Notes

How to Buy Bitcoin


Affording investments in Bitcoin (BTCUSD) may appear complex, but it's simpler when you split it into steps. When you invest or trade, Bitcoin only requires an account with a service or exchange. However, additional storage methods that are safe are advised.





There are several things that aspiring Bitcoin investors should have such as a cryptocurrency exchange account in addition to personal identification documents for those who use a Know Your Customer (KYC) platform and a secure connection to the Internet, and a method for payment. It is also recommended to have your own private wallet separate from the exchange account. Acceptable payment methods for this route are bank accounts credit cards, debit cards, and credit cards. There is also the option to cash out bitcoin at ATMs with specialized equipment and through exchanges P2P.





KEY TAKEAWAYS


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


Although it's almost impossible to allow Bitcoin itself to be compromised however, it is still possible that your bank or exchange system to suffer a breach. This is why practicing proper security and storage practices are crucial.


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


A way to buy bitcoin in indirect ways is to invest into companies with bitcoin on their balance sheets.


Before You Buy Bitcoin


Security and privacy are key concerns regarding security, privacy and confidentiality for Bitcoin investors. Anyone who gains the private secret key to a public address to the Bitcoin blockchain can sign off on transactions.1 Private keys should be kept private as criminals could attempt to steal them once they know of your large holdings. You should be aware that anyone is able to check the balance on a public address you use. The flip side to the public data is that it allows an individual to make multiple public addresses for themselves. Thus, they can distribute their wealth of Bitcoin across multiple addresses. An effective strategy is to keep significant investments at public addresses that aren't directly linked to those which are used for transactions.





Anyone can check the history in transactions done on blockchain, even you. Though transactions are publically documented on the blockchainsystem, identifying data about users isn't. It is true that on the Bitcoin blockchain it is the only place where a private key appears in the transaction. That makes transactions confidential, however not completely in any way anonymous. In that sense, Bitcoin operations are more transparent and traceable over cash as all transactions are public analysis, unlike private transactions. However, Bitcoin transactions also include an element of privacy built inside their code. It's very difficult identify the transacting parties--i.e., recipients and senders of bitcoins on the cryptocurrency's own blockchain.





Researchers from around the world and the FBI claim they are able track transactions made on the Bitcoin blockchain to other accounts on the internet, including their digital wallets.2 In the case of someone opens an account at Coinbase, they must provide their identification.3 After that, when the buyer purchases bitcoin, it is linked to their account. If they transfer it to the other account, it's possible to be traced back to the Coinbase purchase that is connected with the account's holder's ID. This shouldn't worry most investors , as Bitcoin remains legal throughout the U.S. and most other developed countries.





Be sure to check out what is legal, regulatory, as well as tax-related status of purchasing and selling bitcoins in the area you reside before you make any transactions.


Buying Bitcoin








We have described the steps required for purchasing bitcoin in the following steps. Make sure study the options thoroughly and pick the right option according to your needs.





Step 1: Choose a crypto-trading service or venue


The first step to purchase bitcoin is to select a cryptocurrency trading service or a location. Most popular venues and trading services for purchasing cryptocurrencies include cryptocurrency exchanges, payment solutions, and brokerages. In the list, cryptocurrency exchanges are by far the most convenient option because they offer a broad range of options and different cryptocurrencies that can be traded.





In signing up for a crypto exchange will enable you to buy, sell and keep cryptocurrency. It is usually best to sign up with an exchange that lets users move cryptocurrency to their personal online wallet for safekeeping. For those looking to trade Bitcoin or other currencies, this feature might not be relevant.





There are various kinds in cryptocurrency exchange. Since the Bitcoin principle is the individual sovereignty and decentralization, certain exchanges permit users to remain anonymous and do not make users fill out the personal details of their users. These exchanges are autonomous and are often decentralized that is, they don't have a central point of control.





Although these systems could serve purposeful purposes, they also be a source of assistance to the majority of the world's population that is not banking. For certain groups of people, such as refugees or those who reside in countries which have little or no infrastructure for government credit or banking -- anonymous exchanges can make them part of the mainstream economy.





The moment is, however, that many of the major exchanges aren't decentralized and adhere to laws that have users provide identification documents. For instance, in the United States, these exchanges include Coinbase, Kraken, Gemini, FTX, and Binance.US These are just a few. The exchanges have seen a significant increase in terms of the features they provide.





The cryptocurrency market has expanded exponentially in the past decade and there are a myriad of new tokens to compete for investors' dollars. Except for Bitcoin and some of the most well-known coins, such as Ethereum However, not all the tokens listed are on all exchanges. Each exchange has its own set of criteria for determining whether to accept or exclude trading on specific tokens.





