Buying Bitcoin Is Easier Than Ever. Read This Before Taking the Plunge

Looking to buy bitcoin, ether or other cryptocurrencies? Here's what to know.



During and after this year's Super Bowl, cryptocurrency ads have flooded TV screens. And with bitcoin attracting the attention of finance, art, seemingly unrelated businesses and politicians and regulators, investors are also looking for ways to get in on the action. If all this made you interested in buying bitcoin or any other cryptocurrency, take some time to learn the ropes first. The industry is complex, and you can lose money fast.

Cryptocurrency exchanges generally provide more options than a money app. For example, with exchanges like Coinbase and FTX US, you'll be able to choose between dozens of crypto assets. However, more isn't always better, as many of the lesser-known crypto assets are highly volatile and rife with scams. 

With money apps like PayPal and Venmo, you can choose to buy only a few cryptocurrencies, such as bitcoin and ether. These assets are definitely more acceptable investments in the arena of mainstream finance -- but remember that almost all crypto comes with significant risk.

When deciding between a money app and an exchange, consider the type of wallet that will store your cryptocurrency. Crypto wallets are kept secure through private keys -- usually a series of passwords. Money apps like PayPal generally keep your cryptocurrency in a "custodial" wallet, meaning the company controls the private keys that access it. Exchanges often let you move your crypto to your own "noncustodial" wallet, giving you more control over your assets.

Can I play the bitcoin market without buying bitcoin?

The financial industry continues to search for ways to integrate crypto into conventional investments. If you want exposure to the cryptocurrency market without immediately buying bitcoin, you have a couple options. 

You can buy a bitcoin futures contract, which is an agreement to buy a set amount of bitcoin for a set price at a future date. You might also be able to buy into a few exchange-traded funds, or ETFs, that include bitcoin futures contracts. The first bitcoin futures ETF began trading on the New York Stock Exchange in November 2021. And Fidelity, one of the largest asset managers in the world, recently filed to list their own bitcoin ETF, but the proposal was rejected by the SEC in January 2022.

If you're interested, you could also invest in companies that are working with blockchain technology. Check out this article from CNET's Farnoosh Torabi for more ideas on ways to research the industry or get involved without necessarily buying in. 

Do I need to verify my identity to buy bitcoin?

Most major exchanges require identification verification and sensitive financial information to establish and fund an account. Exchanges that are registered with regulators must confirm your identity before doing business in an effort to protect against fraud and money laundering. 

If you plan to buy and sell bitcoin and other cryptocurrencies, expect to have to verify your identity. Coinbase, for example, requires identity verification of account holders in order to comply with Know Your Customer guidelines. Venmo has also begun to ask their users to verify their identities. 

There's always a danger whenever you provide personal and financial details to any entity, especially online. And if you get an email from a cryptocurrency exchange or a money app asking you to confirm your identity, make sure it's from the company. Phishing emails that claim to be from known companies requesting personal information are common. 

How do I keep my bitcoin safe?

When dealing with cryptocurrency, it's important to prioritize security so you don't fall victim to scams. If you're trading small amounts, the wallet provided by your exchange or another software wallet (there are plenty to choose from) may offer enough security. But if you're going big, you almost certainly want a hardware wallet, and there are a number of encryption-related options. 

Whatever wallet type you choose, make sure you understand its technical requirements before transferring your cryptocurrency. Buying and selling cryptocurrency stored in hardware wallets is generally complicated and requires more steps than using a custodial wallet hosted on an exchange or a money app. And if you decide to use your own noncustodial wallet, you'll have to set up and keep track of your private keys, which are usually a series of passwords you type into the wallet's interface to gain access to the assets inside.

How do I keep my bitcoin safe?

When dealing with cryptocurrency, it's important to prioritize security so you don't fall victim to scams. If you're trading small amounts, the wallet provided by your exchange or another software wallet (there are plenty to choose from) may offer enough security. But if you're going big, you almost certainly want a hardware wallet, and there are a number of encryption-related options. 

Whatever wallet type you choose, make sure you understand its technical requirements before transferring your cryptocurrency. Buying and selling cryptocurrency stored in hardware wallets is generally complicated and requires more steps than using a custodial wallet hosted on an exchange or a money app. And if you decide to use your own noncustodial wallet, you'll have to set up and keep track of your private keys, which are usually a series of passwords you type into the wallet's interface to gain access to the assets inside.

If you created private keys when you set up your wallet, make sure to keep them in a safe place. If you lose the private keys, you lose what's inside the wallet, as well. 



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