The Simple, Risk-Free Process I Used To Buy My First Bitcoin in Under an Hour
How to invest in it (not why, when or if you should)
Fear of missing out can be a powerful motivator.
I was worried for a long while that I’d missed the opportunity to get involved with crypto. I couldn’t quite understand exactly what it was or how it worked and for many years I convinced myself it must surely be a scam dreamt up by people way cleverer than me.
Through years of inaction, I remained interested in cryptocurrency conceptually, while regretting daily that I didn’t own any.
While there have been numerous high profile booms and busts in the value of Bitcoin (the largest and best-known cryptocurrency), it seems apparent that it’s here to stay. When investing heavyweights like hedgefund manager Paul Tudor-Jones writes to his investors sharing his belief in Bitcoin as an investment vehicle it would seem silly to ignore him.
And so it was that by luck and coincidence that on January 2nd 2021, I decided to do what I could to make a small investment in Bitcoin.
I’m going to share how I did it, since it was beyond easy and took far less than the day I’d set aside to figure how how to do it, and then to make my first investment.
I need to point out that this isn’t an in-depth, fully-researched piece describing everything you need to know about Bitcoin. Nor does it represent qualified financial advice. What I’m sharing here is how I invested in Bitcoin from beginning to end.
If you’ve been procrastinating as I had, this may give you the impetus and information you need to get started. At the very least I want to debunk the myth that there are complicated and costly barriers to overcome if you want to get into Bitcoin. The rest of the considerations (like the psychology and strategy of investing) are up to you to make!
The context
I’m a forty-something guy living in the UK who has witnessed many bubbles, booms and busts during his lifetime.
Some of these I’ve capitalised on — the dot-com boom paid the deposit on my first house. Others left me behind — the money that I wasted on consumer goods and needless toys could have secured me shares in Apple, Amazon or Facebook at a bargain price since I was in the right place at the right time.
Until recently I put cryptocurrency into the category of bubbles that I’d also missed and opportunities that passed me by. I read of meteoric gains in value and envied those who’d had the courage and foresight to get involved.
When the price crashed I felt smug for not wasting my time, but still suspected deep down that I was missing the opportunity to buy in when prices were low again.
The other barrier to getting involved besides grit was the technical steps that I’d convinced myself were too great to overcome.
And so I procrastinated, delayed and tried to deny my own interest and the sense in my gut that if I didn’t get involved that in the years to come I’d regret my inaction even more.
On the first Saturday of 2021 for no real reason I finally decided to take the plunge.
I had £100 that had been given to me for Christmas and no desire to send it all to Amazon in exchange for yet another brown parcel full of things I didn’t need.
Instead, I determined I’d buy my first Bitcoin.
Little did I know that-that same day would see the value of Bitcoin climb to its historic high, a rally that would return a 3% gain in one day. Nor did I realise it would continue to climb to $34,000, and later in 2021, to almost $70,000.
The Strategy
My goal was to find the quickest, simplest way of investing in Bitcoin in a risk-free way and with as little up-front expenditure as possible. I wanted all of my £100 to go towards Bitcoin rather than in fees or on specialist hardware.
When I say risk-free I’m mindful that risk is inherent in all investing, particularly with volatile investment vehicles like cryptocurrency. In this context I merely wanted to avoid scams or rogue-processes that might end up costing me more than I had to stake.
As to the risk that my initial investment and subsequent gains may lose value, well I’m prepared for that as a possible, if not a likely outcome. I’ve continued to invest in it since, and mentally I’ve compartmentalised all money I invest in Bitcoin as being lost (just in case it ever went to zero.
To be clear, I don’t think it will ever do that, and the more I accumulate the more difficult I’d find it if it ever did… but still.
My strategy for Bitcoin was that if I could figure out how it worked, I would drip in a small amount of money regularly to build up my investment in Bitcoin over the coming year. I want to have at least a little skin in the cryptocurrency game and to experience a small share of whatever gains and losses might be made in the future.
I’m a buy-and-hold investor risking a relatively small sum of money that won’t destroy my life or that of my family if I lose it all. I’ve no intention of day-trading or trying to predict fluctuations in price to make money off those. To that end, the majority of my modest investments remains in index-tracking managed funds and my pension. Neither of these will ever be replaced by or linked to cryptocurrency.
The Process
I started where all good research projects begin — on YouTube. I’d heard of Coinbase before as a reputable cryptocurrency exchange and so sought out a couple of tutorial videos on how Coinbase enables the purchase of Bitcoin, starting with this one.
I separated learning how to buy Bitcoin from the technical intricacies of what it is and how it works. For the purposes of this experiment I focused solely on turning my £100 into the equivalent value of Bitcoin. I’ve since tried to learn more about the technical side of things - the resulting interest is what prompted me to start the Cryptocurrently project!
