Notes

How to Buy Bitcoin


The process of investing in Bitcoin (BTCUSD) may appear complicated, but it's much easier when you reduce it into steps. When you invest or trade, Bitcoin does not require an account at a service or exchange, but additional safe storage practices are recommended.





There are a variety of things prospective Bitcoin investors should have to have: a cryptocurrency exchange account for personal identification If you're using an Know Your Customer (KYC) platform in addition to a secure connection the Internet, and a method to pay. It is also suggested that you use your own personal account outside of the exchange account. Affordable methods to pay with this method include bank accounts including debit cards, banks, and credit cards. It is also possible to receive bitcoin from ATMs with specialization as well as via P2P swaps.





KEY TAKEAWAYS


"The value and value that comes from Bitcoin comes from its usage as a store of value and payment system and also its limited supply as well as the decreasing inflation.


* While it's almost impossible to allow Bitcoin to be hacked but it's still possible that your bank or exchange bank account to have been compromised. That's why using secure storage and security precautions is crucial.


You can also purchase bitcoin through services that are widely used, like PayPal or Robinhood.


* One method to hold bitcoin in indirect ways is to invest in companies that have bitcoin on their balance statements.


Before You Buy Bitcoin


Security and privacy are key aspects to Bitcoin investors. Anyone who has access to the private secret key to a public address through the Bitcoin blockchain can authorize transactions.1 Private keys must be kept confidential as thieves could try to take them away if they learn of large accounts. Be aware that anyone can examine the balance of a public address you use. The flip side to this information being public is that individuals can make multiple public addresses for themselves. This allows them to spread their wealth of Bitcoin across multiple addresses. A good strategy is to protect investments that are significant at public addresses that are not directly linked to those that are used in transactions.





Anyone can check the history of transactions that have been recorded on the blockchain--even you. Although transactions can be publicly recorded on the Blockchain, identifying the user's information isn't. It is true that on the Bitcoin blockchain, only a user's public key is shown next to any transaction. This makes transactions safe however not completely secure. In that sense, Bitcoin transactions are more transparent and traceable over cash as all them are available for public viewing, in contrast with private cash transactions. However, Bitcoin transactions also come with an element of privacy built as part of their design. It is extremely difficult to locate the transaction parties--i.e., the recipient and the sender of bitcoins on the cryptocurrency's own blockchain.





Researchers from around the world and the FBI have claimed to be able follow transactions made via the Bitcoin blockchain back to users' other online accounts, which includes their digital wallets.2 For instance, if somebody creates a Coinbase account Coinbase it is required to provide their identification.3 In the future, when that buyer buys bitcoin, that is linked to their name. When they transfer it to another wallet, it can still be tracked back to the Coinbase transaction that is tied to the identity of the account's owner. The issue should not bother most investors since Bitcoin is lawful in U.S. and most other developed nations.





Be sure you know whether there are any legal or regulatory and tax regulations for buying and selling bitcoin based on where you are located prior to conducting transactions.


Buying Bitcoin








We've detailed the steps to purchasing bitcoin in the following steps. Remember to conduct your own research and pick the right option according to your specific circumstances.






Step 1: Select a crypto trading company or venue


First step in buying bitcoin is to select a crypto trading company or a venue. Popular trading services and venues that allow the purchase of cryptocurrencies comprise cryptocurrency exchanges, payment services, and brokerages. In all of them, cryptocurrency exchanges are the best alternative because they have a large array of features as well as currencies for trading.





By signing up to a cryptocurrency exchange lets you buy, sell, or hold crypto. It is generally best practice to select an exchange provider that allows users to withdraw their crypto funds to their account online for safe keeping. In the case of those wanting to trade Bitcoin or other cryptos, this feature could not be of any importance.





There are many kinds and types of crypto exchanges. Because the Bitcoin philosophy is one of autonomy and decentralization, certain exchanges permit users to remain anonymous and don't have to require specific personal data. These exchanges operate independently and are often decentralized meaning they don't have a central source of control.





While such systems may serve malicious purposes, they also provide benefits to the global population without banks. Particularly for refugees or those who reside in nations with little to no infrastructure for credit from the government or banking - anonymous exchanges can connect them to the world's economy.





