More than a decade into its existence, bitcoin doesn't seem to be going away anytime soon. Although still a highly controversial investment, crypto is a continuously evolving market empowered by non-traditional traders who believe in the value of decentralized digital coins and tokens as the future of money.
Despite its reputation for volatility, bitcoin continues to attract new investors with its promise of market-beating returns. Here's what you need to know about buying bitcoin through the best cryptocurrency exchanges and the best strategies for generating a profit.
Buying bitcoin
"What makes Bitcoin so special is that it has a finite supply of 21 million coins, with only a couple million left to be mined," explains Edward Moya, chief market strategist at OANDA's MarketPulse. "Simple supply and demand for Bitcoin is the main reason why prices have skyrocketed over the past year."
Bitcoin reached an all-time high of $75,830 on March 14, 2024.
Getting bitcoin through crypto exchanges
Bitcoin is a cryptocurrency. This means it's a form of electronic money that secures and validates transactions via the use of cryptography. For most people, the best place to buy bitcoin is on a crypto exchange. These are online platforms, similar to the best online brokerages, dedicated to facilitating trades in cryptocurrency.
Those new to buying and trading cryptocurrencies may feel more comfortable getting bitcoin through familiar trading platforms like Robinhood. These platforms are more user-friendly and approachable for beginners than the average crypto exchange. That said, investment apps' crypto selection is usually more limited than that of exchanges.
Bitcoin ATMs
Bitcoin ATMs (BTMs) are in-person machines that allow bitcoin purchases using cash or a debit card. Unlike regular ATMs connected to a bank account, bitcoin ATMs are linked to many of the best bitcoin wallets.
Bitcoin ATMs sell and buy bitcoin at the current going rate. All BTMs sell bitcoin, but only select bidirectional BTMs allow you to both buy and sell digital coins. You may also use one of these, a BTM, to send bitcoin to another person with an existing bitcoin wallet.
Unlike online exchanges, BTMs generally charge high transaction fees and bitcoin miner fees. If you're considering using a BTM, familiarize yourself with their charges. Otherwise, it's better to hold off.
Bitcoin peer-to-peer (P2P) platforms
Peer-to-peer (P2P) bitcoin platforms allow investors to buy and sell bitcoin directly to one another instead of trading through a third-party institution. Some crypto exchanges, like KuCoin or Gemini, offer peer-to-peer services, but these exchanges operate as intermediaries.
While peer-to-peer trading can be fairly secure if you trust who you are buying or selling bitcoin from, you are at a higher risk of being scammed because you don't have the same levels of protection as you would with a bank or other financial institution. So, if you decide to pursue P2P trading, do so cautiously.
Mining bitcoin
Bitcoin was introduced in 2009 by an anonymous individual known as Satoshi Nakamoto. It was designed as a digital currency intended to be a reliable asset that maintains its purchasing power over time, similar to gold.
To mine bitcoin, people and organizations known as "miners" use computing hardware to calculate a code — known as a "hash" — that encrypts transaction data. This data is collected into "blocks," linked together in a blockchain that cannot be changed once written.
Mining options
- Solo mining: Solo bitcoin mining is when someone decides to create new blocks and earn rewards independently rather than with a team. While disadvantageous compared to groups of miners who pool their resources, solo mining generally reaps higher rewards for individuals. Only miners with extensive technical expertise should attempt solo mining.
- Cloud mining: Cloud mining for bitcoin is the process of renting cloud computing power for automated crypto mining. It doesn't require participants to install robust software, so you don't have to buy or maintain expensive equipment. But it still requires miners to make a costly initial payment, and the cloud mining industry is riddled with scams.
- Joining a mining pool: Pooled mining refers to miners pooling their resources and knowledge to create new blocks. Mining pools split bitcoin rewards based on contributions. Some mining pools charge fees to join.
Earning bitcoin
If mining bitcoin is outside your expertise, you can also get bitcoin by earning it.
Accepting bitcoin as payment
Business owners can accept bitcoin as a payment if they have a wallet or crypto gateway. Crypto gateways allow you to accept payments in exchange for US dollars. Certain point-of-sale (POS) systems also allow you to add bitcoin as a payment method, but additional plugs may be required.
When accepting bitcoin as a payment, be aware that additional fees may apply. On the plus side, crypto transactions are quick and can be transferred between accounts regardless of region.
Adding bitcoin as a form of payment may attract new customers interested in spending their digital coins and tokens. However, investing in cryptocurrencies comes with significant risks. Only business owners with knowledge of cryptocurrencies should accept bitcoin as payment.
Freelancing or working for bitcoin
You can seek out employers and platforms that reward bitcoin or other cryptocurrencies. Freelancers may be able to find job opportunities to earn bitcoin on niche jobs listing sites like Bitcoin Jobs or Bitcoiner Freelancer. You can also consider asking your clients to pay a percentage of your compensation in bitcoin. There's no harm in asking.
Other ways to earn bitcoin are through staking programs. Crypto exchanges often offer proof-of-stake opportunities to users to help manage and validate the digital asset's decentralized network.
However, many exchanges stopped offering staking programs to U.S. customers after the SEC began cracking down on them as illegal, unregistered securities offerings. So, it might want to hold off on staking programs for now.
