What is Bitcoin?
Bitcoin is the first decentralized digital currency and a global digital payment system. It was invented by
an
unknown person or group under the pseudonym Satoshi Nakamoto and release in 2009. The system works without a
central
repository or administrator and is peer-to-peer, meaning its transactions take place between users directly
and
without an intermediary. Transactions are verified by network nodes and recorded in the so called
blockchain, a
public distributed ledger. Learn more about Bitcoin here.
How do I buy bitcoins?
Bitcoins can be bought on cryptocurrency marketplaces. To buy your first bitcoins, all you have to do is
open an
account and verify your identity with a marketplace. The verification process can take anywhere from minutes
(by
showing your ID to an agent using videochat) to several weeks. Once being verified, simply transfer money
via
your preferred payment method to buy bitcoins. In case your desired marketplace does not provide a wallet
service, you will also have to setup a wallet to store your
bitcoins.
Where can I buy bitcoins?
Three different types of cryptocurrency marketplaces can be distinguished.
Exchanges resemble traditional stock exchanges (such as the New York Stock Exchange or the
NASDAQ
Stock
Market) where individuals can trade bitcoins directly with other buyers and sellers. Cryptocurrency
exchanges are responsible for matchmaking which means finding enough sellers and buyers and determining the
price. Hence, there is no personal contact between traders. The trading features offered by exchanges are
tailored to what professional traders with higher frequencies and volumes require. This is why their user
interfaces may be somewhat confusing for beginners.
Brokers act as dealers as they participate in the transactions by taking the opposite side
of the
trade.
Instead of matching the trading parties via an algorithm, a broker has his own asset stock (e.g. of
bitcoins) from which he can sell some to fill a buyer’s order or buy some for their own account to fill a
seller’s order. Cryptocurrency brokers therefore act as market makers and charge a markup or markdown that
is more expensive than trading fees charged by exchanges. On the other hand, their services are usually very
easy-to-use and therefore beginner-friendly.
Peer-to-peer (P2P) directories offer a platform where two individuals can trade bitcoin
directly
between
each other, without intermediation by a third-party or a matchmaking algorithm. So, if you want to buy
bitcoins on a P2P service, you will have to look for a seller that is offering your desired amount of
bitcoins at a price that you are willing to pay. Note, however, due to the lack of a third party or
matchmaking algorithm, there is a greater risk that the buyer may not pay. This extra risk is often defrayed
by lower prices. Hence, very good deals can sometimes be found on P2P markets.
What to consider when buying bitcoins
After learning about the various types of marketplaces you may be left with the question: “What’s the
best marketplace for me?” Rest assured, you have come to the right place: Our service lists popular
places to buy bitcoins from all over world. Now, all you have to do is specify your requirements and
simply choose an exchange or broker of your liking.
Verification: The majority of marketplaces will require you to verify your identity (e.g.
by uploading a
copy of your passport as well as a utility bill to proof your residency) before you can buy bitcoins.
The verification process can take anywhere from instant to several weeks.
Wallet Service: A bitcoin wallet is a piece of software where you can store your bitcoins.
If you are
new to bitcoin, look for marketplaces that already provide a wallet service. We would like to point out
that storing bitcoins in a wallet that you are managing yourself is the safer option but it requires
some learning effort. We’ve collected some basic info about
different
types of wallets here.
Prices & Fees: The price of a bitcoin is determined solely by supply and demand. Hence, its
price will
rise and fall depending on the number of people willing to sell and buy bitcoins. Generally speaking,
exchanges have lower fees than brokerage services. Besides trading fees there are often fees for
deposits and withdrawals.
Payment method: Before you can actually buy bitcoins you will need to transfer money to the
marketplace.
Most exchanges only offer the possibility to deposit money using wire transfer, which sometimes can take
up to a week. Good broker services offer faster payment methods such as VISA or MasterCard at an extra
fee.
Security: Security also plays a major role when you buy bitcoins. We help you filter
marketplaces by
security features such as two-factor authentication (2FA), cold storage etc. Also, we would like to
encourage you to not keep significant amounts of fiat (USD or EUR) and cryptocurrencies stored on
marketplaces, as they may be affected in the event of a cyber attack.
When to buy bitcoins?
Is now a good time to buy bitcoins? We don’t know. However, if you are looking at a specific price
at which you would like to buy bitcoin, we can help you to not miss a favorable opportunity: Sign up
for a Cryptoradar account and set up a price alert to be notified when bitcoin trades below or above
your target price.