4a – How do I actually purchase some bitcoin?
If you are looking to buy bitcoin with the money in your bank account, the best and easiest option is to use a brokerage.
A bitcoin brokerage is essentially an online bureau de change for bitcoin. Brokerage platforms sell bitcoin at a fixed price, depending on the time and date of the transaction. Just like when exchanging pounds for euros at the airport, the price at which you can buy bitcoin from a brokerage will be set by the current exchange rate, plus whatever commission the broker charges for exchanging your money.
Because of their commission rates, brokerages are the most straightforward way to purchase bitcoin but not necessarily the cheapest. To find the best price, trading bitcoin on an exchange is your best option. This will be explained in section 4c, but first you’ll need to know how to store any bitcoins that you buy.
4b – How do I store my bitcoins in a wallet?
In order to store bitcoin, you’ll need a bitcoin wallet. In section 3a we learned what bitcoin wallets are, how they work, and their importance in the movement of bitcoin, so now let’s run through the different types of wallet that you can get.
There are 5 different types of wallets: online wallets, desktop wallets, mobile wallets, paper wallets, and hardware wallets. Each wallet type functions as an account to store your bitcoins, and enables you both to send bitcoin to, and receive it from, other wallets. The difference between the different types of wallet is in the way they secure your private keys (essentially your password that allows you to transfer bitcoin out of your wallet).
There are pros and cons to each wallet type, which you can learn about in our ‘Wallets’ section. If you’re getting your first bitcoin wallet, then it’s easiest to get an online wallet, for which you’ll simply need to register with an email address and create a password. These wallets are commonly attached to exchanges (see 4c) or brokerages (see 4a) through which you can also buy bitcoin.
Once you have a wallet, you’re ready to buy or trade bitcoin on an exchange. Also, if you want to trade bitcoin without needing a wallet then that’s also possible with CFD platforms. Keep reading and we’ll explain your bitcoin trading options.
4c – How do I begin trading with bitcoin?
If you want to trade bitcoin, then your two main options are exchanges and broker platforms. These platforms are more complicated than brokerages, but provide more options for making profit out of bitcoin. The only difference between the two is that exchanges require you to own and store the bitcoins you’re trading in a wallet, whereas CFDs do this for you.
Trading bitcoin with the above platforms is similar to regular day-trading. Users can try to profit through making trades around the price fluctuations of bitcoin, just like with any other store of value like gold or regular fiat currency (pounds, euros, dollars).
On exchanges you’ll be trading your bitcoins directly for other cryptocurrencies, and on CFD platforms you’re basically making bets with the trading platform about whether the price of bitcoin will rise or fall. For this reason, you will need a wallet to use an exchange, but not to trade on a CFD platform.
As mentioned, these platforms are more complicated to use than brokerages, so it’s recommended to read our pages detailing how CFD platforms and exchanges work, which will guide you through the process and help you start trading for profit – if that’s how you want to use bitcoin.
By now you’re probably wondering if bitcoin has any uses other than trading for profit. The answer is a definite yes, and so the final stage of our bitcoin tour will take you through the different ways you can use bitcoin.