Buying bitcoin and other digital currencies can seem overwhelming. In this guide, we walk you through how to buy Bitcoin and other cryptocurrencies.
Almost eight years ago, I wrote a article here asking whether or not Bitcoin was a scam. The cryptocurrency was almost brand new and at the time had a value of just $13 per coin. Being the genius I am, I purchased 100 coins over the course of six months using a variety of unreliable online platforms. My total investment at the time was roughly $1,500. If you can’t already tell from my investment in baseball cards, I am an outside the box kind of guy.
At the time I owned these Bitcoins, I was single, living alone, employed at a job I had just started with student debt up the wazoo. As life progressed, I got married, bought a house, had children and paid a lot of my student debt down. When Bitcoin hit $300 some years ago, I cashed out. There was simply no way to pass up a 7,000% return. Today however, those 100 coins are worth roughly $1.6 million.
Ohhhh, how that pains me. Like I said … genius.
Getting to the point of my diatribe: When I purchased those coins in 2010, I did so at great risk. There were only a few star- up Bitcoin sellers. For $50 at a time, I was able to make deposits, buy BTC, and store them in an online wallet. Every single one of those start-ups is gone except for Coinbase, so naturally, we’ll start there.
Four Best Websites to Buy BTC, ETH, or LTC
I’ve used all four of these websites to buy and sell Bitcoin, and the transactions have been smooth and reliable every-time. Each provides something a little different. So depending on your needs, you may find them more or less expensive.
Coinbase
The biggest and brightest merchant for bitcoin and other cryptocurrencies is easily Coinbase. With over 13 million members signed up, Coinbase is the most popular and most recognizable Bitcoin merchant on the web. And to be honest, they’re a little different than the markets you see below.
Coinbase lets you deposit money into your account via credit card or bank transfer with moderate. The fees are 3.99% when depositing via a credit card and 1.49% when done via bank transfer. In fact, the bank transfer cost is higher than any of the other merchants on our list. Unlike other exchanges however, Coinbase offers to buy and sell your cryptocurrency at a set price. When you enter the amount of Ethereum you want to buy or sell, Coinbase will tell you the fee and the cost. It will execute the transaction immediately if you have the funds available. No muss, no fuss.
While Coinbase is secure and uses two-factor authentication, they’ve had a bit of trouble recently on their platform. Twice in the period of two weeks, Coinbase was forced to shut down for a few moments (an hour or so) to adjust their pricing structure. Their model made the price of Bitcoin soar (higher than other merchants had the value). Because of this, they were forced to freeze accounts and fix the issue. Coinbase does offer a secondary market for the purchase of all cryptocurrencies called GDAX, where fees are much lower. However, buying and selling here is a bit more complicated.
Coinbase is located on the west coast in San Francisco, CA. They were founded in 2011 and by October of 2012, they were fully operational
Gemini
Gemini Exchange is relatively new to the space, having launched in 2015 by the famed Winklevoss twins. It’s fully regulated and compliant in the state of New York (since 2016) and is the second largest US based exchange (behind Coinbase). Bitcoin, Ethereum, and Litecoin are all available on the exchange. In the last few months, this is where I have done most of my cryptocurrency trading.
Fees for trading on the Gemini Exchange are moderate. When trading less than $1,000 in value, the fee is 0.25%. That fee quickly creeps lower as you trade more. The fee Gemini charges is determined by the amount you trade over a 30-day calendar window. When you sell more than $1,000, the fee drops to 0.23%. When you sell more than $2,000, the fee goes to 0.20% and so on. At just $5,000, the fee drops to 0.10%. When you buy, the fees are even better, as putting an order in for greater than $5,000 will allow you trade fee-free. You can find the full schedule of fees from Gemini trading here.
Why I use Gemini more than other exchanges is the ease with which money can come in and out of the exchange. Initially when setting up my account, they attempted to verify my bank account automatically (but could not do so). After I submitted a single bank wire, my account was confirmed. Then I was able to deposit and withdraw money in and out of the exchange fee-free. Deposits do take some time, up to five business days before being able to be trade. But withdrawals only take one to two business days. Three times in the last few months, I’ve requested withdrawals before noon ET and the very next day, they arrived.
