Notes

How to Buy Bitcoin


It is easy to invest in Bitcoin (BTCUSD) may appear complicated, but it is easy to reduce it into steps. In order to invest or trade Bitcoin just requires an account at a third party or exchange. However, more secure storage practices are suggested.





There are several things that hopeful Bitcoin investors need: a cryptocurrency exchange account or personal identification document that you can use with an Know Your Customer (KYC) platform with a secure connection the Internet as well as a method of payment. It is also recommended that you have your own private wallet separate from your exchange account. Methods of payment that work with this route include bank accounts such as debit cards, bank accounts, and credit cards. You can also acquire bitcoin using ATMs specifically designed for bitcoin and P2P transactions.





KEY TAKEAWAYS


"The value and value that comes from Bitcoin comes from its popularity as a storage of value and payment system, as well as its limited supply and declining inflation.


While it's nearly impossible to allow Bitcoin to be hacked yet, it's possible for your exchange or wallet bank account to have been compromised. This is the reason why implementing proper storage and security measures are imperative.


* You can also buy bitcoin through popular services such as PayPal as well as Robinhood.


* One method to hold bitcoin indirectly is by investing in businesses with bitcoin on their balance accounts.


Before You Buy Bitcoin


Security and privacy are essential aspects concerning security and security for Bitcoin investors. Anyone who gets the private access to a public-facing address in the Bitcoin blockchain may be able to sign transactions.1 Private keys should be kept private as criminals could attempt to steal them when they discover large amounts. Be aware that anyone may know the balance of any public address you've created. The downside to the public data is that the user can have multiple addresses public for themselves. In this way, they can divide their wealth of Bitcoin over a variety of addresses. One option is to safeguard investments with significant amounts at public addresses that are not specifically linked to accounts which are used for transactions.





Anyone can look up a history of transactions recorded on the blockchain -- even you. Though transactions are publically documented on the Blockchain, identifying data about users isn't. When using the Bitcoin blockchain users only have their public key appears next to each transaction. Thus, transactions are private however not completely anonyme. In that sense, Bitcoin the transactions appear more clear and trackable than cash since all of the transactions are publicly available for access, unlike private cash transactions. However, Bitcoin transactions also have an element of anonymity built to their design. It's difficult for anyone to find the transacting parties--i.e., both the parties who are sending and receiving bitcoins--on the cryptocurrency's Blockchain.





International researchers and the FBI have claimed that they could track transactions made on the Bitcoin blockchain to the users' other online accountsas well as their digital wallets.2 In the case of anyone creates an account on Coinbase and then registers, they need to show their identification.3 When that user purchases bitcoin, it is linked to their identity. If they send it to another wallet, it will nevertheless be traced back the Coinbase transaction that is tied to the account holder's identity. This should not worry the majority investors , as Bitcoin will be legal in U.S. and most other developed countries.





Make sure you check the lawful, regulatory, and tax regulations for buying and selling bitcoin where you reside before you make any transactions.


Buying Bitcoin








We've broken down the steps to buying bitcoin below. Be aware that you need to do your research and choose the most suitable option in your needs.





Step 1: Choose a crypto trading service or venue


The initial step to buying bitcoin is to choose the right crypto trading service or a venue. Popular venues for trading and platforms that allow the purchase of cryptocurrencies comprise cryptocurrency exchanges, payment providers, and brokerages. The cryptocurrency exchanges are the most efficient option due to their broad range of options and the use of cryptocurrencies in trading.





Registering for a cryptocurrency exchange will enable you to buy, sell, and keep cryptocurrency. It is usually best using an exchange service that allows its users to withdraw cryptocurrency into their personal online wallets for safekeeping. In the case of those wanting to trade Bitcoin or other cryptocurrency, this feature isn't crucial.





There are many types and types of crypto exchanges. Because the Bitcoin philosophy is based on independence and personal sovereignty, some exchanges allow users to remain anonymous and don't make users fill out personal information. These exchanges operate as autonomous entities and are often decentralized so they don't have a central point of control.





Although such systems can serve malicious purposes, they also be a source of assistance to the world's unbanked population. For certain categories of individuals, like refugees or those in countries which have little or no infrastructure for credit from the government or banking--anonymous exchanges are a great way to make them part of the mainstream economy.





