How to buy your first Bitcoin

Do you want to own some Bitcoin but don't know where to start? Do you get anxious at the mention of crypto-exchanges and high-risk? This article will guide you through the process.

How to buy your first Bitcoin
Photo by Kanchanara / Unsplash

Many of you may have never considered buying Bitcoin, or you have considered it but determined it to be too complicated to get started.  The truth is, it doesn't need to be complicated, and I'll explain why.

How risky is owning Bitcoin?

What about the risks involved?  It's true there are risks, but we do many risky things every day. Bitcoin is not something risky that could get you killed. It is something risky that could lose you money, that's all. It is not risky like buying a sports car, that is risky because it will most definitely lose you money and may kill you but you'll find it enjoyable.  Bitcoin is more like buying a fine wine or whisky and keeping it in the cellar for a few years only to find that it has gone up in value, or maybe it has gone down in value.  If you only keep it one month then you'll probably lose money, if you keep it 6 months then you may lose or may make money, if you keep it two years then you'll probably make money.

As a first time Bitcoin owner, then I'd highly recommend the HODL strategy. That means Hold On for Dear Life and reflects the highs and the lows that you will experience if you regularly watch the market price.

Photo by Somruthai Keawjan / Unsplash

Why Bitcoin?

You may have noticed that I've been focussing solely on Bitcoin until now.  That is because the market capitalization of Bitcoin is much much higher than it is for any other single cryptocurrency. The market cap means how much money is invested in total in that coin. The higher the market cap. the more difficult it becomes to move the market. Think of it like weights on a weighing scale, when you have 1Kg on one side of the scale and you add 1 gram to the other side, it is not going to move the scale because it is only 1 thousandth of the other side. If instead there is only 1 gram on one side and then you add your 1 gram then the scale will move. Likewise, one person can get an average-sized car moving from stationary by pushing but to move a locomotive will require many more people.

This weights and cars analogy illustrates the likely movements of cryptocurrencies. Bitcoin may see plus or minus 10 per cent moves in a week and sometimes may experience a 50% move over a longer period of time but the long term trend has been exponentially upward over the last 13 years.

After you have invested in Bitcoin then you could consider purchasing some of the other Top-10 coins. You can find these listed on CoinMarketCap.com along with other useful information. The thing to bear in mind is that the market usually moves in sync the same as happens with the Stock market, if Bitcoin goes down, then every cryptocurrency goes down.

Bitcoin price, last 10 years, by CoinGecko

Step 1 - Where to buy Bitcoin

The first step is to decide where to buy Bitcoin. It is digital, although it can reside off of the Internet. You get a Wallet address and once Bitcoin has been placed at that address, then a record of the transaction is kept forever on the distributed Blockchain. When you create a wallet you get the address, the private key and the public key. You should keep the private key as safe as you keep your Internet Banking password! Knowing the Address and the Private key allows you to spend or transfer the contents of the wallet. To receive Bitcoin you need to know the Address and the Public key.

You can print your wallet information, delete it from your computer and file the paper copy away with your important documents. There is a risk that you lose it or it gets stolen if you do this. This used to be the recommended method of storing cryptocurrency because the online exchanges would from time to time get hacked or go bankrupt.

I currently do not recommend keeping cryptocurrency in paper wallets when you are buying the currency as an investment.  Another use-case is as a medium of exchange during an end-of-the-world (EOTW) scenario and then paper wallets indeed come into play, but that is a subject for another article.

For now, the first step is to choose the online place to purchase Bitcoin. This is called an exchange, and it serves the same function as a normal currency exchange where you would swap your Euros for Pounds or Dollars. The exchange takes a commission and you receive the Bitcoin.

