Notes

How to Buy Bitcoin


It is easy to invest in Bitcoin (BTCUSD) is complicated, but it's much easier when you take it apart into smaller steps. In order to invest or trade Bitcoin just requires the creation of an account on a service or an exchange. additional safe storage practices are advised.





There are a variety of things future Bitcoin investors should have for their cryptocurrency investment: a cryptocurrency exchange accounts and personal identification documents for those who use a Know Your Customer (KYC) platform, a secure connection to the Internet, and a method for payment. It is also suggested that you establish your own private wallet separate from the exchange account. Methods of payment that work with this route are bank accounts including debit cards, banks, and credit cards. You can also acquire bitcoin using ATMs specifically designed for bitcoin and via P2P exchanges.





KEY TAKEAWAYS


"The value" of Bitcoin is derived from its usage as a place of value and payment method, as well as its limited supply, and the decrease in inflation.


It is almost impossible for Bitcoin to be hacked yet, it's possible that your bank or exchange account to be compromised. This is why practicing proper safe storage and security measures is crucial.


* You can also buy bitcoin using mainstream services like PayPal as well as Robinhood.


* One method of owning bitcoin is to invest in businesses with bitcoin in their balance sheet.


Before You Buy Bitcoin


Privacy and security are important concerns for Bitcoin investors. Anyone who obtains the private secret to an address on the Bitcoin blockchain can be authorized to make transactions.1 Private keys must be kept in secret. Criminals may attempt to steal them in the event of learning of huge accounts. You should be aware that anyone is able to know the balance of any public address used. But the upside to this data being available to the public is that you can set up multiple public addresses for themselves. In this way, they can divide their wealth of Bitcoin to multiple addresses. It is a good idea to safeguard investments with significant amounts at public addresses that aren't directly linked to those that are used in transactions.





Anyone can access a history of transactions conducted on the blockchain--even you. Although transactions are publicly recorded on the blockchainsystem, identifying the user's information isn't. For the Bitcoin blockchain just a user's public keys are visible alongside any transaction. This makes transactions safe however not completely anonyme. In this way, Bitcoin transfers are much easier to trace and trackable than cash since all of the transactions are publicly available for examination, unlike private transactions. However, Bitcoin transactions also have the element of anonymity built as part of their design. It's difficult for anyone to track the transaction parties--i.e. those who send and receive bitcoins--on the cryptocurrency's Blockchain.





International researchers as well as the FBI claim they are able trace transactions made through the Bitcoin blockchain back to users' other online accounts, which includes their digital wallets.2 For example, if one creates an account with Coinbase you must supply their identification.3 When that user purchases bitcoin, it is linked to their identity. When they transfer it to another account, it will nevertheless be traced back the Coinbase purchase that is connected to the identity of the account holder. This shouldn't cause concern to most investors , as Bitcoin remains legal throughout the U.S. and most other advanced countries.





Be sure you know all the regulatory, legal and tax regulations for buying and selling bitcoin where you live prior to doing any transaction.


Buying Bitcoin








We have broken down the steps needed for purchasing bitcoin in the following steps. Keep in mind that you will need do your research to choose the best solution to suit your needs.





Step 1: Choose a crypto trading company or a venue


The initial step in purchasing bitcoin consists of choosing a crypto trading company or a location. The most popular options for trading and venues for purchasing cryptocurrency include exchanges, payment services and brokerages. Out of these, cryptocurrency exchanges are the best option as they provide a breadth of features and more exchanges using cryptocurrencies.





In signing up for a crypto exchange lets you purchase, sell, and hold crypto. It is generally best practice to choose an exchange that lets its customers cash out cryptocurrency to their personal online account for safekeeping. If you are looking to trade Bitcoin or other currencies, this feature might not be relevant.





There are a myriad in cryptocurrency exchange. Because the Bitcoin concept is about individual sovereignty and decentralization certain exchanges allow users to remain anonymous and do not require users to fill in their personal details. The exchanges that operate in this manner are autonomous and are generally decentralized which means that they don't have a central point of control.





While how to buy bitcoin without fees are able to serve nefarious purposes, they can also offer services to the global population without banks. For certain kinds of people--refugees or those who reside in countries with little to no infrastructure for government credit or banking--anonymous exchanges can help bring them into mainstream economy.





