Level 1: Getting Started¶
Save Bitcoin using a reputable exchange (a small amount that you can risk losing).
The only way to get started with Bitcoin is to first get some Bitcoin. The experienced Bitcoiners will tell you "don't leave Bitcoin on an exchange", and while this is true, this remains the easiest and least-friction path to getting Bitcoin that is secured, somewhere. This is also an easy way to learn about Bitcoin: buy some on an exchange and try to use it!
Advantages of an Exchange¶
- device agnostic -- because it's an online account, you can access the exchange from a laptop, smarthphone, or wherever
Disadvantages of an Exchange¶
- it is not your Bitcoin -- it will belong to the Exchange, and they will let you access it at their whim (according to their terms-of-service and availability)
- it's much less secure than self custody -- it will be as secure as your login credentials (your password, MFA, etc) and the exchange's "forgot password" mechanism
- it requires strict KYC processes such that you lose all privacy and security that Bitcoin otherwise could have offered
- initial account setup can be difficult due to integrations and slowness with legacy financial networks (e.g., waiting to verify a checking account for ACH transfers)
Despite the many disadvantages it can be very educational to setup an exchange account. You will learn about ACH and wire transfers and the lengthy waiting periods needed before fiat money can settle. Bitcoin reaches final international settlement quickly, and as a result it puts strain on the existing financial rails even for small amounts.
Alternatives¶
If you can acquire Bitcoin directly without an exchange then you may want to skip to level-2.
Here are some alternative ways to get Bitcoin (without an exchange).
- get paid in Bitcoin -- you know someone who is willing to pay you in Bitcoin directly
- trade with someone -- similar to above, you have something to sell and the buyer can pay directly in Bitcoin
- Bisq or localbitcoins.com -- useful for the privacy conscious, peer-to-peer exchanges which assume you are already on level-2
- Azteco Dealer
There are many alternatives, and ultimately it depends on your circumstances whether an online exchange is appropriate for you.
Find a Reputable Exchange¶
Not all exchanges are equal, in fact, most are downright scammy and poorly managed. Experienced Bitcoiners are not at all surprised when overleveraged "crypto" companies go bankrupt. Here are some criteria to look for when evaluating an exchange:
- Withdrawal support -- this is the most critical requirement; avoid any exchange that does not allow you to transfer your Bitcoin to your own self custody. Otherwise you have no Bitcoin, only an IOU. And importantly, selling Bitcoin for fiat (as a means to withdraw) is a taxable event in the US.
- Bitcoin-only -- if they offer other "cryptocurrencies", full stop, go to a different platform. This may seem extreme, but there are valid security concerns. The technology behind Bitcoin is non-trivial, and even a Bitcoin-only exchange will have serious challenges to overcome when building a proper custody and trading system. Exchanges that list Bitcoin as "one of many cryptocurrencies" are most likely scams and cannot offer the base level of security and identity protection that you will need.
- Future-proof -- a competent Bitcoin-focused company will build on top of Bitcoin: lightning integration, mining services, or other related products. Ultimately, a fiat-to-Bitcoin exchange will not lead to long-term profit, and any exchange not looking to the future should be avoided (as their short-term profits will likely be at your expense).
- No scammy yield products -- if they promise some % yield through some unspecified source, go to a different platform. This is not only a security concern but it's also very likely a future bankruptcy ending in you losing your wealth.
Reputable Exchanges¶
no paid nor influenced content -- all views are from personal experience
There are only two exchanges I would recommend:
River Financial¶
River is a Bitcoin-only fintech with probably the most reliable and impressive tech stack. During bull markets you'll find many popular exchanges (coinbase, gemini, etc) will be unresponsive and unable to handle spikes in traffic, or they may have issues integrating with your bank, or any number of problems. Meanwhile, River has proven extremely reliable and easy to use through bull and bear markets.
Swan Bitcoin¶
Swan Bitcoin is perhaps the most Bitcoin-focused exchange in the world; and it seems everyone at Swan (at any level) is a Bitcoiner. Swan openly embraces and encourages self custody, allowing you to setup recurring buys that will transfer to your own custody automatically.