How to Buy and Sell Bitcoin: A Comprehensive Guide

Bitcoin (BTC) was the first cryptocurrency, created by a still unidentified developer. It launched in 2009, initially worth less than a cent, before its value boomed into the thousands in 2017.

Fast-forward through several crypto-winters, and in 2024, Bitcoin’s price once again surpassed previous records, fueled by interest after the U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin exchange-traded funds (ETFs) in January 2024.

Bitcoin, powered by blockchain technology, offers a digital currency on a secure, immutable network that can be transacted globally without third-party oversight. Although there are many risks associated with Bitcoin and other cryptocurrencies, Bitcoin has emerged as a popular tradeable asset and store of value.

Advantages of Bitcoin Investments

• Accessibility

Bitcoin is easily accessible to anyone around the globe, including those without experience in institutional investing and the unbanked. It can be bought, sold, and transferred, often in minutes.

• Security

Bitcoin is known as a secure digital currency, though it’s not impervious to attacks on wallets, exchanges, user error, and other security risks.

• Decentralization

Part of Bitcoin’s attraction to some is its decentralization. It’s not governed by a third party like a bank or a company or controlled by governments, although there is increasing regulation.

• Price, scarcity, and volatility

This digital asset has gone from zero value to worth tens of thousands, making it attractive to investors. Traders have profited from its intense price volatility, both up and down, although many investors and traders have also lost. Bitcoin’s supply is capped at 21 million Bitcoin, which adds scarcity.

Risks of Bitcoin Investment

• Volatility

As noted, the same price volatility that makes Bitcoin attractive to investors and traders is also a substantial risk. Bitcoin’s value can fall as rapidly as it rises, and investor funds can be quickly lost. There is no oversight of the cryptocurrency market to prevent this volatility, and Bitcoin price can be influenced by sell-offs by Bitcoin whales, changes to regulation, and other market influences.

• Regulation

On the whole, cryptocurrencies are unregulated, although legislation is only just beginning to be implemented around the globe. This means there’s no control over the market and no protection for consumers and investors if they fall for a scam, get hacked, make an error, or suffer from market volatility. Bitcoin’s decentralization can be seen as a benefit, but it can also be a risk.

• Hacks and errors

Cryptocurrency scams and hacks have lost the market and investors billions since the inception of crypto. The same technology that makes Bitcoin secure can also put it at risk of hacks and other illicit activities, although the Bitcoin blockchain is reputed to be safer to many others. There are substantial risks to cryptocurrency keys, wallets, and funds stored on exchanges. These crypto trading tools can be complex for new users, and there is no recourse if a user sends their Bitcoin to the wrong recipient address or loses their secure keys and cannot access their Bitcoin balance.

• Energy usage

The cryptographic process and blockchain technology used to secure Bitcoin and create its immutable ledger via Bitcoin mining and the network’s proof-of-work (PoW) consensus mechanism are energy intensive. The process requires significant computational power and, thus, consumes energy, leading to environmental concerns.

• Mainstream uncertainty

The cryptocurrency sector’s newness, risk, illicit actors, lack of regulation, and other concerns have all contributed to mainstream uncertainty. Bitcoin and other cryptos aren’t widely accepted as means of payment, and many financial institutions, governments, and leaders are still skeptical.

1. Setting Up a Bitcoin Wallet

An investor planning to use Bitcoin will require a Bitcoin wallet or a cryptocurrency wallet compatible with Bitcoin. As with any cryptocurrency, digital platform or service, it’s important to thoroughly research a new product for credibility and safety, check genuine user reviews, and, of course, make sure it offers the features and usability required.

Types of Bitcoin Wallets

Although Bitcoin can be kept on an exchange, this is the least safe storage method. Bitcoin wallets, or hot/online crypto wallets, are also used to access other cryptocurrency products and services, make transfers, and connect with other platforms. The safest cryptocurrency wallet for storage is a cold wallet or hardware device like a Ledger or Trezor wallet.

How to Secure Your Bitcoin Wallet

Once investors have selected their secure hot and/or cold wallets, they can take several steps to ensure the security of their funds. These steps include using backups, encryption, and the maximum security features available, storing keys and devices safely, keeping software up to date, and ensuring cybersecurity protection.

