How buying bitcoin works

Most people buy bitcoin from a company that swaps it for ordinary money: an exchange, a payments or banking app, a brokerage, or a bitcoin ATM. Some buy directly from another person. Whichever way, the steps are similar, and the real price is the market price plus fees that aren't always shown as fees.

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You never need a whole bitcoin. Most apps let you buy a few dollars' worth.

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The usual steps

1. Open an account. Exchanges and apps ask for your name, address and a photo ID, and sometimes a selfie. Laws in most countries require it to stop money laundering.
2. Add money. A bank transfer is usually cheapest; a card is faster and usually costs more.
3. Buy. Enter an amount in your own currency. The app shows how much bitcoin you'll get.
4. Decide where to keep it. Leave it with the company, or move it to a wallet of your own. See on an exchange or in your own wallet.

The ways to buy, side by side

Way	What you get	Good to know
Exchange	Bitcoin held for you, which you can usually withdraw	Often the lowest fees, especially with an order at a price you set.
Payments or brokerage app	Bitcoin held for you; some apps don't let you withdraw it	Simple, but the price often includes a wider spread. Check whether you can send it out.
Fund (ETF)	Shares in a fund that holds bitcoin	Bought like a stock. You can't send or spend the bitcoin, and the fund charges a yearly fee.
Bitcoin ATM	Bitcoin sent to a wallet you scan	Fees are usually much higher than an exchange's. A heavy favorite of scammers.
From a person	Bitcoin sent straight to your wallet	No company in between, so mistakes and fraud have no one to complain to.

Fees you see and fees you don't

There are up to four costs. A trading fee, shown as a percentage. The spread, the gap between the price you pay and the market price, which is how many "zero-fee" apps earn. A deposit fee, especially for cards. And a withdrawal fee if you move the bitcoin out. To compare, look at how much bitcoin you get for the same amount of money, not at the advertised fee. These costs are also why many people see a small loss straight after buying, even when the price hasn't moved.

All at once or a little at a time

Some people buy in one go; others buy a fixed amount every week or month, which is called dollar-cost averaging. Regular buying spreads purchases over many prices, so no single day matters much, but it doesn't prevent losses if the price falls overall. Each small purchase can carry its own fee, so the fee per purchase matters more. Which approach suits anyone depends on their situation; this lesson doesn't recommend either.

"Is it safe to buy?"

It is one of the most common bitcoin questions, and it hides three different risks. The price can fall a long way and stay down for years; see why the price moves so much. The company holding it for you can freeze withdrawals, be hacked or fail; see on an exchange or in your own wallet. Scams are the risk that costs beginners most, and they almost always reach people through someone else's advice or a link; see rules that catch most scams. Nobody can remove the first risk. The other two depend a lot on where and how you buy.

Before you buy

Nobody can tell you whether it's a good time, and this lesson doesn't. What people ask before they start: Is the company licensed where I live? Can I withdraw the bitcoin, and what does that cost? Did I reach this site by typing its address myself, not through an ad or a message? And is anyone urging me to buy quickly? Urgency is the mark of most scams; see rules that catch most scams.