The moment is, however, that most of the popular exchanges do not decentralized , and they follow regulations that require users to submit identifying documents. Within the United States, these exchanges comprise Coinbase, Kraken, Gemini, FTX, and Binance.US, to name a few. These exchanges have risen significantly in the number of features they offer.





The crypto universe has grown rapidly in the last decade and a wide array of tokens are offering investor dollars. Except for Bitcoin and a few other prominent coins, such as Ethereum some of these coins are sold on all exchanges. Each exchange has specific criteria to decide if it's appropriate to include or restrict trading of specific tokens.





Coinbase, Kraken, and Gemini offer Bitcoin and a variety of altcoins. These three are the easiest on-ramps to crypto within the entire cryptocurrency industry. Binance caters to a more advanced buyer, offering advanced trading tools and a better variety of altcoin options. FTX is a rapidly growing crypto exchange that has garnered the highest valuation in terms of dollars per share, has only a limited amount of altcoins to U.S. investors.4 However, investors from outside their home country of the U.S. have a greater choice of tokens on its platform.






The most important thing to remember when creating an account for cryptocurrency exchange is to ensure that you are using secure Internet practices. This includes two factor authentication and using a long, unique username with a mix of lowercase letters, capitalized and capitalized letters, special characters, and numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. The country was the first to do so.5 Bitcoin can be used as a currency to pay for transactions where a business can take it. There is no substitute for the U.S. dollar continues to serve as El Salvador's main currency.


Step 2: Link your Exchange to any payment option


If you've made a decision to go with an exchangeoption, you'll have to collect your personal documents. Based on the exchange, they may require photos of your driver's license, Social Security card, as in addition to information about your employer as well as the source of funds. Information you'll need depends on the place your home is located in and laws within it. The process is in general the same as opening a traditional brokerage account.





After the exchange has verified your identity, you'll be asked to connect the payment option. At the majority of exchanges, it is possible to can connect your bank account to the exchange directly, or you can connect a debit or credit card. While you may use a credit card to purchase cryptocurrency, it's not advisable since the price fluctuations of cryptocurrency could raise the total cost of purchasing a coin.





Bitcoin has been legalized in the United States, but some banks may question or block deposits to crypto-related websites or exchanges.6 It is advised to look for yourself if the bank you use allows deposits to the exchange you choose.





There are different fees for deposits via a bank account either debit or credit card. It is crucial to investigate the costs that come with each payment method so you can make a decision on an exchange or decide which option is most effectively for you.





Exchanges may also charge fees for each transaction. The fees could be an all-inclusive fee (if you trade at a lower) or part of the transaction amount. Credit cards incur an extra processing fee in addition to transaction fees.





Step 3. Place an order


You can buy bitcoin (or other cryptocurrency) after choosing the exchange you want to use and then connecting it to a payment option. In recent years, cryptocurrency exchanges have slowly become more mainstream. They have seen a significant increase in terms both of liquidity and their number of features. The operational changes of bitcoin exchanges are similar to the change in how people view cryptocurrencies. An industry once believed to be a scam or one that was based on questionable practices is slowly morphing into an authentic one, which has attracted attention from every major player in the financial services sector.





Now, cryptocurrency exchanges ' offerings have developed to a point where they're nearly offering the same amount of features as their counterparts who are stock brokers. Today, cryptocurrency exchanges offer various types of orders and methods to invest. Many crypto exchanges have limits and market orders. Some also provide stop-loss transactions. Of the exchanges discussed above, Kraken offers the most different types of orders. Kraken allows for market, limit, stop-loss, stop-limit and take-profit limit orders.7





Apart from the various order types, exchanges also provide ways to create regular investments that allow clients the option of incorporating a dollar-cost median into the investments they prefer. Coinbase is one example. It lets users make recurring purchases to be made every day, week, or month.8





Step 4: Safe storage


The cryptocurrency and bitcoin wallets are an excellent way to store your digital assets with greater security. With your cryptocurrency out of the exchange and in your personal wallet means that only you control the private key to the funds. It also gives you the ability to protect your funds to an exchange without the possibility that your exchange could be hacked and losing your funds.





While most exchanges offer user-friendly wallets, security is not their primary business. We generally don't recommend making use of an exchange account for larger or longer-term holdings in cryptocurrency.