Step 2 - Sign up for an Exchange

The easiest way to sign up is by downloading the smartphone-based app. There are two that I would recommend for Europe and the US:

  • Revolut provides free currency conversions allows regular investments in Forex, Bitcoin, Gold/Silver. (This affiliate link may reward me if you sign up using it.)
  • Crypto.com provides for regular investments in Bitcoin and other cryptocurrencies. Has a way to place cryptocurrencies into savings accounts to earn interest. (This affiliate link may reward me if you sign up using it.)
Revolut Crypto.com
revolut_icon crypto_com_icon
Google Play Store Link Google Play Store Link

If you're just getting started with an investment plan then I'd go with Revolut because it has more use-cases and offers some protections through its banking license, this however does not apply to Crypto investments. You should also note that you cannot transfer the Bitcoin out of Revolut, you must first convert it to a fiat currency, which incurs a fee.

Fees

Currently, the fees for purchasing Bitcoin are approximately 1% in Crypto.com and 2.5% or 1.5% in Revolut with free or paid subscriptions respectively.

Revolut allows the possibility to purchase Silver or Gold. The fee for these are 1.5% and 0.5% with free or paid subscriptions respectively.

The fees are transparent, more so with Revolut but obviously more expensive with Revolut. When buying or selling more than €1000 then it is worth upgrading to the Premium account at least for one month.

KYC

Know Your Customer (KYC), is a requirement for all exchanges, banks, accountants, stock brokers in Europe and the USA. It means that after opening an account, or in some cases in order to open an account, you will need to verify your identity.  This normally involves uploading an image of your identity card or passport and a proof of address, such as a recent utility bill. This is fairly easy for most customers, but means that your transactions will be visible to the government if they choose to look into them.

Step 3 - Load currency

Both Revolut and Crypto.com allow for the account to be loaded using Credit/Debit card. If this is your preferred route then I leave it as an exercise for the reader, I personally prefer bank transfers and explain the process below.

In the Crypto.com app the steps are as follows:

  • Click the Transfer button on the home screen
  • Click the Fiat option
  • Choose the applicable currency
  • Copy the details to your traditional bank and initiate a transfer (SEPA or Faster Payments)
  • Wait approximately 24 hours for the transfer to complete

In the Revolut  app the steps are as follows:

  • On the home screen next to the currency either click the flag, or click the ellipsis and choose Account details
  • Copy the details to your traditional bank and initiate a transfer (SEPA or Faster Payments)
  • Wait approximately 24 hours for the transfer to complete

Step 4 - Purchase Bitcoin

In Revolut:

  • Click the Crypto heading
  • Click on the Invest button
  • Find BTC (Bitcoin), do not select BCH (Bitcoin cash) which has a similar name and icon, the price should be in the tens of thousands.
  • Click on the Buy button
  • Enter the amount of BTC to buy (e.g. 0.001 ≈ €40)
  • Click on Buy BTC button

In Crypto.com:

  • Click the Trade button
  • Click on Buy
  • Find BTC (Bitcoin)
  • Choose the purchase method from the heading (Credit Card / Crypto Wallet / Fiat Wallet). Choose Fiat Wallet as we have already transferred money in Step 3
  • Enter the amount of BTC to buy (e.g. 0.001 ≈ €40) or the value in your currency
  • Click the Buy BTC button (sometimes Review/Submit)

Step 5 - Optional - Recurring Purchase

I strongly recommend purchasing not as a one-off but a small amount on an ongoing basis. This means that we don't need to worry about highs and lows. If we purchase €1000 and then the price drops suddenly we could lose 50% and then worry about it.  If we instead invest €100 every two weeks then sometimes we catch the lows and sometimes the highs but it averages out. The generic term for this strategy is Dollar Cost Averaging. As long as the overall direction is upwards then this strategy will outperform other strategies.

In Revolut to set up a recurring purchase use the Recurring buys button instead of the Invest button. Enter the amount to purchase, probably best to enter a local currency amount instead of a fixed BTC amount. Click the Set option to select the purchase schedule. Then confirm the recurring purchase by pressing the Set Frequency button.

In Crypto.com to set up a recurring purchase click on the Clock+ button which is next to the Buy BTC button. When you select this you can enter the amount in your currency, the date and frequency of purchase and the payment method. Then confirm the recurring purchase by pressing the Confirm Schedule button.

If you do not have enough money in the account for the chosen payment method then the transactions will not complete and you will get a notification in the app.

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