Depending on where you are in the world buying bitcoin may be an easy thing to do, or a difficult one.
Buying bitcoin is not an activity that is exactly the same everywhere in the world, and unfortunately there are countries where the financial infrastructure is not sufficiently developed (or trusted) to support buying bitcoin through the help of financial institutions like banks.
In many countries (particularly in developed countries), you can buy cryptocurrencies easily through a bitcoin exchange using credit/debit cards or bank wires.
What is a Bitcoin Exchange?
A Bitcoin exchange is an online platform for buying and selling bitcoin and the many other altcoins you may have heard of, such as Cardano, Monero and Dash. These exchanges act as intermediaries for buyers and sellers of these cryptocurrencies, similar to a stock exchange.
The term ‘exchange’ and ‘wallet’ are sometimes used synonymously. Though there is some overlap there are important differences to be aware of.
Exchange – a platform to trade crypto such as Bitcoin. On an exchange you can usually store your crypto as well. Since you can store crypto on an exchange they are also referred to as ‘web wallets’.
Wallets – these come in a few different formats. On some wallets you cannot trade bitcoin since they’re purely a means of storing it. i.e. a ‘hardware wallet’, such as the Trezor exists to provide a safe method of storing crypto, but does not offer a way to trade crypto.
Types of Bitcoin Exchanges
Centralized Exchanges (Fiat and Crypto) – Most people buy and sell crypto using a centralized exchange (aka ‘web wallet’) that allows for funding and withdrawal using fiat currency (state-issued money like US dollars) because they need a way to convert their fiat into crypto.
Centralized exchanges store and secure your bitcoin in their online funds similar to how a bank works. You don’t usually have direct access to your private key, and they rely on a third party to keep your bitcoin safe. Web wallets are widely used because they conveniently allow you immediate access to your bitcoin and to perform fast transactions.
One of the most popular and respected online bitcoin suppliers on the market is Coinbase, but there are other websites where you can purchase crypto using either a credit card or a bank transfer.
If you’re located in the US, Coinbase is the easiest and safest path to buying bitcoin. They can instantly verify your documentation to get you buying crypto right away and they also insure your funds up to $250,000.
If you’re located in Canada the best option would be Coinsquare since they also auto-verify documentation, have reasonable fees and offer an easy-to-use interface.
Centralized Exchanges (Crypto Only) – Some crypto exchanges do not have the option to fund or withdraw funds using fiat money. So you need to deposit a crypto like bitcoin before you can do any trading on the exchange for another crypto like Cardano or EOS.
And if you want to withdraw your money you’ll have to withdraw it as a crypto. That means that if you want to convert your crypto to USD you’ll have to send the coins to an exchange that deals with fiat.
Binance is a favoured exchange that has strong security, has many altcoins available for trading and has reasonable fees.
Decentralized Exchanges – A decentralized exchange differs from the centralized exchanges in that there is no third party intermediary that holds the user’s funds.
Crypto is traded directly from one person to another based on an automated peer-to-peer system. Decentralized exchanges offer greater privacy since users do not need to submit any personal documentation.
Bisq is a decentralized exchange favoured by many though it’s much more difficult to set up and use than a centralized exchange like Coinbase.
Local Exchanges – If you don’t have the ability to purchase bitcoin online you can buy bitcoin locally in exchange for cash through an exchange like LocalBitcoins.com as long as there’s someone nearby who wants to sell.
Since you can buy for cash that also means you can buy bitcoin anonymously. The disadvantage with buying locally is that the price can be significantly higher. As well, trading in physical space has its own risks, so make sure to do it in a public space where you feel safe.
For a more in-depth guide to buying Bitcoin read our How to Buy Bitcoin (Beginner’s Guide)»