Some wallets have more features than others. Some are Bitcoin exclusive, while others offer the ability to store multiple altcoins. Some wallets also offer the option of swapping one token for another.





When it comes to selecting an Bitcoin wallet, you have several options. The first thing you be required to know about crypto wallets is the idea of hot wallets (online wallets) and cold wallets (paper or physical wallets).





Hot wallets


Online wallets are also known also as hot wallets. Hot wallets are those that run with Internet-connected devices, like phones, computers or tablets. This poses a risk because these wallets generate the private keys to your money on devices that have Internet connectivity. Though a hot wallet can be extremely convenient due to the ways that you can access and make transactions with your assets rapidly, storing your private key using an Internet-connected device may make it more vulnerable to attack.





It may sound odd however, hot wallet owners who aren't putting in enough security are at risk of losing money due to theft. It's not a rare event, and it could be triggered in many ways. It is for instance, boasting on a forum such as Reddit about the amount of bitcoins you've stored while you're having little to no security and keeping it in a wallet with a high temperature would not be sensible. Although, these accounts can be made secure as that precautions are taken. Secure encryption, strong passwords and two factor authentication, and safe Internet browsing are essential prerequisites.





The best wallets for hot wallets are for small amounts of cryptocurrency or other currencies you are engaged in trading on an exchange. You can compare a hot wallet to a checking account. Traditional wisdom in finance would advise not to place money you use within a bank account that is a checking one, while the majority of your money can be found in savings accounts and other investments accounts. Similar could be said regarding hot wallets. Hot wallets consist of mobile, desktop, web and exchange accounts custody wallets.





As was mentioned earlier, exchange wallets are custodial accounts provided by exchange. The user of this wallet type is not the owner on the personal key for the cryptocurrency stored in this wallet. If a situation were to occur in which the exchange was compromised or the account of yours is compromised, you'd end up losing your money. The expression "not your key, not your coin" is heavily frequented in cryptocurrency forums and communities.





Cold wallets


The most simple way to describe a cold wallet is that it isn't connected to the Internet and therefore stands at lower risk of being in danger of being hacked. These wallets may also be referred to as offline wallets or even hardware wallets. These wallets keep a user's private key in a device that isn't connected to the internet. They may also come with software working in parallel so users can access the portfolio of their choice without putting their private keys at risk.





Perhaps the most secure way to save cryptocurrency offline is to use a papier wallet. A paper wallet is a wallet that you can generate from certain websites. It can then generate both private and public keys that are printed out on a piece of paper. The ability to access cryptocurrency from these addresses is only possible if you possess the piece of paper with the private key. A lot of people laminate their paper wallets and store them in safe box at their bank or even in a safe at home. These wallets are intended for more secure and long-term investments due to the fact that you are not able to rapidly sell or trade bitcoin stored using this method.





A more commonly used kind of cold wallet is a hardware wallet. Hardware wallets are typically one that is a USB drive that is used to store the private keys of a user offline. The benefits of such wallets are substantial over hot ones since they are not affected by viruses that could harm a computer. Hardware wallets ensure that private keys do not come into contact with your network-connected computer or other software that is potentially vulnerable. They're also open source, allowing the community to gauge their security using codes audits rather than a company claiming they are appropriate for usage.





These are considered to be the best and most secure method to store your bitcoin or other cryptos. But they require more expertise to set up.





A great way to set up your wallets is to include three things that you need: an exchange account to purchase and sell items with a hot or hot wallet that will hold small to medium amounts of crypto you wish to trade or sell and a cold physical account to store bigger amounts to last for a long 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 through PayPal. The first and simplest method is to buy cryptocurrency with your PayPal account, which is linked to a transaction mechanism, such as a debit card or bank account. Another option is to use the balance in you PayPal account to purchase crypto through a third party service. This isn't quite as user-friendly as the previous because a few sites allow users to purchase bitcoin using it's 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. You can also make use of your cryptocurrencies to purchase products and services through the "Checkout With Crypto" feature.10





For the purpose of opening a crypto account with PayPal, the following information is needed the following information: name and physical address, date of birth, in addition to a tax-identification number.11





It isn't possible using credit cards to buy Bitcoin using PayPal. In the process of buying, PayPal will display a price for the cryptocurrency. However, the price is subject to rapid changes due to the volatility of the cryptocurrency market. It is a good idea to ensure that you've got more than you have budgeted for your purchase in your bank account.





