Notes

How to Buy Bitcoin


Making investments in Bitcoin (BTCUSD) may seem complicated, however it's much easier when you split it into smaller steps. Investing or trading Bitcoin is easy if you have an account at a service or exchange. However, additional safe storage practices are suggested.





There are a variety of things aspiring Bitcoin investors need to have: a cryptocurrency exchange account for personal identification for those who use a Know Your Customer (KYC) platform with a secure connection the Internet, and a method to pay. It is recommended to keep your own private wallet, separate from your exchange account. Methods of payment that work with these options include bank account as well as debit cards and credit cards. It is also possible to obtain bitcoin through ATMs that are specifically designed as well as via P2P swaps.





KEY TAKEAWAYS


Its value Bitcoin is due to its adoption as a store of value and a payment system and also its finite supply as well as its decreasing inflation.


It is almost impossible to allow Bitcoin to be hacked but it's still possible that your bank or exchange account to be compromised. That's why using secure protection and storage measures are essential.


You can also purchase bitcoin through mainstream services like PayPal and Robinhood.


* One way to invest in bitcoin is to invest in businesses with bitcoin on their balance financial statements.


Before You Buy Bitcoin


The security and privacy of your information are critical aspects in the lives of Bitcoin investors. Anyone who gets the private secret to an address using the Bitcoin blockchain can approve transactions.1 Private keys must be kept in secret. Criminals may attempt to steal them when they find out about large holdings. Remember that anyone is able see the balance of a public account you've used. However, the flip side of this information being public is that the user can have multiple addresses public for themselves. They can then distribute their stash of Bitcoin to multiple addresses. One good option is to place large sums of money on public addresses that aren't directly linked to those which are used for transactions.





Anyone can view a history in transactions done on blockchain -- even you. Although transactions can be publicly recorded on the Blockchain, identifying individual information about the user isn't. The Bitcoin blockchain it is the only place where a public keys are visible alongside any transaction. This makes transactions safe however not completely untraceable. In this regard, Bitcoin operations are more transparent and trackable than cash since all of the transactions are publicly available for examination, unlike private transactions. But Bitcoin transactions also come with the element of anonymity built in their structure. It's extremely difficult to trace the transactions of the parties--i.e. both the parties who are sending and receiving the bitcoin on the cryptocurrency's blockchain.





Researchers from around the world and the FBI claim they are able track transactions made on the Bitcoin blockchain to users' other accounts on the internet, including their digital wallets.2 In the case of anyone creates an account on Coinbase they have to verify their identification.3 Then, when that person makes a purchase on Coinbase, it is tied to their name. If they send it to an alternative wallet, it could still be traced back to the Coinbase purchase which is tied with the account's holder's ID. This shouldn't cause concern to most customers because Bitcoin can be legally used in the U.S. and most other developed countries.





Be sure to check out the legal, regulatory, and tax consequences of purchasing and selling bitcoin based on where you live before transacting.


Buying Bitcoin








We have explained the steps for buying bitcoin below. Remember to do your homework and decide on the best option depending on your circumstances.





Step 1: Select the best crypto trading service or a venue


The first step of buying bitcoin is choosing a crypto trading company or a location. Popular venues for trading and platforms for purchasing cryptocurrencies include cryptocurrency exchanges, payment services, and brokerages. In the list, cryptocurrency exchanges are the most reliable alternative because they have a range of features, and even more cryptocurrencies for trading.





Making an account with a cryptocurrency exchange can allow you to purchase, sell, and keep cryptocurrency. It is generally recommended to sign up with an exchange that allows users to withdraw crypto to their own individual online wallets for safekeeping. If you're planning to trade Bitcoin or other currencies, this option may not be necessary.





There are a myriad or cryptocurrency exchanges. Since the Bitcoin principle of individual sovereignty and decentralization some exchanges permit users to remain anonymous and don't demand that users enter their personal details. These exchanges operate independently and are usually decentralized, this means they don't have a central source of control.





Although such systems are often used to fulfill criminal purposes, they help the global population without banks. In certain cases, people who are refugees and those living in countries with little to no infrastructure for credit from the government and banking--anonymous exchanges might help get them to join the mainstream economy.





Right now, however, the majority of popular exchanges aren't decentralized and follow laws that have users provide identification documents. The United States, these exchanges include Coinbase, Kraken, Gemini, FTX, and Binance.US There are many others to mention. These exchanges have grown significantly in the number of options they offer.





