The price of bitcoin has exploded over the past couple of years. In 2016, you could buy bitcoin for around $600 a coin, and the price in 2021 has hit as high as $59,000. With that kind of growth, new crypto investors are interested in learning where to buy bitcoin and how to do it.
The appeal is easy to see, but the truth is that there are still many risks involved in buying bitcoin and other cryptocurrencies. Prices are constantly fluctuating, and you can see your investment plummet after a tweet. Elon Musk’s tweets about crypto are notorious for affecting their prices — a single tweet caused the price of bitcoin to drop 15%.
It's vital to understand the risks before going in. So as long as you understand them and start slowly, here’s the best way to buy bitcoin.
The Best Way to Buy Bitcoin in 2022
1. Decide where to buy bitcoin
There are several places to buy and sell bitcoin, and crypto exchanges are the most popular and best place to buy bitcoin if you’re brand new to crypto.
When buying bitcoin, look for an exchange with low fees, high-security measures, and usability. Here are my top picks for exchanges that are well-known for all of those features:
Coinbase
Coinbase is a U.S.-based bitcoin exchange that trades over 30 different cryptocurrencies. It’s also one of the world’s largest exchanges, with over $455 billion in total volume traded on the platform since 2012.
Coinbase charges a couple of different fees. This includes a spread of about 0.5% for purchases and sales, and there’s also a transaction fee based on your payment type. ACH transfers are the cheapest on Coinbase (no charge), followed by a 1.49% fee if you use your bank account or Coinbase wallet.
One of the best things about Coinbase is that it has multiple platforms — regular Coinbase and Coinbase Pro — so you can choose one based on your experience. New bitcoin traders will find regular Coinbase super user-friendly.
Gemini
Gemini was designed to be a one-stop shop for buying, selling, trading, and storing bitcoin and other cryptocurrencies. They also have a PayPal like account called Gemini Pay so you can spend your Bitcoin for online purchases.
Transaction fees on Gemini are a little higher than other exchanges, and include a 0.5% convenience fee on top of a transaction fee that ranges from $0.99 to 1.49% of your order (depends on size of order).
Kraken
Kraken is one of the oldest cryptocurrency exchanges. It’s based in the U.S. making it a great place to buy bitcoin for U.S. traders. Kraken has over 60 different digital securities on top of bitcoin.
Kraken charges fees of 0% to 0.26% per trade, so they have some of the lowest fees around.
Start using Kraken
Take advantage of Kraken’s low trading fees when you buy bitcoin.
Buy bitcoin on Kraken
Binance.US
Binance has a couple of different trading platforms, and Binance.US is one of the best ways to buy bitcoin if you’re in the U.S. There are over 340 different coins available on top of bitcoin, and they have some of the lowest fees — 0.02% to 0.1% trading fee.
Looking for low bitcoin fees?
Binance has some of the lowest fees on the market.
Buy bitcoin on Binance
Other places to buy bitcoin
On top of the exchanges I mentioned, there is a growing number of online stock brokerages that are selling bitcoin and popular altcoins like litecoin, ethereum, and dogecoin. Robinhood is a top pick because they sell commission-free crypto. Webull is another popular option because it has far more coins available than just bitcoin.
When you’re setting up an account with an exchange, they will ask you for some personal information like your name, bank account info (more on this next) or other payment information, Social Security number, and sometimes a photo I.D. Having all of that info onhand will make the process go much faster.
2. Choose a payment method
You have to fund your account before you buy bitcoin on an exchange. Sounds simple enough, and it really is, but different funding methods can cause you to encounter additional fees or higher fees.
Generally, paying with a credit card is one of the most expensive ways to buy it. Not only are you paying higher exchange fees with a credit card, you’re borrowing money at an incredibly high interest rate to buy it. This should only be an option if you know you can pay your balance off in full each month.
The best way to buy bitcoin is via ACH transfer. These are electronic bank transfers that move money directly from your bank account to a crypto exchange. They can take a couple of business days to process, but most exchanges charge lower fees for ACH transfers. Coinbase is one that doesn’t charge any fees for them.
Most bitcoin exchanges also allow for Paypal, debit card, and wire transfers. Again, you’ll run into higher fees than ACH transfers, but you should know they’re an option.
It’s also worth noting that you do not need to buy one whole bitcoin. At the time of writing this, they are over $30,000. The vast majority of buyers now purchase fractional amounts of bitcoin. That can be $10, $100, $1,000, and so on. Base your purchase on what you can afford to invest.
