade cryptocurrency frequently, you can use a hot wallet for the funds you’re actively trading and a cold wallet to securely store the rest.
If you plan to buy and hold, a cold wallet is all you need.
4. Buy your Bitcoin
Now for the fun part. The purchase process for each exchange is slightly different, but most include the following steps:
Choose which type of cryptocurrency you’d like to buy (in this case, BTC).
Enter how much you’d like to purchase.
Select your payment method.
Preview and confirm your order.
Once done, you know own crypto. You will want to transfer your crypto to a wallet at this point for safekeeping.
Benefits to buying Bitcoin
Pros
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Low fees. When you take banks and governments out of the picture, you pay fewer fees (surprise).
Cons
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Discretion. Unlike credit cards and bank transfers, Bitcoin transactions are not directly linked to your personal identity (although they can be traced back to you).
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Accessibility. All you need to use Bitcoin is a smartphone and an internet connection. This opens up possibilities for millions of people without access to traditional banking systems.
What are the risks of buying Bitcoin?
RISKS. All investments have some element of risk, but there a few unique Bitcoin risks you’ll want to be aware of before buying. The most obvious is Bitcoin’s inherent volatility. For example, on Dec. 31, 2024, one bitcoin was worth $92,643.25 when the market opened. One week after that, on Jan. 7, 2025, it had soared to $102,248.85. Three days later, it had fallen back to an opening price of $92,494.49. These giant swings are not for the faint of heart, and there’s no telling if (or when) the bubble will burst. Bitcoin investing also comes with fewer protections than other types of investments and is not insured by the government. Apart from volatility, there are also security risks. If you don’t take proper precautions (which we’ll cover shortly), hackers will be looking for ways to sneak in and drain your accounts. Lastly, as Bitcoin exploded, so has Bitcoin-related fraud. Before investing, make sure to familiarize yourself with all the popular Bitcoin scams.
What is Bitcoin?
Before throwing your hard-earned money at Bitcoin, let’s make sure you understand what you’re investing in. Bitcoin (BTC) was created in 2009 and is considered the original cryptocurrency. You can think of it as virtual cash that you store in digital wallets. Bitcoin is powered by blockchain — essentially a database spread across many computers requiring no centralized oversight. In other words, it’s a technology that can operate independently of banks and governments.
How to avoid Bitcoin nightmares
It’s one thing to know how to buy Bitcoin. It’s another to know how to buy Bitcoin more safely.
Let’s go over some safety ground rules.
- 1.
Don’t invest money you can’t afford to lose. Whether you believe in Bitcoin or not, the truth is nobody knows what its future holds. Expect the worst, hope for the best, and don’t invest money you depend on.
- 2.
Understand the process. When investing in cryptocurrency, don’t buy a cryptocurrency just because everyone else is doing it. Do your own research. Verify it with multiple sources, and don’t invest in anything you don’t understand.
- 3.
Keep everything secure. Protect your funds with a complicated password, two-factor authentication and a hard wallet. Print out multiple copies of your private keys and store them in different secure locations. That way if you ever lose your hard wallet, you can recover your funds.
- 4.
Track everything you do. Just like traditional investments, you must pay taxes on cryptocurrency-related income. You must report all capital gains and losses on your crypto investments. This includes the gains and losses that are realized when you purchase a product or service directly with Bitcoin, so make sure to keep a detailed record for tax time.
Mitchell is a freelance contributor to Moneywise.com.
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