Right now, however, most of the popular exchanges do not centrally managed and have laws that require users to provide identifying documentation. In the United States, these exchanges include Coinbase, Kraken, Gemini, FTX, and Binance.US Just to name a few. The number of exchanges has increased in the variety of features they offer.





The crypto market has grown rapidly over the last decade, with many new tokens fighting for the investor's dollars. Except for Bitcoin and some of the most well-known coins, such as Ethereum However, not all these tokens can be found on all exchanges. Each exchange has their own set of rules for determining whether to accept or disallow trading of certain tokens.





Coinbase, Kraken, and Gemini offer Bitcoin and a steady stream of altcoins. They're among the easiest crypto on-ramps in the entire market. Binance caters to a more advanced traderand has an enhanced trading experience and more alternative cryptocurrency options. FTX is a rapidly-growing crypto exchange that has a multibillion-dollar valuation, offers limited amounts of altcoins for U.S. investors.4 However, customers outside of that U.S. have a greater selection of options on its platform.





One important aspect to take into consideration when creating an account for cryptocurrency exchange is to follow safe Internet procedures. It is recommended to use two-factor authentication. having a unique and long password that comprises a variety lowercase and capitalized letters, special characters, and numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the first nation to do so.5 The cryptocurrency is used as a form of currency in any transaction in which a company is willing to accept it. A U.S. dollar continues to be El Salvador's principal currency.


Step 2: Connect your exchange to your payment option


If you've made a decision to go with an exchange, you will be required to gather your personal documents. Dependent on the exchange, they may require photos of a drivers license or Social Security card, as together with details about your employer as well as the source of funds. The information you'll require can depend on the region your home is located in and regulations that are in place within it. It's basically the same as opening a traditional brokerage account.





After the exchange has verified your identity, you will be asked to join to a payment service. On most exchanges you can connect to your bank account without a hassle or connect a debit or credit card. While you are able to use a credit card to purchase cryptocurrency, it's not a good idea because the price fluctuations of cryptocurrency could raise the overall cost of purchasing the coin.





Bitcoin is legal in the United States, but some banks may question or even restrict deposits to crypto-related sites or exchanges.6 It is recommended that you check to see if your bank allows deposits at your chosen exchange.





There are various costs for deposits to a bank account either debit or credit card. It is vital to look into the fees that are associated with every payment method to help select an exchange option or decide which one works best for you.





Exchanges can also charge fees per transaction. These fees can be either a flat amount (if the amount traded is small) or an % of the trading amount. Credit card transactions incur fees for processing in addition to transaction charges.





Step 3. Place an order


You can buy bitcoin (or other cryptocurrencies) after selecting an exchange , and then connecting a payment option. In recent times cryptocurrency exchanges have slowly become more widespread. They have grown considerably both in terms liquidity and their array of features. Changes in the operations at bitcoin exchanges are similar to the change regarding the perceived value of cryptocurrencies. The business once considered a fraud or one with unsound procedures is slowly changing into a legitimate one that has attracted attention from every major player in the financial sector.





Now, cryptocurrency exchanges have become so popular that they're nearly offering the same range of features that they have as their counterparts who are stock brokers. There are now crypto exchanges that offer numerous types of order and ways to invest. All crypto exchanges will offer both limit and market orders, and some also offer stop-loss-orders. Of the exchanges discussed above, Kraken offers the most different types of orders. Kraken allows for market, limit, stop-loss, stop-limit, take-profit, and take-profit limit orders.7





Alongside a wide range of orders, exchanges provide options for setting up recurring investments, allowing clients to integrate a dollar cost average into the investments they prefer. Coinbase for instance, lets users set up recurring purchase for each week, day or month.8





Step 4: Secure storage


Coins and crypto wallets are places to store digital assets more securely. Your crypto is kept away from the exchange as well as in your personal wallet makes sure that only you have control over the private key to the funds. It also gives you option of keeping your money away from an exchange and avoid the risk that your exchange is hacked and thereby losing your money.





While many exchanges provide wallets for their users, security isn't their main business. We generally do not recommend using an exchange-based wallet for significant or long-term investments in cryptocurrency.





Certain wallets come with more features than others. Some are Bitcoin only, while some offer the ability to store many altcoins. Some wallets also offer the ability to swap one token for another.





