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Key Points

  • Bitcoin is digital money that exists on a global, decentralized network
  • Exchanges are the most common way to buy bitcoin, but not all provide true ownership
  • True ownership means controlling your private keys, not just price exposure
  • Security exists on a spectrum from basic exchange custody to full self-custody
  • Hardware wallets (cold storage) provide the best security for your bitcoin
  • Your recovery phrase is the master key to your bitcoin and must be protected
  • Physical security of your recovery phrase is crucial for long-term asset protection
  • Start small and verify everything twice while learning

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Summary

This comprehensive guide walks you through the entire process of getting started with Bitcoin - from understanding what it is, to purchasing your first coins, to securing them properly in self-custody. You’ll learn how to choose the right exchange, set up a secure wallet, and most importantly, how to protect your recovery phrase which is the master key to your bitcoin. While the journey to financial sovereignty might seem complex at first, this guide breaks it down into simple, manageable steps.

Bitcoin can seem complex at first, but getting started is simpler than you might think. This guide will walk you through everything you need to know to buy your first bitcoin and store it securely.

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What is Bitcoin?

Think of Bitcoin as digital money that exists on a global network, similar to how emails exist on the internet. Unlike traditional money that’s controlled by banks and governments, Bitcoin is maintained by a peer-to-peer network of computers worldwide, making it truly decentralized, borderless and independent.

Here’s what you need to know:

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Bitcoins

  • Supply: Only 21 million bitcoin will ever exist, making it a scarce digital asset
  • Properties: Bitcoin is fungible (each unit is identical), divisible, and easily transferable
  • Units: The smallest unit is called a “satoshi” (0.00000001 bitcoin)
  • Accessibility: You can buy any fraction of a bitcoin - no need to purchase a whole one
  • Storage: Each bitcoin is stored at an “address” (like an email address for receiving money). The address is generated from a public key, which is derived from a private key. The address is safe to share, but the private key is like your password and should never be shared.
  • Keys: You control your bitcoin through:
    • A public key (like your email address - safe to share)
    • A private key (like your password - never share it)

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The Bitcoin Network

  • The Network: Bitcoin lives on a network of computers (nodes) that keep track of all transactions via a shared ledger called the blockchain.
  • Transactions: Moving bitcoin involves sending from one address to another. This is done via a transaction, which is a record of a transfer from one address to another. To send bitcoin, you need to have the private key of the address you want to send from.
  • Blocks: All transactions are recorded in blocks, creating a permanent, immutable history of all bitcoin transactions.

The beauty of Bitcoin lies in its simplicity: once you own bitcoin, you truly own it. There’s no bank that can freeze your account, no government that can seize it, and no middleman needed to send it to anyone, anywhere in the world, almost instantly.

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” — Satoshi Nakamoto, Bitcoin Whitepaper

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Where to Buy Bitcoin

The cryptocurrency industry has matured significantly over the past decade. Today, there are several ways to acquire bitcoin, but it’s crucial to understand that not all methods give you true ownership of your bitcoin.

  1. True Bitcoin Ownership Methods

    a) Withdrawal-Enabled Exchanges

    • Allow withdrawal of actual bitcoin
    • You get real bitcoin you can move to your wallet
    • Full control over your assets
    • Low trading fees
    • Crypto-native
    • Examples: Kraken, Binance, Coinbase

    b) Recurring Buy Services

    • Automatic regular bitcoin purchases
    • Direct withdrawal to your wallet
    • Dollar-cost averaging made easy
    • Examples: PocketBitcoin, Relai

    c) Direct Methods

    • Bitcoin ATMs (convenient but higher fees)
    • Peer-to-peer platforms
    • Getting paid in bitcoin for work
    • Local bitcoin meetups

  2. Bitcoin Price Exposure Only (Not Real Bitcoin)

    a) Brokers Platforms

    • Charge high fees
    • Don’t allow bitcoin withdrawals
    • Only sell you an IOU (“I Owe You”), you never own actual bitcoin
    • Examples: Revolut, PayPal, Banking apps, etc.

    b) Bitcoin ETFs

    • Trade on traditional stock markets and only track bitcoin’s price
    • No ability to withdraw actual bitcoin
    • Controlled by financial institutions

Remember: Bitcoin was created to give people financial sovereignty - the ability to truly own and control their money without intermediaries. When you buy through methods that don’t allow withdrawals, you’re missing the fundamental value proposition of Bitcoin as outlined in Satoshi Nakamoto’s original proposal. If you want to truly own your bitcoin, you need to use a method that allows you to withdraw your bitcoin to your own wallet and you need to control your keys.