2. Choosing a Bitcoin Exchange

It’s also vital that investors choose a Bitcoin or cryptocurrency exchange with care, opting for a reputable, safe, legal, regulated, or compliant platform.

Factors to Consider When Choosing an Exchange

There are many factors to consider when choosing a cryptocurrency exchange. These include the exchange’s security measures, regulatory oversight, fee structures, liquidity levels, ease of use, supported cryptocurrency and products, reputation, customer support, and withdrawal and deposit processes.

Top Bitcoin Exchanges Overview

Today, there are numerous established and well-reputed cryptocurrency exchanges, although most have, at some point, been subject to scrutiny, hacked, or been under the eye of regulators. Three of the largest cryptocurrency exchanges by volume traded and according to CoinMarketCap’s ranking at the time of writing are Binance, Coinbase, and Bybit.

Understanding Bitcoin Pricing

Bitcoin’s price is incredibly volatile, so it can move up or down quickly. It’s possible to buy Bitcoin on an exchange with fiat currency, a credit card, or another cryptocurrency. Investors can set the amount in fiat that they want to spend and then purchase the Bitcoin they can get for that amount. There are network fees for Bitcoin transactions and exchange fees.

A Step-by-step Guide to Buying Bitcoin

The steps an investor will follow to buy Bitcoin on a cryptocurrency exchange will be similar to the ones below, but the exact steps might vary depending on the exchange and the method of purchase. The first step is always carefully choosing a reputable exchange:

1. Create an account or log in to the cryptocurrency exchange
2. Navigate to the “Buy” option
3. Select how to fund the purchase of Bitcoin and Bitcoin (BTC) as the crypto to buy
4. Enter the amount of fiat or other currency being spent on Bitcoin
5. Fund, confirm, and complete the payment

A Step-by-step Guide to Selling Bitcoin

To sell Bitcoin on an exchange, investors will move the Bitcoin they want to sell back to the exchange. Here is an outline of the steps, which again may vary:

1. Deposit Bitcoin to the exchange wallet
2. Navigate to the “Sell” option
3. Select how much Bitcoin to sell or trade and for which fiat currency/other crypto
4. Confirm and complete the sale
5. Withdraw the proceeds to an account or wallet, where appropriate

Tax Implications of Selling Bitcoin

When an investor sells Bitcoin or any cryptocurrency, any gains are subject to taxation. The exact method and rules for taxation will vary from country to country, so investors should always check the rules in their jurisdiction.

Security Practices for Bitcoin Transactions

Investors should first choose reputable and secure platforms and services such as exchanges and wallets. Then, it’s important to use the maximum security available, such as two-factor authentication and strong passwords.

It’s also important to remember that exchange wallets are the least safe place to store crypto, whilst the safest option is a cold wallet or hardware wallet. It’s critical to keep crypto keys, passwords, and devices safe, take extra care when making transactions and transfers, and be cautious of phishing and other potential hacks and attacks. Any software should be regularly updated, and it is good practice to monitor account balances, history, and security and to stay informed about cryptocurrency markets, developments, and security risks.

Bitcoin investors will make their purchases according to a well-researched investment strategy that suits their risk tolerance and investment profile. As always, with cryptocurrencies, they will only invest what they can afford to lose.

Investors might choose to HODL, holding on to their Bitcoin, waiting for its price to rise and watching the market carefully for signs of downward volatility. More experienced cryptocurrency users might research, learn, and investigate advanced trading strategies, of which there are many, such as day trading strategies, swing trading, or even options trading. 2024’s new Bitcoin ETFs have also been incredibly popular with investors, especially those with exposure to more traditional trading platforms.

At Coin Hint we believe all Bitcoin investors should protect themselves and their investments by spending time learning how to buy and sell Bitcoin safely, as well as learning about the broader cryptocurrency markets, the factors that influence crypto and Bitcoin prices, and how to keep their investments safe and secure. Crypto investments are a gamble. They can be high-risk but also high-reward for savvy, careful investors, who research, build their knowledge-base and understand their own risk tolerance.