Notes

How to Buy Bitcoin


It is easy to invest in Bitcoin (BTCUSD) could seem complicated, however it's easier to understand if you divide it up into smaller steps. If you are interested in investing or trading Bitcoin does not require an account with a service or exchange, but other safe storage practices are recommended.





There are numerous things those who are aspiring Bitcoin investors should have an account with a cryptocurrency exchange along with personal identification documentation in the case of a Know Your Customer (KYC) platform, a secure connection to the Internet and a means to pay. It is also recommended that you keep a private wallet, separate from your exchange account. The most reliable methods to pay using this method include bank accounts or debit cards as well as credit cards. It is also possible to take bitcoin at ATMs that specialize in bitcoin as well as through P2P exchanges.





KEY TAKEAWAYS


"The value and value that comes from Bitcoin is due to its usage as a place of value and a payment system along with its limited supply and declining inflation.


* While it's almost impossible to allow Bitcoin itself to be hacked however, it is still possible that your bank or exchange system to suffer a breach. This is why practicing proper storage and security measures is vital.


* You can also purchase bitcoin with mainstream companies like PayPal or Robinhood.


* One method of owning bitcoin is to invest in companies that have bitcoin in their balance sheet.


Before You Buy Bitcoin


Security and privacy are crucial issues regarding security, privacy and confidentiality for Bitcoin investors. Anyone who acquires the private key to a public account that is on the Bitcoin blockchain can approve transactions.1 Private keys should be kept secret--criminals may attempt to steal them should they learn of massive amounts. Be aware that anyone can check the balance on a public address you've created. But the upside to the public data is that a person can create multiple public addresses themselves. Thus, they are able to distribute their stash of Bitcoin across several addresses. The best strategy is to safeguard investments with significant amounts at public addresses that aren't directly tied to the ones which are used for transactions.





Anyone can see a record of transactions performed on blockchain, even you. Although transactions are publicly recorded on the blockchainplatform, identifying data about users isn't. On the Bitcoin blockchain users only have their public key is displayed next to any transaction. This makes transactions safe but not anonymous. In this sense, Bitcoin the transactions appear more clear and trackable in comparison to cash, as all of transactions are public view, unlike private cash transactions. However, Bitcoin transactions also include some element of privacy built to their design. It's very difficult identify the transacting parties--i.e. the recipient and the sender of bitcoin--through the blockchain used by the cryptocurrency.





International researchers as well as the FBI have said they are able to trace transactions made through the Bitcoin blockchain to users' other accounts on the internet, including their digital wallets.2 For example, if someone opens an account at Coinbase, they must provide their identification.3 This means that when that individual purchases bitcoin, the transaction is linked to their name. If they send it to other wallets, it could be traced back to the Coinbase purchase which is tied with the account's holder's ID. This shouldn't be a problem for most buyers since Bitcoin is lawful in U.S. and most other developed nations.





It is important to know the lawful, regulatory as well as tax-related status of purchasing and selling bitcoin based on where you reside prior before making any transactions.


Buying Bitcoin








We've simplified the steps of buying bitcoin below. Make sure to do your homework and pick the right option for you based on your situation.





Step 1: Select a cryptocurrency trading service or a venue


The first step of buying bitcoin consists of choosing the right crypto trading service or a location. Popular trading services and venues to buy cryptocurrency include payments, exchanges and brokerages. In all of them, cryptocurrency exchanges are by far the most convenient alternative because they have a array of features as well as more the use of cryptocurrencies in trading.





By signing up to a cryptocurrency exchange can allow you to purchase, sell, and keep cryptocurrency. It is generally recommended to sign up with an exchange that allows its users to transfer cryptocurrency to their account online for safe keeping. For those looking to trade Bitcoin or other cryptocurrency, this feature could not be of any importance.





There are numerous types from cryptocurrency-based exchanges. Because the Bitcoin principle is decentralization and individual sovereignty, some exchanges allow users to remain anonymous and do not oblige users to submit personal information. Such exchanges operate autonomously and are typically decentralized, meaning they don't have a central source of control.





Even though these systems have evil purposes, they help the people who are not banked. For certain categories of people--refugees and those living in countries with no infrastructure for government credit or banking, anonymous exchanges could help move them into the mainstream economy.





