How to Buy Bitcoin

Bitcoin is a type of cryptocurrency you can exchange digitally and use as a form of payment or investment. Bitcoin transactions don’t require banks or a centralized party, as the network operates on a decentralized peer-to-peer ledger system.

There are multiple cryptocurrencies on the market, and Bitcoin remains a popular option for those interested in alternative assets.

How to Buy Bitcoin (BTC)

Cryptocurrencies like Bitcoin use a decentralized ledger database known as a blockchain to log all transactions that have occurred on the network. When a transaction occurs, it goes into a queue for a Bitcoin miner to validate. (This can take up to 10 minutes, which is much shorter than more traditional trading methods of settlement.) The miner must validate the individual buyers’ records and the Bitcoin blockchain records for the transaction to be approved. This prevents fake or malicious transactions.

You can become a Bitcoin miner with certain software and hardware, but most people buy Bitcoin using an exchange and store it in a cryptocurrency wallet. (Our best Bitcoin wallets guide can help you make an informed choice.) 

For example, if you own a Bitcoin, you can use your cryptocurrency wallet to send smaller portions of that Bitcoin as payment for goods or services.

What Is the Value of Bitcoin?

Bitcoin’s value is determined by the users and market rates due to supply and demand. The key value proposition of Bitcoin is that there is, and only ever will be, 21 million of them (a key differentiator between Bitcoin and other currencies and cryptocurrencies). This hard cap creates scarcity and value. 

The price of one Bitcoin (BTC) in July 2023 is just over $29,288. Bitcoin values tend to fluctuate wildly, though its long-term value has trended positive. For example, Bitcoin sunk to less than $16,000 after several cryptocurrency fiascos struck in 2022, like the FTX collapse, but its value is rebounding in 2023. 

Pro Tip: Given its high price tag per whole BTC—Bitcoin peaked at $68,789.63 in November 2021—most people buy, own, and exchange Bitcoin fractionally as a more affordable investment method. When buying Bitcoin, you may hear the term “sats,” which describes the smallest unit of Bitcoin, 1/100,000,000 of a BTC.

Ways to Buy Bitcoin

While you can use Bitcoin as a payment method to purchase items, it’s more common for people to buy BTC as an alternative investment asset—especially during times of inflation. A recent survey conducted by Retirement Living found of the 78% of respondents that had invested in some asset type within the past six months, roughly one-third of those were alternative investments—with cryptocurrency (19%) topping that list.

On a Crypto Exchange

One of the easiest ways to buy Bitcoin is through a crypto or bitcoin exchange, where you exchange dollars for BTC. Like a stock exchange, a broker takes orders and completes sales. The exchange will charge a fee for each transaction. First, you’ll create an account on an exchange platform. Then, you’ll fund your account using your bank, credit, or debit cards. 

You can choose from lots of crypto exchanges, but as a beginner investor, you’ll want to find one that balances ease of use with advanced security measures and low fees (like storage fees, for example). Some of the more substantial exchanges are Coinbase, Kraken, and Gemini. 

Exchange operations widely vary because they are, at least for now, mostly unregulated. Most operate via a mobile app or desktop, and you can shop just like you would on any other investment broker website, such as Robinhood, Schwab, or E-Ttrade.

Exchanges may offer digital storage in a wallet with various levels of encryption. Some use offline storage to prevent hacking. Be sure to research how your chosen exchange stores your data. After hackers began targeting Bitcoin and other cryptocurrency exchanges, some began offering private insurance on funds and transactions.

Via Peer-to-Peer Money Transfer Apps

P2P platforms like PayPal, Venmo, or Cash App allow users to purchase Bitcoin and receive BTC as payment directly on the application. Ethereum, Litecoin and Bitcoin Cash are also tradable on some platforms. Most Bitcoin P2P platforms usually take small transaction fees to facilitate the process.

By Mining Bitcoin

Mining Bitcoins is a process where specialized computer programs compete to solve complex math problems involved in recording Bitcoin transactions. Every time someone buys or sells Bitcoins, computers process the data called blocks. The computer that solves the block the fastest earns Bitcoin as a reward for supplying the processing power to make the Bitcoin process work. 

The successful miner earns around 6.5 Bitcoins, though this number will be halved to 3.125 in 2024. Bitcoin mining can be profitable if you invest in the right tools; you’ll need significant processing power, internet speeds, and hardware to process this data correctly. 

Bitcoin mining is also vital to the industry—miners contribute to the ecosystem by validating transactions and circulating new coins. Without miners, there would be no new Bitcoin.

How Do I Store My Bitcoin?

Unlike traditional currency, where you might have the physical product in hand or allow a regulated financial institution to hold the records of your funds, Bitcoin storage is your responsibility. While the blockchain is a global ledger of Bitcoin ownership and transactions, it is untraceable and unusable without individual account keys. Users store their keys—a string of characters representing their account—in a digital Bitcoin wallet. 

There are several cryptocurrency wallets to consider for storing Bitcoin, such as Coinbase, Exodus, and Ledger.

You’ll also need to consider whether you want to use a hot or cold wallet. A hot wallet is a wallet that is connected to the internet, like on an exchange. There are also software hot wallets that are not on an exchange but are still connected to the internet. However, these are less protected from hacking and unauthorized transactions than those on an exchange.

A cold wallet is a device that stores the keys off the internet, such as a Ledger device. These wallets are the safest way to store crypto as they cannot be remotely hacked. However, you’ll have to physically store the cold wallet, which comes with its own risks.

From Our Expert: I believe that cold wallets are the safest if you have a sophisticated investor who understands how to use them. If you only have a small amount of crypto, using a hot wallet is acceptable; the impact is less if your investments were to be lost. As the value of the crypto you own becomes larger, a cold wallet becomes more important.

Ryan Sullivan, Investment Advisor

Bottom Line

Bitcoin’s value fluctuates fairly quickly. Whether you plan to sell your Bitcoin, make purchases, or invest it for retirement, you should be ready to do so quickly when the price is right.