Buying Bitcoin

Buying Bitcoin

Disclaimer/Disclosure: I am not an investment advisor. Do not consider this investment advice. I’m writing this because I get asked the same questions over and over by friends, family, and the public.

Before You Invest

I strongly believe you should never invest in things you don’t understand. In order to understand Bitcoin, first read the Bitcoin Whitepaper. Don’t worry if you don’t understand it all at first, but don’t invest until you do; it’s really important. After you understand how Bitcoin works to the point that you can simply explain it to another person, you might be ready to invest.

Where to Buy BTC

So, you’ve read the Bitcoin whitepaper and you understand it, now where do you buy your Bitcoin? I recommend using an established exchange such as Bitstamp, Kraken, or GDAX. Personally, I prefer Bitstamp. I have EU bank accounts so it’s easy for me to do SEPA transfers of Euros into and out of the exchange. Whatever you choose, try to pick an established exchange with high volume, low/reasonable fees, and the ability to withdraw in the currency of your choice.

How Much BTC to Buy

I personally think that if someone isn’t heavily involved in the space, and is under the age of 40, 5% of net worth is a safe max amount to put in. Ultimately it’s up to you, but I’d strongly caution against more than 5%.

How to Buy BTC

To order on Bitstamp, once your account is setup, verified, and funded, click “Tradeview” on the top right. If you funded with USD, ensure it says BTC/USD on the top left. If you funded with EUR, you can change it to BTC/EUR. On the bottom middle, slightly to the right, you’ll see the order book. The ‘bid’ column is what price people are buying for. The ‘ask’ column is what price people are selling for. On the Open New Order panel on the right, enter a price in the middle of the bids and asks. For example if the highest bid is 3767, and the lowest ask is 3770, put in 3768.50. To find out how much you want to buy, open your computer’s calculator and do {amount you want in USD or EUR} / {price you want to pay}, copy and paste the result into the “Amount” in the box. Then click the green “Buy button. This will then put the order in the Open Orders section on the right sidebar. If the “spot” price (the price between the highest bid and lowest ask) has moved too much higher than your bid, you might need to cancel your order by clicking the x next to it and replacing at the new spot. Or you could just wait a little while for the price to come down again. It’s up to you. There are no hard and fast rules. If you want a guaranteed, instant buy, you can just make the price you put in match the lowest ask price. You’ll lose a few dollars, but it’ll save you some hassle.

What Other Coins/Tokens to Buy

For someone who knows little about crypto, just put your money in BTC and forget about it (23 September 2017), but again, I’m not an investment advisor. Think for yourself and decide on your own. If you really want other coins/tokens, only do so at a point where you feel familiar enough with trading on exchanges that you can work out on your own how to even acquire other tokens. There are a few issues that BTC faces, namely scaling and remaining truly decentralised. Other coins address this issue and may one day “replace” Bitcoin as the top coin. There are other coins that address different issues, such as a common platform and programming language for implementing smart contracts (Ethereum and Solidity). If all of these things feel a bit over your head at the moment, I wouldn’t invest in them. Again, only invest in things you understand.

Where to Store Your BTC

The ultimate solution is to withdraw your money from the exchange and store it in a cold wallet (you can Google how to set one up). Slightly lazier, but still more secure than on an exchange is to download a mobile wallet such as Coinomi and keep it there. Make sure to backup all of your recovery phrases, passwords, and private keys. Do so in a secure manner. If someone has your recovery keys, passwords, or private keys, they can steal your money. Treat leaving a piece of paper with your private key laying about as leaving the entire value of your crypto just laying about on a table that anyone can take without you knowing. Some people put their recovery phrases and private keys in safety deposit boxes. Some split across multiple boxes. Some give partial information to multiple friends. Some keep the information in their own safes. Others use a combination of strategies. It’s up to you how you secure these keys and passwords, but think hard about it. It’s really important. I strongly recommend a cold wallet.

Exchange Account Security

Inevitably you’ll need to put money on an exchange for a period of time in order to purchase cryptocurrency (or later to sell it), so security is important here. Aside from having a strong passphrase, you should 100% have 2FA enabled on all of your exchange accounts. There’s no reason not to have 2FA on all of your accounts; it’s easy and invaluable. Download a 2FA app such as Google Authenticator or Lastpass Authenticator onto your phone. On the account you’re using click something like Settings -> Security -> 2FA (it’s different for every service, obviously, but that’s generally where you’ll find it). It should give you a QR code. Scan that code with your 2FA app, then enter the code the 2FA app displays on the website you’re using. Once you get the hang of it, you’ll start to 2FA everything. There’s no reason not to. It makes your accounts much more secure, only takes 5 minutes to learn, and can save you from losing all of your money even if your email account is hacked and your exchange password discovered. Make sure to backup your 2FA seeds (the QR codes) somewhere in case you lose your phone and need to reenter them on a new phone. I prefer Lastpass Authenticator because it automatically backs up seeds for me. Google Authenticator does not, so you’ll have to take a separate picture of the QR code and store it somewhere safe.

Parting Advice

A lot of influential people in crypto are on Twitter. I recommend you find them and follow them. There are also a lot of Telegram groups (such as @CryptoAlerts) that are good for industry news. I also highly recommend you follow a diverse group of people to avoid getting yourself in a self-reinforcing social bubble. Follow people you disagree with; sometimes they’re right too. Some people who I like in the space that Tweet interesting things are Jameson Lopp, Nick Szabo, and Chris Derose

Contact Me

Did I miss something out that you think I should include? Is something here incorrect? Is something now outdated? Just want to say hi? DM me on Twitter. If you liked this post, please follow me on Twitter <3.

Jonathan Sterling

Written by

In March 2017, I quit my job as a software engineer and began travelling around the world. This open-source blog exists to share my thoughts and let my friends and family know that I'm not dead.