Notes

How to Buy Bitcoin


The process of investing in Bitcoin (BTCUSD) could seem complicated, however it's much easier when you breakdown the process into steps. When you invest or trade, Bitcoin just requires an account at a provider or exchange, however additional storage methods that are safe are advised.





There are several items that potential Bitcoin investors need including a cryptocurrency trading account and personal identification documents for those who use the Know Your Customer (KYC) platform an encrypted connection to the Internet as well as a method of payment. It is also suggested that you establish your own private wallet separate from your exchange account. Alternative payment options for this option include bank accounts credit cards, debit cards, and credit cards. There is also the option to get bitcoin at specialized ATMs or through P2P-based exchanges.





KEY TAKEAWAYS


"The price of Bitcoin is derived from its usage as a place of value and a payment system in addition to its limited supply, and the decrease in inflation.


It's not impossible for Bitcoin to be hacked It is nevertheless possible that your bank or exchange bank account to have been compromised. This is why taking care of proper storage and security measures is vital.


* You can also purchase bitcoin via mainstream services such as PayPal and Robinhood.


* One option to acquire bitcoin indirectly is by investing in businesses with bitcoin in their balance reports.


Before You Buy Bitcoin


The security and privacy of your information are critical aspects regarding security, privacy and confidentiality for Bitcoin investors. Anyone who gains the private key to the public address to the Bitcoin blockchain can sign off on transactions.1 Private keys must be kept confidential as thieves could try to take them away once they know of your large accounts. Remember that anyone is able view the balance of a publicly accessible address. However, the flip side of the public data is that individuals can make multiple public accounts for themselves. Thus, they are able to distribute their stash of Bitcoin across several addresses. It is a good idea to safeguard investments with significant amounts at public addresses that are not directly linked to those that are used in transactions.





Anyone is able to view a historical record of transactions recorded on the blockchain, even you. Although transactions can be publicly recorded by the blockchain, the identification of user information is not. When using the Bitcoin blockchain it is the only place where a public key appears alongside a transaction--making transactions confidential however not completely secretive. In this sense, Bitcoin transactions are more transparent and traceable than cash since all of them are available for public access, unlike private cash transactions. But Bitcoin transactions also come with an element of security built into their design. It's difficult to locate the transaction parties--i.e., both the parties who are sending and receiving bitcoin - on the blockchain of the cryptocurrency.





International researchers and the FBI have claimed that they could identify transactions made using the Bitcoin blockchain back to users' various online accounts, including their digital wallets.2 In the case of one creates an account with Coinbase you must supply their identification.3 This means that when that user purchases bitcoin, it can be traced back to their name. In the event that they transfer it an alternative wallet, it could remain traced back to the Coinbase purchase , which is linked with the account's holder's ID. This should not be a concern for the majority of investors , as Bitcoin remains legal throughout the U.S. and most other developed nations.





Be sure to look up what is legal, regulatory and taxation status for buying or selling bitcoin in your area of reside before you make any transactions.


Buying Bitcoin









We have explained the steps for buying bitcoin below. Make sure do your research to select the best option depending on the circumstances you face.





Step 1: Choose an exchange service for crypto or venue


The first step of buying bitcoin is to select a crypto trading site or a location. Popular venues for trading and platforms for buying cryptocurrency include exchanges, payment services, and brokerages. In the list, cryptocurrency exchanges are the most efficient option as they provide a range of features, and even more than cryptocurrencies to trade.





In signing up for a crypto exchange lets you buy, sell, and keep crypto. It is usually best to choose an exchange that lets users move cryptocurrency to their secure online wallet for their personal. In the case of those wanting to trade Bitcoin or other crypto currencies, this may not be a problem.





There are many types or cryptocurrency exchanges. Because the Bitcoin philosophy is based on individual sovereignty and decentralization some exchanges permit users to remain anonymous and do not need users to input their personal details. These exchanges operate on their own and are usually decentralized meaning they don't have a central point of control.





While these systems are able to serve harmful purposes, they serve as a service to the vast majority of people without banking. For certain types of people - refugees or people living in countries with little to no infrastructure for government credit or banking, anonymized exchanges can integrate them into the mainstream economy.





As of now, the top exchanges are not controlled by a central authority and make users submit identifying documentation. As for the United States, these exchanges comprise Coinbase, Kraken, Gemini, FTX, and Binance.US, to name a few. These exchanges have increased in the number of options they offer.





