Notes

How to Buy Bitcoin


Making investments in Bitcoin (BTCUSD) may seem complicated, however it's easy to breakdown the process into steps. It is possible to invest in or trade Bitcoin is easy if you have an account at a provider or an exchange, although other safe storage practices are suggested.





There are several items that prospective Bitcoin investors need in order to invest: a cryptocurrency-exchange account, personal identification documents If you're using the Know Your Customer (KYC) platform with a secure connection the Internet, and a method of payment. It is also recommended to have your own private wallet separate from your exchange account. Affordable methods of making payments using the method of bank accounts credit cards, debit cards, and credit cards. It is also possible to cash out bitcoin at ATMs with specialized equipment and through exchanges P2P.





KEY TAKEAWAYS


"The value and value that comes from Bitcoin is derived from the fact that it is a popular store of value and payment method in addition to its limited supply as well as the decreasing inflation.


* While it's virtually impossible to allow Bitcoin to be hacked, it is possible for your wallet or exchange Account to fall victim to a hack. This is why taking care of proper security and storage practices are essential.


* You can also purchase bitcoin through the main services such as PayPal as well as Robinhood.


One way to get bitcoin indirectly is by investing into companies with bitcoin on their balance financial statements.


Before You Buy Bitcoin


The security and privacy of your information are critical aspects when it comes to Bitcoin investors. Anyone who acquires the private keys to a private address that is on the Bitcoin blockchain may be able to sign transactions.1 Private keys must be kept confidential as thieves could try to take them away after they learn about huge amounts. Be aware that anyone could know the balance of any public address that you have. But the upside to this is that you can create multiple public addresses for themselves. Thus, they can distribute their stash of Bitcoin among several addresses. One good option is keeping large investments in public addresses that aren't directly linked to addresses that are used in transactions.





Anyone can look up a history of transactions that have been recorded on the blockchain -- even you. Although transactions are recorded publicly by the blockchain, the identification of personal information of the user isn't. With the Bitcoin blockchain only the public key is displayed next to a transaction--making transactions confidential however not completely private. In this regard, Bitcoin is more transparent as well as trackable than cash because all of them are public inspection, in contrast to private cash transactions. However, Bitcoin transactions also have some element of privacy built by their very design. It's very difficult to identify the transacting parties--i.e., recipients and senders of the bitcoin--on the cryptocurrency's blockchain.





Researchers from around the world and the FBI have claimed to be able identify transactions made using the Bitcoin blockchain back to users' other accounts on the internet, including their digital wallets.2 For example, when anyone creates an account on Coinbase they have to verify their identification.3 After that, when the buyer purchases bitcoin, it is linked to their name. In the event that they transfer it another wallet, it can still be tracked back to the Coinbase purchase tied to the person who owns the account. This shouldn't cause concern to most investors since Bitcoin is officially legal within the U.S. and most other developed nations.





Be sure to check out what is legal, regulatory and tax consequences of purchasing and selling bitcoin based on where you live prior to doing any transaction.


Buying Bitcoin








We have broken down the steps needed for buying bitcoin below. You should remember to research the options and choose the most suitable option for you based on your circumstances.





Step 1: Select a crypto trading company or a venue


The first step of buying bitcoin is to select a crypto trading site or a venue. Popular trading services and venues to purchase cryptocurrencies include payments, exchanges and brokerages. Out of these, cryptocurrency exchanges are the most reliable choice because they provide a breadth of features and more currencies for trading.





By signing up to a cryptocurrency exchange allows you to buy, sell, and hold cryptocurrency. It is generally best practice to select an exchange provider that lets users withdraw cryptocurrency into their private online wallet to keep safe. If you are looking to trade Bitcoin or other cryptocurrencies, this feature may not matter.





There are many kinds from cryptocurrency-based exchanges. Since the Bitcoin concept is about personal sovereignty and decentralization, some exchanges permit users to remain anonymous and do not have to require personal information. Such exchanges operate autonomously and are usually decentralized, this means they don't have a central point of control.





Though these systems can be used for evil purposes, they also provide services to the vast majority of people without banking. For certain kinds of people--refugees or those in countries which have little or no infrastructure for government credit or banking--anonymous exchanges may help move them into the mainstream economy.





At the moment, the top exchanges are not controlled by a central authority and oblige users to submit identification documentation. On 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 provide.





