How and where can I buy bitcoin?
Buying bitcoin still depends a lot on where you physically live as there are very few (good) options that work globally. On top of that, some options are more "beginner-friendly", whereas other places offer more advanced features and perhaps others focus more on privacy. In this blog post, we'll outline a few of your options and briefly describe the pros and cons of each of them. We'll cover the following three types of places to buy bitcoin:
- Bitcoin brokerages
- Centralized bitcoin exchanges
- Decentralized bitcoin exchanges
1. Bitcoin brokerages
If you were to buy a listed stock on the Amsterdam Stock Exchange, you would have to go through some sort of middle man (broker) which will facilitate this transaction (i.e. your bank). While you can buy bitcoin directly on an exchange, you may find it easier to go through a local brokerage that optimized the purchase process for your country.
These companies will generally make a very accessible website, for which you don't need to know all the ins-and-outs of trading. If you are new to bitcoin, we recommend going with a broker in your country as they are easier to use and offer a bit more guidance and support on your first purchase (compared to exchanges). We prefer brokerage companies that focus exclusively on bitcoin, such as Bitonic in The Netherlands.
Pros & Cons
👍 Easy to use.
👍 Targeted to your country (local payment options, translated into your language and trading in your currency).
👍 Perfect for lower amounts (€25-€1000).
👎 A little more expensive than centralized bitcoin exchanges.
👎 Usually requires you to follow a KYC procedure, identifying yourself (and sometimes provide residency information) similar to opening a bank account.
You can check whether there is a broker in your local jurisdiction at bitcoin-only.com.
2. Centralized bitcoin exchanges
Once you've bought bitcoin a few times through your favorite local broker, you might be wondering why the exchange rate is always a little bit worse than what you see on your favorite bitcoin price tricker. Well, these companies also have to earn a living so brokers will either show their fee separately or "hide" it into the exchange rate.
Since Stekking is based in Europe, we'll focus on the euro <> bitcoin market, for which we recommend trading on Kraken or Bitstamp.
While you may have bought your first bitcoin from your broker, the bitcoin you buy on a centralized exchange will come directly from somebody who sells you their bitcoin. Don't worry, the exchange will make sure you'll receive your bitcoin.
Pros & Cons
👍 The cheapest possible price you'll find to buy your bitcoin.
👎 The user interface of a bitcoin exchange may seem somewhat complicated and intimidating.
👎 High withdrawal fees (to send your bitcoin to your wallet), which makes it less suitable for small purchases (€25-€300).
👎 Requires you to follow a KYC procedure, identifying yourself and provide residency information similar to opening a bank account.
3. Decentralized bitcoin exchanges
While you could buy your bitcoin in the cheapest possible way on a centralized exchange, you might have issues with uploading sensitive personal information (I.D. card, passport, driving license, utility statement, banking statement, etc.) to these platforms. After all, wasn't bitcoin going to be this new decentralized financial system, without banks and governments' involvement? There are two platforms through which you can find other people selling bitcoin to you directly Bisq and HodlHodl.
Pros & Cons
👍 Decentralized exchanges will offer more privacy as they are not required to ask for identity information (although some sellers on HodlHodl do it).
👎 Exchange rates are usually worse on decentralized exchanges.
👎 Decentralized exchanges are more challenging to use compared to bitcoin exchanges or brokerages.
👎 You will need a little bit of bitcoin to use Bisq, which makes it impossible to use for a first-time bitcoin purchase.
Four golden rules on buying your first bitcoin
- Don't invest more than you can afford to lose.
- Don't invest all your investible money at once, spread it out in smaller daily/weekly/monthly batches (discover the power of dollar-cost-averaging).
- If it looks too good to be true, it probably is (the cryptocurrency world is full of scams and there are a lot of people out there trying to steal your bitcoin).
- Invest time in yourself (through education on bitcoin) before investing your money into bitcoin.
More Bitcoin 101
We'll be publishing one blog post every week answering many of the questions we've heard from our Stekking users who are new to bitcoin:
- What is bitcoin?
- How and where can I buy bitcoin?
- How and where can I use bitcoin?
- Where should I keep my bitcoin stored safely?
- How does a bitcoin transaction work?
- How does bitcoin mining work?
- What are the advantages and disadvantages of using bitcoin?
- What is a blockchain and how does it work?
- How does bitcoin compare to other cryptocurrencies?
- Why should I want to have bitcoin?