When it comes time to choose the right Bitcoin wallet, you can choose from several options. The first thing you need to understand about crypto wallets is the notion of hot wallets (online wallets) and cold wallets (paper or hardware wallets).





Hot wallets


The online wallets can also be known as "hot wallets. Hot wallets work on devices that are connected to the Internet, such as phones, computers, or tablets. It is possible for them to be vulnerable since they generate private keys to your money in these devices connected to the Internet. Although a mobile wallet can be quite convenient in the manner that you can connect to and perform transactions with your assets swiftly, the fact that you store your private keys on a device connected to the internet makes it more susceptible to a attack.





This may sound ridiculous However, those with hot wallets who aren't putting in enough security are at risk of having their money stolen. This is not an infrequent instance, and it can happen in a number of ways. As an example, announcing on a popular forum such as Reddit about how much bitcoins you've stored while you're having little to no security , and storing it in a hot vault would make sense. That said, these wallets are secure as they are protected by the appropriate measures. Secure logins that require two authentication, and secure Internet browsing should be considered minimum requirements.





They are great for small amounts or other cryptocurrency you are currently trading on an exchange. One could compare a hot wallet to a bank account. The conventional wisdom of finance is that you should keep your money only for spending with a check-book account while the majority of your funds is saved in savings or other investments accounts. The same can be said with hot accounts. Hot wallets include mobile desktop, web and exchange accounts custody wallets.





Like how to buy bitcoin how much said earlier, exchange wallets are custodial accounts offered by exchanges. The person who uses this wallet form is not holder of the public key to the cryptocurrency held within the wallet. If a situation were to occur in which the exchange was hacked or your account becomes compromised, you'd lose the funds you have invested. The phrase "not your key, not your coin" is heavily repeated within cryptocurrency forums and communities.





Cold wallets


The most basic description of"cold" wallets is that it isn't in connection with the Internet and , therefore, has much lower risk of being affected. These wallets are also known as offline wallets or even hardware wallets. These wallets keep a user's private key on something that is not connected to the internet. They can also come with software which operates in parallel so users can access their entire portfolio without putting private key at risk.





Perhaps the best way to store cryptocurrency offline is with a paper wallet. A paper wallet is a wallet that you can generate using certain websites. It then generates private and public keys which can be printed on paper. The ability to access bitcoin and other digital currencies is only possible if you own the piece of paper that contains the private key. A lot of people laminate their paper wallets and keep them in safe deposits at their bank or even in a secure at home. These wallets are for longer-term, secure investments as you are not able to rapidly sell or trade bitcoin stored the way.





A more typical type of cold wallet is one that is a physical wallet. The typical hardware wallet is made up of a USB drive device that keeps a user's private keys securely offline. The advantages of these wallets are significant against hot wallets due to the fact that they aren't affected by viruses that can infect one's computer. With hardware wallets, private keys are not in contact with your network-connected computer or software that could be vulnerable. They're also usually open source, allowing the community to determine the security of their devices through codes audits rather than a company claiming that they are appropriate for usage.





They are by far the most secure method of storing your bitcoin or other cryptos. However, they require a greater amount of technical knowledge to set up.





An ideal way to set your wallets is with three things such as an exchange account that allows you to purchase and sell products an exchange account, a hot bank account to hold small to medium amounts of crypto you wish to trade or sell, and a cold hardware wallet for holding larger sums over a longer period of time.





How to Buy Bitcoin With PayPal


Bitcoin can also be bought via the payment processor PayPal Holdings, Inc. (PYPL). There are two ways to buy bitcoin with PayPal. The first and most convenient method is to purchase cryptocurrencies using your PayPal account that is connected to a financial institution that accepts checking account with a debit or credit card. The other option is to use the balance of you PayPal account to buy cryptocurrencies through a third party service. This option is not exactly as efficient as the other since a small percentage of third-party websites allow customers 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 cryptocurrencies to buy goods and services through the "Checkout With Crypto" feature.10





To establish a cryptocurrency account with PayPal, the following information is needed in order to set up a PayPal account: name; physical address or address, birth date along with a tax identification number.11





It isn't possible to use a credit/debit card to buy Bitcoin via PayPal. During the purchase process, PayPal will display a price for the cryptocurrency. However, the price is subject change rapidly due to the fluctuation of markets for cryptocurrency. It's a good idea to ensure that you've got more than the amount which you budgeted in your bank account.





