The world’s most well-known cryptocurrency, Bitcoin has seen a steady rise in value since it was launched in 2009. Since that time, Bitcoin has seen an overall positive value trend.
As investors turn their eyes to the cryptocurrency market again, you might be considering investing in Bitcoin for the 1st time. Despite it being the most popular digital currency online, many investors still aren’t sure how they can legally purchase Bitcoin and keep their investment secure. Thankfully, it’s never been easier to set up and account with a broker that supports cryptocurrency and start investing. Our guide will help you choose a trading platform, open an account and get started with your 1st Bitcoin purchase.
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Before you can invest in Bitcoin or make your first purchase, you’ll need to have a few supplies and information available.
Here are a few of the things you’ll need before you purchase any type of crypto:
- A brokerage account. Though it is possible to purchase cryptocurrency outside of a major exchange (more on that later), it’s significantly safer and easier to buy Bitcoin using a broker’s trading platform. A brokerage account allows you to place requests to buy and sell cryptocurrency through orders submitted through your broker. The broker then fills the order on your behalf, sometimes in exchange for a fee.
- Your personal information. Like opening a stock brokerage account, your cryptocurrency broker will need to collect a little of your personal information before they can grant your access to the cryptocurrency market. This information is used to accurately track your profits, as converting crypto to fiat and crypto to crypto are both taxable events.
The specific information you’ll be required to provide before opening your account will vary depending on which broker you work with. As a general rule, be prepared to provide your full legal name, your phone number, an email address, your physical address, and your Social Security number to open your account. Most brokers also require you to scan a photo ID (like a driver’s license or a passport) to access higher funding tiers. You’ll also need some form of payment method to fund your account — most investors choose to link a credit card or bank account to their investing account for easy transfers.
- A digital wallet. A digital wallet is a smartphone or computer app that allows you to safely store any cryptocurrency you purchase. Cryptocurrency wallets provide you with an enhanced layer of security for your tokens and limit the possibility of a hack or theft when compared to keeping your tokens on an exchange. We’ll go into a few of the characteristics you might want to consider when choosing a wallet in the next section.
Get a Cryptocurrency Wallet
A cryptocurrency wallet is an app that allows you to safely store your Bitcoins off the exchange you purchased them on. Holding your Bitcoin in a wallet is a more reliable choice for long-term storage because it limits the possibility of losing your tokens in an exchange hack.
Some of the factors you might want to consider when choosing a wallet might include:
- Security features. Always choose a wallet that offers two-factor authentication and encryption to ensure that your tokens are secure. For the highest possible security, consider a wallet with multisig features, which requires multiple keys to access tokens.
- Compatibility with your tokens. Not every digital wallet supports all types of cryptocurrencies. Be sure that you’re choosing a wallet that supports Bitcoin transfers before you open it or send your tokens.
- Online vs. hardware wallets. If you’re looking to store a large amount of Bitcoin as securely as possible, a hardware wallet might be the right choice for you. However, if you lose your hardware wallet, it’s virtually impossible to regain access to your tokens.
Not sure which wallet is right for you? Consider starting your search with a few of our favorite cryptocurrency wallets, listed below.
Open an Account
After you have your cryptocurrency wallet open and secure, it’s time to open an account with a broker. A cryptocurrency broker provides you with access to the crypto market. You can place orders through your broker to buy and sell Bitcoin, who will then fill them according to your instructions. Once your order is filled, you’ll see your tokens in your brokerage account.
There are dozens of cryptocurrency brokers operating online. Some of the factors you may want to consider when you choose a broker include:
- The broker’s trading platform. Some brokers focus on offering a streamlined, easy ordering system. Other brokers take a more expert-aimed approach, providing you with a range of investment analysis tools, charting platforms and screeners to help you analyze market movements before you invest. Consider the type of platform and buying experience you’d prefer before you open an account.
Select brokers (like Coinbase) focus on providing a streamlined platform and easy access to Bitcoin purchases.
- Accessible assets. As the most well-known cryptocurrency on the planet, any investing platform that offers access to cryptocurrency will allow you to buy Bitcoin. If you’re only interested in purchasing Bitcoin, you’ll have a wide range of platform options to choose from. However, if you’re interested in investing in stocks or ETFs on the same platform, be sure to choose a broker that supports these assets.
Some brokers (like Webull) provide you with access to stock, metal and altcoin investments alongside Bitcoin.
You might also want to consider the other cryptocurrencies you can buy and sell through your broker of choice. There are over 2,000 individual cryptocurrencies in existence — and no single broker will allow you to access all of them. It can be helpful to create a list of cryptocurrencies you’re interested in before you begin comparing platforms and account providers to ensure that you’ll have access to every asset you’re interested in.
- Fees and commissions. Fees and commissions vary by broker and asset. If you plan on trading frequently, be sure to pay special attention to commission rates.
If you aren’t sure where to open your brokerage account, consider a few of our top selections below. Each option is currently accepting new clients and offers access to the Bitcoin marketplace online.
Trade or Invest
After you place your 1st order and it’s filled by your broker, congratulations — you’re now a Bitcoin owner! Now, you’ll need to choose whether you want to be an active trader or a long-term investor.
Traders speculate on day-to-day (and sometimes hour-to-hour) price movements, attempting to sell their Bitcoin when prices rise and buy back when the price drops again. These investors focus on taking advantage of small, quick price movements to accumulate more Bitcoin over time. As cryptocurrencies are a volatile asset, this can present plenty of opportunities for profit.
Investors take a more long-term approach, holding their Bitcoin for months or even years at a time before selling. Investors believe that the price of Bitcoin will rise over time and focus less on small price fluctuations. If you plan on investing in the long-term, you should move your Bitcoin to a cryptocurrency wallet for enhanced security. These wallets are less susceptible to hacking attempts than exchanges.
Other Ways to Buy Bitcoin
In addition to buying Bitcoin through an online exchange, there are other ways to access the Bitcoin market. Here are 2 of the most common methods investors use to buy and sell Bitcoin without using a standard brokerage account.
A Bitcoin ATM works in much the same way as the ATMs issued by your bank or credit union. Insert cash into the machine, purchase Bitcoin at the current market rate and transfer your tokens to a secure digital wallet. Websites like Coin ATM Radar can help you track down a Bitcoin ATM near you.
Peer-to-Peer (P2P) exchanges
P2P exchanges like LocalBitcoins connect Bitcoin buyers and sellers together directly using a marketplace format. Users holding Bitcoin can post sales ads, while buyers can respond to the ads that interest them.
The site facilitating the transaction offers escrow accounts that protect both the buyer and the seller. If you’re interested in buying Bitcoin with payment methods like Cash App or Zelle, a P2P exchange can facilitate these types of transactions.
Add Bitcoin to Your Portfolio
With a long history of price improvements, Bitcoin can provide your investment portfolio with a unique layer of diversification. However, remember that unlike stocks or ETFs, cryptocurrencies are not regulated — and it’s possible to lose 100% of your investment.
If you do decide to buy Bitcoin, remember to never invest more money than you can afford to lose. Use our guide to help you add Bitcoin to your portfolio today.
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