Now we‘re coming closer to the acquisition of your Bitcoin. In this part of our guide, we present you several common models that enable you to change fiat-money to digital cash – in Bitcoin. Each model has its own advantages and disadvantages.

• ATM: Maybe the easiest and most private method to acquire Bitcoins is a Bitcoin ATM. You know it, these machines where you can get money with your card. Some companies like Lamassu produce ATM-machines for Bitcoins, where you can buy Bitcoin with cash. If the operators of these machines wish, they can apply some KYC-rules, from mobile phone verification to biometric methods. On Coin-ATM-Radar.com you find a global map with these machines. Another kind of ATM is to just use an existing net of ATMs, like that from banks or train stations, to sell Bitcoins. This has been done for example in the Swiss, in Ukraine or in Spain. ATMs mostly have a relatively high fee of 3-6 percent or even more.
• Gift Cards/Voucher: This is another easy method to buy Bitcoins. You go to a kiosk or some other shop, buy a gift card or a voucher, visit a website, where you can use the code on the card to get your Bitcoin. This method is in use for example in Austria, Mexico, and South Korea. Like ATMs, gift cards mostly charge relatively high fees.
• Direct commercial exchanges/brokers: These vendors are like the exchange offices you might know from an airport, but digital. They buy Bitcoins on an exchange and sell it to customers. You visit a website, choose your means of payment, pay and get Bitcoins for prices set by the platform. For most of these platforms, you need your own wallet, while some, for example, Coinbase and Circle, give you the option to save and spend the Bitcoins with a wallet they provide. Since you can use a great variety of payment channels, even credit cards, and PayPal, such platforms might be the fastest and easiest way for new users to buy their first Bitcoin. The fees of direct commercial exchanges vary between 1 and 5 percent. Some of them earn money by using the spread between buying and sell. Most demand extra fees for some means of payment like credit cards.
• P2P-Markets: On P2P-marketplaces buyers and sellers of Bitcoin meet and trade with each other. The fees on these markets are relatively low with 0 to 1 percent; the spread depends on the liquidity of the market and the payment channel. Other than with direct you can not only take, but make an offer: You set a price and wait until someone sells you a Bitcoin. This enables you to buy relatively large amounts of Bitcoin at relatively low prices. The most famous P2P-market is LocalBitcoins. This worldwide platform serves a lot of currencies and lets buyers and sellers decide which means of payment they use. It is often used to facilitate anonymous exchanges, sometimes for extraordinarily high prices. Bitcoin.de, the largest P2P-market in the Eurozone offers good liquidity and is a nice option to easily change Euro to Bitcoin. The third famous P2P market is bitsquare, a completely decentralized market, which is nothing more than a software that connects people.
• Exchange platforms: If you want to buy regularly large amounts of Bitcoin to good prices or trade with Bitcoins you‘ll most likely choose an exchange platform. Exchanges act as an escrow for its clients and save both Bitcoin and Fiat-money on behalf of their customers. Here you can offer your own orders to buy or sell Bitcoin, and the Their trading engine of the exchanges cumulates these orders and s offers from buyers and sellers and processes trades. Often exchanges have more options to trade like margin trading. Usually, fees and the spread are low. But the process to start an account on exchanges can be complicated, requires privacy disclosing information and needs you to trust the exchange with your money.

Bitcoin is money, but to buy Bitcoins, you need to send money to someone else. The more advanced the financial system of your country is, The better the financial system you live in, the easier it is to exchange your money in Bitcoins.

The movement of old fiat-money is the biggest obstacle in the flow of Bitcoin trading. If you use a slow and expensive payment channel, your acquisition of your Bitcoin is slow and expensive. If you use a fast channel, you can buy Bitcoins fluidly.

Here is an incomplete not-complete list of commons means of payment  to buy Bitcoin:

