That there is bitcoin fever in the market probably has not escaped anyone. Just as we wrote in the longer analysis “There is bitcoin hysteria: A new asset class has emerged”, more and more are being attracted by the rapid rise in prices and many are also looking for exposure to the crypto sector.
A common question we currently receive from our members is: “how do I buy bitcoin?”
It’s a seemingly simple question – but it has many different answers.
That is why we have created this quick guide with 8 steps for you who want to learn as a beginner.
The guide also works for those who do not want to buy bitcoin, but still curious about the area and what the process looks like.
Step 0 – Before You Begin
Everything in life includes risk taking – and financial investments are no exception to this rule.
Equities, bonds and bitcoin can both increase and decrease in value and in the worst case, you can lose all your invested capital.
Therefore, before you start bitcoin seriously, you need to ask yourself a number of questions in step 0:
Do you understand what you want to buy?
How would you react if the price went down?
How much money can you afford to risk if the worst happens?
Does your personal finances manage to bear that loss?
Speculating in various financial assets can be both exciting and potentially profitable – but don’t forget that you risk your capital even if the upside is attractive. Be careful.
We totally discourage speculation with borrowed money. Bet only what you can afford to lose.
Step 1 – look inward
Then decide what you are looking for.
Do you only want price exposure to access the price increase or do you want real bitcoins that can be used in transactions at a later date?
The answer to this question affects what potential path you will take.
Step 2 – Price exposure only
If you only want price exposure, you can buy the certificate from XBT Provider which is available from online brokers like Avanza and Nordnet.
You can own the certificate, like shares and funds, in an investment savings account (ISK) or in a traditional custody account.
In terms of cost, there is a commission for trading (as for shares) and an administration fee of 2.5 percent per year.
This path gives a “synthetic” exposure to bitcoin and therefore you cannot make transactions in the bitcoin network. On the other hand, you avoid all the hassle of wallets and safe storage of your bitcoins.
If you are only looking for more short term oriented trading with quick deals, the certificate may be right for you.
However, the instrument has its weaknesses in the form of counterparty risk, which is something that was noticed when KNC Miner (former guarantor) had problems a few years ago.
Read more about the history of the certificate at Dagens Industri here:
Read more about how the certificate works on XBT Provider’s website here:
Step 3 – more than just price exposure
If you have a longer investment horizon than the short-term investor and believe in bitcoin as an international means of payment and long-term value deposit, you can buy “real” bitcoins.
The process requires some preparation and many pitfalls exist – caution is therefore very important.
Step 4 – create a wallet
Just like physical cash, you need to store your bitcoins somewhere.
However, a bitcoin wallet differs from traditional wallets because you need to send your bitcoins to the wallet’s unique address.
For example, a bitcoin address might look like the following:
Step 5 – which wallet is right for you?
When it comes to wallets, there are a variety of suppliers on the market. Which supplier is right for you depends on the purpose and how you view the placement.
If you want to make frequent transactions with lower amounts, an online (online) wallet may be right for you. Usually it is enough to download an app to your phone and then follow the instructions to create an account.
Here are suppliers like Blockchain.info, Breadwallet, AirBitz.
Read more about different online wallets here: https://bitcoin.org/en/wallets/mobile/ios/
The rule of thumb is that these online service providers are suitable for smaller amounts (less than €1,000). The flexibility has, so to speak, a price and entails a security risk.
Larger amount, higher security
If you are instead interested in a larger amount (over €1,000), it is wise to add a security dimension and keep your private “keys” (required to spend bitcoin) secure and not with a third party.
Then you can choose an offline wallet (not connected) that is in “cold storage”.
Here are alternatives such as Trezor (costs from €59) or Ledger (costs from €59). Only buy these products from trustworthy resellers to minimize the risk of someone having “mixed up” with the hardware and / or software.
You can buy Trezor here: https://trezor.io/
You can buy Ledger here: https://www.ledger.com/
You can also make your own paper wallets, but the process is more complicated and requires a lot of time and dedication.
The steps for how to make a paper wallet we will not go into this guide, but for those interested there is more guidance on how to proceed here:
Step 6 – Time to buy bitcoins
Now that you’ve done the prep work, it’s time to buy bitcoins. By now, you’re probably wondering: where to buy bitcoins?
You can buy bitcoins in several different ways, for example:
From a company like BTCx or Safello (payable with Swish and / or bank transfer)
On a stock exchange such as GDAX or Bitstamp (Payment with foreign payment)
From a private zone in your local area via Localbitcoins.com (payment by physical cash or Swish)
All sellers basically require some form of registration (with the exception of possibly Localbitcoins). This means that – just like when you open a bank account – you need to fill out a form and submit an ID document or verify your identity using BankID on your mobile phone or BankID on your card.
For lower amounts, the easiest way is to go via Safello, BTCx or Localbitcoins, while higher amounts are cheaper via exchanges such as Bitstamp.
You enter your wallet address and the suppliers then send your bitcoins to your wallet – and suddenly you are a bitcoin owner.
Step 7 – What happens then?
After you’ve made the steps and have bitcoins in your possession, the last question becomes: what do you do now?
If you think the value increase will continue, choose not to do anything. You “sit” on your holding until the price perception changes. Much like a “buy and hold” strategy for your favorite stocks – you buy to keep them.
If you want to spend your bitcoins instead, you can look around the net for shops and others who accept bitcoin as a means of payment. Examples of traders who accept bitcoin are the travel site Expedia, Swedish Web Hall and sports car company Lamborghini.
If you want to sell, you can turn to the same place where you bought your bitcoins, for example via Safello or on a bitcoin exchange. You can also sell to other individuals through Localbitcoins.
Of course, you need to keep yourself informed about what’s happening in the bitcoin market, how legislation is evolving in this area, how to keep your bitcoins safe and so on.
Now you have learned the basics of how to buy bitcoin. The blockchain technology, on which bitcoin is based, is fascinating and there is much to learn.
This quick guide gives a quick introduction – but at the same time there are of course several factors to consider and we urge anyone interested in the market to continue their self-study.
Good luck with the investments – but remember that trading in bitcoin is very risky and don’t forget to use your common sense!
Learn more and in-depth
Watch the documentary: “Bitcoin: The end of money as we know it” (2015) – You can find more about the film here http://www.imdb.com/title/tt4654844/?ref_=nv_sr_2
Disclaimer: This is an introductory text on how to buy bitcoin. Before following the steps, make sure you understand what you are doing and how the technology works. Do your homework properly. All bitcoin trading is done at your own risk and the Share Savers take no responsibility for any losses that may occur in whole or in part. Bitcoin is a volatile asset that fluctuates greatly in value and you can lose all your invested capital. Use common sense!