The moment is, however, that many of the major exchanges aren't uncentralized and do not need users to present identifying documents. Within 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 cryptocurrency world has grown rapidly over the last decade, with many new tokens in competition with investor dollars. With the exception of Bitcoin and certain prominent coins like Ethereum However, not all these tokens are listed on all exchanges. Each exchange has their own set of rules that determine whether they will include or not allow trading of certain tokens.





Coinbase, Kraken, and Gemini provide Bitcoin as well as a growing array of altcoins. These three are the most convenient on-ramps to cryptocurrency within the entire crypto industry. Binance caters to a more sophisticated marketer, and provides more robust trading functions and more diverse altcoin options. FTX is a booming crypto exchange that has the highest valuation in terms of dollars per share, has a restricted number of altcoins to U.S. investors.4 However, users outside their home country of the U.S. have a greater selection of options on its platform.





A crucial thing to keep in mind when creating your cryptocurrency exchange account is to make use of secure Internet procedures. This includes two factor authentication and lengthy, unique password that includes a range of lowercase lettersand capitalized ones or special characters as well as numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the first nation to do so.5 Bitcoin is able to serve as a payment method for any transactions when a business accepts it. A U.S. dollar continues to be El Salvador's main currency.


Step 2: Link your Exchange to any payment option


When you've selected the exchange option, you'll need to gather personal documents. Dependent on the exchange, it could be necessary to have photos of a driver's certificate or Social Security card, as together with details about your employer and source of money. Information you'll need will vary depending on the area which you reside and regulations within it. The process is the same as creating a typical brokerage account.





After the exchange has verified your identity, you will be asked to join an option for payment. The majority of exchanges can connect to your bank account through the account or connect a credit or debit card. Although you are able to use your credit card to purchase cryptocurrency, it's not advisable as fluctuation in the price of cryptocurrency can raise the total cost of purchasing a coin.





Bitcoin is legal in United States, but some banks may be suspicious of or suspend deposits on crypto-related websites or exchanges.6 It's recommended that you check to confirm that your bank will allow deposits to the exchange you prefer.





There are different fees for transactions made with a banking account as well as debit and credit card. It is vital to look into the fees that are associated with any payment option so that you can you choose an exchange, or choose the option that is most effectively for you.





Exchanges can also charge fees per transaction. These charges could be an unrestricted fee (if the trading value is low) or part of the transaction amount. Credit cards are charged an extra processing fee in addition to transaction charges.





Step 3. Place an order


Bitcoin can be purchased (or other cryptocurrency) after selecting an exchange , and then connecting a payment option. In recent times crypto exchanges have slowly been gaining popularity. They have increased significantly in terms of liquidity as well as the variety of features available. Changes in operation at cryptocurrency exchanges mirror the changes in the way people perceive cryptocurrencies. An industry once thought to be a shady business or one with unsound techniques is slowly changing into an actual one that has attracted attention from all the big players within the financial service industry.





Nowadays, cryptocurrency exchanges' have developed to a point where they're equipped with the same degree of functionality as their counterparts who are stock brokers. There are now crypto exchanges that offer an array of different order types and methods to invest. The majority of crypto exchanges offer limit and market orders. Some even offer stop-loss and limit orders. The exchanges listed above, Kraken offers the most possible types of orders. Kraken accepts market, limit, stop-lossand stop-limit as well as take-profit and limit orders.7





Alongside the variety of purchase types, exchanges provide options for setting up recurring investments, allowing clients to apply a cost-per-dollar average to the investments they prefer. Coinbase is one example. It lets users set up recurring purchase for every day, week or month.8





Step 4: Safe storage


Coins and crypto wallets are an opportunity to save digital assets more safely. Being able to store your cryptocurrency away from the exchange but in the personal wallet of yours ensures only you control the private key to your funds. Also, it gives you ability to secure your funds from an exchange , and reduce the possibility of your account being hacked and losing your funds.





Though most exchanges provide wallets to their customers, security isn't their main business. We do not generally recommend using an exchange-based wallet for the long-term, large-scale holdings of cryptocurrency.





Certain wallets offer more features than others. Some are Bitcoin only, and others can store many different altcoins. Some wallets additionally offer the ability to exchange one token with another.





