There are many options when it comes to buying Bitcoin. You can buy it directly from friends, on what’s generally known as over the counter (OTC) trade. Or you can buy BTC from exchanges.
For US customers, the most popular option seems to be Coinbase. This is America’s largest Bitcon broker and perhaps the largest cryptocurrency company in the USA. Millions of investors trust Coinbase and perhaps it’s a nice first choice to get your feet wet with cryptocurrencies.
Update: In February 2023, Localbitcoins announced it was shutting down. We decided to keep LB listed here for historical reasons, as it was one of the “OG” exchanges which onboarded thousands of users onto Bitcoin.
Another great option is LocalBitcoins.com. This system works a bit like Ebay for cryptos, it puts you in contact with other sellers and provides feedback about these sellers. This contrasts with Coinbase where you buy and sell directly from the company itself. With LocalBitcoins you buy from 3rd parties, the system is just a middleman that helps put you in touch with buyers/sellers and provides some reputation management services.
In our article “How to buy Bitcoin near me?” we present other options similar to LocalBitcoins.com where you can trade Bitcoin with people geographically near you.
Some areas may have ATMs available where you can buy Bitcoins. Although not as common as online services, we should mention these as a possibility. ATMs allow you to swipe a credit card and buy Bitcoins instantly. Expect to pay a high premium for such convenience.
You can also buy Bitcoin indirectly, via mining for example. Some folks mine alternative coins like Dash or Zcash using their work PC’s and then trade these for Bitcoin using an exchange. Mining is always an option but it’s technically complex and not a quick thing you can achieve. So if you’re in a hurry to buy some BTC, then mining is likely not for you.
If you’ve tried to buy cryptocurrencies using Ebay and Paypal you may have been surprised by the difficulties presented. The problem lies with the impedance mismatch between cryptocurrencies and digital payments systems like Paypal.
Crypto transactions cannot be reversed, whereas Paypal disputes are very easy to open.
A lot of cryptocurrency sellers have fallen victim to schemes using these reversible payment options and thus it has become harder, and more expensive, for everyone to buy cryptos using Paypal. There isn’t much risk for crypto buyers using Paypal, but for the sellers it’s a different story. So expect to pay a high premium for any cryptocurrency transaction involving Paypal.
Update: As of 2020, Paypal now allows buying and selling cryptocurrencies.
Buying Bitcoin using wire transfers also incurs in some of the same premiums caused by other online payment solutions. Some exchanges require up to 30 days before crediting the cryptocurrency. This is to guarantee that the wire transfer will not be reversed after an irreversible cryptocurrency transfer happens.
As you can tell, the main concern for crypto sellers is the reversibility of fiat money transactions (see our main article about cryptocurrency escrow). Credit cards, wire, Paypal and other solutions all can be reversed up to many days/weeks after the transfer, where crypto transactions cannot. So this poses a challenge every time crypto and fiat money must be exchanged.
We hope these tips will help you buy Bitcoin and we hope to have provided you with an overview of the difficulties involved in exchanging cryptos for fiat money.
Bitcoin can be purchased from formal channels like Coinbase or Bitfinex and also over the counter from peers around the globe and close by in your region. Good luck!