Almost 10 years ago, I remember hearing stories from friends about how they bought bitcoin by mailing envelopes of cash to strangers they met online. It felt shady. Fast forward 10 years and crypto, NFTs and web3 are all hot topics. To avoid missing out, I decided to take another look at crypto and figure out how to buy bitcoin. It turns out the market has matured and buying bitcoin is surprisingly professional and easy. This post outlines how I bought my first crypto. I hope it will be useful to you.
Before we go any further, I should say that I’m not providing any investing advice here, just a how-to guide. Cryptocurrencies are really volatile and you shouldn’t invest anything you aren’t willing to lose.
Choose a crypto (bitcoin) exchange
To buy Bitcoin or other cryptocurrencies, you need to sign up at an exchange. There are many to choose from. I chose coinbase because they seem to have a good reputation. You can sign up with coinbase here. If you use this link and trade more than £75, we should both receive ~£7.50 credit on our accouts. You can, of course, go directly to coinbase.com and sign up. Coinbase offers two trading experiences:
- coinbase.com – aimed at the everyday person
- pro.coinbase.com – aimed at a more trading savvy person.
Interestingly, the latter has much cheaper fees and if you use it neither of us are likely to receive any bonus money – and that’s OK. When buying bitcoin, you should always be looking to minimise your costs.
Prove your identity
I signed up for coinbase.com (not pro.coinbase.com). I recommend you do the same. It was really easy, you just need to provide some proof of identity (photo ID and a utility bill or similar). As soon as you’re approved, you’ll be able to use both Coinbase and Coinbase Pro.
Fund your account
After signing up, don’t worry about the 3 step ‘getting started’ process on coinbase.com. Head over to pro.coinbase.com. Before you trade, you’ll need to add some funds to your account. I linked my bank account and transferred £100 to get started. Coinbase will give you their bank details and a unique reference code so you can transfer funds to them from your normal bank. If you’re in the UK, funds are transferred within a few minutes and available to use for buying bitcoin.
Start Buying Bitcoin
Now you’re account is topped up, you can start trading. Before you do, you should check the fees involved. For example, Coinbase charges a 1.99% fee. This varies depending on how you funded your accout (credit card vs bank transfer). On the other hand, Coinbase Pro charges a 0.50% fee. Although their interface looks more complicated, I recommend using Coinbase Pro as you should get a better deal.
There are also other exchanges – like Kraken – where the fees are even lower (0.26% at the time of writing). I havent used them so I can’t recommend them, but you may want to check them out. If you do use a different exchange, let me know what your experience is like.
Keep Your Bitcoin Safe
Once you’ve bought your crypto you can leave it sitting in your coinbase account, but there is risk in doing so. Crypto exchanges are big targets for hackers. To protect yourself you can move your crypto to a personal wallet. There are two kinds ‘hot wallets’ and ‘cold wallets’.
Hot wallets are wallet apps which you can run on your mobile or desktop. They’re called hot because they’re running on a device which is connected to the internet. It isn’t 100% safe because you could have malware on your device which can expose your wallet keys and steal your crypto.
Bitcoin Wallet Public and Private Keys
Unlike a traditional bank accout, a crypto wallet has two keys. A public key and a private key. The public key is like your traditional bank accout and sort code. Anyone can use this to send you money, but they can’t use it to take your money. Your private key is like your online banking login details. If anyone knows these they’ll be able to log in, view your balance and make transfers. Most wallets will generate you a 12 or 24 word private key. It’s recommend you write this on paper and keep it in a safe place. If anyone sees your private key, they can use it to access your funds and steal them.
Cold wallets are usually hardware wallets. I haven’t done a lot of research on these, but they come highly recommended by everyone in the crypto world. Think of them as specialised USB sticks which run special wallet software. If you start to hold large amounts in crypto, I’d highly recommed getting a hardware wallet. Make sure you buy it directly from the manufacturer – not amazon or ebay. A compromised wallet is the quickest way to say goodbye to your crypto.
My Bitcoin security recommendation
When investing in crypto, you shouldn’t invest anything you’re not willing to lose. You can lose money either through price volatiility or theft. If you’re holding less than a few hundred pounds you can leave your funds with Coinbase. Once you start heading towards £500+ you should consider using a separate wallet on your mobile phone. Coinbase offers a separate wallet app. You can move your funds here to avoid them sitting at the exchange. At £1000+ I would recommend you get yourself a hardware wallet. They generally cost £100 – £150 and can store multiple currencies. I haven’t used one yet, but if there’s enough interest, I can get one and write up the process.
Questions about buying Bitcoin?
This post isn’t exhaustive. If you have questions I’d be happy to updated it with more information. Just drop me a note via the contact me page.