How to Buy Bitcoin

13 Feb 2019

In 2019, there are a lot of ways to buy bitcoin.

Each method has its benefits - and tradeoffs between convenience, availability, and privacy. We will take you through all of the best options in this guide.

In Person

On one end of the bitcoin buying spectrum is the unbelievably simple, and perhaps the best way: Buy it from a trusted friend. Nothing involves less hassle and is more private - but you must first have that special friend.

Failing that, there are still ways to buy bitcoin and other cryptoassets in person. There are bitcoin ATMs available pretty much everywhere in the world, although their availability varies quite a bit. A good resource for finding a crypto ATM in your area is CoinATMRadar.com, featuring a self-explanatory map of the world and all ATM locations. While the site is largely self-reporting and not exhaustive, it’s a great place to start.

An honorable mention for buying bitcoin in person is the “House of Nakamoto,” a quirky outfit with two retail locations, one in Amsterdam and one in Vienna. It may seem strange to buy internet money at a brick-and-mortar, but it’s actually a pretty simple way of doing it.

Pros:

  • Simplicity: Buying in person, especially from someone you know and trust, is much simpler than any other method. Other in-person buying options can be less simple, but are still very quick, and it’s nice to have the instant option.
  • Privacy: Although the person you’re buying from may be known already through blockchain analytics (Bitcoin is not very private on the whole, and identities can be discerned through analysis), funds transferred to you for cash will be a giant question mark until you somehow associate yourself with your bitcoin or other crypto.

Cons:

  • High Fees: ATMs often have high fees, sometimes up to 20%, which is higher than pretty much every other option. The convenience of instant buying with cash comes at a price.

Big Exchanges

At the complete opposite end of bitcoin buying - at least for small buyers or “retail investors,” most likely the kind of person reading this guide - is signing up for a government-regulated, high liquidity exchange. This kind of platform, perhaps the best example of which is a site like Coinbase, requires all the extensive Know-Your-Customer and Anti-Money-Laundering (KYC/AML) measures that a bank does.

This means that users when signing up for such an exchange, must submit government issued identification documents, and often a proof of address and a headshot. There is usually a waiting period involved, as the exchange inspects the submitted items. And of course, a private company has all of your info centrally stored - where it can be hacked and stolen.

The plus side of of this method is that, after approved, it is possible to buy and sell bitcoin and other cryptoassets at a more or less unlimited rate, on demand - and at very near the current market rate. Some will even offer aids for calculating crypto taxes - which you will definitely need to pay after using a large fiat-to-crypto exchange. (“Fiat” means government issued, non-gold-backed money - normal, modern money.)

Pros:

  • Power: The reason to get on a big exchange is, in a word, power. After getting registered and approved, you can buy and sell as often as you want, as much as you want, often with sophisticated trading tools. There is also customer support, in case something goes wrong.
  • Rates: Rates are also usually pretty good, depending on the exchange. And on exchanges with actual trade interfaces, one can buy and sell crypto at the actual market price - in fact, this is probably the only way to acquire crypto at the actual current price.

Cons:

  • Identity: All of your identity and traditional banking details belong to the exchange you sign up with. That means they’re in a central location, where they could be hacked and stolen. Big exchanges also share your details with governments.
  • “Not your crypto”: And if you leave your bitcoin on the exchange, like many do, you don’t actually own your crypto in the truest sense - a company says that you own it. Such centralization questions the central philosophies that helped produce cryptocurrency in the first place.

Peer to Peer

Lying in between in-person transactions and big exchanges is almost everything else, which is the Peer-to-Peer (or P2P) option. P2P options vary greatly but they are all essentially very simple markets consisting of individuals putting up offers - in exchange for a dizzying array of payments options.

LocalBitcoins.com is a P2P exchange that offers a wide variety of buying and selling options, ranging from in-person meetups to wire or paypal transfers to amazon gift cards, and much more. But although a trusted tool for some time, LocalBitcoins recently alienated some users who value privacy by introducing its own KYC/AML measures.

As with most of the P2P exchanges listed below, LocalBitcoins uses a reputation system to produce reliable and clean transactions. It isn’t ironclad like the big, bank-like exchanges, but it does work. It is slow, however, in the sense that one must first build a reputation on the site before transactions can be easily made in volume. Also, there have been several nightmarish reports in past years of various law enforcement entities entrapping bitcoin buyers via LocalBitcoins.

