With the financial world embracing cryptocurrency more and more, learning how to buy Bitcoin merits serious consideration for a growing number of investors.
Rising interest from Wall Street types such as hedge fund manager Paul Tudor Jones and Stan Druckenmiller, as well as a series of multimillion-dollar purchases by companies like business analytics firm MicroStrategy Inc. (NASDAQ: MSTR), have helped legitimize the idea of Bitcoin as an investible asset.
But buying Bitcoin isn't as straightforward as buying other types of investments. Most brokerages remain wary of crypto and don't yet offer it as an option.
At the same time, investors have a dizzying array of Bitcoin-buying options to choose from. For those new to Bitcoin investing, it can seem overwhelming.
That's why we've put together this Money Morning guide on how to buy Bitcoin. We'll walk you through the different options available to you, lay out all the pros and cons, and go over everything you'll need to know before diving in.
With that out of the way, let's look at the many ways you can buy Bitcoin...
To buy from a crypto exchange in the United States, you will need to provide some personal information, such as your birthday, home address, and Social Security number. Some also require you to upload images of personal identification such as a driver's license or a passport.
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All of this is required by U.S. anti-money laundering (AML) and know your customer (KYC) laws. Exchanges must follow these rules to move money around and interact with U.S. banks.
This is far from an exhaustive list, but these exchanges are best for U.S. investors with little to no experience in buying Bitcoin.
Over the years, I have recommended Coinbase to newcomers as the easiest, safest way to buy Bitcoin - and I still believe that's true. You can link your account to a checking account to move U.S. dollars in for buying Bitcoin and back out when you sell. The website walks you through the steps and makes buying and selling many different cryptocurrencies about as easy as it can be.
Gemini is the exchange founded and run by the Winklevoss twins, Cameron and Tyler. It is considered one of - if not the most - trustworthy of the exchanges. While Gemini has features aimed at more sophisticated investors, it caters to beginners as well. It also offers a mobile app as well as a high-security wallet backed with insurance. Fiat funding is by bank account.
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Rather than just provide a basic trading service, eToro enhances crypto buying by adding features like watchlists and news feeds. But the most compelling is "CopyTrader" - the ability to "duplicate" the trades of eToro's most successful traders. You choose how much money to assign to the copy, and from then on, everything that trader does gets duplicated within your portfolio. It also lets users copy a "CryptoPortfolio" professionally managed by eToro. You supply funding by linking to your bank account.
This popular investing app has added crypto to its offerings state by state as the firm obtained regulatory approval (four blocked states remain: Hawaii, New Hampshire, Nevada, and West Virginia). The biggest draw here is no-fee trading. It's easy to link Robinhood to your bank account to provide funding. While best known for its app, Robinhood has a pretty good website as well. And unlike other crypto exchanges, you can use Robinhood to trade stocks.
Brought to you by payments platform Square, Cash App is similar to Robinhood. You can buy stocks in addition to Bitcoin, and the focus is on the mobile app. (In fact, the Cash App website has limited functionality; you can't buy or sell Bitcoin or stocks there.) But Cash App does charge fees on Bitcoin trades now. And Cash App offers only Bitcoin - no Ethereum or other cryptos. Of course, Cash App is also a convenient way to send money directly to another person, which was its original purpose.
Swan Bitcoin was created with the singular aim of helping people set up recurring buys of Bitcoin with the lowest fees possible. That's all Swan does, but it does it well. Depending on the size of your daily, weekly, or monthly buy, Swan claims its fees are 35% to 80% lower than those charged by CashApp and Coinbase. Swan doesn't offer wallet services, but uses a third-party custodian (Prime Trust) to secure your Bitcoin until you can withdraw it to your own wallet. You do need to link a U.S. bank account.
Since millions of people already have a PayPal account, this option is a convenient way to buy and hold Bitcoin and a few other cryptocurrencies. As with the crypto exchanges, you do have to provide additional personal information before you can buy Bitcoin. But you don't control the crypto you buy - you can't move it off PayPal. You can only buy and sell it. PayPal charges a transaction fee as well as a currency conversion spread fee.
Bitcoin ATMs
Yes, there are ATMs dedicated to buying Bitcoin - and it's likely one is in your neighborhood. When I first wrote about Bitcoin ATMs in 2014, there were just 100 in the United States. Now there are nearly 11,000. You can find one near you by using the Coin ATM Radar website. They are most often located in gas stations and convenience stores. They offer the advantage of buying without the hassle of providing a lot of personal identification information. But fees are typically very high - as much as 7%-10%. Bitcoin ATMs also can be a bit intimidating. Although the exact process varies by machine manufacturer, in most cases, you scan a QR code with your smartphone, insert your cash, and click send. The Bitcoin ATM then transmits your bitcoins to your smartphone wallet.
Your Brokerage (Stay Tuned)
As noted at the beginning of this article, brokerages have been lukewarm on Bitcoin so far. None allow you to buy Bitcoin outright as of now. The closest you can get is a couple of OTC index funds. If your brokerage offers these funds, you can find them by searching for the ticker symbols while logged in on their website.
The seven-year-old Grayscale Bitcoin Trust (OTC: GBTC), tracks the price of Bitcoin. The caveat here is that GBTC typically trades at a steep premium to its net asset value, so you're overpaying to get exposure to Bitcoin. If the SEC ever approves a Bitcoin ETF (exchange-traded fund), shares of GBTC are likely to fall. Grayscale also offers index funds for other cryptos. The other fund, the Bitwise 10 Crypto Index Fund (OTC: BITW), launched in December 2020. It's a basket of the top 10 cryptocurrencies, but is heavily weighted toward the top two cryptos, Bitcoin (75%) and Ethereum (13%).
TD Ameritrade offers Bitcoin futures if you meet a set of requirements and get approved. However, investors should keep an eye on this, as I believe customer demand will persuade the major brokerages to start offering a way to buy Bitcoin within the next couple of years. If they don't want to deal with it themselves, they might partner with a crypto-centric brokerage like Coinbase or Gemini.
Institutional money has been a primary force in driving the stock market to new highs. And now some of that money has started moving into crypto.
Imagine if every single investment firm on the planet began to diversify to include Bitcoin and other digital assets. If they put 2%, 3%, or 5% of their capital into coins… it would do nothing less than trigger the biggest crypto inflow ever, period.
We've found a way to make the most of this rare opportunity.
Nearly every time Bitcoin goes up, certain members of this small class of little-known cryptos jump even higher; 142% in 12 days… 330% in 82 days… 273% in 14 days.
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About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.