Bitcoin has seen meteoric growth in recent years. In May 2016, you could buy one Bitcoin for about $500. As of April 2022, a single Bitcoin was worth over $46,000. That’s growth of more than 9,000%.
Some analysts believe the price of Bitcoin could rise even more as cryptocurrency and blockchain technology become a bigger part of people’s daily lives. But buying Bitcoin comes with big risks. Along with impressive gains, BTC has also experienced devastating declines. After almost reaching $20,000 in 2017, for example, the value of Bitcoin plummeted to around $3,100 just about a year later.
Bitcoin remains a highly volatile asset, and simple things like an ill-timed tweet from Elon Musk can decimate its value. buy in dhaka If you want to buy Bitcoin, experts recommend that you invest no more than a small percentage of your net worth in the leading cryptocurrency.
How to Buy Bitcoin in 4 Steps
1. Choose a Crypto Exchange
To buy Bitcoin or any cryptocurrency, you’ll need a crypto exchange where buyers and sellers meet to exchange dollars for coins.
There are hundreds of exchanges out there, but as a beginner, you’ll want to opt for one that balances ease of use with low fees and high security. Be sure to check out our top picks for best crypto exchanges, like Coinbase, Gemini and Binance.US if you don’t already have an exchange in mind.
Make sure to check if your exchange has a Bitcoin wallet built into its platform; if not, you’ll need to find one of your own. You may also choose to buy your crypto on a platform like Robinhood, Paypal or Venmo, though buying crypto this way often means you cannot withdraw your coins and move them to another platform. If you want to hold your crypto to a different wallet, you’ll need to sell your holdings and then rebuy them on a different exchange.
2. Decide on a Payment Option
After choosing an exchange, you have to fund your account before you can begin investing in Bitcoin. Depending on the exchange, you can fund your account through bank transfers from a checking or savings account, PayPal, wire transfers, a cryptocurrency wallet or even a credit or debit card.
Keep in mind, though, that platforms may charge higher transaction fees for certain funding options. For example, Coinbase doesn’t charge a fee if you do an electronic transfer from a bank account. However, it charges $10 on wire transfers and 2.5% of the transaction amount if you use PayPal.
Because fees reduce how much money you can invest (and therefore also how much money you have to grow and compound), it tends to make sense to use electronic transfers from a bank account rather than other methods. In addition, if you use a credit card to buy cryptocurrency, it generally will count as a cash advance and be subject to a higher interest rate than you pay on regular charges. What’s more, taking on debt to buy volatile investments is extremely risky.
3. Place an Order
Once your account is funded, you can place your first order to buy Bitcoin. Depending on the platform you’re using, you may be able to purchase it by tapping a button, or you may have to enter Bitcoin’s ticker symbol (BTC). You’ll then have to input the amount you want to invest.
4. Select a Safe Storage Option
The crypto exchange you use probably has an integrated Bitcoin wallet or at least a preferred partner where you can safely hold your Bitcoin. Some people, however, do not feel comfortable leaving their crypto connected to the internet, where it may be more easily stolen by hackers.
Most major exchanges have private insurance to reimburse clients if this happens, and increasingly, they’re also storing the majority of customer assets in offline so-called cold storage. If you want ultimate security, you can store your Bitcoin in an online or offline Bitcoin wallet of your own choosing. But keep in mind that if you move crypto off of an exchange, you may have to pay a small withdrawal fee. In addition, if you use a third-party crypto wallet custodian, you may also be permanently unable to access your coins if you lose the private key that serves as your wallet password. This has locked some Bitcoin millionaires out of their fortunes.
When you decide you’re ready to sell your Bitcoin, you can place a sell order through your exchange, much like you did when you originally purchased your BTC. Most exchanges offer multiple order types, so you can decide to sell only when Bitcoin reaches a certain price, or you can place an order that goes through immediately.
You can choose to sell your entire holdings of Bitcoin or only a specified amount. Once the sale goes through, you can transfer the money to your bank account. Your exchange, however, may have a holding period before you can make a transfer back to your bank account. This isn’t cause for concern; it simply takes some time to make sure the transactions clear.
When you sell your Bitcoin, you may make a profit. If you do, you’ll be on the hook for capital gains taxes as cryptocurrency sales must now be reported on your taxes.
Should You Buy Bitcoin?
When Bitcoin’s price is skyrocketing, investing in the popular cryptocurrency can be tempting. But while it has the potential to be a lucrative investment, you should be cautious: It’s an incredibly volatile purchase that experts don’t recommend you allocate a large percentage of your investing dollars to.
If you’re not sure whether investing in Bitcoin or other cryptocurrencies is a good idea for your needs, consider meeting with a financial planner who can help you figure out where cryptocurrencies fit into your investment strategy.