The cryptocurrency market has expanded rapidly over the last decade and a wide array of tokens are which are competing with dollars from investors. The exception is Bitcoin and a few of the more well-known ones such as Ethereum there are a few exceptions to the fact that not all these tokens can be found on all exchanges. Each exchange has specific criteria that determine whether they will include or exclude trading in specific tokens.





Coinbase, Kraken, and Gemini provide Bitcoin and a steady stream of altcoins. They're among the easiest crypto on-ramps across the industry. Binance caters to a more sophisticated buyer, with the most sophisticated trading features and more alternative cryptocurrency options. FTX is a fast-growing cryptocurrency exchange that has earned its valuation to be multibillion dollars, also offers limited number of altcoins to U.S. investors.4 However, those who are not from within the U.S. have a greater choice of cryptocurrency options on the platform.





An important thing to note when setting up an account on a cryptocurrency exchange is to make use of secure Internet methods. This includes two factor authentication and A long, unique password that includes a wide range of lowercase lettersand capitalized ones or special characters as well as numbers.






El Salvador made Bitcoin legal tender on September 7, 2021. The country was the first to do so.5 The cryptocurrency can serve as a means of payment for all transactions where a business can take it. This is why the U.S. dollar continues to be the currency of El Salvador.


Step 2. Connnect your exchange with an option for payment


After you've picked the exchange option, you'll be required to gather your personal documents. Dependent on the exchange, this could include images of a drivers license or Social Security card, as also information regarding your employer and the source of funds. The information you require may vary based on the state you reside and the regulations within it. The procedure is mostly similar to setting up a typical brokerage account.





After the exchange has verified your identity, you'll be required to connect to a payment service. On most exchanges you can connect your bank account straight away or you can connect a credit or debit card. Although you can use a credit card to buy cryptocurrency, it is not recommended because the price fluctuations of cryptocurrency could raise the cost of buying coins.





Bitcoin is legal in the United States, but some banks may be reluctant to accept or refuse deposits to crypto-related web sites or exchanges.6 It is important to research to ensure that your bank will accept deposits at the exchange you prefer.





There are various costs for deposits through bank accounts such as debit or credit card. It is vital to look into the costs associated with each payment option in order to choose an exchange and choose which payment option works most effectively for you.





Exchanges can also charge fees per transaction. These fees can be fixed (if the trading amount is minimal) or an amount that is a percentage of the trade amount. Credit card transactions incur an extra processing fee as well as transaction fees.





Step 3: Place an order


You can buy bitcoin (or other cryptocurrency) after choosing an exchange , and then connecting a payment method. In the past few times cryptocurrency exchanges are slowly become more mainstream. They have grown substantially by virtue of their liquidity, and their array of features. Changes in the operations at cryptocurrency exchanges mirror the changes in the way people perceive cryptocurrencies. An industry once dismissed as a fraud or one with questionable practices is now slowly becoming an actual one that has attracted attention from all of the major players in the industry of financial services.





Today, cryptocurrency exchanges have progressed to the point where they're almost the same degree of functionality as their counterparts at stock brokerages. The cryptocurrency exchanges of today provide an array of different order types as well as ways to invest. A majority of cryptocurrency exchanges offer limits and market orders. A few offer stop-loss options. Of the exchanges discussed above, Kraken offers the most sorts of orders. Kraken is able to accommodate market limits, stop-loss orders, stop limit or take-profit limit orders.7





Alongside the variety of orders, exchanges provide methods for setting up periodic investments, and allow customers to apply a cost-per-dollar average to their preferred investment. Coinbase is one example. It lets users create recurring purchases for every day, week or month.8





Step 4: Secure storage


Bitcoin and cryptocurrency wallets provide a place to store digital assets more securely. A crypto wallet that is separate from the exchange and inside your own wallet will ensure that only you have control over the private keys to your accounts. It also gives the ability to store funds away from an exchange and eliminate the possibility of your account being hacked and thereby losing your money.





Though most exchanges provide wallets for their users, security is not their primary business. We generally do not recommend making use of an exchange account for larger or longer-term holdings in cryptocurrency.





Some wallets have more features than other wallets. Some are Bitcoin only, while others offer the ability to store multiple altcoins. Some wallets offer the ability to exchange one token with another.