The cryptocurrency universe has grown rapidly in the last 10 years with a multitude of new tokens offering investor dollars. The exception is Bitcoin and certain prominent coins like Ethereum, not all of the tokens listed are on all exchanges. Each exchange has its own set-of criteria for determining whether it is appropriate to include or disallow trading of specific tokens.





Coinbase, Kraken, and Gemini offer Bitcoin and a steady stream of altcoins. They're probably the most accessible on-ramps into crypto in the entire market. Binance is an sophisticated buyer, with the most sophisticated trading features and more altcoin choices. FTX, a fast-growing crypto exchange that has achieved an estimated value of more than a billion dollars, provides some limited altcoins to U.S. investors.4 However, traders outside that U.S. have a greater variety of tokens available on its platform.





One thing you should remember when setting up accounts with cryptocurrency exchange companies is to adhere to safe Internet methods. This is done by using two-factor authentication. using a long, unique username that includes a wide range of lowercase letters, capitalized and capitalized letters along with special characters and numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the very first country to do so.5 Bitcoin can be used as a form of currency in any transaction where a business can take it. In the end, however, it is still the U.S. dollar continues to be the primary currency in El Salvador.


Step 2. Connect your exchange to an option for payment


After you have chosen an exchangeoption, you'll have to collect your personal documents. According to the exchange you choose, these could include photographs of a driver's permit or Social Security card, as along with information regarding your employer and source of your funds. What information you'll need depends on the place you reside in and regulations within it. The process is generally similar to creating a typical brokerage account.





After the exchange has verified your identity, you'll be asked to join a payment option. In the majority of exchanges, you can connect to your bank account through the account or you can connect a credit or debit card. Though you could use a credit card to purchase cryptocurrency, it's not a wise choice because the volatility of prices for cryptocurrency can boost the price of buying coins.





Bitcoin is legal in United States, but some banks may be suspicious of or restrict deposits to crypto-related sites or exchanges.6 It is recommended to verify to confirm that your bank is able to accept deposits at the exchange you have chosen.





There are various costs for deposits to a bank account debit or credit card. It is vital to look into the costs for any payment option so that you can make a decision on an exchange or decide which option is best for you.





Exchanges may also charge fees for each transaction. The fees may be in the form of a flat charge (if you trade at a relatively small) or some percentage of the trading amount. Credit cards are charged fees for processing, as well as transaction fee.





Step 3. Place an order


You can purchase bitcoin (or other cryptocurrency) by selecting an exchange and connecting a payment option. In the past few times Bitcoin exchanges have slowly become more popular. They have risen significantly in terms both of liquidity and the variety of features available. The operations of cryptocurrency exchanges parallel the change regarding the perceived value of cryptocurrencies. An industry once thought of as a scam or with unreliable practices is gradually becoming an actual one that has attracted interest from all the big players that are in the business of financial transactions.





Now, cryptocurrency exchanges ' offerings have advanced to the point that they are able to offer nearly the same amount of features as their counterparts at stock brokerages. how to buy bitcoin how much offer various types of orders and investment options. Most crypto exchanges provide both limit and market orders, and some also offer stop-loss order. Of the exchanges mentioned above, Kraken offers the most different types of orders. Kraken accepts market, limit, stop-loss, stop-limit taking-profit, and take-profit limit orders.7





Aside from a variety of purchase types, exchanges provide ways to create regular investments that allow clients to add a dollar-cost average to their investment options. Coinbase, for example, allows users to set up recurring purchases to be made every day, week, or month.8





Step 4: Secure storage


Blockchains, cryptocurrency or Bitcoin can be an opportunity to save digital assets in a more secure way. When you store your cryptocurrency outside of the exchange and stored in your personal wallet makes sure that only you are the only person who has control over the private key to your money. It also gives you ability to store funds away out of an exchange. This will help you avoid the possibility that your exchange is hacked and losing your funds.





Although many exchanges offer accounts for users, security isn't their main business. We generally do not recommend making use of an exchange account for big or long-term cryptocurrency investments.





Certain wallets have more features than others. Some are Bitcoin only, while others allow the storage of multiple altcoins. Some wallets are also equipped with the ability to swap one token for another.





When it comes down to picking the best Bitcoin wallet, you can choose from several choices. The first thing you need to learn about crypto wallets is hot wallets (online wallets) and cold wallets (paper or hardware wallets).