At the moment, many of the major exchanges aren't in a decentralized manner and are subject to laws that require users to submit identifying documents. On the United States, these exchanges comprise Coinbase, Kraken, Gemini, FTX, and Binance.US These are just a few. These exchanges have seen significant growth in the range of services they provide.





The crypto world has grown exponentially in the past decade With a variety of new tokens competing for investor dollars. Except for Bitcoin and a few of the more well-known ones like Ethereum some of these tokens can be found on all exchanges. Each exchange has its own set-of criteria that determine whether they will include or disallow trading of certain tokens.





Coinbase, Kraken, and Gemini offer Bitcoin and a rising number of altcoins. These three are likely to be ones of the easiest ways to get into crypto across the industry. Binance is an sophisticated marketer, and provides more sophisticated trading options and more diverse altcoin options. FTX is a fast-growing cryptocurrency exchange that has the valuation of a multibillion dollar, provides limited amounts of altcoins for U.S. investors.4 However, buyers outside in the U.S. have a greater range of cryptos available on its platform.





An important thing to note when setting up an account with a cryptocurrency exchange company is to follow safe Internet practices. It is recommended to use two-factor authentication. A long, unique password which includes a variety of lowercase, capitalized, and capital letters, special characters, and numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the only country to do so.5 The cryptocurrency can serve as a substitute for currency for any type of transaction where a business can take it. For now, the U.S. dollar continues to be the currency of El Salvador.


Step 2. Join your currency to one of the payment options


When you've selected an exchange, you will be required to gather your personal documents. If you are using an exchange, this could include images of a drivers license or Social Security card, as in addition to information about your employer and source of funds. The information you require depends on the place you reside and the laws in it. It's basically the same as setting up a typical brokerage account.





After the exchange has verified your identity, you'll be asked to connect to a payment service. The majority of exchanges can connect to your bank account without a hassle or connect a credit or debit card. Though you could use a credit card to purchase cryptocurrency, it is not recommended because currency price volatility can inflate the total cost of purchasing a coin.





Bitcoin remains legal across the United States, but some banks may question or restrict deposits to crypto-related sites or exchanges.6 It is best to do a little research to confirm that your bank permits deposits to the exchange you have chosen.





There are various costs for transactions made with a banking account debit or credit card. It is vitally important to know the costs associated with each option of payment to help you choose an exchange, or decide which method of payment is best for you.





Exchanges can also charge fees per transaction. The fees may be in the form of a flat charge (if you trade at a low) or it could be a percentage of trading amount. Credit cards incur the processing fee as well as transaction fees.






Step 3: Place an order


Bitcoin can be purchased (or other cryptocurrencies) after choosing an exchange and linking a payment method. In the past few times bitcoin exchanges have steadily became more accepted. They have grown dramatically by virtue of their liquidity, and their number of features. Changes in operation at exchanges for cryptocurrency are mirrored by the change in how people view cryptocurrencies. A sector that was previously believed to be a scam or with questionable procedures is slowly changing into legitimate, and has drawn interest from all the big players in the financial services sector.





Now, cryptocurrency exchanges have become so popular that they're nearly offering the same range of features that they have as their counterparts in stock brokerage. Exchanges for cryptocurrency today offer an array of different order types and options to invest. All crypto exchanges will offer both market and limit orders. A few offer stop-loss and limit orders. In the list of exchanges above, Kraken offers the most available order types. Kraken offers market, limit, stop loss, stop limit or take-profit limit orders.7





Alongside the variety of orders, exchanges offer methods to set up indefinite investments, allowing customers to incorporate a dollar-cost average into their investments of choice. Coinbase is one example. It lets users create recurring purchases for every day, week or month.8





Step 4: Safe storage


Cryptocurrency and Bitcoin wallets can be storage options for digital assets in a more secure way. The fact that your cryptocurrency is not in the exchange and within your own wallet will ensure that only you have control over the private key that you have to your funds. This gives you the option to save your funds from exchanges and eliminate the risk of your account being hacked and the loss of your funds.





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





Certain wallets come with more options than others. Some are Bitcoin only, and some offer the ability to store several types of altcoins. Some wallets provide the possibility of swapping one token for another.





When it comes down to picking an Bitcoin wallet, you have many options. The first thing you will need to understand about crypto wallets is that they are made up of hot wallets (online wallets) and cold wallets (paper or hardware wallets).