When it comes time to choose an Bitcoin wallet, there are a number of options. The first thing you will must know about crypto wallets is the concept of hot wallets (online wallets) and cold wallets (paper or physical wallets).





Hot wallets


These wallets may also be known by the name of hot wallets. Hot wallets are ones that run via Internet-connected devices, including phones, computers or tablets. This could lead to vulnerability since hot wallets create key to your private coins using these devices that are connected to the Internet. While a hot account can be extremely convenient due to the ways that you can use it to access and transfer your assets quickly, storing your private key on an Internet-connected device makes it more vulnerable to hack.





This may sound farfetched and a bit naive, but wallets with inadequate security risk losing money to theft. This is not an infrequent situation and it could occur in several ways. It is for instance, boasting on forums like Reddit about the amount of bitcoins you've got, even though the wallet has little to zero security and placing it in a hot bank account would not be the best idea. In reality, the wallets can be made secure as it is taken care of. Secure encryption, strong passwords and two factor authentication, and secure Internet browsing are as minimum specifications.





These wallets are best when you have a small amount of cryptocurrency or any cryptocurrency that you're currently trading on an exchange. You could liken a hot wallet to a checking account. The conventional wisdom of finance is to only put money spent with a check-book account while the majority of your savings are in savings and other investments accounts. Similar could be said for hot wallets. Hot wallets comprise mobile, desktop, web, and exchange accounts custody wallets.





As we have mentioned before, exchange wallets serve as custodial banks provided by exchanges. The owner of this particular type of wallet is not owner or owner of the keys for the cryptocurrency in this wallet. If an incident should occur where the exchange compromised or your account is compromised, you'd lose your funds. The phrase "not your key, not your coin" is heavily utilized in cryptocurrency forums as well as communities.





Cold wallets


The most simple way to describe a cold-wallet is that it's not connected to the Internet and therefore is at greater risk of being breached. These wallets might also be known as offline wallets or hardware wallets. These wallets keep a user's private keys on a device that is not connected to the internet. They also come with software that works in parallel so that the user can view their portfolio without placing their personal key at risk.





Perhaps the most secure method to store digital currency offline is to use a papier wallet. Paper wallets are account that can be generated using certain websites. It then produces both private and public keys that can be printed on a piece of paper. Access to cryptocurrency from these addresses is only possible if you've got the piece paper with the private keys. Many people laminate these wallets in paper and put them in safe storage boxes at the bank or even in a secure in their home. These wallets are meant for higher security and longer-term investments since you are not able to rapidly sell or trade bitcoin stored such a way.





A more typical type of cold wallet is a hardware wallet. Hardware wallets are usually made up of a USB drive that can store the user's private keys offline. Such wallets have serious advantages against hot wallets due to the fact that they are immune to viruses that could harm a computer. Hardware wallets ensure that private keys don't come in contact with your computer's network or software that might be vulnerable. The majority of these devices are open source, allowing the community to verify the safety of these devices by performing inspections of their code rather than the corporation stating they're secure to be used.





Cold-wallets are among the most secured way to store bitcoin or other cryptos. But they require more technical know-how to setup.





An effective way to set your wallets is by having three items three things: an exchange account to use for selling and buying in hot wallets, a hot account to keep small to moderate amounts of cryptocurrency you would like to trade or sell as well as a cold hardware wallet to store your larger assets for long-term time periods.





How to Buy Bitcoin With PayPal


You can also buy bitcoin through a payment processor PayPal Holdings, Inc. (PYPL). There are two methods to buy bitcoin through PayPal. One and the easiest method is buying cryptocurrencies by using your PayPal account, which is linked to a payment device, such as a check or debit card. The other option is to utilize the balance on you PayPal account to purchase cryptocurrency through a third-party vendor. This option is not as convenient as the first since only a handful of third-party sites allow users to buy 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 crypto to buy goods and services through"Checkout With Bitcoin" or the "Checkout With Crypto" feature.10





To establish a Crypto account through PayPal The following information is needed: name, physical address or address, birth date as well as a tax ID number.11





It is not possible to use a credit or debit card to purchase Bitcoin through PayPal. In the process of buying, PayPal will display a price for the cryptocurrency. However, the price is subject to rapid changes because of the volatility of the cryptocurrency market. It is a good idea to ensure that you've got more than the amount that you had budgeted to purchase in your bank account.