• Bank transfer: Everybody might know the good old Bank transfer. Mostly with online banking you send money to a seller of Bitcoins and get the Bitcoins when the payments are done. In most countries, this needs 1-3 days. Direct debiting is usually not accepted common. Most exchange platforms only accept bank transfers.
• Credit Card: Credit cards are one of the most common means of payment. But only a few direct commercial vendors accept credit cards. The reason is that Bitcoin transactions cannot be undone, while credit card transactions can be reversed. This has resulted in losses for vendors that accepted credit cards. Also, vendors risk that people buy Bitcoin with stolen credit cards. Use Bitcoins to profit from stolen credit card numbers and apply algorithms to reduce the risk.
• PayPal: A few platforms accept PayPal, but most reject it for the same problems as credit cards: PayPal transactions can be easily undone, and when this is done after the buyer has transferred the acquired Bitcoin to another wallet, the vendor might lose. This is why eBay is a bad place to trade Bitcoins. But, like with credit cards, some platforms accept PayPal.
• Other Payment Channels (Sofort, iDeal, Skrill…): The world of payment is rich with payment providers. In the EU alone you have dozens of them. Many direct exchanges support a rich collection of them. If you use a common provider, in Germany Sofort, in the Netherlands iDeal and so on, you have a good chance that your domestic direct exchange accepts it.
• Private Payment Channels (Cash, Western Union, Paysafecard, etc.): Most commercial platforms don‘t accept these means of payment. You find very few exchange platforms and most probably no direct exchange where these payments are accepted. But often you‘ll find a seller on p2p marketplaces you can pay with cash or other private means of payments. A good chance might also be an ATM where you can buy Bitcoins with cash.

Bitcoin is a financial tool and thus subject to financial regulation in most jurisdictions. Nearly everywhere Anti-Money-Laundering-Rules (AML) are applied to platforms that sell Bitcoins or enable users to buy and sell Bitcoins. Most of these platforms have to adopt Know Your Customer rules (KYC) to verify the identity of its users.

Since Bitcoin transactions are saved publicly visible on the blockchain and can be traced back, the degree of private information you disclose with buying Bitcoins can have serious implications on your privacy.

There are several grades of KYC with an increasing amount of private information you have to disclose. The following list starts with the lowest grade:

• No KYC: No KYC means that the platform or the seller of Bitcoins does not know who you are. You don‘t have to show an identity document, and you pay with a private means of payment like cash, Moneygram, Paysafecard or Western-Union. Buying Bitcoin without KYC is possible in some jurisdictions – for example with P2P-marketplaces like LocalBitcoins, ATMs or Gift Cards – but is usually more expensive than other options.
• KYC Light: This degree of KYC identifies you by your payment channel and/or your phone numbers. If you pay with your bank account, PayPal, credit card or other common means of payment, the payment providers know your identity. On most platforms, be it direct exchanges, exchange platforms or marketplaces, you can buy a limited amount of Bitcoins with KYC Light.
• Full KYC: On top of verifying your identity with your phone number and your bank account, Full KYC means that you provide documents that prove your identity. This can be a passport, an ID card, a driver‘s license, a utility bill or a combination of all of this. Some platforms demand that you provide approval of your identity documents by a notary or a trusted third party like your bank; some are satisfied if you submit a photo showing you holding your ID card or take part in the process of video identification. If you want to invest larger amounts of money or trade on exchanges, there‘s usually no way around Full KYC.

What do you need to buy Bitcoin?

• An email address
• Driver’s license or Passport (18 years of age)
• A bank account with or without a debit/credit card
• Money

1. International exchanges (safer)

There are many international exchanges where you can create an account in 5 minutes, verify your identity, and buy Bitcoin with Credit/Debit card or a bank transfer.

Although we do recommend using a software or hardware wallet for long-term storage for bitcoin, if you want to store your Bitcoin on an exchange, International exchanges are perhaps a better option than local exchanges. International exchanges are monitored closely, they have a long history, and they have to honor the laws and regulations in the countries they provide services to.

Here are a few international exchanges you can use:

• Coinbase.com
• Blockchain.com
• Coinmotion.com

2. Local exchanges (riskier)

Since the Bitcoin industry has become more regulated around the world, some countries are banned from international exchanges, but you may be able to buy Bitcoin from an exchange that has been approved in your country.

You can do a local google search or use your native language to try and locate them, “buy bitcoin Thailand,” for example.

The benefit of local exchanges is that you can use your native language on the platform, and you may get a better price with your currency. But research about the exchange first before you make a purchase as there have been reports of local exchanges shutting down unexpectedly if they have failed to comply with country’s laws, they have gone bankrupt, or they have done something illegal.

3. Peer-to-peer exchanges (riskiest)

Peer-to-peer exchanges work slightly differently than centralized exchanges. Peer-to-peer exchanges simply serve as a platform that allows individuals to make trades with one another privately.

Private transactions made on peer-to-peer exchanges are harder to track for governments, which also attracts users with ill intent.

Some peer-to-peer exchanges do not require a proven identity, or the identity of the other person is only verified by other accounts, which may be fake accounts.

This is why some peer-to-peer exchanges and traders on those exchanges are under investigation for money laundering, tax evasion, or allowing illegal scams. This is why I will not list them here.

4. Bitcoin ATMs (safe?)

4th way to buy Bitcoin are Bitcoin ATMs. You simply insert cash or a credit or debit card, then choose how much you want to deposit, scan your Bitcoin wallet address and transfer your money into Bitcoin.