It seems that to buy Bitcoin (or any widely-known cryptocurrency) you need the following:
1) An account with a reputable crypto-friendly bank account— This enables you to deposit your native funds (in my case £GBP) and to receive your Bitcoin once purchased.
2) Access to a Crypto-Exchange — this is your marketplace where buyers meet sellers and vice-versa to deal in cryptocurrency and is exactly the same as any stock market or currency exchange. I’ve split this from Point 1 above for the purposes of describing the process I went through, but it’s really part and parcel of the same thing.
3) A Crypto-wallet — A secure place or device that is logically and physically separate to the Crypto-Exchange where you can hold your Bitcoin once you’ve bought it.
I’ve included links to the specifics of what I used below in case you want to follow the same approach. You are of course free to do your own research (and indeed I’d suggest you do so). I’m sure there are many alternatives to each of these that may be better in many respects.
I decided against wasting time at this point trying to save pennies in fees or looking for other reasons to end up in analysis-paralysis. I simply wanted what was safest, most reputable and quick to set up and use.
To reiterate, the advice that I encounter regularly when reading anything to do with crypto and Bitcoin is to do your own research — I heartily recommend that you do just that!
The Account
As mentioned above, I came to crypto investing having pre-selected Coinbase and a little further background research gave me reassurance and comfort — Coinbase was founded by (amongst others) a former Goldman Sachs trader in 2012. They are the leading Crypto-exchange in the USA by trading volume, which gave me confidence.
Since my main concern was about security and the prospect of getting ripped-off it seemed like a smart move to go with the biggest player in much the same way that my first ever online book purchase was made via Amazon (back in 1998 as I recall — a tale that reminds me just how old I really am!)
Rhetoric that Coinbase’s fees are relatively high didn’t put me off — I ended up paying pennies to buy my £100 of Bitcoin via Coinbase end-to-end. I was also pleased that there seemed to be no significant minimum investment which I was relieved about — another potential barrier lifted.
The sign-up process took minutes and was completed while waiting for my morning coffee to brew. This included scanning and uploading ID for age and address verification purposes which was all done securely, online and in minutes. This activity (known as ‘Know Your Customer’) is legally required for regulated financial companies to undertake. It’s a nod towards preventing money laundering and it is also the extent to which Bitcoin and cryptocurrency are regulated.
In reality, Bitcoin itself is entirely unregulated (and its holders are unprotected by financial services authorities around the world) but the ‘on-ramp’ or the exchange through which it is purchased - in this case Coinbase - is regulated. If this seems confusing, there’s no need for it to be at this point. I mention it only in case you are confused about having to go through ID and verification processes.
Back to the story.
With the account set up and the Coinbase app downloaded on my iPhone I was ready to add funds and make my investment.
Your Coinbase account can be funded from a bank account via an electronic transfer or you can fund it via a credit or debit card. Bear in mind that some banks and card providers don’t allow the funding of crypto accounts using their products. I assume this is a means of preventing some from getting in over their heads and maxing out their credit card in search of crypto riches?
In my case, an electronic bank transfer from my checking account to Coinbase was quick, easy and free. There are many banks the world-over that don’t allow their accounts and cards to be used to fund crypto exchanges. In the UK, HSBC do and Lloyds don’t (for example). If your bank doesn’t allow it, I suggest looking around for a financial services provider - perhaps a challenger bank that is less restrictive towards its customers, and that you open a second account with them.
The Crypto-Exchange
Without any further steps required, a funded Coinbase account will allow you to buy your Bitcoin (or any other cryptocurrency). The interface is as simple as any well-designed online shop and most who have shopped online will be able to buy via Coinbase alone.
At the simplest level, you enter how much of your initial funds you want to invest at the current market price (which is fluctuating by the second). When you submit your request to deal, Coinbase will display the fees you’ll incur which are of the order of a few pennies for a £100 trade.
The tutorials I watched pointed to Coinbase Pro as a more involved and intricate Coinbase experience which links seamlessly, and uses the same credentials as Coinbase. Through the use of Coinbase Pro, fees can be reduced and curious souls like myself are able to be a bit more ‘hands-on’ with how they execute their trades.
While I’m not an expert trader I was drawn to this as I have in the past dabbled (very unsuccessfully) with spread-betting on foreign exchange currency pairs. While that venture was a dead-loss financially, I learned a lot at the time about trading charts, submitting sell and buy orders and so-on.
I decided to investigate it, and ultimately downloaded the Coinbase Pro app and used it to complete my Bitcoin trade. If you’re looking to make your first trade without such a step then you probably don’t need to follow the remainder of this step and can just execute your trade via the non-pro version of Coinbase!
In my case, I funded Coinbase Pro by transferring my £100 into it from Coinbase (which is fee-free and instantaneous).