Hot wallets


They are referred to in the field of hot wallets. Hot wallets are those that run on devices that are connected to the Internet, such as computers, phones or tablets. This is a security risk since they create private keys that you use to access your funds on devices that have Internet connectivity. While a hot account can provide convenience in the method that you can access and conduct transactions on your assets quickly, storing your private keys using an Internet-connected device may make it more vulnerable to attack.





This may sound farfetched even to some, but people who haven't setup enough security have the possibility of losing funds to theft. This is not an infrequent possibility, and can occur in several ways. For instance, boasting on a platform such as Reddit about how much bitcoins you have in your account when there is little or no security and storing it in a hot bank account would not be the best idea. However, these wallets could be secure so you take the proper precautions. Secure authentic passwords with two factors of authentication and safe Internet browsing are essential necessities.





These wallets can be used when you have a small amount of cryptocurrency or currency you are already trading on an exchange. You can compare a hot wallet to a checking account. According to conventional wisdom, you should to only put money spent on a checking account whereas the bulk of your money is in savings accounts or other investment accounts. The same is true about hot wallets. Hot wallets encompass mobile, desktop, web and exchange account custody wallets.





As mentioned previously, exchange wallets serve as custodial banks provided by the exchange. The owner of this of this type does not hold the owner on the personal key for the cryptocurrency stored within the wallet. If an event were to take place where the exchange is compromised or your account gets compromised, you'd be liable to lose your funds. The phrase "not your key, not your coin" is frequently used in cryptocurrency forums and communities.





Cold wallets


The most straightforward description of a cold wallet is that it isn't attached to an Internet and therefore stands at the lowest risk of being vulnerable. These wallets are also called offline wallets or even hardware wallets. These wallets are used to store a customer's private key on something and isn't connected the internet and can come using software that works in parallel so users can access the portfolio of their choice without putting their personal key at risk.





The most secure way to save cryptocurrency offline is by using a physical wallet. A paper wallet is a digital wallet that is created from specific websites. It creates both private and public keys which you print on a piece of paper. The ability to access cryptocurrency from these addresses is only possible when you've got that piece sheet of paper with a private key. Many people laminate these plastic wallets to store them in safe deposit boxes at their bank or even in a secure in their home. They are intended for high-security and long-term investments because it is impossible to quickly sell or trade bitcoin stored with these wallets.





A more typical type of cold wallet is a hardware one. Hardware wallets are usually an USB drive device that keeps one's personal keys offline. These wallets offer significant advantages over hot wallets because they are immune to malware that could affect a computer. With hardware wallets, your private keys will not be in contact with your network-connected computer or potentially vulnerable software. They're also usually open source, which allows the community to verify their safety through code audits rather than a company claiming they are secure to be used.





In fact, cold wallets can be described as the most secure method of storing your bitcoin or other cryptos. But they require a greater amount of technical knowledge to setup.





An excellent way to set your wallets is to set up three things An exchange account for trading and buying as well as a hot wallet that can hold small to moderate amounts of cryptocurrency they want to trade with or sell or trade, and a cold wallet to store your larger assets that will last longer.





How to Buy Bitcoin With PayPal


Bitcoin can also be bought through the payment processor PayPal Holdings, Inc. (PYPL). There are two methods to buy bitcoin through PayPal. The first , and the most convenient option is to purchase cryptocurrency through your PayPal account that is connected to a payment mechanism like a banking account, debit card or credit card. The second alternative is to use the balance in an existing PayPal account to purchase crypto from a third-party company. This isn't exactly as efficient as the other because very few third-party providers permit users to buy bitcoin with their PayPal button.





Four cryptocurrencies--Bitcoin, Ethereum, Litecoin, and Bitcoin Cash--can be purchased directly through PayPal.9 With the exception of those who live in Hawaii, residents of all states can either use their existing PayPal accounts or set up new ones. It is also possible to use your cryptocurrencies to purchase products and services through"Checkout With Crypto" "Checkout With Crypto" feature.10






To set up a crypto account through PayPal The following information is required for registration: name, physical address, date of birth, or tax identification number.11





It is not possible to use a credit or debit card to buy Bitcoin through PayPal. In the course of purchasing, PayPal will display a price for the cryptocurrency. But that price is subject to rapid changes due to the fluctuation of markets for cryptocurrency. It's best in order to ensure you have more than the price you have budgeted for your purchase in your bank account.