Using Bitcoin ATMs does not usually require you to verify your identity, but this may depend on the country you live in. The fees of ATMs are typically higher than using online exchanges.

You only have to have a Bitcoin wallet address where you want to transfer the Bitcoin. You can use this wallet generator to create a new Bitcoin wallet.

Always asses the risk of the ATMs in your country before you head to the closest mall and give them your money.

5. Physical Bitcoin coins (unusual way?)

There are services around the world that sell “physical coins” that include access codes to real Bitcoin. Having physical coins makes Bitcoin more tangible.

For example, you can buy a physical gold-plated coin for $30 and order 1 Bitcoin inside the coin. If Bitcoin would be $10,000 during the time of purchase, you would pay $10,030 + fees.

When you receive the coin, you can break the coin to get access codes to 1 BTC, which you can then transfer to any wallet you want.

These physical coins are a great gift even in smaller amounts like 0.01 BTC.

A few services:

• Denarium.com
• Casascius.com
• Alitinmint.com

3 simple steps to buy Bitcoin on online exchanges

Most people purchase their first Bitcoin with online exchanges, and that’s how we got into crypto as well. The process is simple.

1. Sign up to an exchange
2. Verify your identity
3. Buy Bitcoin with a credit card or bank transfer

That’s it! After you have Bitcoin on the wallet on your exchange, you can start using Bitcoin in any way you choose.

What to do with Bitcoin after you have it?

After you’ve bought your Bitcoin, you will start wondering what to do with it.

Here are a few examples:

• Keep it and sell it when its price is higher
• Use it to make money on a leveraged crypto trading exchange.
• Convert it to other cryptocurrencies like Ethereum and start earning interest or use other decentralized finance services
• Buy real-world items and services with Bitcoin
• Donate money to charities without middlemen anywhere in the world

The process to purchase bitcoin consists of four steps: choosing a venue or exchange to place your order, selecting a payment method, and ensuring safe storage for your purchased cryptocurrency. Depending on the type of venue chosen in the first step, there might be additional steps involved in the process. For example, you might need to factor additional costs for an online wallet and custody of your bitcoin, if you purchase the cryptocurrency through Robinhood because it does not offer these services.

What Are the Most Popular Venues to Buy Bitcoin?

The most popular venues to buy bitcoins are cryptocurrency exchanges, brokerages (crypto and mainstream), and payment services like PayPal. You can also buy Bitcoin from peer-to-peer exchanges. For indirect ownership of bitcoin, you can invest in companies that hold the cryptocurrency on their balance sheet, such as Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR). 

How Much Should I Expect to Pay to Purchase Bitcoin?

Typically, the price to purchase bitcoin consists of a fee per trade plus the cost to convert a fiat currency, generally dollars, to bitcoin. (Cryptocurrency exchanges and payment services make money off this conversion spread.) The fee per trade is a function of the dollar amount of the trade. A higher trade amount will carry higher fees. The overall purchase cost also depends on features offered at the venue. For example, Robinhood does not currently offer an online wallet to store bitcoin. Therefore, you will need to budget for online wallet costs for your purchase.  

Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?

You can also buy bitcoin at the following locations: 

• Through Bitcoin ATMs
• Through online payment services like PayPal
• At mainstream brokerages like Robinhood

Is My Bitcoin Purchase Protected by SIPC?

No, your bitcoin purchase is not protected by SIPC. At certain exchanges, like Coinbase, fiat balances in individual accounts may be FDIC-insured to the tune of $250,000 per account.

Very few mainstream brokerages offer bitcoin purchase and trading capabilities due to the uncertainty surrounding the regulatory status of cryptocurrencies. Robinhood Markets, Inc. (HOOD), an app popular with retail investors, is one exchange that offers crypto trading facilities. It charges zero percent commission for cryptocurrency trades and purchases and makes money from payment for order flow, passing on its trading volume to other trading platforms or brokerages. 

The absence of a commission fee may be an enticing prospect for beginners, but there are a couple of catches to that offer. First, Robinhood does not have breadth of features and coins offered by prominent crypto exchanges like Coinbase. As of October 2021, Robinhood enables trading of seven cryptocurrencies—Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic—on its platform. In contrast, you can trade more than 100 cryptocurrencies on Coinbase. The exchange also offers various order types to minimize risk and offset losses during trading. 

The Robinhood platform also does not have a hosted wallet. Therefore, if you want to purchase cryptocurrencies through Robinhood, you will have to factor in additional costs for an online wallet provider.

