Bitcoin is a cryptocurrency that is growing rapidly in popularity and has seen some wild swings in price along the way. It’s been a bumpy ride, especially in recent years, and many traders have taken up bitcoin, with some earning millions.
If you are considering using this decentralized version of digital money, you have several options for buying bitcoins. You can buy them directly or indirectly from a few traditional brokers, as well as a few newcomers. In fact, it’s easier than ever tobuy bitcoin, and you can probably do it at a lower commission than before.
Here are five ways to buy bitcoin and some key factors to consider.
What is bitcoin?
Bitcoin is a kind of digital currency or cryptocurrency, a way to pay for things that only exists virtually. The currency made its debut in 2009 and really burst into the mainstream consciousness in 2017 with its rapid rise that year. Coins are created, or “mined,” when the computers that organize currency process and legitimize transactions in that currency.
Bitcoin uses a decentralized network of computers to run everything – a distributed ledger called a blockchain that tracks the transactions of the currency. It’s like a huge public ledger of all transactions made in the currency. And the network monitors everything, ensuring the integrity of the currency and the ownership of bitcoins.
If you’re looking to trade bitcoins, the good news is that you now have several options. You may not even need to open a separate, dedicated account to do so, since many large brokers offer a way to buy them. (Here are the best brokers for trading cryptocurrencies.)
Binance e is a specialized cryptocurrency exchange that allows you to own digital currencies directly. You will be able to trade dozens of the most popular cryptos, including bitcoin, bitcoin cash, solana, and ethereum.
Indeed, Binance offers one of the best ways to invest in cryptocurrency at low cost. Binance – offers some of the lowest fees in the crypto industry, so traders looking to minimize the sometimes outrageous costs of other brokers.
Although the fees are low, customers could pay the price with minimal customer support. Nonetheless, the exchange should prove valuable to a wide range of crypto traders, especially those who want to go further into the space than the first few names.
Cryptocurrencies available on Binance
You can buy and sell over 50 cryptocurrencies on Binance, including:
- Bitcoin (BTC)
- Ethereum (ETH)
- PAX Gold (PAXG)
- Harmony (ONE)
- Orchid (OXT)
- Helium (HNT)
- Chain link (LINK)
- Cardano (ADA)
- Stellar (XLM)
- Tether (USDT)
Binance also offers a large number of trading pairs. These include options to trade two cryptocurrencies without needing to cash out one against USD, as well as options to trade between a crypto and a fiat currency like USD. Different exchanges offer different trading pairs depending on the cryptocurrencies they offer.
Buying bitcoins: here’s what to watch out for:
When thinking about how to buy bitcoin, you should weigh the following factors, as they should influence your choice of where to buy or avoid it altogether.
- Property. What exactly do you want to own? You can own bitcoins directly or through a derivative product such as a futures contract, which offers a return on the movement of the currency.
- Advantages and disadvantages. Your potential gain is directly related to whether you own the currency directly or through a futures contract. By directly holding bitcoins, your earning increases by one dollar for every dollar the currency increases. In contrast, with futures, you can earn much faster without having to put up so much capital. However, your loss is more limited if you hold bitcoin directly, whereas you can lose more money with futures contracts.
- The cost. Commissions can vary greatly depending on how you purchase bitcoin. Futures contracts allow you to get a large share of the stock at a relatively low price, while some brokers may charge you several percent for a direct purchase. A few percent doesn’t sound like a lot of money, but if you trade in the market, these commissions will quickly eat into your profits.
- Security. One of the biggest concerns with any investment is making sure it’s secure. Some newer cryptocurrency players have had serious security issues.
If you are looking to buy bitcoins or other digital currencies as an investment, it is important to keep costs to a minimum. Given the newness of the cryptocurrency market, many brokers would like to maximize their commissions (unlike the stock market where transaction fees have become zero). These fees eat into your profits, so look for a way to minimize these frictional costs.
Although bitcoin’s price has skyrocketed, it still comes with some serious risks that make it not for everyone. Those looking for conservative investments or who cannot afford to lose money should consider avoiding bitcoin or only trading with an amount they are willing to lose.