“Trusted third parties are security holes.” — Nick Szabo - Satoshi Nakamoto Institute

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How to Buy Bitcoin on an Exchange

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1. Choose a Reliable Exchange

We suggest using one of the well-known and regulated exchanges, available worldwide.

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Detailed Withdrawal Guides by Exchange

For step-by-step withdrawal instructions for specific exchanges:

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2. Create and Verify Your Account

  • Sign up with your email
  • Complete KYC (Know Your Customer) verification
    • Provide ID
    • Proof of address
    • This is required by law in most countries

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3. Fund Your Account

  • Bank wire transfer (cheapest, recommended)
  • Credit/debit card (faster but higher fees)
  • Deposit other cryptocurrencies to trade for Bitcoin
  • Other payment methods (varies by exchange)

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4. Place Your Order

When you’re ready to buy, go on the spot market. Here, you’re buying bitcoin directly at the current market price. You can either place a market order to buy immediately, or a limit order to buy at a specific price you choose. Start small - there’s no rush, and it’s better to learn with amounts you’re comfortable with. Some exchanges offer options to put automatic regular buys in place. This is a great way to buy bitcoin regularly, and it’s a great way to get used to the process.

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Withdrawing Bitcoin to Your Own Wallet

This is where the magic happens. Moving your bitcoin to your own wallet is like taking your money out of the bank and putting it in your personal safe. It’s a crucial step in truly owning your bitcoin - remember the saying in the Bitcoin community: “Not your keys, not your coins.”

When you keep bitcoin on an exchange, you’re trusting that exchange to hold it for you. History has shown this can be risky - numerous exchanges have been hacked or gone bankrupt, taking customers’ funds with them. By withdrawing to your own wallet, you take full control of your bitcoin’s security.

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1. Choose Your Wallet

  • Software Wallet: Good for small amounts
    • Mobile apps
    • Easy to use
    • Always connected to internet
  • Hardware Wallet: Recommended for larger amounts
    • Physical device
    • Better security
    • Keeps private keys offline

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2. Set Up Your Wallet

  1. Download/purchase your chosen wallet
  2. Follow setup instructions carefully
  3. CRITICAL: Securely back up your recovery phrase
    • Write it down on metal (paper can be damaged)
    • Never store digitally
    • Keep in a safe place

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The Importance of Your Recovery Phrase

Your recovery phrase (also known as a secret phrase, seed phrase or simply a seed) is the master key to your bitcoin vault. It’s a series of 12 or 24 words, generated from the BIP39 wordlist, the industry-standard backup method used for all crypto assets. It is generated by your wallet when you first set it up and allows you to restore all your public and private keys at once when your wallet reaches end of life, has a bug, gets lost, broken or even if the wallet manufacturer no longer exists. Your secret phrase is your bitcoin life-line. This is why storing it securely is absolutely critical.

Paper backups are vulnerable to fire, water damage and degradation over time, while cloud storage exposes your seed phrase to hacks and the risk of being forgotten or lost over time.

Metal storage solutions provide the necessary durability for long-term security while making your recovery phrase tangible and concrete. This physical presence serves as a constant reminder of its importance and makes it much harder to misplace compared to paper documents. If your bitcoin is worth protecting, your recovery phrase deserves a dedicated physical form that will stand the test of time.

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3. Withdraw from Exchange to Self-Custody

  1. Generate a receiving address in your wallet
  2. On the exchange:
    • Go to withdrawal section
    • Enable address whitelisting for extra security
    • Add the generated receiving address to your whitelist
    • ALWAYS verify the address matches exactly
    • Enable 2FA for withdrawals
  3. Select the whitelisted address as the destination
  4. Withdraw a small test amount and wait for it to appear in your wallet (it might take a few minutes, don’t worry)
  5. Once confirmed, proceed with larger amounts

Remember: Bitcoin ownership is about personal responsibility. This might feel daunting at first, but it’s also empowering. Take your time to understand each step, start small, and gradually increase your holdings as you become more comfortable with the process. The journey to financial sovereignty is a marathon, not a sprint.

This article is part of our educational series on cryptocurrency. For more guides on protecting your digital assets, explore our other articles on best practices and security concepts.

Ready to secure your bitcoin properly? Visit hodlr.swiss to explore our range of Swiss-quality solution to properly backup your recovery phrase.