Gemini also uses two-factor authentication, but currently does not use Google Authentication to log-in. They send you a text to confirm your identity. Once you enter that online, you have the option to stay logged in for 24-hours.
Bitstamp
While the first two on our list are US companies, Bitstamp is not. They’re located in Luxembourg. And if you ever decide to do a wire transfer in or out of the exchange, you’re likely to see the money come and go from Slovenia. While that may give you some pause, Bitstamp has been around since 2011 and currently has over 1 million users. I personally have made many transfers to and from this exchange. And I’ve always received my money in a timely fashion.
The fee schedule for Bitstamp is on the higher side. When trading, you’ll start at a 0.25% fee for each trade. Depending on your daily trade volume, they lower that amount all the way down to 0.10%. For example, if you make a deposit into the exchange and wish to purchase $5,000 in BTC, ETH, or LTC, Bitstamp will charge a 0.25% fee to do so ($12.50). To transfer your cryptocurrency back to cash, the same fee applies.
When depositing money as a US citizen, you have two main options. You can deposit via credit card, which costs a 5% fee. Or you can deposit by bank wire, where a .05% fee applies, with a minimum fee of $7.50. To withdraw via bank wire, the fee is 0.09% (minimum fee $15). If you’re planning to trade tens of thousands, these fees are of little consequence. If you’re a casual trader looking to buy $50 here and $50 there, this is not the exchange for you. Perhaps most importantly, there is no fee for depositing and withdrawing Bitcoin, Litecoin, or Ethereum.
Bitstamp uses two-factor authentication for logging in and making transfers to and from along with email confirmation. Google Authentication is required (which means downloading an app). So if you use Bitstamp for your cryptocurrency purchases, make sure to print your validation mark (should you ever lose your phone).
CEX.io
Before Gemini came along and before I was able to consistently deposit into Bitstamp (as a US customer), I used CEX.io for my purchases and transfers. Launched in 2014 and located in the UK, CEX.io may have the best trading tools and platform. The trouble I ran into as a casual trader is that they requested a lot of compliance documents for buying and selling four-figure BTC amounts. Over time, I grew tired of having to provide validation documents.
In addition to the regulations, the fee structure on this exchange is on the high side for getting money in and out of the exchange. When trading on the exchange, the fees are right in line with just about everyone else. Depending on the amount you’re trading inside of a 30-day window, the fee can be as high as 0.25% and as low as 0.10% (for sellers). For buyers, the fee is as high as 0.16% and as low as nothing. In order to qualify for the fee-free buying structure, you’d have to trade more than 6,000 coins in a month. At today’s value, good luck!
The trouble becomes getting money into the exchange as a US resident. Using Visa or MasterCard, the fee is 3.5% per transaction. There is no fee for a bank transfer. But as a US resident, those can only come from bank wires (for which your bank will surely charge a fee). Withdrawals occur via the form of bank transfers. And no matter the amount you request, the fee is $50.00. If you’re feeling crazy, CEX.io also offers trading on margin. Here’s a full list of the structure of margin fees … be CAREFUL.
CEX.io has an API you can take advantage of, multiple calculators, a mobile app and price widget to help you predict the future. All in all … if you don’t mind paying just a little bit extra to get your money into the exchange, it’s a winner. Depositing cryptocurrency is FREE, so your best bet is to deposit your fiat currency somewhere else, and transfer your coins here.
Where to Avoid Buying Bitcoin
LocalBitcoins
LocalBitcoins is the Craigslist of the cryptocurrency world. If you’re looking to buy something like Litecoin, you can post a want ad. If you have Litecoin to sell, you can post that up as well. This website brings buyers and sellers together. On the surface, it seems like a great idea to be able to transfer coins with a simple “for sale” advertisement.
But the problem I’ve always had with this website is that the costs to the buyer are unreasonable. Often times, buyers are asked to send money via wire transfer. Other times, the fee for buying a single coin can be as high as 85%. It was very rare to complete a transaction at a reasonable price on the site, so I would urge you to proceed with caution. The transactions are not as secure as they are elsewhere, and the fees can be outrageous.
Topics: Investing
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