When the price of bitcoin goes up, the question of how to buy bitcoin starts trending. That is the natural progression and those new to bitcoin should take care to avoid FOMO (Fear Of Missing Out) resulting in buys at highest prices.
OGs and whales can drive the price up with large buys, followed by large sells which causes the price to drop rapidly. Inexperienced newcomers panic sell because they lack an understanding that the overall price trend is UP. The OGs and whales happily buy up the bitcoin being sold at lower prices and walk away having accumulated even more than what they sold. Institutional investors are starting to buy large quantities of the scarce asset as well. Even whales are beginning to have a hard time driving the price down for too long.
This type of newbie mistake can be avoided by having a clear understanding of best practices before you buy bitcoin.
Buy Bitcoin Using DCA
When bitcoin starts delivering 10+% gains in a single week, or day – it is hard to exercise good money management practices. The boring, most cost efficient way to buy bitcoin is to dollar cost average, buying a little bit at a time over a long period of time. Too offen, FOMO causes newcomers to throw this best practice to the wind only to have buyer’s remorse when the price corrects. The price always corrects. Even in a bull run, the price of bitcoin will not just go straight up forever.
By exercising DCA (Dollar Cost Averaging) buying habits, the price paid for bitcoin will be different each time. The “average” price paid helps your bitcoin investment grow over time. Sometimes you’ll pay more, other times less, but in the long run you’ll have accumulated bitcoin at a good price overall.
Where to Buy Bitcoin
There is a growing number of exchanges offering easy ways to buy bitcoin. One of the most popular choices is Coinbase. The user interface is easy to understand, and buyers can use a connected bank account or a debit card. Coinbase is a good choice for those looking to DCA, as they offer the ability to set up recurring buys for investing slowly over time. New users can get $10 in Bitcoin when they buy $100 or more! Additionally, account holders can earn crypto by learning about the various types of coins.
Buy Bitcoin Peer-to-Peer
Bitcoin can also be bought from another person, or peer-to-peer. Unlike an exchange, which acts as a middleman to execute transactions – p2p exchange assets are bought directly from another person. There are “clearinghouse” sites which will escrow funds until both parties agree to the exchange. It is very important to buy bitcoin using reputable exchanges and users with a good score on the platform. Local Bitcoins and Hodl Hodl are two of the most reputable and both offer the use of a wide variety of payment methods.
Buy From Bitcoin ATMs
Buying bitcoin with cash can be accomplished by using a Bitcoin ATM. This is a very easy way to quickly buy and there are a growing number of ATMs around the world. Here is generally how it works:
- Verification (optional and varies depending on machine’s type and location)
- Provide bitcoin address for deposit (optionally can be generated and printed/emailed at some ATMs on the fly, but better to have your own before using a machine)
- Insert cash into the ATM
- Confirm operation (bitcoins are sent to your bitcoin address instantly)
Storing Bitcoin You Buy
Once you make the decision to buy bitcoin, secure storage of your assets is critical. Learn about the various options and types of wallets, then select a hardware wallet that suits your needs.
The one thing newcomers should understand is that no matter what wallet is used, you won’t actually be storing bitcoin itself. Bitcoin is not an object – it is an encrypted address on the blockchain for which you own a unique key that unlocks a specific bitcoin location (address). It is this unique “private key” that must be protected at all times by storing it in a wallet.
While storing your bitcoin buy on a smartphone or online exchange wallet may be easier, it is certainly not the safest thing to do. Exchanges and smartphones can be hacked and funds stolen. Hardware wallets are the best option to protect your digital assets.