When it comes to choosing the best Bitcoin wallet, you have many options. The first thing you have to be aware of about crypto wallets is the concept of hot wallets (online wallets) and cold wallets (paper or hardware wallets).





Hot wallets


Digital wallets also known under the term hot wallets. Hot wallets function via Internet-connected devices, including computers, phones, or tablets. This could lead to vulnerability since they generate secret keys to your currency on devices that have Internet connectivity. While a hot wallet could be quite convenient in the method that you can connect to and perform transactions with your assets rapidly, storing your private key on an Internet-connected device makes it more vulnerable to attack.





It might sound like a lot of work However, those with hot wallets who haven't set up enough security run the risk of losing their money to theft. This is a frequent event, and it could occur in a variety of ways. For example, boasting on a platform like Reddit about the amount of bitcoins are in your wallet when there is little or none security and storing it in a wallet that is hot would not be wise. That said, these wallets could be secure so long as the necessary precautions are in place. how to buy bitcoin through coinbase , two-factor authentication, and safe Internet browsing are essential standards.





These wallets are suitable to store small amounts of cryptocurrency or cryptocurrency you're currently trading on an exchange. A hot wallet to a bank account. A common sense financial advice is to put only money you spend in a checking or savings account while the majority of your money is stored in savings accounts or other investment accounts. The same could be said about hot wallets. Hot wallets consist of mobile, desktop, web, and exchange account custody wallets.





As we have mentioned before, exchange wallets serve as custodial banks provided by exchanges. The person who uses this wallet particular type of wallet is not owner of the private key to the cryptocurrency stored in the wallet. If an event should happen where the exchange gets damaged or your accounts are compromised, it would be lost your funds. The expression "not your key, not your coin" is frequently utilized in cryptocurrency forums as well as communities.





Cold wallets


The simplest description of the term "cold wallet" is that it is not connected to the Internet and thus has greater risk of being susceptible to being compromised. They can also be known as offline wallets or even hardware wallets. These wallets store a user's private key on something but isn't connected the internet. These wallets can be fitted using software that works in parallel so that the user has access to their portfolio without putting their private keys in danger.





Perhaps the best way to store cryptocurrency offline is using a paper wallet. A paper wallet is a one that you can build on certain websites. It can then generate both private and public keys that can be printed on a piece of paper. The ability to access bitcoin and other digital currencies is only possible when you have the piece of document with the private number. A lot of people laminate their wallets in paper and put them in safe deposit boxes at their banks or even in a secure at home. These wallets are designed to be higher security and longer-term investments since you are unable to swiftly sell or trade bitcoins stored in on this type of wallet.





A more common type of cold card is a a Hardware wallet. Hardware wallets are usually comprised of a USB drive device that stores key information of the user offline. The advantages of these wallets are significant over hot ones since they are unaffected by viruses that can affect one's computer. With hardware wallets, private keys are not in contact with your computer's network or software that could be vulnerable. These devices are also typically open source, allowing users to test their security using code audits rather than a firm declaring that they're safe to use.





In fact, cold wallets can be described as the best and most secure storage option for your bitcoin or other cryptos. But they require additional technical knowledge to setup.





The best way to set your wallets is by having three items three things: an exchange account to use to sell and buy the hot wallet, which can store small or medium amounts of crypto that you intend to trade or sell in the future, and a cold wallet that can store more substantial holdings for long-term durations.





How to Buy Bitcoin With PayPal


You can also buy bitcoin through a payment processor PayPal Holdings, Inc. (PYPL). There are two options to buy bitcoin with PayPal. The first , and the most convenient way is to buy bitcoin with your PayPal account that is connected to a transaction mechanism, such as a deposit card or a bank account. The other option is to use the balance on you PayPal account to purchase cryptocurrencies via a third-party supplier. This option is not quite as user-friendly as the previous because few third-party websites allow users to buy bitcoin via that 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 cryptos to pay for products as well as services via the "Checkout With Crypto" feature.10





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





It isn't possible to use a credit or debit card to buy Bitcoin through PayPal. While you are buying the Bitcoin, PayPal will display a price for the cryptocurrency. But , the price can be subject changing rapidly due the volatility of cryptocurrency markets. It's a good idea to make sure you have more than the cost you had budgeted to purchase in your bank account.