I wanted to use a limit order to buy my Bitcoin which means I specified the price I was willing to pay rather than proceeding direct to buy at the prevailing market price. This reduced the fees slightly. It also made me feel like less of a rookie and inflated my ego a little! I’ve since learned that for the hassle, a market order is quicker and almost as cheap, and means my Bitcoin is purchased immediately - far less hassle.
I set a price of a few dollars beneath the market price at that moment and submitted my order. A couple of seconds after submitting my order it was fulfilled and I was the proud owner of a little over four thousandths of a Bitcoin! You can buy fractions of a Bitcoin - there are 100 million Satoshis (known as Sats) in a Bitcoin.
The Crypto Wallet
The story could end here since I now owned the Bitcoin.
Recommended best practice however is that investors shouldn’t leave their Bitcoin to reside on the Crypto Exchange unless they’re intending to sell again in the near future. Instead, it’s advised that the coins (essentially a unique and encrypted code that constitutes the coin) are moved or downloaded and stored securely on a Crypto Wallet.
The rationale is that hackers are more likely to target exchanges rather than individuals’ wallets, hence there’s no sense in leaving your coins in the exchange account to potentially be lost. There is also a reliance on the exchange organisation remaining in business — if coins were left on the exchange and they went bust, then I guess it would be a nightmare to retrieve ones investment.
Crypto wallets are the answer to this.
They are software or hardware-based devices, designed to be ultra-secure and independent of the exchanges themselves. Many remain offline and unconnected to the Internet except when the owners are accessing them to trade or spend their coins, or want to add more to their wallet.
I did a little more research, and in-line with my ‘zero-spend’ principle opted for a software app-based wallet rather than buying a hardware wallet (think along the lines of a removable hard-drive or USB Memory Key). For simplicity I used the Coinbase Wallet App.
I’ve done more research since, and I’ve since purchased a Ledger Nano-X which is a best-of-breed crypto hardware wallet. A hardware wallet gives the coin owner ultimate control and ownership of the private key which remains online in a software wallet.
By storing your Bitcoins in a secure, encrypted wallet the already secure and encrypted coins themselves are placed under further protection. You’d keep an eye on your wallet if you’d just filled it with cash, so why not treat your cryptocurrency with similar care?
It seems to make sense in a world where we’re opting out of the banking system providing that protection on our behalf that we would want to ensure we provide our own protection, right?
The follow-on from this would then presumably be “How and where do you then store and protect the wallet?”
I still keep some Bitcoin in the Coinbase app on my iPhone and as and my hardware wallet is kept in a secret location, in a fireproof safe. When I have enough Bitcoin on it to warrant more stringent security measures then I’ll gladly consider the matter further as it will signify something worth protecting!
For now, the Coinbase Wallet links seamlessly to the Coinbase Exchange and utilises multiple layers of security. After purchasing my coins on Coinbase Pro I moved them for free onto Coinbase and from there onto my wallet for just a few pennies of ‘miners fees’ (essentially the network processing fees for the Bitcoin Blockchain to process the transaction and write it to the Bitcoin Ledger.
I’m now a Bitcoin investor
Following less than an hour of cumulative effort (including watching the tutorials on YouTube) and less than £1 expenditure on fees, I’d achieved my intended goal and converted my £100 into Bitcoin.
On the day I invested, Bitcoin closed at a price reflecting a 3% return on my investment. My combined holding has shown an increase of as high as 75% or more but it’s as yet unrealised as I have no intention of selling in the near future.
I’m not so deluded as to think that the price won’t drop once again — as an investment vehicle Bitcoin is clearly extremely volatile which is why so many are drawn to the potential for life-changing gains and why many more have no-doubt lost more than they could afford while chasing such riches.
In 2017 it reached a value of nearly $20,000 before plummeting to a little over $3,000. Much of this volatility may be a side effect of its maturation as a recognised and accepted store of value, or there may be worse to come.
Either way, it’s my intention to continue to drip-feed a little money into my Bitcoin investment regularly over time, to build up my share of the Bitcoin pie.
It would be nice to think that in time and with education and experience I might be able to predict fluctuations so that I’m not always buying at the top price. My goal remains to buy and hold Bitcoin (and potentially other of the bigger coins such as Ethereum) for the long-term.
Fear of missing out was what finally pushed me to figure out how to make my first cryptocurrency investment — a fear that in 20-years’ time one Bitcoin will be worth $100,000 and I’ll be lamenting that I didn’t take the plunge and make at least a small investment when it was beneath $30,000.
Five years ago I might have also had the excuse that the cost and technical-mechanics of investing in Bitcoin were prohibitive for a small-time investor like me. Now it seems like those barriers are non-existent.
Sometimes the best way to overcome FOMO, or indeed any fear is to take action and to see what’s possible.
Note: This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.