Hot wallets


They are known as hot wallets. Hot wallets are wallets that run via Internet-connected devices, including phones, computers, or tablets. This is a security risk since these wallets create the private keys to your money in these devices connected to the Internet. Although a digital wallet can provide convenience in the manner that you can access and conduct transactions on your money quickly, keeping your private key in a device that is connected to the Internet makes it more vulnerable to hack.





This may seem absurd and a bit naive, but wallets who don't have sufficient security have the chance of losing money to theft. This is not an infrequent occasion, and could occur in a variety of ways. One example is boasting on a platform such as Reddit about how much bitcoin you've got while you have little or any security, and then storing it in a hot vault would make sense. But, these wallets can be made secure as long as the necessary precautions are in place. Strong logins that require two authentication, and safe Internet browsing should be considered as minimum specifications.





These wallets can be used for small amounts of cryptocurrency or any cryptocurrency that you're currently trading on an exchange. The idea is to think of a wallet to a checking account. A common sense financial advice is that you should only keep money for spending on a checking account whereas the majority of your savings is saved in savings or other investment accounts. The same could be said regarding hot wallets. Hot wallets consist of mobile, desktop, web, and exchange accounts custody wallets.





As was mentioned earlier, exchange clients are custodial wallets that are offered by exchanges. The user of this wallet of this type does not hold the owner for the secret key for the cryptocurrency in this wallet. If an incident were to occur where the exchange compromised or your account is compromised, you'd end up losing your money. The expression "not your key, not your coin" is often frequented in cryptocurrency forums and communities.





Cold wallets


The most straightforward description of an offline wallet is that it's not attached to an Internet and thus has greater risk of being affected. These wallets can also be referred to as offline wallets or hardware wallets. These wallets keep a user's private key on something that is not connected to the internet. They are also equipped with software that works in parallel, so that the user is able to see their portfolio without putting their private keys in danger.





Perhaps the most secure method to save cryptocurrency offline is by using a physical wallet. A paper wallet is a account that can be generated from certain websites. It produces public and private keys that are printed out on paper. Access to cryptocurrency from these addresses is only possible if you've got that piece paper that contains the private key. Many people laminate these cash wallets with paper and store them in safe deposit boxes at their bank or in a safe in their home. These wallets are designed for longer-term, secure investments as it is difficult to sell or trade bitcoin stored using this method.





A more typical type of cold type of wallet is the hardware. A hardware wallet is typically one that is a USB drive that can store personal keys of the user offline. Hardware wallets have significant advantages over hot wallets in that they are not affected by viruses that can affect one's computer. Hardware wallets ensure that private keys are never in contact with your network-connected computer or software that could be vulnerable. They're also open source, which allows the community to judge their security via audits of code rather than a company claiming they are completely safe for you to utilize.





The cold wallet is the best and most secured way to store bitcoin or other cryptocurrencies. However, they require additional technical knowledge to setup.





The best way to set your wallets is to include three things one of which is an exchange bank account for buying and selling as well as a hot wallet that can store small or moderate amounts of cryptocurrency which you'd like to trade sell or trade, and a cold bank account to store larger amounts over a longer period of time.





How to Buy Bitcoin With PayPal


You can also purchase bitcoin through a payment processor PayPal Holdings, Inc. (PYPL). There are two methods to purchase bitcoin using PayPal. The first and most practical method is to purchase bitcoin by using your PayPal account that is connected with a payment instrument that accepts check or debit card. The other alternative is to use the balance on funds in your PayPal account to buy cryptocurrencies through a third-party vendor. This option is not exactly as efficient as the other because a few sites allow users to buy bitcoin through this 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 buy products and services with"Checkout with crypto "Checkout With Crypto" feature.10





To open a crypto account with PayPal, the following information is needed to establish a PayPal account: name, physical address the date of birth and tax identification number.11





It isn't possible using a credit/debit card to purchase Bitcoin using PayPal. While you are buying the Bitcoin, PayPal will display a price for the cryptocurrency. The price, however, is subject to rapid change due to the fluctuation of markets for cryptocurrency. It is a good idea for you to check if you have more than the price you set for the purchase in your bank account.