If you purchase bitcoin directly via PayPal they earn money via the crypto spread. It is the difference between Bitcoin's market price and its exchange rate with USD. The company additionally charges you a transaction fee for every purchase. The fee is based on the value of the purchase. For example, a flat charge of $0.50 is paid for purchases between $100 and $200. Following that, it is proportional to the total dollar amount. For example, a fee of 2% of the amount total is payable for purchases of crypto between $100 and $200.12





One drawback of purchasing cryptocurrency through PayPal is that you can't transfer the crypto out of the processing platform of the payment processor. So, it's not possible move your bitcoin from PayPal's account to your external wallet for crypto, or your personal wallet.11





Another disadvantage of using PayPal is that very few exchanges and online traders allow using the processor for payment. eToro is one of the very few online merchants that permit for the usage of PayPal to purchase bitcoin through its platform.13





How to Buy Bitcoin With a Credit Card


The process for purchasing bitcoin using credit cards will be similar to the process for purchasing it using debit cards as well as through automated clearing house (ACH) and transfers. You'll need your credit card's details with the online trading or exchange firm and they will then authorise the transaction. However, generally speaking, it's not a wise option to buy bitcoin using credit cards. There are several causes for this.





First, many exchanges do not support bitcoin purchasing using credit cards due to processing charges and the threat of fraud. This decision may work out for the benefit of consumers. This is since credit card processing is able to tack additional charges onto such transactions. This means that in addition to the transaction fee and transaction fees, you'll also be charged having processing charges that the exchange can pass onto you.





The third reason is credit card purchases are costly. Credit card issuers consider bitcoin purchases as cash advances and add significant fees and interest rates for such advances. For example, American Express and Chase both count purchases made with cryptocurrencies like cash transactions. In other words, if one purchases $100 worth of bitcoin with the American Express card, you will pay 10 dollars (current cash advance fee applicable to the transactions) plus the annual percentage rate of 25 percent. Further, the credit card provider also restricts your purchase to $1,000 of bitcoin purchases per month.14





Another method to purchase bitcoin with credit card is to use an Bitcoin reward card. Such cards function like your usual rewards credit card but they also offer rewards in format of Bitcoin. Also, they invest profits from purchases into Bitcoin. One illustration of a Bitcoin rewards card could be called the BlockFi Bitcoin Rewards Credit Card.15 Be aware, however that the annual fees associated with these cards could be quite high and there could be additional charges associated with the conversion between fiat and crypto currencies.





Even though exchanges such as Coinbase as well as Binance remain as the most popular method to purchase Bitcoin But they're by no means the only way.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. People can deposit cash into a machine and use it for the purchase of bitcoin. The money is sent to digital wallets of users. Bitcoin ATMs are becoming increasingly frequent in recent years. Even the retail huge Walmart Inc. (WMT) is testing a trial program that provides customers with the possibility of buying bitcoin. Coin ATM Radar can help locate nearby machines.





However ATMs can be costly alternative. There are two fees associated with ATM bitcoin purchases such as a transaction fee and one for conversion fees to convert an exchange rate from fiat to bitcoin. Both of these fees are quite expensive relative to the other options. For example, in the world, the average purchase fee at Bitcoin ATMs is 8.4 percent (of the amount of purchase) and 5.4 percent for sales made at ATMs.16





Be aware, however, that Bitcoin ATMs are more often requiring Government-issued IDs starting in 2020.


Exchanges between P2P


The decentralized exchanges are able to match sellers and buyers anonymously and allow for all aspects of the trade, there's peer-to-peer (P2P) exchanges that facilitate a better interaction between users. LocalBitcoins is an example of such an exchange. After creating an account, users can submit requests to purchase or sell bitcoin, including details about payment methods, as well as costs. Users can then search through lists of buy and sell offers by selecting the partners with whom they wish to conduct business.





LocalBitcoins aids in some aspects of trading. Although P2P exchanges cannot provide an identical level of security and privacy as decentralized exchanges however they do provide users an opportunity to compare prices to find the best price. A majority of these exchanges have rating systems in place so that buyers have the ability to evaluate potential trade partners prior deciding to do business.