If you buy bitcoin directly from PayPal it earns you money off the crypto spread or the differences between Bitcoin's value plus its price of exchange with USD. The company will also charge a transaction cost per transaction. These fees are contingent on the amount in dollars of the purchase. For instance the flat fee of $0.50 is per purchase between $100 to $200. Thereafter, the fee is in the form of a percentage of total dollar amount. As an example, a percentage of 2 percent of the amount total is paid for purchases in the range of $100 and $200.12





One of the disadvantages of buying cryptocurrency through PayPal is that it is not possible to transfer the crypto away from the company's platforms for payment. It is therefore not possible for you in order to transfer your Bitcoin purchase from PayPal's wallet to another crypto-wallet or your personal wallet.11





Another drawback to using PayPal is that only a handful of online and offline traders permit to use the service for payments. eToro is one of the few online trading platforms that permit payment through PayPal to purchase bitcoins on its platform.13





How to Buy Bitcoin With a Credit Card


The procedure for buying bitcoin with credit cards is the same as the method for purchasing it via debit cards as well as through the automated clearing house (ACH) funds transfers. You will need to enter your credit/debit card details to the exchange or online trading firm and sign the transaction. In general, , it's not the best decision to buy bitcoin using credit cards. There are a couple of reasons for this.





First, not all exchanges allow bitcoin purchasing using credit cards due to the associated processing fees and the potential for fraud. This option could be to be in the best interest of consumers. This is since credit card processing can include additional charges to these transactions. As a result, instead of paying transaction fees, you will end up being charged processing fees which the exchange could pass on to you.





The second reason is because purchasing credit cards is costly. Issuers of credit cards view bitcoin purchases as cash advances and add significant fees and interest charges on these advances. For example, American Express and Chase each count cryptocurrency purchases for cash advance as. So, if you buy $100 worth of bitcoin on an American Express card, you will pay $10 (current cash advance fee applicable to these transactions) and an annual fee of 25 percent. Additionally, the credit card provider also restricts you to making $1,000 worth of bitcoin transactions per month.14





A more indirect way of purchasing bitcoin using credit cards is to obtain an Bitcoin rewards credit card. Such cards function like your regular rewards credit card, but they give rewards in the format of Bitcoin. So, they invest the cashback from purchases into Bitcoin. One example of one Bitcoin cards that reward you is called BlockFi Bitcoin Rewards Credit Card.15 Be aware, however, that the annual charges for such cards can be high and there may be additional expenses associated with the conversion of fiat currency into crypto.





Though exchanges like Coinbase or Binance remain among the top methods to buy Bitcoin, they are not an all-inclusive solution.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Individuals can plug cash into the machine which can then be used to buy bitcoin that is then stored in online wallets for users. Bitcoin ATMs are becoming more commonplace in recent years. Retail big Walmart Inc. (WMT) is trialling a pilot program that offers its customers the possibility of buying bitcoin. Coin ATM Radar can help to track down the closest ATMs.





However ATMs can be costly alternative. There are two charges associated with ATM bitcoin transactions they charge a cost for the purchase as well as the conversion fee when converting one currency that is fiat to bitcoin. Both costs are quite costly when compared to other options. For instance, the global average price for purchases made for Bitcoin ATMs is 8.4% (of the purchase amount) and 5.4 percent for sales at ATMs.16





Be aware that Bitcoin ATMs have increasingly required government-issued IDs beginning in 2020.


Exchanges between P2P


As opposed to decentralized exchanges which provide buyers and sellers with anonymity and handle all aspects of the transactions, there are peer-to-peer (P2P) exchange services which facilitate a faster link between users. LocalBitcoins is one example of such an exchange. After signing up, users can request to buy or sell bitcoin. They can also provide information about payment options and prices. Customers can then browse through lists of deals to buy and sell before selecting the traders with whom they want to trade.





LocalBitcoins helps with certain aspects of the trade. While P2P exchanges don't have the same level security and anonymity as traditional exchanges but they provide users with the opportunity to shop around to find the best price. Many of these exchanges also offer rating systems to ensure that users are able evaluate potential trade partners before transacting.