If you purchase bitcoin straight from PayPal and it earns money from the spread of crypto or the difference between the market price of Bitcoin in addition to its conversion rate USD. The company adds a transaction cost for every purchase. These charges are based on dollar amount of the purchase. For instance, a flat fee of $0.50 is due for purchases ranging from $100 and $200. Following that, the cost is determined by a percentage percentage of the dollar amount. In this case, for instance, a cost of 2% of the total amount will be due for transactions between $100 and $200.12





One of the disadvantages of buying cryptocurrency through PayPal is the fact that you can't transfer the crypto away from the pay processor's website. Thus, it's not possible for you in order to transfer your Bitcoin purchase through PayPal's bank account to any other crypto account, or your personal wallet.11





Another drawback of using PayPal is the fact that very few marketplaces and online retailers allow it to be used for payment. eToro is one of the very few online trader that allows the use of PayPal to buy bitcoin on its platform.13





How to Buy Bitcoin With a Credit Card


The procedure of purchasing bitcoin with credit card is similar to the one used to purchase it using debit cards or through the automated clearing house (ACH) funds transfers. You'll have to input your credit card's information into the exchange or online trading company, and then you can authorize the purchase. In general, , it's not an ideal choice to buy bitcoins using credit cards. There are a couple of factors to consider.





First, none of the exchanges permit bitcoin purchases with credit cards due to the associated processing fees and the threat of fraud. This could work in the best interests of consumers. This is due to the fact that credit card processing may add additional charges onto transactions. This means that in addition to the transaction fee, you will end up being charged processing fees which the exchange might pass onto you.





The third reason is that credit card purchases can be costly. Credit card issuers view bitcoin purchases as cash advances and have to charge high-cost fees and rates on such advances. For example, American Express and Chase both consider cryptocurrency purchases as transactions that are cash advances. So, if you buy $100 worth of bitcoin using the American Express card, you will pay 10% (current cash advance fee applicable to such transactions) plus an annual percentage of 25%. The credit card company will also limit you to $1000 worth of bitcoin purchases per month.14





An indirect method of purchasing bitcoin with credit card is to buy one of the Bitcoin reward credit card. These cards function similarly to your regular rewards credit card, but they grant rewards in type of bitcoin. The cards invest cash back from purchases into Bitcoin. One example of a Bitcoin Rewards card to use is BlockFi Bitcoin Rewards Credit Card.15 Beware, however that the annual fees associated with these cards might be high and could also come with additional charges for the conversion of fiat currencies into cryptocurrency.





Even though exchanges such as Coinbase and Binance remain one of the most well-known ways to buy Bitcoin however they are not the only way.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Customers can put cash into the machine and use it to purchase bitcoin, which is later sent to digital wallets for users. Bitcoin ATMs are increasingly popular in recent years--even retail huge Walmart Inc. (WMT) is trying out a pilot program that will offer its customers the option to purchase bitcoin. Coin ATM Radar can help locate the closest ATMs.





However ATMs can be expensive option. There are two costs that come along with ATM bitcoin transactions which are a purchase charge and the cost of conversion for changing one currency that is fiat to bitcoin. Both fees are fairly steep compared to those of other alternatives. As an example, the average price of purchases from Bitcoin ATMs starts at 8.4% (of the amount of purchase) and 5.4% for sales at ATMs.16





Be aware, however, that Bitcoin ATMs have been increasingly requiring government-issued IDs as of early 2020.


P2P exchanges


Different from decentralized exchanges that make it possible to connect buyers and sellers in an anonymous manner and handle all aspects of the transaction, there are peer-to-peer (P2P) exchange services that allow a much more direct link between users. LocalBitcoins is an example of such an exchange. After signing up, users can request to purchase or sell bitcoin. It also includes details about payment methods, as well as costs. Users can also browse through listings of both buy and sell deals, choosing the trading partners with whom they wish to conduct business.





LocalBitcoins simplifies certain aspects of trading. Although P2P exchanges don't provide the same protections as decentralized exchanges but they provide users with the possibility of shopping around to find the most affordable deal. Many of these exchanges also offer rating systems to ensure that users can assess potential partners for trade prior to doing business with them.





