Since its creation in 2009, Bitcoin has continued to dominate both headlines and the general cryptocurrency market. It is the largest cryptocurrency by market capitalisation and shows no sign of giving up this position any time soon.
If you’re looking to diversify your portfolio with cryptoassets, and are considering allocating a percentage of your capital to bitcoin, you’ll need to know exactly how to buy bitcoin and how to keep it safe.
There are several different ways to buy bitcoin. Most commonly, however, bitcoin is bought through a cryptocurrency exchange. Crypto exchanges are versatile platforms that offer a range of features, enabling investors to buy, sell or hold cryptocurrencies and other cryptoassets.
There are two different types of crypto exchange: centralised and decentralised. The former utilises “Know Your Customer” (KYC) checks and validates the identity of its users, whereas the latter encourages anonymity and does not require personal information.
To purchase bitcoin, you will first need to create an account, the process of which will vary depending on your chosen exchange. Most exchanges will then allow you to connect your bank account directly, or you can choose to use a debit card.
Tip: Despite being legal in many countries, cryptocurrency is still a widely mistrusted asset. As a result, not all financial institutions will accept deposits to crypto-related sites. Make sure to check your bank’s position on cryptocurrencies before creating an account with a crypto exchange or trading platform.
Exchanges enable you to buy smaller denominations of bitcoin. You can usually spend fiat currency — and receive a proportionate amount of bitcoin in return — or purchase a set amount of bitcoin, using fiat currencies. There is no difference in price or value, so this comes down to preference.
How to keep your bitcoin safe and secure
Once you have purchased your bitcoin, it is important that you store it somewhere safe. Most exchanges or trading sites will allow you to leave your bitcoin and other cryptoassets on their platform.
Others have their own cryptocurrency wallets or separate storage accounts to which they allow you to transfer certain cryptoassets. These sites often have a relatively high level of security, meaning that your assets are safe on the platform on which you bought them, bitcoin included.
However, some investors prefer to move their cryptocurrencies to a separate storage solution. Crypto wallets are one of the best options for cryptocurrency storage. Wallets can be used to keep your bitcoin safe and accessible, while still allowing you to send and receive it.
To keep your bitcoin safe, consider the following different crypto wallet types:
| Mobile Wallets | An app that stores your private keys on your smartphone |
| Web Wallets | A third-party controlled, online server that stores your private keys |
| Desktop Wallets | A computer program that allows you to store your private keys on your hard drive |
| Hardware Wallets | Physical devices that store your private keys offline |
Tip: Crypto wallets do not technically store your cryptoassets. Instead, the assets themselves remain on the blockchain and are only accessible using a digital, private key, which is stored in the wallet.
Learn more about Bitcoin
It is important to learn about Bitcoin before you consider buying the cryptocurrency. Created in 2009, bitcoin was designed as an alternative, digital method of payment, while removing the need for third-party involvement in financial transactions.
To put it most simply, Bitcoin is a cryptographically secure database, on which the bitcoin cryptocurrency is created, stored and transferred. On the blockchain, bitcoin transactions are validated, users are anonymised and security is paramount.
There are plenty of sources available to investors hoping to learn more about Bitcoin and how it works.
| eToro Academy | Online | A beginner-friendly, educational platform for learning about how bitcoin and other cryptocurrencies work. |
| The Bitcoin Standard | Book | A detailed overview of how Bitcoin works and why it could provide an alternative to the traditional banking system. |
| What Bitcoin Did | Podcast | A podcast that covers the fundamentals of Bitcoin, as well as current updates and news about the network. |
| Bitcoin.org | Online | A community-funded, public resource for learning about Bitcoin, from the basics to the more complicated elements. |
At its core, bitcoin is a smart currency, designed by very forward-thinking engineers. It eliminates the need for banks, gets rid of credit card fees, currency exchange fees, money transfer fees, and reduces the need for lawyers in transitions.
Peter Diamandis
How to buy bitcoin on eToro
The eToro trading platform allows you to invest in all major cryptocurrencies, including Bitcoin, Ethereum and Cardano. eToro does not charge any hidden fees, making it an excellent option for investors.
Tip: Consider using a demo account before committing real funds to a trade. Virtual portfolios are an excellent option for learning how to trade on your chosen platform.
- Create an Account
Create an account on eToro by choosing a username and adding your email address and password. eToro requires users to verify their identity once they have registered for a new account.
- Deposit Funds
From the navigation bar on the left-hand side, click “Deposit Funds.” Choose which fiat currency you want to deposit with, add your payment details and click “Deposit.”
- Buy Bitcoin
Navigate to the Bitcoin page and click “Invest.” Here, users can choose to “Trade” or “Order.” The former involves purchasing bitcoin at its current price. The latter allows you to place an order, automatically buying bitcoin once its value reaches a predetermined level. - Download the eToro Crypto Wallet
For additional security, consider downloading the eToro Money crypto wallet and storing your bitcoin there. To transfer your bitcoin to the eToro wallet, click on a position in your portfolio and select “Transfer to Wallet.”
Final thoughts
Bitcoin is one of the most controversial technologies to be created in recent years, but it could also provide a good opportunity for investors interested in diversifying their portfolio. If you’re looking to buy more volatile assets to increase the potential risk-return of your portfolio, bitcoin could be a good potential option.
Head to the eToro Academy to learn more about Bitcoin and other cryptoassets.
FAQs
- Can I buy bitcoin with cryptocurrency?
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Depending on where you choose to buy bitcoin, you do not necessarily need to use fiat currency to pay for it. Cryptocurrency exchanges will often allow users to effectively swap one cryptocurrency for another, as long as the exchange in question accepts the alternative cryptocurrency as a payment method.
- How many bitcoins are there?
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Unlike fiat currencies, most cryptocurrencies have a limited maximum supply. For Bitcoin, there will only ever be 21 million bitcoins created. Satoshi Nakamoto designed it in such a way that bitcoin production would slow down as time went on, meaning that the last bitcoins will be mined by around 2140.
- How much bitcoin should I buy?
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It’s up to individual investors how much bitcoin they should buy. It is important to consider how much of your portfolio you want to allocate to a particular asset or asset class, as well as remembering to never invest more than you can afford to lose. Crypto is a particularly risky asset class, so bear this in mind when deciding how much bitcoin to purchase.
To purchase bitcoin, you’ll first need to create an account, the process of which will vary depending on your chosen exchange. Most exchanges will then allow you to connect your bank account directly, or you can choose to use a debit card.
This information is for educational purposes only and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to, buy or sell any financial instruments.
This material has been prepared without regard to any particular investment objectives or financial situation and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Not all of the financial instruments and services referred to are offered by eToro and any references to past performance of a financial instrument, index, or a packaged investment product are not, and should not be taken as, a reliable indicator of future results.
eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this guide. Make sure you understand the risks involved in trading before committing any capital. Never risk more than you are prepared to lose.