If you buy bitcoin directly via PayPal it earns revenue from the crypto spread. This is the variance between Bitcoin's current market price and its exchange rate with USD. PayPal has a transaction cost for every purchase. The fee is based on the amount of money spent. For example an all-inclusive fee of $0.50 is assessed for purchases between $110 to $200. Following that, it is determined by a percentage percentage of the dollar amount. A typical example is a charge of 2% from the total amount applicable for purchases that range from $100 to $200.12





The main drawback of buying cryptocurrencies through PayPal is that it isn't possible to transfer the crypto out of the Payment processor's own platform. It is therefore not possible for you to transfer your purchased bitcoin from PayPal's wallet to an outside crypto wallet or your personal wallet.11





The downside of using PayPal is that only a handful of merchants and exchanges allow users to utilize the credit card processor for payment. eToro is among the few online marketplaces that allow you to make use of PayPal to buy bitcoin through its platform.13





How to Buy Bitcoin With a Credit Card


The procedure to purchase bitcoin with credit card is similar to the procedure for purchasing it using debit cards or the automated clearing house (ACH) transfers. The buyer must enter your credit/debit card details to the online trading or exchange company and also authorize the transaction. The general rule is that it is not a good idea to purchase bitcoin with credit cards. There are a couple of reasons.





First of all, none of the exchanges permit bitcoin purchases with credit cards due to processing fees and the potential for fraud. The decision could be for the benefit of the customers. This is because credit card processing will apply additional charges to transactions. Thus, in addition to paying transaction fees you'll be left with processing costs that the exchange could charge you.





The second reason is that purchase with credit cards can be costly. Issuers of credit cards view bitcoin transactions as cash advances and charge hefty fees and interest rate on these advances. For example, American Express and Chase both count purchases made with cryptocurrencies as cash advance transactions. Therefore, if, for example, you purchase $100 worth of bitcoin using the American Express card, you must pay $10.00 (current cash advance fees for the transactions) and an annual fee of 25 percent. In addition, the credit card firm also limits you to making $1,000 worth of bitcoin purchases per month.14





An alternative to buying bitcoin with a credit card is to apply for one of the Bitcoin Rewards credit card. Such cards function like your traditional rewards credit card however they offer rewards in the format of Bitcoin. So, they invest the earnings from purchase into Bitcoin. One example of a Bitcoin points card for rewards is the BlockFi Bitcoin Rewards Credit Card.15 Be aware that annual fees for these cards can be very high as well as the cost associated with conversion between fiat and crypto currencies.





Although exchanges such as Coinbase and Binance remain among the top methods to purchase Bitcoin however, they're not the only options.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Customers can put cash into the machine that can be used to purchase bitcoin. It is then sent to digital wallets of users. Bitcoin ATMs are becoming more popular in recent years--even retail major Walmart Inc. (WMT) is testing a pilot program that offers its customers the option to purchase bitcoin. Coin ATM Radar can help find the nearest ATMs.





However, ATMs are an expensive alternative. There are two fees that are associated with ATM bitcoin transactions that include a fee for purchase and an exchange fee to convert cash to bitcoin. Both are quite high when compared to other alternatives. In the case of Bitcoin, for instance, the average fee for transactions with Bitcoin ATMs is 8.4 percent (of the amount of purchase) and 5.4 percent for sales at ATMs.16





Be aware that Bitcoin ATMs have increasingly required identification cards from the government since early 2020.


Exchanges between P2P


As opposed to decentralized exchanges which meet sellers and buyers in a non-public way as well as facilitate all aspects of the transaction, there exist peer-to-peer (P2P) exchanges that provide a more direct connection between users. LocalBitcoins is one such exchange. After signing up, customers can post their requests to buy Bitcoin, or sell it, along with information about payment methods and costs. Users can also browse through listings of offers to buy and sell by selecting the partners who they would like to conduct business.





LocalBitcoins simplifies certain aspects of trading. While P2P exchanges don't have the same level of privacy as decentralized exchanges, they allow users the chance to shop around to find the most affordable deal. Some exchanges offer rating systems to ensure that users can review potential trade partners before making any transactions.





