Bitcoin (BTC) has seen meteoric growth in recent years. In May 2016, you could buy 1 BTC for just over $600 CAD ($500 USD). As of May 2022, a single Bitcoin was worth just above $37,000 CAD ($30,000 USD). That’s growth of just over 6,000% in Canada and nearly the same percentage in the U.S.
Some analysts believe the price of Bitcoin could rise even further as cryptocurrency and blockchain technology become a bigger part of people’s daily lives. But buying Bitcoin comes with big risks. Along with impressive gains, BTC has also experienced devastating declines.
After almost reaching $20,000 USD in 2017, for example, the value of Bitcoin plummeted to around $3,100 USD in December 2018.
Today, BTC remains a highly volatile asset, and simple things like an ill-timed tweet from Elon Musk can decimate its value. If you want to buy Bitcoin, experts recommend that you invest only a small percentage of your net worth.
What Is Bitcoin? How Does It Work?
Bitcoin is a decentralized digital currency, which operates without the oversight of banks and governments. It holds the distinction of being the first-ever 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 roughly worth $1.3 trillion USD, with Bitcoin representing 45% of the market.
While it began life as a payments network, Bitcoin has evolved into an investment asset. Most holders consider BTC to be a store of value, and it’s often referred to as “digital gold.”
Bitcoin transactions are verified by crypto miners via a proof-of-work consensus mechanism, and usually take up to 10 minutes to clear. That’s much slower than many competing cryptocurrencies, to say nothing of conventional payments networks.
Still, Bitcoin is accepted as a form of payment by some online retailers and merchants, such as Overstock and Newegg in Canada.
How to Buy Bitcoin on a Crypto Exchange
To buy Bitcoin or any cryptocurrency, you’ll need a crypto exchange where buyers and sellers meet to exchange dollars for coins.
There are scores of exchanges out there, but as a beginner, you’ll want to opt for one that balances ease of use with low fees and high security. If you don’t already have an exchange in mind, check out our top picks for the best crypto exchanges.
You can buy BTC on several different crypto exchanges. Here are a few 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 U.S. dollar. Here are a couple of exchanges that pair BTC to USDC:
After choosing an exchange, you have to fund your account before beginning to invest in Bitcoin. Check if your exchange has a Bitcoin wallet built into its platform. If not, you’ll need to find one of your own. Once your account is funded, you can place your first order to buy Bitcoin.
Depending on the platform you’re using, you may be able to purchase it by tapping a button, or you may have to enter Bitcoin’s ticker symbol (BTC). You’ll then have to input the amount you want to invest.
When the transaction is complete, you will typically own a portion of a Bitcoin. It requires a large upfront investment to buy a single Bitcoin now. If Bitcoin’s current price was around $37,000, for example, you’d need to invest that much to buy 1 BTC. If you invested less, say $1,000, you’d get a percentage of a Bitcoin that would equate to about 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 U.S.
Even if you are in America and tempted to buy your Bitcoin on PayPal, purchasing crypto this way means you cannot move your Bitcoin around easily. According to PayPal’s website: “You can only hold the cryptocurrency that you buy on PayPal in your U.S. personal account. Additionally, the cryptocurrency in your account cannot be transferred to other accounts on or off PayPal. You will not be able to transfer crypto assets from your cryptocurrencies hub to another cryptocurrency wallet.”
An alternative in Canada is funding your cryptocurrency exchange account with Canadian dollars through an Interac e-Transfer.
Several Canadian crypto exchanges allow you to purchase Bitcoin this way. All you have to do is choose Interac e-Transfer as a funding method from your exchange account and email the amount of Canadian dollars you want from your bank account to the exchange’s email address that accepts e-Transfers, complete with your security question and your security answer.
Once the e-Transfer is sent, your money will be taken from your bank account and appear in your exchange account ready to use for buying 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. While you may purchase BTC with a credit card, we strenuously advise against it. That’s because credit card transaction fees on crypto exchanges often run high.
In addition, if you use a credit card to buy cryptocurrency, it generally will count as a cash advance and be subject to a higher interest rate than you pay on regular charges. Moreover, taking on debt to buy volatile investments is extremely risky.
It’s generally advisable to pay for cryptocurrency purchases with cash, or with other crypto that you own. However, some crypto coins and tokens are only available in U.S. dollars, which means some of America’s largest exchanges only allow Canadians to purchase crypto with a credit card. As a result, there won’t always be a convenient alternative beyond a wire transfer, which comes with its own fees. Therefore, sometimes a credit card is 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 safely hold your BTC. Some people, however, do not feel comfortable leaving their crypto connected to the internet—a “hot wallet”—where hackers may more easily steal it.
Most major exchanges have private insurance to reimburse clients if this happens. BTC can be stored in several ways, whether with online or offline storage:
- Hardware Wallets. A hardware device stores the private keys to 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 a “cold wallet,” it is considered a safe way to store BTC because this type of storage isn’t accessible via an internet connection. You can keep your crypto on paper using a paper wallet—this will generate a public key and 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 managing crypto assets. Trust Wallet is an example of a mobile wallet where you can store BTC.
- Crypto Exchanges. Many exchanges that trade BTC will let you store your crypto with their wallets. The crypto exchanges based in Canada that offer this include Bitbuy or Coinsmart, to name a couple.
Should You Invest in Bitcoin?
When Bitcoin’s price goes to the moon, investing in the popular cryptocurrency can be tempting. But while it has the potential to be a lucrative investment, you should be cautious: It’s an incredibly volatile purchase that experts don’t recommend you allocate a large percentage to this risky asset class.
If you’re not sure whether investing in Bitcoin or other cryptocurrencies is a good idea for your needs, consider meeting with a financial planner who can help you figure out where cryptocurrencies fit into your investment strategy.
Read More: How To Buy Bitcoin (BTC)