Mainstream brokerages


Most brokerages don't offer the capability to trade and buy bitcoin due to the uncertainty over regulation of cryptocurrency. Robinhood Markets, Inc. (HOOD) A mobile app which is popular with investors in retail, is one platform that offers crypto-based trading. It charges no commissions for cryptocurrency trading and purchases , and earns money from the flow of orders, passing its trading volume onto additional trading platforms as brokerages.17





The absence of a commission charge is a tempting option for those just starting out, but there are some problems with this offering. It is the first. Robinhood does not have the range of features and coins provided by prominent cryptocurrency exchanges such as Coinbase. Robinhood had made trading possible on its platform for seven different cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 On the other hand, you can trade more than 100 cryptocurrency with Coinbase.19 Additionally, the exchange offers various types of orders that help minimize potential risk and limit losses when trading.





The Robinhood platform also does not have an online wallet. So, if you'd like to buy cryptocurrency on Robinhood then you'll have take into account additional charges to an online wallet service.





Bitcoin and other cryptocurrency investment options are not secured by insurance provided by insurance companies like the Securities Investor Protection Corporation (SIPC). At regular brokerages, the insurer protects against losses of cash and securities in brokerage accounts containing up to $500,000with a maximum of $250,000 cash limit.20 This service isn't available to customers of exchanges for cryptocurrency. The cryptocurrency exchanges such as Coinbase are covered by insurance against crime to protect their infrastructure against hacks. But that insurance does not protect individual customers from password theft.21


How to Sell Bitcoin


Bitcoin can be sold at the same outlets where you bought the cryptocurrency including cryptocurrency exchanges, and P2P platforms. In general, the process of selling bitcoin through these platforms is similar to the method of buying it.





For instance, you might only have to click on a button, and then specify the type of order (i.e. it is whether the cryptocurrency is sold immediately at available prices or whether it should be sold to limit losses) to make the sale. Based on the composition of the market and demand at the place and location, the sale price for Bitcoin can vary. As an example, the exchanges in South Korea traded bitcoin at an amount that was referred to as kimchi during the peak in prices in the year 2018.





Cryptocurrency exchanges charge a percentage from the cryptocurrency sold amount in fees. For instance, Coinbase charges 2.49% of the overall transaction amount as fees.22





Exchanges generally have daily and monthly withdrawal limitations. Therefore, money from the sale could not be readily available to the seller. There aren't any limits to the amount of cryptocurrency you can sell, however.





What Are the Steps for Purchasing Bitcoin?


The process of buying bitcoin is comprised comprising four steps: deciding on the appropriate venue or exchange for you for your order in, choosing a payment method and then making sure you have a safe place to store for your purchased cryptocurrency. Depending on the type of location chosen in the very first stage, there could be additional steps required in the process. In the case of Robinhood, for instance, if you are purchasing the cryptocurrency with Robinhood you may need to factor in additional costs for the online wallet and custody of your bitcoin , as it does not offer these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most sought-after places for buying bitcoins are cryptocurrency exchanges, brokerages (crypto and conventional) and payment companies such as PayPal. You can also buy Bitcoin through P2P exchanges. For ownership in bitcoin that is indirect You can invest in companies that have 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?


Typically, the price for buying bitcoin includes fees per trade and the cost to convert a dollar-based currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment solutions make money on this conversion spread.) The cost per transaction is a function of what amount in dollars is the trade. A larger amount of trade will attract higher fees. The total cost of purchase will depend on the features offered by the location. For example, Robinhood does not currently provide an online account for saving bitcoin. Therefore, you'll need be prepared for online wallet costs for your purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


Bitcoin can also be purchased at the following locations:


* Through Bitcoin ATMs


* Through online payment services such as PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


There is no way to ensure that the purchase you make with bitcoin is not protected by SIPC.20 On certain exchanges like Coinbase, fiat balances in individual accounts could be insured by the FDIC up to $250,000 per account.21





The Bottom Line


The process of buying bitcoin is more involved than the procedure for buying normal equity or stock. This is mainly because the cryptocurrency ecosystem and infrastructure aren't as developed that those of traditional trading.





A bitcoin purchase procedure consists from four steps: choosing a venue or service to complete purchases, joining with an online payment system, making the order, and also ensuring safe storage for the cryptocurrency. Each of these steps involves a lot of research and careful assessment of the pros and pros of each option. You can also buy bitcoin through Bitcoin ATMs or pay services like PayPal and other major brokerages, such as Robinhood.












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