Bitcoin (BTC) has grown by leaps and bounds in recent years. In May 2016, you could buy 1 BTC for just over $600 CAD ($500 USD). In May 2022, a single Bitcoin was worth just over CAD$37,000 (US$30,000). This is a growth of just over 6,000% in Canada and almost the same percentage in the United States.
Some analysts believe that the price of Bitcoin could rise further as cryptocurrency and blockchain technology become more prominent in people’s daily lives. But buying Bitcoin comes with big risks. Along with impressive gains, BTC has also seen devastating declines.
After nearly hitting $20,000 in 2017, for example, Bitcoin’s value dropped to around $3,100 in December 2018.
Today, BTC remains a highly volatile asset, and simple things like an untimely tweet from Elon Musk can decimate its value. If you want to buy Bitcoin, experts recommend investing only a small percentage of your net worth.
What is bitcoin? How it works?
Bitcoin is a decentralized digital currency, which operates without the oversight of banks and governments. It has the distinction of being the very first cryptocurrency, launched in 2009.
In the words of its creator, Satoshi Nakamoto, Bitcoin was created to allow “online payments to be sent directly from one party to another without going through a financial institution”.
Today, the entire cryptocurrency market is worth around US$1.3 trillion, with Bitcoin accounting for 45% of the market.
While it started life as a payment network, Bitcoin has evolved into an investment asset. Most holders view BTC as a store of value, and it is often referred to as “digital gold.”
Bitcoin transactions are verified by crypto miners through a proof-of-work consensus mechanism, and typically take up to 10 minutes to clear. This is much slower than many competing cryptocurrencies, not to mention conventional payment networks.
Yet Bitcoin is accepted as a form of payment by some retailers and online merchants, such as Overstock and Newegg in Canada.
How to Buy Bitcoin on a Crypto Exchange
To buy Bitcoin or any other cryptocurrency, you will need a crypto exchange where buyers and sellers meet to exchange dollars for coins.
There are dozens of exchanges out there, but as a beginner, you’ll want to go for one that balances ease of use with low fees and high security. If you don’t have an exchange in mind yet, check out our top picks for the best crypto exchanges.
You can buy BTC on several different crypto exchanges. Here are some exchanges where you can exchange Canadian dollars for BTC:
Note the terminology of “trading pairs”, such as BTC to Tether (USDT) or USD Coin. In the case of BTC/USDC, bitcoins can be converted into Tether, a stablecoin whose value is pegged to the US dollar. Here are some exchanges that pair BTC with USDC:
After choosing an exchange, you need to fund your account before you start investing in Bitcoin. Check if your exchange has a Bitcoin wallet built into its platform. If not, you will have to find one yourself. Once your account is funded, you can place your first order to buy Bitcoin.
Depending on the platform you use, you may be able to buy it with the press of a button, or you may need to enter the Bitcoin (BTC) ticker symbol. You will then need to enter the amount you wish to invest.
Once the transaction is complete, you will usually own a portion of a bitcoin. It takes a big initial investment to buy a single bitcoin now. If the current Bitcoin price was around $37,000, for example, you would need to invest that much to buy 1 BTC. If you invested less, say $1,000, you would get a percentage of one Bitcoin which would equal approximately 0.025 BTC.
How to Buy BTC with PayPal and Interac e-Transfer
Unfortunately, the ability to buy, hold or sell Bitcoin with Paypal is only available if you are in the United States.
Even if you’re in America and are tempted to buy your Bitcoin from PayPal, buying crypto this way means you can’t easily move your Bitcoin around. According to the PayPal website: “You can only keep the cryptocurrency you buy on PayPal in your personal US account. Additionally, cryptocurrency in your account cannot be transferred to other accounts on or outside of PayPal. You will not be able to transfer crypto assets from your cryptocurrency hub to another cryptocurrency wallet.
An alternative in Canada is to fund your cryptocurrency exchange account with Canadian dollars through an Interac e-Transfer.
Several Canadian crypto exchanges allow you to buy bitcoins this way. All you have to do is choose Interac e-Transfer as your funding method from your exchange account and send the Canadian dollar amount you want from your bank account to the email address. exchange that accepts wire transfers, along with your security question and security answer.
Once the wire transfer is sent, your money will be withdrawn from your bank account and appear on your exchange account ready to be used to purchase the cryptocurrency of your choice.
How to buy Bitcoin with a credit card
Investors should consider that platforms may charge higher transaction fees for certain funding options. Although you can buy BTC with a credit card, we strongly advise against it. This is because credit card transaction fees on crypto exchanges are often high.
Additionally, if you use a credit card to purchase cryptocurrency, it will generally count as a cash advance and be subject to a higher interest rate than what you pay on regular fees. Moreover, going into debt to buy volatile investments is extremely risky.
It is generally advisable to pay for cryptocurrency purchases with cash or other cryptos you own. However, some crypto coins and tokens are only available in US dollars, which means that some of the largest US exchanges only allow Canadians to buy crypto with a credit card. Therefore, there will not always be a practical alternative beyond a bank transfer, which carries its own costs. Therefore, a credit card is sometimes the only option for those of us north of the border.
Store your BTC
The crypto exchange you use probably has an integrated bitcoin wallet or at least a preferred partner where you can keep your BTC safe. Some people, however, don’t feel comfortable leaving their crypto connected to the internet – a “hot wallet” – where hackers can more easily steal it.
Most major exchanges have private insurance to reimburse clients if this happens. BTC can be stored in several ways, either with online or offline storage:
- Hardware wallets. A hardware device stores the private keys of your assets and allows you to interact with the wallet without exposing your data. Trezor and Ledger are examples of hardware wallets that support BTC.
- Offline storage. Sometimes referred to as “cold storage” or “cold wallet,” it is considered a safe way to store BTC because this type of storage cannot be accessed through an internet connection. You can hold your crypto on paper using a paper wallet. This will generate a public key and a private key for your crypto.
- Software wallets. Desktop wallets, considered “hot” wallets, are programs downloaded to store your crypto asset. There are also mobile wallets that interface with crypto asset management. Trust Wallet is an example of a mobile wallet where you can store BTC.
- Crypto exchanges. Many exchanges that trade BTC will allow you to store your crypto with their wallets. Canadian-based crypto exchanges that offer this include Bitbuy or Coinsmart, to name a few.
Should you invest in Bitcoin?
When the price of Bitcoin soars over the moon, investing in the popular cryptocurrency can be tempting. But even though it has the potential to be a lucrative investment, you need to be careful: it’s an incredibly volatile buy that experts don’t recommend allocating to this risky asset class.
If you’re unsure whether investing in Bitcoin or other cryptocurrencies is a good idea for your needs, consider meeting with a financial planner who can help you determine where cryptocurrencies fit into your investment strategy. .