The cryptocurrency universe has grown rapidly over the last decade There are many new crypto tokens which are competing with dollars from investors. With the exception of Bitcoin and certain prominent coins such as Ethereum however, not all of the coins are available on all exchanges. Each exchange has its own set-of criteria to determine whether to include or restrict trading of certain tokens.





Coinbase, Kraken, and Gemini offer Bitcoin and a variety of altcoins. They are among the most straightforward on-ramps for crypto within the entire crypto industry. Binance is geared towards an sophisticated marketer, and provides more sophisticated trading options and more diverse altcoin choices. FTX is a rapidly growing crypto exchange that has an investment of multibillion dollars, offers limited amounts of altcoins for U.S. investors.4 However, investors from outside the U.S. have a greater range of cryptos available on its platform.





A crucial thing to keep in mind when setting up accounts with cryptocurrency exchange companies is the need to employ secure Internet methods. It is recommended to use two-factor authentication. having a unique and long password that comprises a variety lowercase characters, capitalized letters or special characters as well as numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the very first country to do so.5 The cryptocurrency can serve as a means of payment for all transactions in which businesses are able to accept it. However, U.S. dollar continues to be El Salvador's principal currency.


Step 2: Connnect your exchange with any payment option


After you have chosen an exchange, you will be required to gather your personal documents. Depending on the exchange, these could include photographs of a driver's licence or Social Security card, as together with details about your employer and source of money. The details you'll need is contingent on the location you reside in and laws in it. The procedure is basically similar to the process of setting up a standard brokerage account.





Once the exchange has confirmed your identity, you'll be asked to join a payment option. In most exchanges, you can connect your bank account to the exchange directly, or connect a credit or debit card. While how to buy bitcoin in 2011 may use a credit card to purchase cryptocurrency, it's not advisable as the volatility of prices for cryptocurrency can boost the total cost of purchasing a coin.





Bitcoin has been legalized in the United States, but some banks may deny or refuse deposits to crypto-related web sites or exchanges.6 It is an excellent idea to confirm whether the bank you use allows deposits to your chosen exchange.





There are different charges for deposits via a bank account in the form of debit, credit, or card. It is important to research the costs for every payment method to help pick an exchange option or determine which payment option is most effectively for you.





Exchanges can also charge fees per transaction. They may charge one-time fees (if the trading value is low) or an % of the trading amount. Credit cards incur a processing fee in addition to the transaction charges.





Step 3: Make an order


You can buy bitcoin (or other cryptocurrencies) after choosing an exchange as well as connecting to a payment method. In the past few years cryptocurrency exchanges slowly became more accepted. They have grown significantly in terms of liquidity and their breadth of features. Changes in the operations at cryptocurrency exchanges match the change in how people view cryptocurrencies. An industry that was seen as a fraud or one that was based on questionable procedures is slowly changing into an authentic one, which is attracting the attention of every major player that are in the business of financial transactions.





Now, cryptocurrency exchanges have progressed to the point where they provide the same quantity of features available as their counterparts in stock brokerage. These exchanges provide various types of orders and investment options. The majority of crypto exchanges offer both market and limit orders. A few offer stop-loss options. From the above exchanges, Kraken offers the most different types of orders. Kraken is able to accommodate market limit, stoploss, stop-limit taking-profit, and take-profit limit orders.7





Alongside the variety of order types, exchanges also offer ways to set up recurring investments, allowing clients to dollar-cost average into their investment of choice. Coinbase, for example, lets users set recurring transactions for every day, week or month.8





Step 4: Secure storage


In addition, bitcoin and cryptocurrency wallets provide an opportunity to save digital assets more safely. With your cryptocurrency out of the exchange but in your personal wallet means that only you hold the private key to the funds. Additionally, it gives you the possibility of storing your funds away from exchanges and eliminate the possibility that your exchange is hacked and causing loss of funds.





Although many exchanges offer user-friendly wallets, security isn't their main business. We generally do not recommend the use of exchange wallets for long-term or large-scale cryptocurrency holdings.





Certain wallets have more features than others. Some are Bitcoin only, while others allow the storage of diverse altcoins. Some wallets also provide the option of swapping one token for another.