Mainstream brokerages


Only a handful of mainstream brokerages have bitcoin-based trading and purchasing capabilities because of the uncertainty regarding the legality of cryptocurrency. Robinhood Markets, Inc. (HOOD), an app which is popular with investors in retail, is one platform that offers cryptocurrency trading facilities. It charges no commissions on cryptocurrency trades as well as purchases . The company earns money from payment for order flow, transferring its trading volume to the other platforms for trading or brokerages.17





The absence of commissions may be an enticing prospect for beginners, but there are a few negatives with this deal. In the beginning, Robinhood offers nothing like the wide range of features or coins offered by well-known crypto exchanges such as Coinbase. Robinhood has allowed trading on its platform with seven cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 As a contrast, you can trade more than 100 different cryptocurrencies on Coinbase.19 It also offers several types of orders to limit risk and mitigate losses during trading.





The Robinhood platform doesn't have an online wallet. If you are looking to buy cryptocurrency on Robinhood the platform, you'll have be prepared to pay additional fees for an online wallet provider.





Bitcoin and other cryptocurrency investments , however, are not insured by The Securities Investor Protection Corporation (SIPC). In the case of regular brokerages and brokerages, the agency is able to protect against the loss of cash and securities in brokerage accounts that have a total of $1 million, with a $500,000 cash limit.20 That facility is not accessible to clients that use crypto exchanges. Cryptocurrency exchanges like Coinbase have crime insurance to guard their infrastructure against attacks. However, it does not protect individual customers from password theft.21


How to Sell Bitcoin


There are ways to sell bitcoin at exactly the same places you purchased the cryptocurrency including cryptocurrency exchanges, and P2P platforms. Usually, the process of selling bitcoin on these platforms is similar to the process of purchasing it.





In this case, for instance, you could only be required to click on a button and select the type of order (i.e. it is whether the cryptocurrency is sold immediately at the best price or it should be sold in order to be able to limit losses) to make the sale. Depending on the market composition and demand at the place, the offering price for Bitcoin can differ. For instance, exchanges within South Korea traded bitcoin at what is known as a kimchi cost during the run-up in its prices back in 2018.





The cryptocurrency exchanges charge a portion from the cryptocurrency sold amount in fees. For instance, Coinbase charges 2.49% of the transaction total as fees.22





Exchanges generally have monthly and daily withdrawal limitations. This means that the money earned from an extensive sale may not be immediately available to the seller. There are no limits on the amount of cryptocurrency that you can sell however.





What Are the Steps for Purchasing Bitcoin?


The process to buy bitcoin is made up of 4 steps: selecting the best location or exchange for your order and selecting a payment method and ensuring that your data is safe for your purchase. In the case of the choice made in the first step, there may be additional steps involved in the procedure. In the case of Robinhood, for instance, if you choose to purchase the cryptocurrency through Robinhood you may need include additional expenses for an online bank account and custody of your bitcoin since Robinhood does not provide these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most used places for buying bitcoins is through cryptocurrency exchanges as well as brokerages (crypto along with mainstream) and payment companies such as PayPal. You can also buy Bitcoin via P2P exchanges. For ownership in bitcoin that is indirect, you can invest in companies which hold the cryptocurrency on their balance sheets, such as Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Usually, the cost for purchasing bitcoin includes the fee for each trade as well as the cost for converting a foreign currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment companies make money off of this conversion spread.) Fees per trade are a function of an amount in dollars that is associated with the trade. An amount that is higher will incur higher fees. how to invest 401k in bitcoin of purchasing is contingent on the amenities offered by the venue. For instance, Robinhood does not currently offer an online wallet service for storage of bitcoin. Therefore, you will need to plan 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 these locations:


* Through Bitcoin ATMs


* Through online payment services like PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


Your bitcoin purchase is not protected by SIPC.20 For certain exchanges such as Coinbase Bitcoin, the balances of the fiat currency in individual accounts are FDIC insured up to $250,000 per account.21





The Bottom Line


The process of buying bitcoin is more involved in comparison to the purchase of the stock or equity that you normally purchase. This is due to the fact that the cryptocurrency ecosystem and infrastructure isn't as well developed as those used for trading in the mainstream.





The process of buying bitcoin consists of four steps: selecting a venue or service to complete buying, connecting with a payment method, placing an order, and then ensuring the safe storage of your purchased cryptocurrency. Each of these steps requires research and a careful assessment of the pros and disadvantages of each method. You can also purchase bitcoin through Bitcoin ATMs or pay companies like PayPal or major brokerages like Robinhood.












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