Coinbase, Kraken, and Gemini offer Bitcoin and a steady stream of altcoins. These three are possibly the easiest on-ramps to crypto in the entire industry. Binance is for an advanced marketer, providing higher-quality trading features as well as an array of alternative currency choices. FTX is a rapidly-growing crypto exchange that has a multibillion-dollar valuation, offers the limited number of altcoins for U.S. investors.4 However, investors outside of those from the U.S. have a greater choice of cryptocurrency options on the platform.





A crucial thing to keep in mind when creating the account for a cryptocurrency exchange to adhere to safe Internet procedures. This includes two-factor authentication as well as a long, unique password that can include a variety of lowercase letters, capitalized letters as well as special characters and numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. The country was the first to do so.5 The cryptocurrency can serve as a substitute for currency for any type of transaction where the business can accept it. There is no substitute for the U.S. dollar continues to constitute El Salvador's primary currency.


Step 2. connect your account to your payment option


If you've chosen an exchange, you'll be required to gather your personal documents. According to the exchange you choose, these could include photographs of a driver's permit or Social Security card, as along with information regarding your employer and source of money. The details you'll need can depend on the region that you reside in, as well as the laws in it. The procedure is mostly similar to opening a traditional brokerage account.





Once the exchange has confirmed the authenticity of your account, you will be asked to connect to a payment method. The majority of exchanges can connect your bank account to the exchange directly, or you can connect a credit or debit card. However, if to make money through work want to use a credit card to purchase cryptocurrency, it is unwise because cryptocurrency price volatility could inflate the overall cost of purchasing coins.





Bitcoin exists in legal form in United States, but some banks may question or make deposits unavailable to crypto-related sites or exchanges.6 It is recommended that you check for yourself if your bank permits deposits to the exchange you prefer.





There are various costs for payments made via bank accounts or debit card. It is crucial to investigate the costs associated with every payment method to help pick an exchange option or decide which method of payment is most effectively for you.





Exchanges also charge fees per transaction. They can be one-time fees (if the trading value is not large) or an amount that is a percentage of the trade amount. Credit card transactions incur the processing fee in addition to transaction charges.





Step 3. Make an order


It is possible to purchase bitcoin (or other cryptocurrencies) when you select an exchange and linking a payment option. In the past few years crypto exchanges have slowly became more accepted. They have significantly increased in terms of liquidity and the variety of features available. The operating changes that have occurred at crypto exchanges have been accompanied by a change in the perception of cryptocurrencies. The business once considered a fraud or one that had questionable practices is slowly morphing into an established one that has attracted attention from all the big players in the financial sector.





Now, cryptocurrency exchanges have become so popular that they offer the same amount of features as their counterparts in stock brokerage. They offer various types of orders and methods to invest. Nearly all exchanges allow limits and market orders. Some have stop-loss or stop-loss orders. Of the exchanges listed above, Kraken offers the most order types. Kraken lets you place market, limit, stoploss stop-limit, take-profit, and take-profit limit orders.7





Alongside the variety of options for orders, the exchanges offer ways to set up regular investments, which allows clients to incorporate a dollar-cost average into their funds of choice. Coinbase for instance, lets users set up recurring purchase for every day, week or month.8





Step 4: Safe storage


The cryptocurrency and bitcoin wallets are the ideal way to store digital assets in a more secure way. Being able to store your cryptocurrency away from the exchange as well as in the private wallet of your wallet ensures only you have control over the private key to your funds. It also gives the option to save your funds from an exchange and avoid the risk of your account being hacked and the loss of your funds.





While many exchanges provide users with wallets, security isn't their main business. We generally don't recommend the use of an exchange for significant or long-term investments in cryptocurrency.





Some wallets provide more features than others. Some are Bitcoin only, while some can be used to store many different altcoins. Some wallets are also equipped with the option of swapping one token for another.





When it comes to selecting the best Bitcoin wallet, you can choose from several choices. The first thing you will have to know about crypto wallets is the notion of hot wallets (online wallets) and cold wallets (paper or physical wallets).





Hot wallets


Digital wallets also known in the field of hot wallets. Hot wallets are those that run on internet-connected devices like phones, computers or tablets. The risk of vulnerability is that they create secret keys to your currency on devices that have Internet connectivity. While a hot account can prove extremely beneficial in the way it lets you gain access to and complete transactions using your assets quickly, storing your private key on a device connected to the internet makes it more susceptible to a attack.





This may seem absurd even to some, but people who don't have enough security run the risk of losing funds to theft. This is not an infrequent event, and it could occur in several ways. For example, you could boast in a public forum, such as Reddit about the amount of bitcoins you've stored while you're having little to zero security and placing it in a wallet that is hot would not be sensible. It is true that these wallets can be secured as long as precautions are taken. Secure security measures, such as two-factor authentication and secure Internet browsing should be considered essential specifications.