Similar to LocalBitcoins but committed to anonymous and private transactions are the Bisq and Hodlhodl P2P exchanges

Hodlhodl, semi-decentralized, offers a wide variety of methods similar to LocalBitcoins, and is web-based.

Bisq, on the other hand, requires downloading a proprietary app, has more modest bank transfer options, and a slightly higher learning curve. But it’s decentralized, meaning users funds or cryptocurrencies are never held by the exchange.

One exchange that allows users to buy bitcoin exclusively through Amazon purchases - most useful for unloading unwanted Amazon gift cards in exchange for bitcoin - is the Purse exchange.

Also a P2P exchange, users can, with a slight learning curve, acquire bitcoin by buying other users Amazon products - or buy Amazon products from other users using bitcoin. The website has very clear and helpful visual guides to get users through their first transactions, after which the process becomes intuitive. Rates can be painful with this option, though, so expect to pay a high premium of between five and twenty percent - or a high discount if you’re paying with bitcoin for Amazon products.

The up and coming Paxful is perhaps the most comprehensive P2P exchange, offering a dizzying array of options for transacting to and from bitcoin.

In the web-based style of LocalBitcoins, there are simply too many options to list here (totaling over 300). They have a particular presence in Africa, connecting to both Nigerian bank accounts, and to the widely used M-Pesa. Only email and phone verification are initially requested, but a full KYC/AML option is eventually required for some kinds of deals. There is a bit of everything here.

Pros:

  • Options: There are so many options with P2P methods, and if you look long and hard enough, you will find a way to buy or sell bitcoin and other cryptos. This is especially useful for people living without access to rigorous banking (or any banking), who can’t get on a big exchange. No matter what you have to trade for bitcoin, be it mobile phone credit, Russian rubles, or seashells, you can probably find a way to dispense with it in exchange for bitcoin.
  • Privacy: In addition, some P2P options are quite private, and some are even decentralized - minimizing the counterparty risk.

Cons:

  • Slow: P2P options are slow. It takes time to learn how to navigate and operate P2P exchanges; time to decide among all the options; time to build a reputation; time to find buyers and sellers. Time, effort, and research make P2P more viable and faster, but the learning curve is significant.

“Fintech” Apps

A rapidly developing new category of bitcoin and crypto access is in the general “Fintech” (or, financial technology) direction. Several new companies have succeeded in combining a host of financial capabilities into single packages, and could turn out to be disruptive forces for traditional banking.

The prime examples of these are services like Uphold and Revolut, which essentially combine the services of traditional banks, a simplified forex market, and a cryptocurrency-fiat market, all while offering deep discounts. Users can send and receive wire transfers, buy, sell and transfer bitcoin and other cryptocurrencies, and trade for a wide array of global fiat currencies and even precious metals. Revolut even has a debit card.

They both require KYC/AML, and Uphold is widely available, while Revolut is currently only available for EU residents.

US-based Cash.App is another up-and-comer and this category, offering banking-like services from a phone in addition to bitcoin access. There is some modest KYC/AML involved here, too, and only available in (the vast majority of) the US

Robinhood started out as a millennial-aimed free stock trading service, entirely operated from a mobile app. The service added crypto buying options last year.

Pros:

  • Convenience and Flexibility: If you reside in a jurisdiction that allows this option, it is a good one. Fintech apps essentially combine the functions of a bank and a crypto exchange. They offer convenience, functionality, and flexibility. Traditional banks are starting to feel the threat of these options for good reason.

Cons:

  • Limited Availability: Aside from the bank-like KYC/AML requirements, the somewhat limited availability to most developed countries seems to be the main hangup at this time. In this sense, the cons here are largely identical to those of big exchanges.

Conclusion

The above options are just the beginning of your bitcoin journey, with the primary aim of illustrating the compromises between ease of use, liquidity and buying power, and privacy.

In the interest of trying to be more comprehensive, a larger list of options can be found below - however, this list is absolutely not exhaustive, with new options coming out every day.

On a final note, this guide has detailed how to buy bitcoin - not how to store it safely! This is an entirely different subject and you can read how to do this in our guide here.

Robust exchanges with high KYC/AML:

P2P exchanges, variable amounts of KYC/AML

Private P2P

Fintech-style apps, combined fiat and crypto, high KYC/AML

Another list by country can be found here: https://bitcoin.org/en/exchanges

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