Mainstream brokerages


A small percentage of the major brokerages offer bitcoin purchase and trading capabilities due to the uncertainty surrounding the regulation status of crypto currencies. Robinhood Markets, Inc. (HOOD) is an app that is popular among retail investors, is one of the exchanges that offer cryptocurrency trading facilities. It charges no commission for cryptocurrency transactions and purchases . It also earns money from payments for order flow transferring its trading volume to any other platform for trading, as well as brokerages.17





The absence of a commission-based fee might sound appealing in the beginning, but there are a few limitations to the service. Primarily, Robinhood does not have the broad range of features and coins offered by well-known crypto exchanges like Coinbase. Robinhood has allowed trading on its platform for seven cryptocurrency: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 While Coinbase is a different story, you can trade more cryptocurrencies than 100 through Coinbase.19 It also has various order types to lower the risk and reduce losses in trading.





The Robinhood platform doesn't offer a hosted wallet. Therefore, if you intend the purchase of cryptocurrencies via Robinhood and you want to purchase cryptocurrencies, you'll need to factor in additional costs for an online wallet provider.





Bitcoin and other cryptocurrency investments do not come protected by insurance from this organization. Securities Investor Protection Corporation (SIPC). The regular brokerages of the organization protects against the loss of cash or securities account with brokerages that are up to $500,000, which includes a $250,000 cash limit.20 This insurance option isn't accessible to clients at cryptocurrency exchanges. Cryptocurrency exchanges like Coinbase have crime insurance to safeguard their infrastructure from hacks. However, it does not provide protection to individual customers against password theft.21


How to Sell Bitcoin


Bitcoin is sold on the same place where you purchased the cryptocurrency including cryptocurrency exchanges, and P2P platforms. Typically, the process of selling bitcoin on these platforms is similar to the buying process.





For instance, you might only need to click the button and choose an order type (i.e., whether the cryptocurrency should be sold instantly at the current price or if it should be sold to limit losses) to complete the sale. Based on the composition of the market and the market demand at the event the price of offering for Bitcoin will vary. The example is that exchanges in South Korea traded bitcoin at an alleged kimchi premium in the run-up in its prices in the year 2018.





The cryptocurrency exchanges charge a portion of the amount sold in the form of fees. For how to buy bitcoin with c , Coinbase charges 2.49% from the total transaction amount as fees.22





Exchanges generally have daily and monthly withdrawal limits. This means that cash earned from a large sale may take a while to reach the seller. There are no limits on the quantity of cryptocurrency you can sell, however.





What Are the Steps for Purchasing Bitcoin?


The process to buy bitcoin consists of 4 steps: choosing an exchange or venue for your order, selecting a payment method and then ensuring a secure storage for your purchase. Depending on the type of venue you select in the first phase, there will be additional steps involved in the procedure. For instance, if, for example, you are purchasing the cryptocurrency with Robinhood you may need to take into account additional costs for an 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 used places for purchasing bitcoins include cryptocurrency exchanges and brokerages (crypto and standard) as well as payment solutions like PayPal. It is also possible to purchase Bitcoin through P2P trading platforms. To acquire indirect ownership of bitcoin, you can put money into companies that own the cryptocurrency in their bilan sheets, including Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


In general, the cost of buying bitcoin includes an amount per transaction plus the cost for converting a foreign currency (generally dollars) to bitcoin. (Cryptocurrency exchanges as well as payment services make money off of this conversion spread.) The price per trade is dependent on what amount in dollars is the trade. A larger amount of trade will incur higher fees. The cost of the purchase will depend on the features offered by the provider. For instance, Robinhood does not currently provide an online wallet to depositing bitcoin. Therefore, you will need to budget for the costs of a wallet online for your purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also purchase bitcoin at the following places:


* Through Bitcoin ATMs


* Through online payment providers like PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


Your bitcoin purchase is not protected by SIPC.20 On certain exchanges such as Coinbase account balances with fiat currencies 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 is somewhat more complicated than the procedure for buying normal equity or stock. This is mainly because the cryptocurrency's infrastructure and ecosystem is not as well-developed as those used for trading in the mainstream.





A bitcoin purchase process consists of four stages: choosing a service or venue for payment, connecting to the payment method of your choice, placing an order, and making sure you have an appropriate storage space for your cryptocurrency. Each of these steps requires extensive research and careful study of the pros & cons of every service. Bitcoin can be purchased through Bitcoin ATMs or from payment service providers like PayPal and mainstream brokerages like Robinhood.












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