3. Place your order
You’re almost there — you’ve picked a place to buy bitcoin, and your account is funded. Placing a bitcoin order is as easy as buying stocks and ETFs. Which, if you’ve done before, you know it can be as simple as clicking a “buy” button.
Depending on the exchange you use, you’ll either be browsing through a list of cryptocurrencies or you can enter BTC, which is the ticker symbol for bitcoin. You’ll be able to easily find it in your portfolio once you’ve made your first purchase.
Because it’s highly likely you’ll only be buying a portion of a bitcoin, most exchanges will have you enter a dollar amount when you’re ready to place your first order. Then it will show you the percentage of bitcoin you’re buying. For example, if you want to spend $25 on bitcoin you would be placing an order for 0.00081% of a bitcoin.
Before you complete the sale, most exchanges will give you a chance to confirm your order. Double check that the dollar amount and coin are correct. Then you tap “buy” and you wait for a confirmation.
Most purchase orders for bitcoin go pretty quickly, but it may take a few hours to complete your order request.
4. Safely store your bitcoin
There are two different ways to store your bitcoin once you’ve bought it, but it’s not a currency you can store in the bank. Let’s talk about your options.
Storing your bitcoin in a cold wallet
Cold wallet, or cold storage, is considered the safest way to store cryptocurrency, and that’s because it’s offline storage. These are small portable devices, like a thumb drive, and you plug them into your computer to move your bitcoin to.
You can purchase a cold wallet in advance or after you buy your crypto. They run around $100 or so, and you can easily find them online. The Ledger Nano S is a really popular option, and it runs about $60.
Make sure you keep your cold wallet in a safe place, and create a strong password when you set it up. It’s also recommended that you use two-factor authentication.
Storing your bitcoin in a hot wallet
Hot wallets are online crypto storage, and many of the best places to buy bitcoin also have a free hot wallet you can use. Hot wallets store your bitcoin in the cloud, and then you access them via your hot wallet provider. If you don’t have a crypto wallet before you purchase, the exchange will automatically store your bitcoin in their hot wallets.
You can use the hot wallet your exchange offers, or you can use a third-party one. Coinbase has a popular wallet that you can use to store bitcoin you buy from other exchanges. It’s free and they insure your crypto from losses due to security breaches, hacks, fraudulent transfers, and employee theft.
Other good picks for hot wallets are Exodus, Electrum, and Mycelium.
Hot wallets are really convenient because your exchange likely has a free one built in, but again, cold storage is your safest bet. Hot wallets have been targets of hackers in the past, and that’s why most bitcoin exchanges use cold storage for the majority of their crypto.
Whatever you do, don’t forget your password! There was a recent story about a programmer from Germany who lost his password for his cold wallet. It contained over 7,000 bitcoins, which is worth $220 million.
Should you buy bitcoin?
As the price of bitcoin has skyrocketed, buying it has become incredibly alluring. There’s less investor hesitancy too, so there are more and more people interested in learning how to buy bitcoin.
The reality is that bitcoin, and crypto in general, is still risky. It’s a volatile and speculative market with new coins popping up often. On the other hand, it can be lucrative.
The best way to buy bitcoin is to not sink a lot of cash in the market at once. Be safe, and take care of the rest of your finances first.
Ideally you’re putting money in savings and funding your IRA or other retirement accounts first. Then you can spend some time with your budget to see how much you can put towards bitcoin.
The final word on the best way to buy bitcoin
As the cryptocurrency market grows, there will continue to be more and more places to buy bitcoin and other digital currencies. Remember to pay attention to the fees (you can put more money towards bitcoin with lower fees), security, and how easy the exchanges are to use.
Coinbase is definitely my top pick for bitcoin. It does have slightly higher fees than Kraken or Binance, but there are features for beginners to advanced crypto traders.
About Millennial Money Man
Bobby Hoyt is a former band director who paid off $40,000 of student loan debt in 18 months on his teaching salary and then left his job to run Millennial Money Man full-time. He helps other Millennials earn more through side hustles, save more through budgeting tools and apps, and pay off debt. He is a personal finance expert who has been seen on Forbes, Reuters, MarketWatch, CNBC, International Business Times, Business Insider, US News, Yahoo Finance, and many other personal finance and entrepreneurship media outlets.
