While understanding exactly what Bitcoin is and how it works can be complex, actually buying Bitcoin is not difficult. In fact, thanks to the growing legitimacy of the sector, it’s now easier and safer to buy Bitcoin than ever.
In this guide you’ll learn how to buy Bitcoin and store it safely in four simple steps.
Things To Consider Before You Buy Bitcoin
Before you purchase Bitcoin, there are a few things you should know about Bitcoin and cryptocurrencies in general.
First, bitcoin is a highly volatile asset, and the prices and rise and fall very quickly. This means you could face steep gains or losses in a short period of time. Prepare yourself for that.
Second, bitcoin can be difficult to secure. Your bitcoin is accessed with a private key, and anyone who has that key can access it. Keeping your key safe is critical to protecting your assets. We cover ways to do this in step four of this guide.
Third, bitcoin is not really anonymous. Your bitcoin will correspond to a public "address" that anyone can lookup online. The balance of your address will be public knowledge, as will every transaction made using that address. That said, your identity is not publicly listed along with your address. But many exchanges and cryptocurrency platforms now require your personal information to signup, so they can associate your address with your identity. This may not be an issue for you, but if you want to remain anonymous, you should be aware of this.
With all that said, if you want to buy bitcoin in Canada, here's a four-step guide to doing so.
Step One: Choose Where To Buy Bitcoin
The easiest way to buy bitcoin is to sign up for an online service that will facilitate the transaction. Choosing the right service is as important as choosing the right bank. Cryptocurrency exchanges and platforms are often subject to hacking attempts. Others have turned out to be fraudulent. Choosing insecure or illegitimate exchanges have cost people millions of dollars.
If you don’t care about remaining anonymous while purchasing bitcoin, then your best bet will be to choose a popular, well-established cryptocurrency platform with a long and positive track record. Here are a few options for Canadians:
Shakepay: Shakepay is a Canadian-based service that lets you buy bitcoin with Interac e-Transfers. It lets you deposit and withdraw many without any fees or commissions, which is nice.
Bitbuy: Bitbuy is based in Toronto and has been around since 2016. You can make purchases and withdrawals from your bank or using Interac. Because Bitbuy is Canadian, you don’t need to worry about currency conversion fees.
Binance: Binance is one of the largest cryptocurrency exchanges around. It lets you buy, sell, and trade a wide variety of cryptocurrencies, including bitcoin but also much smaller “altcoins” and tokens. Binance also lets you send your bitcoin wherever you like, so you can store it offline (read on for more about how to do this). Binance is a bit more difficult to use for Canadians, however, as you’ll need to use SWIFT transfers to deposit USD funds.
Coinbase: Coinbase is a publicly-traded company with 68+ million users across 100+ countries. Canadians can use Coinbase and make purchases with a credit card or debit card. You may have to pay a currency conversion fee charged by your bank or credit card if you convert your balance to USD in order to take advantage of Coinbase’s $250,000 insurance.
Wealthsimple: Wealthsimple is not a cryptocurrency exchange, but their Crypto product does offer an easy way to buy and sell bitcoin, especially if you already use their Cash or Invest products. It’s important to note that you cannot transfer your bitcoin in or out of Wealthsimple, so you’ll need to sell it through their platform to cash out. That means no using bitcoin in Wealthsimple to make real-world purchases. Wealthsimple is (as of writing) the only cryptocurrency platform regulated by the Ontario Securities Commission.
Step Two: Setup A Payment Method
Once you’ve selected a platform to use to buy bitcoin, you’ll need to create and fund an account which you’ll use to purchase your bitcoin.
Most platforms follow “KYC” — Know Your Customer — rules and will require that you upload a photo of some personal identification along with other information to create your account. This verification process can take several days (although it is much faster on some services).
If anonymity is important to you, it’s best to choose an exchange that does not require this documentation.
Once your account is verified, you’ll need to setup a funding source. Depending on which platform you choose, this could be an Interac e-transfer, credit card, debt card, or bank wire. Each of these methods will include different costs depending on your financial services provider.