Mainstream brokerages


A small percentage of the major brokerages offer bitcoin purchasing and trading features because of the uncertainty regarding the regulation status of crypto currencies. Robinhood Markets, Inc. (HOOD) which is an app widely used by retail investors is one exchange that offers cryptocurrency trading services. It charges no commission for cryptocurrency transactions and purchases . The company earns money from the transaction flow that it receives, passing its trading volume onto different trading platforms, or brokerages.17





The absence of a commission-based fee may be an enticing prospect in the beginning, but there are a couple of downsides to the offer. First, Robinhood lacks an array of features and currency offered by major crypto exchanges like Coinbase. Robinhood had enabled trading on its platform, which supports seven cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 However, Coinbase can trade more than 100 cryptocurrency with Coinbase.19 The exchange also offers different types of orders to reduce risk and mitigate losses during trading.





The Robinhood platform also does not offer a hosted wallet. If you're looking to buy cryptocurrency on Robinhood you'll need to account for additional costs to an online wallet service.





Bitcoin and different cryptocurrency investments aren't protected by insurance policies from the Securities Investor Protection Corporation (SIPC). At traditional brokerages, this SIPC protects against the theft of securities and cash in account with brokerages that are up to $500,000and a $250,000 cash limit.20 This facility isn't accessible to clients who use cryptocurrency-related exchanges. Exchanges for cryptocurrency like Coinbase are covered by insurance against crime to safeguard their infrastructure from hacks. But this insurance will not cover 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 like cryptocurrency exchanges or P2P platforms. Typically, the process involved in selling bitcoin on these platforms is similar to the method of buying it.





In this case, for instance, you could only need to click on a button and select the type of order (i.e. what type of order, whether the cryptocurrency is sold immediately at the lowest price, or whether it is sold to make sure that losses are not incurred) to conduct the sale. Based on the composition of the market and demand at the place and location, the sale price for Bitcoin may differ. For instance, exchanges within South Korea traded bitcoin at Kimchi's premium, also known as the time of the increase in prices in the year 2018.





Exchanges for crypto currency charge a percentage of the sale price in fees. For example, Coinbase charges 2.49% of the total amount for transactions as fees.22





Exchanges generally have daily and monthly withdrawal limits. This means that cash earned from an extensive sale may not be readily available to the trader. There aren't any limits to the number of coins you can sell however.





What Are the Steps for Purchasing Bitcoin?


The process to buy bitcoin is comprised of four steps: deciding on the location and exchange you want to place your order before deciding on a payment technique in order to secure the storage of your bitcoin purchase. The type of location chosen in the very first step, there might be additional steps that are involved in the process. As an example, if acquire the cryptocurrency using Robinhood you may need to take into account additional costs for an online wallet as well as the custody of your bitcoin since it doesn't provide these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most popular options for buying Bitcoin are cryptocurrency exchanges and brokerages (crypto and traditional) and payment processing services such as PayPal. You can also purchase Bitcoin through P2P marketplaces. For indirect ownership of bitcoin you can invest in companies that hold bitcoin on their balance sheets. Examples include Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Typically, the cost of purchasing bitcoin includes fees per trade, plus the cost to convert conventional currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment solutions make money from this conversion spread.) The cost per transaction is dependent on an amount in dollars that is associated with the trade. The larger the amount of the trade will have higher charges. The total cost of purchase depends on the features available by the company. For instance, Robinhood does not currently provide an online wallet that allows holding bitcoin. This means that you'll have to plan for the cost of an online wallet for your purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also buy bitcoin at these places:


* Through Bitcoin ATMs


* With online payment services like PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


You are not protected by your bitcoin purchase. is not protected by SIPC.20 On certain exchanges like Coinbase and Coinbase, the balances of bitcoin in personal accounts could be FDIC-insured in the amount of $250,000 per account.21





The Bottom Line


The process of buying bitcoin is slightly more complicated than the process to buy normal equity or stock. This is due to the fact that the cryptocurrency's ecosystem and infrastructure are not as well developed as those used for trading in the mainstream.





A process to purchase bitcoin consists of four steps: deciding on the service or the location of purchases, joining with the payment method, placing an order and ensuring an appropriate storage space for your cryptocurrency. Each step calls for research as well as a careful review of pros and negatives of each service. Bitcoin can be purchased at Bitcoin ATMs and from payment services such as PayPal or major brokerages like Robinhood.













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