When you're trying to decide on the right Bitcoin wallet, you can choose from several choices. The first thing you need to understand about crypto wallets is the concept of hot wallets (online wallets) and cold wallets (paper or physical wallets).





Hot wallets


Digital wallets also known also as hot wallets. Hot wallets run on Internet-connected devices such as computers, phones, or tablets. This is a security risk since these wallets store the private keys for your coins on these Internet-connected devices. While a wallet that is hot can be very convenient in the manner that you can access and conduct transactions on your assets swiftly, the fact that you store your private key in a device that is connected to the Internet makes it more vulnerable to hack.





This may seem absurd yet hot wallet holders who haven't set up enough protection run the risk losing money due to theft. This is a frequent occurrence, and it can be triggered in many ways. One example is boasting on a social media platform like Reddit about the amount of bitcoins you have in your account when you're using very little to zero security and placing it in a wallet with a high temperature would not be a good idea. That said, these wallets can be made secure as long as precautions are taken. Secure encryption, strong passwords and two factor authentication and secure Internet browsing are the minimum requirements.





These wallets are perfect for small amounts of cryptocurrency or other cryptocurrency you are engaged in trading on an exchange. It is possible to compare a hot wallet to a checking account. Traditional wisdom in finance would advise that you should keep your money only for spending on a checking account whereas the bulk of your money are in savings and other investments accounts. It is the same regarding hot wallets. Hot wallets comprise mobile, desktop, web, and exchange accounts custody wallets.





The exchange wallets are custodial accounts that are provided by the exchange. The user of this wallet sort is not holder of the private key to the cryptocurrency stored within the wallet. If an incident should occur , where the exchange becomes stolen or your wallet is compromised, you'd lose your funds. The expression "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 is not tied to Internet so it has a far lesser risk of being in danger of being hacked. These wallets can also be known as offline wallets or hardware wallets. They are wallets that store a person's private key in a device and isn't connected the internet. They come with software that runs in parallel so the user is able to view their account without putting their private key in danger.





The most secure method to keep your money offline is to use a papier wallet. A paper wallet is a one that you can build through certain websites. It can then generate both public and private keys that you print out on a piece of paper. Access to the cryptocurrency within these addresses is only possible when you've got that piece paper with the private keys. Many people laminate these papers wallets and place them in safe deposit boxes at banks or even in a secure in their home. These wallets are intended for high-security and long-term investments because you cannot quickly sell or trade bitcoins stored in with these wallets.





A more common type of cold cash wallet is a wallet made of hardware. It is comprised of a USB drive that is used to store users' private keys offline. They offer a significant advantage when compared to hot wallets as they are unaffected by malware that could affect a computer. With hardware wallets, private keys do not come in contact with your computer's network or software that could be vulnerable. They're also open source, allowing the community to evaluate their security by conducting audits of the code, not a firm declaring that they're appropriate for usage.





Cold wallets are the most secured way to store bitcoin or other cryptocurrencies. However, they require more technical understanding to setup.





A good method of setting up your wallets is having three items three things: an exchange account to use for trading and buying in hot wallets, a hot account to store small or moderate amounts of cryptocurrency you'd like to trade, or sell, and a cold hardware wallet for holding larger sums for longer-term periods.





How to Buy Bitcoin With PayPal


You can also purchase bitcoin through payment processor PayPal Holdings, Inc. (PYPL). There are two options to purchase bitcoin using PayPal. The first and most convenient method is to buy cryptocurrencies using your PayPal account that is connected with a payment instrument such as a debit card or bank account. The second option is to utilize the balance of account balances in your PayPal account to buy cryptocurrencies via a third-party supplier. This option is not so convenient as the former because few third-party websites allow users to purchase bitcoin by clicking the 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 cryptocurrency to purchase goods or services using"Checkout With Crypto. "Checkout With Crypto" feature.10





To set up a bitcoin account through PayPal it is necessary to provide the following details is needed such as name, physical address the date of birth and tax identification number.11





It is not possible for a credit card to buy Bitcoin using PayPal. When you purchase, PayPal will display a price for the cryptocurrency. But , the price can be subject to rapid changes due to the fluctuation of markets for cryptocurrency. It's a good idea to be sure to have more money than the amount you anticipated for the purchase in your bank account.





