How to Buy Bitcoin

How to buy Bitcoin easily, cheaply, and anonymously

5 minute read

Now that you have a wallet setup you’re going to need to actually get some bitcoins into it. There are many ways to purchase bitcoins, but none are as easy as could be hoped. There is no website you can go to and use your credit card and immediately get some bitcoins in return at market value (which is whatever Bitcoin is selling for on the exchanges).

If you want to buy bitcoins cheaply (or at least, at the fair market value), you’ll have to use one of the currency exchanges. Those require you to provide a lot of information about yourself and take several days to transfer money into. If you want to get bitcoins faster, there are websites that will let you use a credit card or cash, but you’ll again have to provide identifying information about yourself, and you’ll pay way above the price the exchanges offer. And if you’d like to remain anonymous you’ll have to find someone to sell to you directly, and again you’ll pay a price above the going exchange rate.

You’ll have to choose if you want to buy bitcoins cheaply, easily, or anonymously. Unfortunately, you only get to choose one.

Buying Bitcoin Easily

The easiest way to buy Bitcoin, meaning you don’t have to get out of your seat or learn a complex interface, is to buy through a site like Coinbase. Coinbase is a startup based in Silicon Valley founded back in 2011, and was received funding from some of the most well known venture capitalist firms in the business. As far as trustworthiness goes, Coinbase is the gold standard.

Coinbase lets you buy using a credit card or a bank account. Either method will require you to provide some authentication. If you use a credit card, Coinbase will place two small charges on your card, between $1 and $2, and you’ll have to prove your the owner of the card by correctly identifying the charges to Coinbase. This method can take up to a day to go through. After your credit card is set up, you’ll be able to use it to buy Bitcoin instantly. However, you’ll pay a 3.99% premimum over the exchange rate of Bitcoin (assuming you’re in the US - rates vary in other countries).

You can save money by setting up Coinbase to use your bank account. Coinbase will ask you for your online bank login username and password, which may make you hesitate since providing anyone with the login to your bank account is generally a bad idea.

If you do proceed with this method, your account will be instantly verified. You can elect to not use the instant verification method, and instead use the “deposit verification” method, which will make two small deposits to your bank account. This method is slower and can take 2-3 days. Using your bank account to make purchases will cost you 1.9% over the going Bitcoin/US dollar exchange rate.

After you make a purchase, you can store your Bitcoins with Coinbase, or transfer them to your own wallet. If you do keep your Bitcoins on Coinbase, consider storing them in a Coinbase Vault. Bitcoins stored in a Coinbase Vault require 48 hours before they can be transferred out, meaning that if someone does hack your account, you’ll have plenty of time to fix the situation before your Bitcoins disappear.

Buying Bitcoin Cheaply

“Cheaply” is a relative term - the price of Bitcoin is incredibly volatile, and swings of thousands of dollars a day aren’t unheard of. Those price swings take place on cryptocurrency exchanges, which work like the stock market - matching buy orders with sell orders from users. The exchanges are where you can find the best price for Bitcoin, they’re not as easy to use as Coinbase, and there are several of them to choose from.

When choosing an exchange, it’s important to choose one with a lot of volume, which is the amount of Bitcoin bought and sold in a day. A high volume means that there are many people buying and selling, which means you’re most likely to get the “true” price of Bitcoin. You can find a list of which exchanges let you buy and sell for your currency on Coin Market Cap. The “Pair” column will show something like “BTC/USD”, which means that the exchange offers a market for Bitcoin bought and sold for US dollars. There are exchanges that sell for most major world currencies, including the Euro, Yen, Won, and many others.

Every exchange will require you to complete some form of “Know Your Customer” authentication. “Know Your Customer” is the process by which a bank (or other currency service) ensures that its services are not misused (meaning, to avoid money laundering). On an exchange, this will usually mean providing your full name and address, and often also providing a picture of a government issued photo id.

Once you’ve been verified by the exchange, you’ll then have to get your money to them. Usually this will require a bank transfer, which will take time and incur a fee (depending on your bank).

Finally, after you’ve done all that, you’ll be able to place a buy order on an exchange like Gdax. The interface can be intimidating. The key points are the amount of Bitcoin you want to buy, and the price you’re willing to pay.

Buying Bitcoin Anonymously

Buying anonymously means getting offline and meeting someone to sell you Bitcoin in person. The easiest way to find someone to sell you bitcoins is to head over to Local Bitcoins, a site that matches buyers and sellers who meet up in person to complete the sale. There are also people selling Bitcoin online using Local Bitcoins, but those sales will require you to send money via a bank wire.

The price you’ll pay for using Local Bitcoins depends on the seller, but always some amount higher than you would pay on an exchange.