How do I buy Bitcoin?

Buying bitcoin is very simple. There are basically three ways to obtain bitcoin. Either you become a miner, you work for your coins, or you buy bitcoin. This article lists the different ways to buy bitcoin.

Bitcoin Storage

Before you buy bitcoin, you should think about storing your bitcoin.

Although the bitcoin blockchain is inherently immutable and resistant to cyberattacks, centralized exchanges and brokers are not one hundred percent protected from them. Exchanges usually use an integrated Bitcoin wallet that is connected to the Internet and therefore exposed to some risk.

In addition, you are not really in possession of your bitcoin, as the exchanges and some brokers keep the private keys for you.

While you don't necessarily need an additional wallet for smaller amounts, it is recommended to use an external solution, such as a hardware wallet, for larger sums. Protecting your own bitcoin should be a top priority.

> Learn more about the different Bitcoin Wallets.

Bitcoin Broker

Exchanges and brokers are the most popular trading places for people who want to buy bitcoin.

A broker is a company or individual that acts as a financial intermediary between people who want to exchange money for products or services.

Brokers are best suited for beginners who want to buy bitcoin easily and simply. The exchange of fiat currency for bitcoin and vice versa takes place between the buyer or seller and the broker.

Buying and selling bitcoin through a broker offers users a number of advantages. Here, bitcoin can be bought and sold at the prices set by the broker. Using a bitcoin broker is also suitable if you want to start with a small amount.

Bitcoin Exchange

If you are interested in trading bitcoin directly with other buyers and sellers, you should consider using an exchange.

An exchange provides buyers and sellers with an online platform through which they can exchange bitcoin with each other for other cryptocurrencies as well as fiat currencies at current market prices.

The exchange of fiat currencies and bitcoin takes place directly between buyers and sellers. The exchange, as the operator of the platform, charges additional trading fees in this exchange.

Bitcoin exchanges are suitable platforms for users who are already advanced traders, are familiar with order books and want to profit from price fluctuations through short-term speculation.

Bitcoin OTC Desk

OTC desk refers to the trading of so-called «over-the-counter» trades, and is therefore also known as off-exchange trading. Here, a transaction is settled directly between two market participants without an exchange being involved as an intermediary. In this case, the trade is executed outside the exchange order books.

OTC desks focus on trading larger quantities of bitcoin. For example, between large sellers, such as miners, and buyers, such as a wealthy individual, company, or hedge fund.

Since the exchanges usually lack the liquidity for large trades, such off-exchange trading via OTC desks attempts to avoid short-term price fluctuations and market manipulation.

Peer-to-Peer Platforms

Alternatively, bitcoin can be purchased directly from other market participants. This allows for greater anonymity, as no personal data needs to be deposited in the process.

A peer-to-peer platform connects bitcoin buyers and sellers within a specific geographic region. Users can conduct peer-to-peer trading of bitcoin for fiat money, by mutual agreement, either in person or over the Internet.

In the early days of bitcoin, this was one of the few ways to buy or sell bitcoin. Today, however, this method is a less common one due to the fraud and security risks associated with buying bitcoin from untrusted sellers or interacting with people in person.

Bitcoin ATMs (Automated Teller Machines)

Bitcoin ATMs provide a way to buy bitcoin in a physical location. These vending machines often require you to scan an ID to meet compliance obligations (KYC). The buyer then inserts cash and provides the machine with a bitcoin address to which they wish to receive bitcoin.

Bitcoin ATMs typically charge a significant premium in fees over other purchase options.

Bitcoin Derivatives

Derivatives are tradable securities that derive their value from an underlying asset such as stocks, currencies, commodities, and bitcoin. The most common types of derivatives are futures and options.

In derivatives, the investing individuals do not acquire Bitcoin itself, but speculate on its price movement. This is possible both on profits and losses.

Bitcoin ETFs

A bitcoin ETF is an exchange-traded fund that tracks the price of bitcoin. Investing in a bitcoin ETF allows individuals to invest in the price of bitcoin without having to invest directly in the currency.

Since the investing individuals do not own bitcoin, they do not have to worry about managing or storing it.