When you buy bitcoin directly via PayPal it earns you money on the crypto spread or the differential between Bitcoin's market rate and exchange rate with USD. PayPal will also charge a transaction fee for each transaction. The fee is based on the amount in dollars of the purchase. For instance there is a flat rate of $0.50 is payable for purchases of between $100 to $200. Thereafter, the fee is a percentage of the overall dollar amount. For example, a fee of 2 percent of the total amount will be to be paid for crypto purchases between $100 to $200.12





One of the disadvantages of buying cryptocurrency via PayPal is that it isn't possible to transfer the crypto away from the Payment processor's own platform. Therefore, it's possible to transfer your bitcoin purchase from PayPal's wallet to an external crypto wallet or your personal wallet.11





Another drawback to using PayPal is that the majority of trader and exchanges accept using the processor for payment. eToro is among the few online trading platforms that permit it to utilize PayPal to purchase bitcoin on its platform.13





How to Buy Bitcoin With a Credit Card


The procedure of purchasing bitcoin using credit cards is similar to the procedure to purchase it using debit cards as well as through Automated Clearing House (ACH) the transfer. It is necessary to enter your credit card's details into the online trading or exchange firm , and then sign off on the transaction. In general, , it's not a wise option to buy bitcoin using credit cards. There are a couple of causes for this.





First, certain exchanges are not able to allow bitcoin purchase using credit cards because of the processing costs as well as the risk of fraud. This option could be in the best interests of the customers. This is because credit card processing could charge additional fees to transactions. Thus, in addition to the transaction fee You will be charged with processing fees that the exchange will pass on to you.





The third reason is that transactions made with credit cards may be expensive. Credit card issuers consider bitcoin purchases as cash advances, and add significant fees and interest rates on such advances. For instance, American Express and Chase both count purchases made with cryptocurrencies like cash transactions. Therefore, if, for example, you purchase one hundred dollars worth of bitcoin through an American Express card, you have to pay 10% (current cash advance fee applicable to such transactions) and an annual rate of 25%. The credit card company also limits you to $1,000 worth of bitcoin transactions per month.14





A second method of buying bitcoin using a credit/debit card is to acquire one of the Bitcoin Rewards credit card. These cards function similar to your regular rewards credit or debit card, however, they reward you in the Bitcoin form. Also, they invest cash back earned from purchases into Bitcoin. One illustration of the Bitcoin points card for rewards is the BlockFi Bitcoin Rewards Credit Card.15 Be aware, however that the annual fees for these cards may be steep and may also be added charges associated with the conversion of fiat currency into crypto.





While exchanges like Coinbase and Binance remain among the top methods to purchase Bitcoin, they are not the only choice.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. You can use cash inside an ATM and use it to purchase bitcoin that is then transmitted to web-based wallets for users. Bitcoin ATMs have been increasingly popular in recent years. In fact, retail major Walmart Inc. (WMT) is conducting a test program that provides customers with the option of buying bitcoin. Coin ATM Radar can help to track down the closest ATMs.





However ATMs are expensive alternative. There are two expenses associated with ATM bitcoin purchases: a purchase fee and an expense to convert money from fiat into bitcoin. Both fees are hefty as compared to other options. For example, in the world, the average charge for purchase from Bitcoin ATMs starts at 8.4% (of the purchase amount) and 5.4 percent for sales made at ATMs.16





Be aware, however, that Bitcoin ATMs are now requiring government-issued IDs by the start of 2020.


Exchanges P2P


Instead of decentralized exchanges, that offer buyers and sellers a secure way to communicate and can facilitate every aspect of the transactions, there are peer-to-peer (P2P) exchange services which provide a direct relationship between users. LocalBitcoins is one of these exchange. Once an account is created, users can send requests to buy or sell bitcoin. It also includes information on payment methods as well as prices. They can then peruse listings of deals to buy and sell before selecting the traders with whom they want to transact.





LocalBitcoins provides a variety of benefits to the trading. Although P2P exchanges may not provide the same protections as decentralized exchanges do, they offer users an opportunity to shop around to find the most affordable deal. A lot of these exchanges have rating systems that allow users to are able to review potential trade partners before making any transactions.