Bitcoin rewards programs
Many cryptocurrency exchanges connect investors with their bitcoin rewards programs, either with a learn-and-earn module for beginners or through crypto credit cards. Like cash-back credit cards that reward you a percentage of cash back or points when making purchases, you can earn bitcoin rewards when purchasing items with your crypto credit card.
Popular crypto trading platforms that offer bitcoin-earning credit cards include:
Bitcoin faucets
Like cash-generating mobile apps, bitcoin faucets reward participants crypto rewards for completing tasks like completing a quiz, filling out a survey, or watching an ad. However, these platforms usually require substantial time and energy for a small reward.
Choosing the right bitcoin method for you
While investing in bitcoin may seem complicated, picking a reputable exchange and setting up an account is the best way to start. You're good to go once you've verified your identity and deposited some money.
Depending on your goals, how you want to invest in bitcoin may change. For example, suppose you're looking to diversify your investment portfolio with crypto exposure. In that case, a bitcoin ETF or future may be a better, less volatile option than a direct investment.
On the other hand, if you believe in the future value of bitcoin and its long-term potential (despite the risk), directly investing through a top crypto exchange is better suited for your needs.
Regardless, new traders are generally advised to enter the world of bitcoin investing with the mindset that they could lose most of their money.
"A new investor should only apply a very low, single-digit percentage of their trading portfolio to cryptocurrencies. Despite the many bullish calls for bitcoin or ether, massive plunges have happened in minutes. New investors may want to consider buying and holding a basket of cryptocurrencies, with an approach of scaling into positions," says Michaël van de Poppe, the CEO and founder of MN Trading.
Check the fees charged by crypto exchanges, as these can vary widely. You should also check the minimum account balance required by your chosen platform, as certain exchanges impose a minimum. Others set minimums for account deposits via bank transfer.
Storing your bitcoin
How you store your bitcoin is as important as how you get it.
Importance of secure storage
While bigger exchanges are becoming safer, hacks and fraud counting to remain a big problem for the industry. This is why investors with significant sums in bitcoin are advised to consider storing their cryptocurrency themselves.
"Experienced traders that are very good with cybersecurity might prefer to own their wallets, as this allows you to move your cryptocurrencies whenever you want to and not be subject to an exchange. The saying 'Not your keys, not your coins' was popular in 2022 and 2023, as many exchanges got hacked or shut down," says Moya.
This means transferring your Bitcoin from the exchange you use to your own cryptocurrency wallet.
Types of bitcoin wallets
Such wallets come in two forms:
- Cold wallets: Also known as hardware wallets, cold wallets are small devices that store your bitcoin address' private key, which is necessary to transfer bitcoin out of the address. Cold wallets do not connect to the internet and are considered safer than online, software-based alternatives.
- Hot wallets: Also known as software wallets, hot wallets are apps that can be used through your phone, desktop computer, or web browser. They store the private key of your bitcoin address, but because they connect to the internet, they aren't considered quite as safe as hardware/cold wallets.
Although software wallets aren't quite as secure as hardware wallets, you can implement additional security features, such as two-factor authentication and compatibility with hardware wallets.
Investing strategies for bitcoin
Here are different methods for selling your bitcoin.
Long-term buy-and-hold for bitcoin
While many traders turn to bitcoin hoping to get rich quickly, almost every analyst advocates a long-term buy-and-hold strategy. This is largely because holding for a longer period tends to average out gains and losses, providing a greater probability of a significant positive return when you sell your bitcoin.
"In my opinion, it is better to buy and hold, perhaps allocating a small portion of your portfolio to cryptocurrencies, focusing on the ones typically held by institutional investors, such as bitcoin at the moment," says Nikolaos Panigirtzoglou, an analyst at JPMorgan Chase & Co.
A longer-term approach is also beneficial from a tax perspective since bitcoin is classified as property in the U.S. and, therefore, liable to capital gains tax when sold.
Dollar-cost-averaging for bitcoin
Likewise, many analysts also recommend adopting a dollar-cost-averaging (DCA) strategy, largely because this is another way of averaging out peaks and troughs.
"The best strategy for newcomers would be to [trade] Bitcoin on the DCA approach [...] you'll just buy a tiny bit on a monthly or weekly basis, not looking at the price movements at all," says Poppe.
FAQs about getting bitcoin
Is it too late to get bitcoin?
No, it is not too late to get bitcoin. While you may have missed out on some of the key bitcoin spikes that offered digital coin holders a substantial payoff, you still have the opportunity to benefit from future bitcoin growth. However, like an investment, there is no guarantee that bitcoin will appreciate. Cryptocurrencies like bitcoin are extremely volatile, so make sure you understand the risks involved before buying.
How much does it cost to buy bitcoin?
The cost of buying bitcoin can significantly vary daily or even hourly due to its extremely volatile nature. Unlike traditional investment options, cryptocurrencies are linked to tangible assets. The value of bitcoin is solely determined by supply and demand.
Is getting bitcoin legal?
Getting bitcoin is legal in the U.S., but certain states like New York, Montana, and Ohio have stricter trading rules on crypto investing. While controversial, bitcoin is a completely legal investable security with its own rules and regulations.
Check out Business Insider's picks for best cryptocurrency exchanges