When you buy bitcoin directly via PayPal they earn money out of the spread in crypto, or the variance between Bitcoin's current market price and its exchange rate with USD. The company can also charge you a fee for each transaction. These charges are based on amount in dollars of the purchase. For instance the flat fee of $0.50 is assessed for purchases between $110 to $200. In the following instances, the fee will be part of the overall dollar amount. For instance, a rate of 2 percent of the entire amount is payable for purchases of crypto between $100 and $200.12





One disadvantage of purchasing cryptocurrency via PayPal is that you are not able to transfer the currency outside the company's platforms for payment. This means it's not possible for you in order to transfer your Bitcoin purchase from PayPal's account to your external wallet for crypto or your personal wallet.11





Another drawback of using PayPal is that only a handful of trading platforms and exchanges allow the use of the payment processor to make payments. eToro is one of the very few online trader that allows for the usage of PayPal to buy bitcoin through its platform.13





How to Buy Bitcoin With a Credit Card


The process for purchasing bitcoin with credit cards is similar to the procedure for buying it with debit cards or through electronic clearinghouse (ACH) transactions. The buyer must enter your credit card's details into the online trading or exchange firm and authorize the transaction. In general, however, it's not a smart option to buy bitcoin using credit cards. There are a few motives for this.





First of all, none of the exchanges permit bitcoin buying with credit cards due to processing charges and the risk of fraud. This could work for the benefit of consumers. This is because credit card processing can add additional charges onto transactions. Thus, in addition to the transaction fee and transaction fees, you'll also be charged with processing fees that the exchange might charge you.





The second reason is that purchase with credit cards can be expensive. Some credit card companies treat bitcoin transactions as cash advances, and apply hefty fees as well as high interest rates on such advances. For example, American Express and Chase both consider purchases of cryptocurrencies like cash transactions. If, for instance, you purchase 100 dollars worth of bitcoin with the American Express card, you will pay just $10 (current cash advance charges for such transactions) and an annual fee of 25%. Furthermore, the credit card company also limits you to $1,000 worth of bitcoin transactions per month.14





A more indirect way of purchasing bitcoin with a credit card is to acquire an Bitcoin rewards credit card. The cards function the same way as your typical rewards credit , but they provide rewards in the shape of bitcoin. So, they invest the cash back from purchases into Bitcoin. One example of one Bitcoin cards that reward you is called BlockFi Bitcoin Rewards Credit Card.15 Be aware that the annual fees associated with such cards can be high and may also be added charges for the conversion of fiat currencies to cryptocurrency.





Although exchanges such Coinbase as well as Binance remain among the most popular methods to buy Bitcoin But they're by no means the only method.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Individuals can plug cash into a machine and use it to buy bitcoin. This bitcoin is then moved to online accounts of users. Bitcoin ATMs have become increasingly popular in recent times. Even retail big Walmart Inc. (WMT) is trialling a pilot program that will provide customers with the option of purchasing bitcoin. Coin ATM Radar can help locate nearby ATMs.





However ATMs aren't cheap option. There are two expenses associated with ATM bitcoin purchases one of which is a purchase cost and the other the conversion fee when converting Bitcoin into fiat currency. Both fees are hefty in comparison to other options. For instance, the world average fee for transactions with Bitcoin ATMs is 8.4% (of the purchase amount) and 5.4% for sales at ATMs.16





Be aware that Bitcoin ATMs are increasingly requiring government-issued IDs beginning in 2020.


Exchanges between P2P


The decentralized exchanges connect sellers and buyers anonymously and handle all aspects of the transaction, there are peer-to-peer (P2P) exchanges that provide a more direct interaction between users. LocalBitcoins is an example of this type of exchange. After registering an account, users can place requests to buy or sell bitcoin. The request must include details on payment methods and prices. After that, they can browse through the lists of offers to buy and sell as well as select the partner with whom they want to transact.





LocalBitcoins simplifies certain aspects of the trade. Although P2P exchanges don't provide the same security as decentralized exchanges, they also give customers the opportunity to search to find the most affordable deal. Many of these exchanges also provide rating systems so users can review potential trade partners prior deciding to do business.