When you buy bitcoin directly from PayPal they earn money on the crypto spread or the difference between Bitcoin's market price plus its price of exchange with USD. The company is also charged a transaction fee for every purchase. The fees are based on the dollar amount of the purchase. For instance an all-inclusive fee of $0.50 is applied to purchases between $100 to $200. After that, fees are an amount that is a percentage of the total dollar amount. For instance, a fee of 2% of the amount total is charged for crypto purchases between $100 to $200.12





One disadvantage of purchasing cryptocurrency via PayPal is that it isn't possible to move the crypto beyond the payments processor's system. This means it's not possible for you in order to transfer your Bitcoin purchase from PayPal's wallet into an additional crypto wallet, or your personal wallet.11





Another drawback of using PayPal is that only a few exchanges and online traders allow that use of the processing company to make payment. eToro is among the only a few online sellers that allow using PayPal to purchase bitcoins through its platform.13





How to Buy Bitcoin With a Credit Card


The procedure for buying bitcoin using credit cards is the same as the method for buying it with debit or credit cards. You can also purchase it through automated clearing house (ACH) transfer. You'll have to input your credit card's information into the exchange or online trading firm and then authorize the transaction. However, generally speaking, it is not a good idea to make purchases with bitcoin credit cards. There are a few reasons why this is.





First, none of the exchanges permit bitcoin purchase with credit card because of the processing costs and the risk of fraudulent transactions. The decision could be for the benefit of the customers. This is since credit card processing can apply additional charges to transactions. So, in addition paying transaction fees you'll end up with processing fees that the exchange can pass onto you.





Another reason is that the purchases made using credit cards are costly. Credit card issuers treat bitcoin transactions as cash advances, and are able to charge large fees as well as interest rates on such advances. For instance, American Express and Chase each count cryptocurrency purchases in cash-advance transactions. So, if you buy $100 worth in bitcoin using the American Express card, you are required to pay at least $10 (current cash advance charges for the transactions) and an annual percentage fee of 25%. Furthermore, the credit card provider also restricts your purchases to a maximum of $1,000 in bitcoin purchases per month.14





A more indirect way of purchasing bitcoin by using a credit card is to purchase one of the Bitcoin reward credit card. Such cards function like your typical rewards credit card except they reward you in the type of bitcoin. This means that they invest profits from purchases into Bitcoin. One example of one Bitcoin cards that reward you is called BlockFi Bitcoin Rewards Credit Card.15 Beware, however that the annual fees associated with these cards could be quite high and may also be added expenses associated with the exchange from fiat currency to crypto.





Though exchanges like Coinbase as well as Binance remain among the most sought-after ways to buy Bitcoin however, they're not the only way.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Customers can simply insert money into an ATM and then use it to purchase bitcoin. The money is transfered to wallets online for users. Bitcoin ATMs have grown increasingly famous in recent months. Retail company Walmart Inc. (WMT) is developing a pilot project that offers its customers the option of purchasing bitcoin. Coin ATM Radar can help locate the closest ATMs.





However ATMs aren't cheap alternative. There are two fees associated with ATM bitcoin purchases: a purchase fee and an exchange fee to convert a fiat currency to bitcoin. Both fees are fairly steep when compared to other alternatives. For instance, the world average price of purchases from Bitcoin ATMs starts at 8.4 percent (of the amount of purchase) and 5.4 percent for sales made at ATMs.16





Be aware that Bitcoin ATMs are more often requiring government-issued IDs as of early 2020.


Exchanges P2P


The decentralized exchanges connect sellers and buyers anonymously and allow for 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 purchase Bitcoin, or sell it, along with information about payment methods and costs. Users can also browse through listings of buy and sale offers as well as select the partner with whom they want to do business.





LocalBitcoins aids in some aspects of the trading. While P2P exchanges do not have an identical level of security and privacy as decentralized exchanges but they provide users with the ability to shop around to find the most affordable deal. A lot of these exchanges have rating systems, so that customers can evaluate prospective trade partners prior to committing.





