As the world battles a crisis and quantitative easing hits all-time records, it makes more sense than ever to learn how to purchase your very first Bitcoin.
But what are the options available to new investors, and what sets them apart from each other?
In this article, we cover your top three options for US investors to buy their first Bitcoin with no experience necessary. Each of the three companies is well-established and highly-regulated companies, with seemingly subtle (yet very important!) differences.
In the end, we share a step-by-step walkthrough for each of the platforms, so you know exactly what’s needed for whichever option you choose.
1) Buying Bitcoin at Coinbase
Coinbase is an American cryptocurrency exchange, headquartered in San Francisco. Founded in mid-2012, it has remained a popular and highly-trusted gateway for first-time Bitcoin buyers.
Advantages to using the Coinbase
Users can quickly and easily buy Bitcoin using a debit or credit card, taking full custody of their coins. Bitcoin purchased via Coinbase can be moved to any Bitcoin wallet, or left in their Coinbase account, which is FDIC-insured for up to $250,000.
Requirements on Coinbase are very relaxed compared to traditional market platforms. There is virtually no minimum purchase requirement for Bitcoin on Coinbase, and buyers do not need to be an accredited investor.
Disadvantages to using the Coinbase
Transaction fees are on the high side, sitting at around 4% for instant purchases using a credit or debit card. Coinbase charges no management or custody fees, since all funds are managed directly by the user.
If a user wishes to withdraw their Bitcoin into their own wallet for safekeeping, this will require some basic cryptocurrency knowledge.
2) Buying Bitcoin via Grayscale Bitcoin ETF
Grayscale Investments is an American company that was established in 2013, headquartered in New York.
It is a subsidiary of Digital Currency Group, a US venture capital firm specializing in cryptocurrency business. Digital Currency Group also owns CoinDesk, a prominent cryptocurrency news outlet.
Rather than facilitating direct purchases of Bitcoin, Grayscale Investments offers a traditional-style fund, which tracks the price of Bitcoin. This fund – which trades under the ticker GBTC – is backed by Bitcoin, but it cannot be withdrawn or transacted with.
Advantages to using the Grayscale Bitcoin ETF
This is useful for those investors who do not wish to move, manage, and store Bitcoin themselves, but do want exposure to its price. You may also buy GBTC via your existing stock broker. The downside, however, is that one cannot use their Bitcoin investment for practical uses such as using it to buy goods or other cryptocurrency assets.
Disadvantages to using the Grayscale Bitcoin ETF
They have significantly greater barriers to entry than Coinbase, allowing only accredited investors to participate. They also require a minimum investment of $50,000.
Grayscale Investments charge a 2% management fee, for managing the handling and storage of the underlying Bitcoin. Bitcoin backing GBTC is held securely with Coinbase Custody Trust Company LLC, in cold storage.
Bear in mind that Grayscales Investment’s GBTC often trades at a premium to the spot price of Bitcoin. One can check their latest price per share on their Bitcoin Trust webpage.
3. Buying Bitcoin with Bitwise Asset Management
Bitwise Asset Management is yet another American cryptocurrency company, founded in 2017 and headquartered in San Francisco.
Like Grayscale investments, Bitwise offers exposure to Bitcoin price via a Bitcoin fund, rather than directly selling Bitcoin to customers.
This once again removes the need for the investor to have specialized cryptocurrency knowledge for safely managing and storing Bitcoin, leaving it instead to Bitwise. Intuitively, this also means that investors are unable to withdraw and use their Bitcoin for practical or transactional purposes.
Their minimum investment limit is $25,000 and is also restricted to accredited investors. Bitwise takes a 1.5% management fee, which is marginally lower than that of Grayscale Investments.
The underlying Bitcoin is stored by Fidelity Digital Asset Services LLC, who offer reputable Bitcoin custody for institutions.
Step-by-Step Guides for Buying Bitcoin
1. How to Buy Bitcoin with Coinbase
To get started with buying Bitcoin from Coinbase, visit https://www.coinbase.com/.
Click the green “Buy” button at the top of the list, next to the Bitcoin price data.
A pop-up window will appear, requesting a user’s full name, email address, and desired password. Enter the data, and click “Create account”.
A verification email will be sent to the email address provided. Click the verification link within the email, to finish signing up.
Coinbase will also request a phone number, to assist with securing the account.
From here, a user will be taken to their account’s dashboard. Simply click the blue “Trade” button to make a Bitcoin purchase.
Make sure the asset is set to Bitcoin, and enter the amount desired, denominated in US Dollars. Click “Buy Bitcoin” to complete the purchase.
A user will then enter their payment method and details, which can alternatively be linked in the settings panel.
2. How to Buy Bitcoin with Grayscale Investments
To get started with buying Bitcoin from Coinbase, visit https://www.platform-grayscale.co/create-account.
Users will enter their email address and desired password.
Grayscale Investments will then send a verification email to the user’s email. Locate the email, and enter the verification code in the email body.
Users will then need to log in, using their email address and selected password.
The form will ask for details such as the user’s current portfolio applications, investment experience and more.
Next, users will be asked to enter their personal contact details.
Users will then confirm if they are an individual investor, an IRA or other self-directed account, or an entity. This is followed by the submission of further personal details. Enter these, and click “Next”.
In the next step, users will be presented with an electronic W-9 form to fill out. Enter the relevant fields and then click the “Continue” button.
Users must then verify that they are an accredited investor by submitting documentation relevant to one of three methods.
Users will also have to submit photo identification, using copies of their passport or driver’s license. Upload the appropriate files, and click “Next”.
Users will then be asked which investment product(s) they are interested in. Select “Grayscale Bitcoin Trust”. If a user knows how much they intend to invest, they can enter this amount now. This will be accompanied by all necessary wiring information if a user is ready to make a purchase.
Once all the relevant fields have been filled out, a user will now be ready to sign their subscription agreement. Click “Sign”.
Users will be presented with an electronic copy of the subscription agreement. Review the document and fill out the appropriate fields, including an electronic signature. Once the form is complete, click the blue “I agree” button to finalize the agreement.
One final electronic form will then appear for investor information. Fill this out, and submit it by clicking “I agree”.
From here, a compliance officer will review the submitted forms and provide the user with the final bank wiring information to finalize the transaction. Users can expect to be contacted within 24 hours.
3. How to Buy Bitcoin with Bitwise
To get started with buying Bitcoin from Bitwise, visit https://www.bitwiseinvestments.com/onboarding.
Users will select if they are an individual investor, or a financial advisor.
Users will then verify their intended investment size, as well as whether or not they are a US-based accredited investor.
User now must enter their name, email address and desired password, and verify their email. Click “Next”, then verify the email address using the link in the email sent to your inbox.
Once a user has verified their email address, they will select their country, state and the fund that they wish to invest in. select “Bitwise Bitcoin Fund”, which should be the first option.
Review the key facts about the fund, including the appropriate fees and requirements. Click “Next” to continue.
Users will confirm how they would like to invest. This can be done as an individual, as a trust, or as a company.
Users will confirm the intended investment amount, as well as the banking institution they will be using.
Here, users will fill out the rest of their personal details.
Users will also need to provide documentation to confirm their status as an accredited investor.
Once done, a user will simply review their provided information to ensure it is correct, then submit their application.
The final application will be then sent to the email address provided, for the user to review and electronically sign. Once this action is completed, the Bitwise team will contact the user within 24-72 hours, with the final steps to complete the transaction.