Read our beginner’s guide to buying bitcoin (BTC) with step-by-step instructions.
Want to buy bitcoin (BTC) but don’t know how? If you’re new to the world of cryptocurrency, understanding exactly how bitcoin works and how and where you can buy bitcoin in South Africa is a pretty big challenge.
To help you make sense of the jargon and safely get your hands on some of the world’s most well-known digital currency, we’ve put together this beginner’s guide to buying bitcoin in South Africa.
Compare bitcoin brokers and exchanges
What is bitcoin?
Bitcoin is the world’s oldest and biggest digital currency by market cap. Created in 2009 by an unknown person (or persons) using the alias Satoshi Nakamoto, bitcoin is a form of decentralised electronic cash designed to provide a viable alternative to traditional fiat currency.
Rather than having to deal with a centralised authority such as a bank to process transactions, bitcoin holders can transfer their coins directly to one another on a peer-to-peer network. All bitcoin transactions are tracked on a public ledger known as the blockchain, and people working as miners verify transactions and update the blockchain.
The maximum coin supply of bitcoin is limited to 21 million, but it’s possible to buy a small fraction of a coin – each individual coin can be divided down to 0.00000001 BTC.
A step-by-step guide to buying bitcoin
You can buy bitcoin in South Africa in three simple steps:
Step 1. Choose a bitcoin wallet
Before you can buy any bitcoin, you’ll need to set up a digital wallet where you can safely store your coins. Bitcoin wallets don’t actually hold any coins, but instead store the private keys you need to access your public bitcoin address and sign transactions.
There are dozens of options to choose from, including the following:
- Hardware wallets, such as the Ledger Nano S and TREZOR, provide offline storage for your private keys.
- Desktop wallets, such as Electrum and Exodus, can be downloaded to your computer and used to store private keys on your hard drive.
- Mobile wallets, such as Jaxx and Coinomi, allow you to manage your BTC from your Android or iOS device.
- Web wallets, such as Blockchain Wallet and GreenAddress, offer convenient online access to your bitcoin.
- Paper wallets allow you to print out your bitcoin public and private keys and use this piece of paper as your wallet.
Step 2. Choose a cryptocurrency exchange
The next step is to decide how and where you will buy bitcoin. There are hundreds of platforms to choose from, and they can be separated into three main categories:
Step 3. Buy bitcoin
The final step is to submit an order through your chosen platform. For most first-timers, the easiest and most convenient option is to use a bitcoin broker.
No matter which type of exchange you choose, you’ll usually need to sign up for an account first. Depending on the exchange you use and the regulatory requirements it is subject to, you may be able to sign up simply by providing your email address or you may need to provide your full name, contact information and proof of ID before being allowed to trade.
Once your account has been verified, you’ll need to enter the amount of BTC you want to buy, choose your payment method, review the fees and the total cost of the transaction and then finalise your purchase.
The exact steps you’ll need to follow vary depending on the payment method and type of platform you choose, so keep reading for more details on the different ways you can buy bitcoin.
How can I pay for my bitcoin?
There are many different ways you can purchase bitcoin, each of which has its own pros and cons.
Want to turn your cash into cryptocurrency? There are several ways to buy bitcoin with cash in South Africa, including the following:
- Use a peer-to-peer exchange to find a seller who accepts cash.
- Load a prepaid card with cash and then use it to buy bitcoin on a platform that accepts prepaid cards.
- Find a bitcoin ATM and deposit cash, which can then be converted into BTC.
- Use a crypto broker that accepts cash deposits.
- Use an exchange that allows you to deposit funds into your account using a money transfer service, such as Western Union or MoneyGram, and pay for your transaction with cash. Cryptex24 is one such platform.
Buying bitcoin with cash is quick and convenient but is usually more expensive than other options.
Many bitcoin brokers and exchanges allow you to buy bitcoin using your credit card. These include platforms like Coinbase and Coinmama, and using your credit card allows you to make quick and convenient purchases.
However, credit card transactions tend to attract higher fees and some banks have even blocked customers from buying crypto with plastic. Debit cards are nowhere near as widely accepted as credit cards but can still be used to buy cryptocurrency on some platforms.
Got a PayPal account and want to use it to buy bitcoin? The good news is that you can definitely do this; the bad news is that only a limited number of platforms accept PayPal.
The biggest advantage of buying bitcoin with PayPal is that it’s quick and easy to do as you’ll no doubt be aware if you’ve ever used PayPal to purchase anything else online.
However, you may need to hunt around for the right platform, and if the platform you choose doesn’t accept ZAR, then you’ll need to be fully aware of the fees that apply. VirWox and Paxful are two of the better-known platforms that accept PayPal at the time of writing.
Another way to buy bitcoin with ZAR is to choose a platform that accepts bank transfer deposits. Depositing funds using your bank account usually doesn’t attract any fees, but it does mean you may have to wait one to two business days until the funds are cleared into your exchange account.
Whichever bank account payment method you select, make sure you consider the following:
- Any transaction limits that apply
- The fees charged by the bitcoin exchange or broker
- How long it will take for your funds to arrive
If you want to exchange another cryptocurrency for bitcoin, you’ll be pleased to learn that BTC is listed in a huge range of trading pairs on a wide variety of crypto exchanges. The key is finding the exchange that offers the right features and fees for you.
You’ll need to search for exchanges that list your desired trading pair, such as BTC/DASH, and then compare the pros and cons of each platform. Once you’ve found a suitable exchange, you can buy bitcoin by following a few simple steps.
For example, if you want to buy BTC on Binance, you’ll need to do the following:
- Register for an account with Binance.