Mainstream brokerages


There are very few brokerages that offer the ability to buy and trade bitcoin because of the uncertainty about regulations for cryptocurrencies. Robinhood Markets, Inc. (HOOD) the app, which is popular with retail investors, is one platform that offers cryptocurrency trading facilities. It charges no commissions on cryptocurrency trades as well as purchases . It makes money from payment for order flow, passing its trading volume onto various trading platforms and brokerages.17





The absence of a commission-based fee could be a tempting proposition in the beginning, but there are some problems with this offering. First, Robinhood offers nothing like the broad range of features and cryptocurrency offered by popular crypto exchanges like Coinbase. Robinhood has enabled trading on its platform for seven cryptocurrency: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 Contrary to Coinbase, you can exchange more than 100 cryptocurrency with Coinbase.19 The exchange also provides diverse order types that can help you minimize the risk of loss and protect against losses during trading.





The Robinhood platform doesn't have an online wallet. If you're looking to buy cryptocurrencies on Robinhood you'll need to consider additional fees for an online wallet provider.





Bitcoin and other cryptocurrency investments , however, are not protected by insurance from this organization. Securities Investor Protection Corporation (SIPC). At regular brokerages, the agency is able to protect against the loss of cash and securities in brokerage accounts up to $500,000 with a $250,000 cash limit.20 This service isn't accessible to clients that use crypto exchanges. Cryptocurrency exchanges like Coinbase are covered by insurance against crime to guard their infrastructure against hacks. But this insurance will not provide protection to individual customers against password theft.21


How to Sell Bitcoin


The ability to sell bitcoin is available at those same places that you bought the cryptocurrency such as cryptocurrency exchanges and P2P platforms. The process of selling bitcoin on these platforms is the same as the buying process.





For example, you may only have to press a button and specify the type of order (i.e. which cryptocurrency is to be sold immediately for the best prices or the sale should be made to limit losses) to conduct the sale. Depending on the market composition and demand at the time of the sale the selling price for Bitcoin could vary. For instance, some exchanges in South Korea traded bitcoin at Kimchi's premium, also known as the time of the increase in prices back in 2018.





Exchanges for crypto currency charge a percentage of the amount sold in fees. For instance, Coinbase charges 2.49% of the transaction total as fees.22





Exchanges typically have monthly and daily withdrawal limits. Thus, cash generated by an extensive sale may not be accessible immediately to the seller. There is no limit on the amount of cryptocurrency you are able to sell however.





What Are the Steps for Purchasing Bitcoin?


The procedure to buy bitcoin consists of four parts: selecting the location and exchange you want to make your purchase, selecting a payment method in order to secure the storage to store your bitcoin. It is dependent on the option you pick in the initial section, there may be additional steps required in the procedure. For example, if are purchasing the cryptocurrency with Robinhood there may be a need to include additional expenses for an online wallet , as well as custody of your bitcoin since Robinhood does not provide these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most well-known places for buying Bitcoin are cryptocurrency exchanges brokers (crypto along with mainstream) and payment service such as PayPal. You can also buy Bitcoin via P2P exchanges. To acquire indirect ownership of bitcoin you could invest in companies that have bitcoin on their balance sheets. Examples include Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Typically, the cost of buying bitcoin usually includes fees per trade, plus the cost for converting a money that is fiat (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment solutions make money by converting this spread.) A fee for each trade is dependent on the dollar value of the trade. An amount that is higher will bring higher costs. Also, the total cost for purchasing is contingent upon the features offered by the site. For instance, Robinhood does not currently provide an online wallet to saving bitcoin. This means that you'll have to budget for online wallet fees for your purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also buy bitcoin in the following locations:


* Through Bitcoin ATMs


Payments can be made online using payment service providers like PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


The purchase of bitcoin is not protected by SIPC.20 Certain exchanges, like Coinbase accounts, the balance of your fiat in private accounts can be insured under FDIC in the amount of $250,000 per account.21





The Bottom Line


The process of purchasing bitcoin can be a little more difficult that the process of buying regular stocks or equity. This is due to the infrastructure and ecosystem for cryptocurrency is not as well-developed as those of mainstream trading.





A bitcoin purchase process comprises in four steps: choosing the service or the location of payment, connecting to an option for payment, placing an order, as well as ensuring that your purchase is safe in cryptocurrency. Each of these steps involves a lot of research and careful assessment of the pros and disadvantages of each method. You can also purchase bitcoin at Bitcoin ATMs as well as through payment services like PayPal and other major brokerages, such as Robinhood.












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