Mainstream brokerages


Most brokerages don't offer bitcoin purchasing and trading features due to the uncertainty of the regulation status of crypto currencies. Robinhood Markets, Inc. (HOOD) is an application loved by retail investors, is one platform that offers bitcoin trading capabilities. It charges 0% commissions on cryptocurrency trades as well as purchases . It also earns money from money received for order flow and passing its trading volume onto other trading platforms or brokerages.17





The absence of a commission fee could be an attractive proposition in the beginning, but there are a couple of downsides to the offer. First, Robinhood offers nothing like the variety of features and coins offered by prominent crypto exchanges like Coinbase. Robinhood offered trading on its platform on seven cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 While Coinbase is a different story, you can trade more than 100 cryptocurrency with Coinbase.19 The exchange also provides different types of orders to reduce the risk of loss and protect against losses during trading.





The Robinhood platform does not offer a hosted wallet. So, if you wish to buy cryptocurrencies on Robinhood the platform, you'll have be prepared to pay additional fees to an online wallet service.





Bitcoin and other cryptocurrency investments are not covered by insurance under this organization. Securities Investor Protection Corporation (SIPC). In the case of regular brokerages and brokerages, the organization protects against the loss of cash and securities brokerage accounts up to $5000, with a $2500-dollar cash limit.20 That facility is not accessible to clients from cryptocurrency exchanges. Cryptocurrency exchanges such as Coinbase are covered by insurance against crime to guard their infrastructure against hacks. However, this insurance doesn't ensure that customers are protected from password theft.21


How to Sell Bitcoin


There are ways to sell bitcoin at the same place where you purchased the cryptocurrency, like cryptocurrency exchanges or P2P platforms. In general, the procedure of selling bitcoin through these platforms is similar to the procedure for buying it.





For example, you may only be required to click to select the type of order (i.e. how much, if the cryptocurrency can be sold instantly at the cheapest price or it is to be sold to prevent losses) to complete the sale. Based on the composition of the market and demand at the place the price of offering for Bitcoin can vary. Exchanges for example in South Korea traded bitcoin at what is known as a kimchi cost during the time of the increase in prices back in 2018.





Exchanges for cryptocurrency charge a percentage of the value of the transaction as fees. For example, Coinbase charges 2.49% of the total transaction value as fees.22





Exchanges generally have daily and monthly withdrawal limits. This means that cash earned from an enormous sale might not be available for immediate withdrawal to the seller. There are no restrictions on the amount of cryptocurrency you can sell, however.





What Are the Steps for Purchasing Bitcoin?


The procedure to buy bitcoin is made up with four main steps: selecting the best location or exchange for your order then selecting a method of payment in order to secure the storage for your newly purchased cryptocurrency. Depending on the type of venue you select in the first process, there may be other steps to be taken in the process. If, for instance, you acquire the cryptocurrency using Robinhood you may need be aware of additional costs associated with an online wallet or custody of your bitcoin as they do not provide these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most used places to buy bitcoins are exchanges as well as brokerages (crypto as well as mainstream) as well as payment services such as PayPal. There is also the option of buying Bitcoin through P2P trading platforms. In order to acquire bitcoin in indirect form it is possible to invest in companies that hold the cryptocurrency on their balance sheets. For instance, Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Typicallyspeaking, the cost of buying bitcoin is a transaction fee plus the cost of conversion of a cash currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment services earn money off of this conversion spread.) The fee per trade is a function of an amount in dollars that is associated with the trade. A larger trade volume will carry higher fees. The overall purchase cost also is contingent on the features provided by the location. For instance, Robinhood does not currently provide an online account for storage of bitcoin. Thus, you'll have be prepared for online wallet costs 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?


The purchase of bitcoin is not covered by SIPC.20 At certain exchanges, like Coinbase account balances with fiat currencies in individual accounts may be FDIC-insured up to $250,000 per account.21





The Bottom Line


The process for purchasing bitcoin is more involved when compared to purchasing normal equity or stock. This is mainly because the cryptocurrency ecosystem and infrastructure aren't as developed as those used for trading in the mainstream.





The process of purchasing bitcoin is comprised of four steps: deciding on the right service or location for your purchase, joining to the payment method of your choice, placing the order, and also ensuring secure storage for the purchased cryptocurrency. Each of these steps needs research and an in-depth review of the pros and pros of each service. You can also buy bitcoin through Bitcoin ATMs or via payment companies like PayPal or major brokerages like Robinhood.












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