Unlike decentralized exchanges, which match buyers and sellers anonymously and facilitate all aspects of the transaction, there are some peer-to-peer (P2P) exchange services that provide a more direct connection between users. LocalBitcoins is an example of such an exchange. After creating an account, users can post requests to buy or sell bitcoin, including information about payment methods and price. Users then browse through listings of buy and sell offers, choosing those trade partners with whom they wish to transact.

LocalBitcoins facilitates some of the aspects of the trade. Although P2P exchanges do not offer the same anonymity as decentralized exchanges, they allow users the opportunity to shop around for the best deal. Many of these exchanges also provide rating systems so that users have a way to evaluate potential trade partners before transacting.

Bitcoin ATMs act like in-person bitcoin exchanges. Individuals can insert cash into a machine and use it to purchase bitcoin that is then transferred to online wallets for users. Bitcoin ATMs have become increasingly popular in recent years—even retail giant Walmart Inc. (WMT) has begun a pilot test to offer the option of purchasing bitcoin to its customers. Coin ATM Radar can help to track down the closest machines.

However, ATMs are an expensive option to purchase the cryptocurrency. There are two charges associated with bitcoin purchase at an ATM: a purchase fee and a conversion fee from a fiat currency to bitcoin. Both fees are fairly steep as compared to other options. For example, the worldwide average purchase fee at Bitcoin ATMs is 8.4% (of the purchase amount) and 5.4% for sales at ATMs.

The process for purchasing Bitcoin with credit cards is similar to the one for buying the cryptocurrency with debit cards or through automated clearing house (ACH) transfers. You will need to enter your credit card details with the exchange or online trading firm and authorize the transaction. In general, however, it is not a good idea to purchase bitcoin with credit cards. There are a couple of reasons for this.

First, not all exchanges allow bitcoin purchases using credit cards due to associated processing fees and the risk of fraud. Their decision to do so may work out in the best interests of customers. This is because credit card processing can tack additional charges onto such transactions. Thus, in addition to paying transaction fees, you will end up with processing fees that the exchange may pass onto you.

The second reason is that credit card purchases can be expensive. Credit card issuers treat bitcoin purchases as cash advances and charge hefty fees and interest rates on such advances. For example, American Express and Chase both count purchases of cryptocurrencies as cash advance transactions. Thus, if you purchase $100 worth of Bitcoin using an American Express card, you will pay $10 (current cash advance fee for such transactions) plus an annual percentage fee of 25%. What’s more, the credit card company also limits you to $1,000 worth of bitcoin purchases per month.⁸

An indirect method of purchasing bitcoin using a credit card is to get a Bitcoin Rewards credit card. Such cards function like your typical rewards credit card except they offer rewards in the form of bitcoin. So, they invest cash back earned from purchases into bitcoin. An example of a Bitcoin Rewards card is the BlockFi Bitcoin Rewards Credit Card.⁹ Beware, however, that the annual fee on these cards may be steep and there may be additional costs associated with the conversion of fiat currencies into crypto.

Although exchanges like Coinbase or Binance remain some of the most popular ways of purchasing Bitcoin, they are not the only method. Below are some alternate ways to purchase the cryptocurrency.

The simplest description of a cold wallet is that it is not connected to the internet and therefore stands at a far lesser risk of being compromised. These wallets can also be referred to as offline wallets or hardware wallets. These wallets store a user’s private key on something that is not connected to the internet and can come with software that works in parallel so that the user can view their portfolio without putting their private key at risk. 

Perhaps the most secure way to store cryptocurrency offline is via a paper wallet. A paper wallet is a wallet that you can generate off of certain websites. It then produces both public and private keys that you print out on a piece of paper. The ability to access cryptocurrency in these addresses is only possible if you have that piece of paper with the private key. Many people laminate these paper wallets and store them in safe deposit boxes at their bank or even in a safe in their home. These wallets are meant for high-security and long-term investments because you cannot quickly sell or trade bitcoin stored this way.

A more commonly used type of cold wallet is a hardware wallet. A hardware wallet is typically a USB drive device that stores a user’s private keys securely offline. Such wallets have serious advantages over hot wallets because they are unaffected by viruses that could be on one’s computer. With hardware wallets, private keys never come into contact with your network-connected computer or potentially vulnerable software. These devices are also typically open source, allowing the community to determine their safety through code audits rather than a company declaring that they are safe to use.

Cold wallets are the most secure way to store your Bitcoin or other cryptocurrencies. But they require more technical knowledge for set up.

A good way to set up your wallets is to have three things: an exchange account to buy and sell, a hot wallet to hold small to medium amounts of crypto you wish to trade or sell, and a cold hardware wallet to store larger holdings for long-term durations.