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How to Buy Bitcoin (BTC)

Understand how you can buy Bitcoins online in minutes through a regulated Bitcoin exchange or a CFD broker using your credit card, debit card or PayPal.

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To buy Bitcoin online, you can either turn to a Bitcoin exchange or a CFD broker. This article discusses the pros and cons of each approach in more detail.

Buy Bitcoin through a CFD broker

You can invest in Bitcoin through a CFD broker such as Plus500.com, easyMarkets.com, HYCM.com as well as eToro.com. When you "buy" Bitcoin through a CFD broker, you won't actually own any Bitcoins. Instead, you are speculating on the price of Bitcoin against either the US Dollar or, in some cases, the Euro.

Pros

  • Go long or short: with a Bitcoin CFD, you may either go long or short. This enables you to profit in a rising market if you are "long", or profit in a falling market, if you are "short"
  • Fractional ownership: enables you to buy a fraction of a Bitcoin, rather than a set number of Bitcoins outright. This could be of interest if your budget is constrained.
  • Leverage: allows you to borrow money from your broker to finance your purchase. However, please note that leverage is a double-edged sword which can magnify your gains as well as your losses.

Cons

If you leverage your trades, you should expect to pay your broker interest on your borrowings. This form of interest is known as "swap fees" in the industry's jargon. They may be either positive or negative, depending on the direction of interest rates. You should enquire about these fees with your broker.

Leverage will increase both your potential gains and losses. This is true of all investments. However, this is acute in the case of crypto-currencies, whose prices are highly volatile.

Buy Bitcoin through an exchange

If owning Bitcoins is important to you, you should buy the crypto-currency through an exchange or directly from someone else. When you invest in Bitcoin through a crypto-currency exchange, you'll swap your account's base currency (typically US Dollars, Euros or Pounds) for Bitcoin. You can either store them with the exchange, or transfer them to a digital wallet.

Pros

You will find an updated list of the largest crypto-currency exchanges on Wikipedia. You may also buy Bitcoin directly from eToro.com, the world's largest social trading platform (except if you are an Australian resident, in which case you may only buy a CFD).

Cons

  • Go long: when you own Bitcoin, you can only profit from increases in the price of the crypto-currency. However, you stand to lose if Bitcoin's price falls, unless of course you are willing to hold on to your investment until you have turned a profit.
  • Theft: Bitcoin exchanges have often fallen prey to attacks. Mt. Gox, which was at one time the world's largest Bitcoin exchange, filed for bankruptcy after a large theft which resulted in the loss of 6% of Bitcoins in circulation at the time. Security practices remain lax across many Bitcoin exchanges and wallets.
  • Slow: it can take many days to open and fund an account with a Bitcoin exchange, unless you live in the USA. This can be a genuine problem if you are looking to make a quick trade to take advantage of price changes.

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