So, you’ve finally decided to buy some bitcoin
Bitcoin has been on a tear. From a low in March 2020 of about $4000 to a high of nearly $42000 in the last few days, it has been a crazy ride. Michael Saylor of MicroStrategy has purchased more than 2 billion worth of bitcoin over the last few months, but others think it’s a dangerous investment.
Still determined to join the party? There are a few ways you can purchase your first bitcoins:
- Use an app like eToro or Robinhood. While these advertise zero fees, the spread (gap between the best buy and sell price) is large and you will pay more than you would on a crypto exchange.
- Use the Cash App or PayPal. With fees of anything from 1.5% to about 2.3% you will pay even more.
- Buy directly from a cryptocurrency exchange such as Kraken, Coinbase or Nash. This is a bigger step for many, but the process is quite straightforward and you will without doubt get a much better price than either option above.
- If you are a high net worth individual, a fund such as Grayscale Bitcoin Trust or Galaxy Digital’s offering might be interesting as it will be packaged up in a way that is familiar to you. Make no mistake that you will be paying far more than any of the previous options.
There is a famous expression in the world of crypto: “Not your keys, not your bitcoin”. You might decide to go all the way! Purchase bitcoin on an exchange and withdraw your coins to a hardware wallet (examples include Shapeshift’s KeepKey or Ledger). Now you really own bitcoin.
The hardware wallet itself can be accessed using a pin number — rather like the pin you enter at an ATM bank machine — and if you lose it you can retrieve your bitcoin once you have safely stored a small piece of paper with your private key on it. Note that the private key can be reconstructed from a small set of ordinary words (person, woman, man, camera etc.) that you write down when setting up your wallet. Therefore, if being in full control of the bitcoins you purchased is important to you then make sure to check the policies of the different providers. For example, eToro supports withdrawing bitcoin to an external wallet, RobinHood doesn’t.
A final couple of notes regarding bitcoin. You don’t have to purchase a whole one. Right now that would set you back over 40 thousand dollars. You can buy 0.001 bitcoin for about 40 dollars and hodl. Also, it’s not the only game in town. Ethereum, the second largest crypto by market cap, has performed even better than bitcoin in the last year.