Mainstream brokerages


The majority of brokerages do not offer bitcoin purchasing and trading features because of the uncertainty regarding the regulation status of crypto currencies. Robinhood Markets, Inc. (HOOD) is an application popular with retail investors, is an exchange that has the ability to trade in crypto. It charges no commission on cryptocurrency trades and purchases and makes money from payment for order flow, passing its trading volume onto different trading platforms, or brokerages.17





The lack of a commission fee could be an attractive proposition especially for people who are just beginning, but there are a couple of disadvantages to this offer. It is the first. Robinhood can't offer the full range of features and coins that are offered by the most prominent crypto exchanges like Coinbase. Robinhood had enabled trading on its platform to trade seven cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 However, you can trade more than 100 crypto currencies on Coinbase.19 The exchange also provides various types of orders that help minimize risk and offset losses during trading.





The Robinhood platform does not offer a hosted wallet. So, if you wish to purchase cryptocurrencies using Robinhood and you want to purchase cryptocurrencies, you'll need add on additional costs for an online wallet provider.





Bitcoin and other cryptocurrency investments , however, are not protected by insurance policies from this organization. Securities Investor Protection Corporation (SIPC). The regular brokerages of the insurance company protects against the loss of securities and cash in brokerage accounts with an amount of up $1 million, with a $500,000 cash limit.20 This option is not available to customers of cryptocurrency exchanges. Exchanges for cryptocurrency like Coinbase offer insurance against crime to protect their infrastructure against attacks. But that insurance does not provide protection to individual customers against password theft.21


How to Sell Bitcoin


Bitcoin is sold on the same places where you purchased the cryptocurrency, for instance, cryptocurrency exchanges and P2P platforms. Usually, the process for selling bitcoin on these platforms is the same as the process for purchasing it.





For example, you may only be required to click the button and choose an order type (i.e. how much, if the cryptocurrency is to be sold immediately at the cheapest price or it is to be sold to minimize losses) in order to conclude the sale. Based on the composition of the market and demand in the area the cost of selling Bitcoin might differ. For instance, some exchanges in South Korea traded bitcoin at an amount that was referred to as kimchi during the upswing in Bitcoin's prices in the year 2018.





Coinbase, a cryptocurrency exchange, charges a percentage of the value of the transaction in the form of fees. For instance, Coinbase charges 2.49% of the transaction total as fees.22





Exchanges generally have daily and monthly withdrawal limits. Therefore, the proceeds from the sale may not be available immediately to the seller. There aren't limits on the amount of cryptocurrency you are able to sell, however.





What Are the Steps for Purchasing Bitcoin?


The process of buying bitcoin is made up of four parts: choosing the right venue or exchange for your order choosing a payment method, and ensuring safe storage of your bitcoin purchase. Depending on the type of place you have chosen for the first stage, there could be additional steps that are involved in the process. For example, if choose to purchase the cryptocurrency through Robinhood you might need to include additional expenses for the online wallet and custody of your bitcoin because it doesn't offer these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most sought-after places for buying bitcoins include cryptocurrency exchanges and brokerages (crypto and conventional) and payment providers like PayPal. You can also purchase Bitcoin from P2P exchanges. For the indirect ownership of bitcoin, you can be a shareholder in companies who hold the cryptocurrency on their bilan sheets, including Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Typically, the price for purchasing bitcoin consists of the cost of trading plus charges to convert conventional currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment processing services make money through this conversion spread.) The fee per trade will be dependent on what amount in dollars is the trade. A larger amount of trade will carry higher fees. Cost of purchasing depends on the features available by the company. For example, Robinhood does not currently provide an online wallet to storage of bitcoin. This means that you'll have to plan for costs associated with an online wallet purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also buy bitcoin in the following locations:


* Through Bitcoin ATMs


By using online payment services such as PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


Your bitcoin purchase is not protected by SIPC.20 At certain exchanges, such as Coinbase account balances with fiat currencies in personal accounts could be FDIC-insured to the tune of $250,000 per account.21





The Bottom Line


The process of purchasing bitcoin is more involved than the process to buy common equity or stock. This is due to the fact that the crypto ecosystem and infrastructure aren't as advanced like the ones used in mainstream trading.





A process to purchase bitcoin consists in four steps: choosing the appropriate service or place for making the transaction, connecting to a payment method, putting in an order, then ensuring an appropriate storage space for your cryptocurrency. Each step involves a lot of research and careful review of the pros and cons of every service. You can also purchase bitcoin through Bitcoin ATMs and from payment services such as PayPal and traditional brokerages like Robinhood.












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