Cryptocurrency platforms sometimes also charge fees to make deposits. For example, Coinbase charges 3.99% to make a purchase using a Canadian credit card. Shakepay, on the other hand, does not charge any fees. It’s worth shopping around to see what service will cost you the least depending on what you want to do (if you’re buying and holding for the long term, then commission fees on trades don’t matter so much).
Step Three: Buy Your Bitcoin
Here’s the fun part: once your account is funded, it’s time to buy your bitcoin. On most large exchanges and platforms your options for buying are similar to stock brokerages, with different types of orders like market and limit.
Some platforms, like Coinbase, also allow for recurring orders so that you can dollar-cost average your bitcoin buys.
Now would be a good time to remind you that bitcoin and other cryptocurrencies are highly volatile, and it’s never wise to invest more than you can stand to lose.
Step Four: Store Your Bitcoin
This is where buying bitcoin starts to get a bit complicated. Once you have it, what do you do with it? With traditional money, you might put it in a savings account at a regulated and insured bank. But cryptocurrency exchanges and platforms are not banks. Some of them, like Coinbase, offer insurance on your holdings with them, but others don’t, and ultimately you are responsible for securing your bitcoin. So how do you do that?
There are a few options here.
Leave it on an exchange: The easiest option is to just leave your bitcoin on an exchange. Unfortunately, this also the least secure, and people have lost their bitcoin this way many, many times. One founder of a popular Canadian exchange disappeared with most of his customers crypto assets, never to be seen again.
Some services, like Coinbase and Wealthsimple, are regulated and insured, so your assets are a little safer there. But if a hacker gained access to your account, they could still potentially withdraw your bitcoin.
At the end of the day, if your bitcoin is on an exchange, it’s not under your control and you’re taking a risk.
Hot wallet: A hot wallet is any wallet for crypto that’s connected to the Internet. Some platforms and exchanges provide hot wallets for their users where you can store your bitcoin.
This is somewhat more secure than leaving it on an exchange because your cryptocurrency in a hot wallet is yours, and can be moved around however you like. However, they present many of the same risks as leaving your bitcoin on an exchange in terms of vulnerability to hackers.
If you want to use a hot wallet, we recommend using it to store a small amount of bitcoin that you’re actively trading or need convenient access to. A popular option for hot wallets is Trust Wallet.
Cold wallet: A cold wallet is a physical piece of hardware that you can store cryptocurrency on. Often these are USB sticks that do not connect to the internet and include software to manage the wallet.
A cold wallet stores the private key that gives you access to the bitcoin you own. Because a cold wallet isn’t connected to the internet, it’s very difficult to hack. Of course, it can be physically stolen or lost (some people have millions of dollars worth of bitcoin sitting on cold wallets they can’t find or access). For this reason some people with lots of bitcoin choose to keep their cold wallets in safety deposit boxes or other secure locations.
How to choose: If you plan on buying and selling lots of cryptocurrency, a good setup is usually to have an exchange you use to buy and sell, a hot wallet you use to store small amount of crypto, and a cold wallet you use to store the rest of your crypto securely.
Other ways to buy bitcoin
There are a few other ways to buy bitcoin that we haven’t covered here because they are often less convenient. However, it’s worth knowing that they exist.
Peer-to-peer (P2P): Some people choose to buy and sell bitcoin through direct transactions with others, often exchanging bitcoin for cash. One website that facilitates this is LocalBitcoins. It allows people to post details of their sale and how they accept payment. Another option, which claims to be more secure, is Bisq.
P2P transactions present risks that don’t exist with exchanges, but you may be willing to accept those risks for whatever benefits they offer (like no commission fees or cash payments).
Bitcoin ATMs: Another way to get bitcoin “offline” is through bitcoin ATMs. You feed cash into the ATM and it transfers bitcoin to a digital wallet for you. Coin ATM Radar can help you find a bitcoin ATM near you.
Now that you know how to buy bitcoin, you may want to learn more about the crypto market as a whole to decide whether it’s a good idea.
For that there’s no better place to turn than The Peak’s daily Canadian business newsletter rounding up the top stories in Canadian business, including what’s happening in crypto. Sign up for free today.