- Enable 2-factor authentication.
- Click on “Funds” and select “Deposits”.
- Select the digital currency you want to deposit (eg, DASH) and then copy the relevant wallet address or scan the QR code.
- Transfer the digital currency into your account from your external wallet.
- Click “Exchange” and select either the “Basic” or “Advanced” trading view.
- Search for the pair you want to trade, such as “BTC/DASH”.
- Select a Limit, Market or Stop-Limit Order.
- Enter the amount of BTC you want to buy in the field provided.
- Take a moment to review the details of your transaction.
- Click “Buy BTC”.
The process may vary slightly from one platform to the next, so look for a how-to guide on your chosen exchange or contact its customer support team if you’re unsure of what to do.
If you want to buy bitcoin in South Africa, most exchanges will require you to verify your identity first. However, if you value your privacy, it is still possible to buy bitcoin anonymously.
The following are some of the available options:
- Using a peer-to-peer platform like LocalBitcoins to trade directly with a bitcoin seller
- Using a bitcoin ATM to anonymously deposit cash, have it converted to BTC and then transferred to your bitcoin wallet
- Buying bitcoin with a prepaid credit card or cash via a platform that doesn’t require ID
- Trading altcoins for bitcoin on an exchange that doesn’t require proof of ID
How to choose a bitcoin exchange
With hundreds of platforms to choose from, finding the best bitcoin exchange for your needs is a challenging task. To make your choice easier, consider these key factors when comparing exchanges:
- Where the exchange is based and how it is regulated. Do some research to find out where an exchange is based, the regulatory requirements that apply in that country, and whether the exchange complies with those requirements. This will help you work out if you’re dealing with a reputable platform.
- Security. Look at the security features a platform has to offer, such as 2-factor authentication and PGP encrypted emails. Has it ever been hacked or linked to any suspicious activity?
- Fees. Check the fine print to find out exactly how much your transaction will cost. Depending on the platform you choose, these could include trading fees and transaction fees as well as deposit and withdrawal charges.
- Transaction limits. Are there any minimum or maximum limits on the amount of bitcoin you can purchase? Does the exchange restrict the amount of funds you can withdraw from your account in any one transaction or 24-hour period?
- Supported currencies. As the biggest digital currency in the world by some margin, bitcoin can be bought and sold on a huge range of platforms. However, if you’re looking to acquire other cryptocurrencies as well as bitcoin, check to see what other coins you can buy through the platform.
- Customer support. If you ever have a problem with a transaction, will you be able to quickly and easily get in touch with the customer support team? Check what contact methods are available and find out how quick the team is at responding to enquiries.
- Reputation. Research bitcoin forums and online reviews to find out what sort of experience other users have had with the platform.
Five things you should know before you buy bitcoin
You wouldn’t invest in shares without doing your research first, so make sure you understand the following essential facts about bitcoin before you buy:
- It’s volatile. Take a look at a graph charting the price history of bitcoin and you’ll see straight away that its value is capable of rising and falling sharply in a relatively short space of time. Not only is bitcoin volatile but, as a very new asset class, it’s also highly unpredictable. This means there’s a high level of risk associated with buying bitcoin.
- Security is vital. Have you ever heard the saying that if you don’t own your private key, you don’t own your bitcoin? Understanding the difference between your public and private key as well as the importance of safely storing your private key is crucial to securing your BTC.
- Bitcoin transactions can’t be cancelled. Once you’ve submitted a transaction to the bitcoin network, it cannot be cancelled. With this in mind, make sure you double-check the receiving address before sending a bitcoin payment.
- Bitcoin is not anonymous. There’s a widespread misconception that all bitcoin transactions are anonymous. This isn’t the case as your public address and the details of your transactions are visible to everyone. If anonymous transactions are an important feature for you, it may be worth researching privacy-focused coins, such as Monero.
- There could be tax implications. If you hold bitcoin as an investment, you could be taxed on any capital gains you make. Tax obligations could also apply to bitcoin mining, professional bitcoin traders and in a range of other scenarios, so make sure you’re fully aware of what you need to report.
Finally, it’s also worth remembering that bitcoin is far from the only fish in the cryptocurrency sea. While it may be the biggest and best-known, there are more than 1,600 other cryptocurrencies available as of July 2018 (and growing). While the value of some of these coins is questionable, there are plenty of other digital currencies worth considering as alternatives to bitcoin.
Other ways to get bitcoin
Want to get your hands on some bitcoin without actually buying it? There are a few options available:
- Charge bitcoin for goods and services. You can request payment in bitcoin instead of ZAR.
- Mine bitcoin. It’s now extremely hard for any individual to make money from mining bitcoin.
- Earn free bitcoin. Although time-consuming, there are a handful of legitimate ways to earn small amounts of free bitcoin through online games and bitcoin faucets.
Buying bitcoin OTC
If you want to buy a large amount of bitcoin, for example $50,000 or more, you may want to think twice before placing your trade on a traditional exchange. Not only will you be exposed to slippage, which can substantially increase the cost of your trade, but you’ll also need to accept the risks of hacking and theft associated with traditional exchanges.
Over-the-counter (OTC) brokers can offer better prices, increased transaction limits and faster processing times to large-volume traders.
If you want to buy bitcoin, start comparing a range of cryptocurrency brokers and exchanges. Look at their features, fees, security and overall reputation to decide which platform is the right fit for you.
You can then sign up for an account and get ready to start trading. However, make sure you research your purchase thoroughly and are fully aware of the risks involved before you buy.
Disclosure: At the time of writing, the author holds ADA, ICX, IOTA and XLM.