These wallets are suitable for small amounts of cryptocurrency or cryptocurrency that you are actively trading on an exchange. A hot wallet to a bank account. A common sense financial advice is to only put money spent within a bank account that is a checking one, while the majority of your cash is held in savings accounts or other investments accounts. It is the same of hot wallets. Hot wallets consist of mobile, desktop, web and exchange accounts custody wallets.





The exchange clients are custodial wallets that are offered by exchange. The person who uses this wallet type is not the holder in the case of the private keys for the cryptocurrency in the wallet. If an incident were to occur wherein the exchange is compromised or your account gets compromised, you'd lose the funds you have invested. The expression "not your key, not your coin" is frequently heard in cryptocurrency forums, and communities.





Cold wallets


The most basic description of"cold" wallets is that it is not linked to the Internet and therefore is at less risk of being compromise. These wallets are also described as offline wallets or hardware wallets. They are wallets that store a person's private key in a device but isn't connected the internet and can come with software that works in parallel, so the user is able to view the portfolio of their choice without putting their private key in danger.





Perhaps the most secure option to store digital currency offline is to use a paper wallet. Paper wallets are wallet that you can create by visiting certain websites. It can then generate both private and public keys which are printed out on paper. The ability to access cryptocurrency from these addresses is only possible when you own the piece of paper with the private keys. A lot of people laminate their papers wallets and place them in safe deposits at their bank or in a safe in their home. They are intended for higher security and longer-term investments since you are unable to swiftly sell or trade bitcoin stored on this type of wallet.





The most common kind of cold wallet is a hardware one. Hardware wallets are generally an USB drive that holds the user's private keys offline. The advantages of these wallets are significant over hot wallets , as they are not affected by virus that could infect your computer. With hardware wallets, private keys are never in contact with your network-connected computer or other software that is potentially vulnerable. The majority of these devices are open source, allowing the community to gauge their security through code audits instead of a company that declares that they're secured to work with.





They are by far the most secured way to store bitcoin or any other cryptocurrency. But they require more technical expertise to setup.





A good method of setting your wallets is by having three things three things: an exchange account to use that allows you to purchase and sell products and a hot wallet to keep small to medium amounts of crypto you'd like to trade, or sell and a cold hard-copy wallet for holding larger sums 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 ways to purchase bitcoin using PayPal. The first and most convenient method is to buy cryptocurrencies with your PayPal account that is connected to a financial institution like a credit card, bank account or debit card. The other option is to utilize the balance in account balances in your PayPal account to purchase cryptocurrencies from a third-party provider. This option is not quite as user-friendly as the previous because few third-party websites allow users to buy bitcoin via their PayPal button.





Four cryptocurrencies--Bitcoin, Ethereum, Litecoin, and Bitcoin Cash--can be purchased directly through PayPal.9 With the exception of those who live in Hawaii, residents of all states can either use their existing PayPal accounts or set up new ones. It is also possible to use your crypto to buy goods and services through"Checkout with Crypto" feature "Checkout With Crypto" feature.10





To create a crypto account through PayPal The following information is required for registration: name, physical address or address, birth date plus tax identification number.11





It isn't possible to use a credit or debit card to buy Bitcoin using PayPal. When you purchase, PayPal will display a price for the cryptocurrency. However, that price is subject fluctuation due to the volatility of the cryptocurrency market. It's best to make sure that you have more than the amount you set for the purchase in your account at the bank.





If you purchase bitcoin straight through PayPal it earns you money from the crypto spread. This is the differential between Bitcoin's market rate and its exchange rate USD. The company additionally charges you a transaction cost for every purchase. These fees depend on amount in dollars of the purchase. For instance, a flat fee of $0.50 is payable for purchases of between $100 and $200. Thereafter, the fee is determined by a percentage percentage of the dollar amount. As an example, a percentage of 2% of the total value is applicable for purchases that range from $100 and $200.12





A disadvantage to buying cryptocurrency via PayPal is that you can't transfer the cryptocurrency out of the processing platform of the payment processor. Therefore, it is not possible to transfer your purchased bitcoin from PayPal's account to an external crypto wallet or your personal wallet.11





Another disadvantage of using PayPal is that only a few online and offline traders permit it to be used for payment. eToro is among the few online merchants that permit users to use PayPal to purchase bitcoin on its platform.13





How to Buy Bitcoin With a Credit Card


The procedure for buying bitcoin with credit cards is the same as for purchasing it using debit cards , or through an automated clearinghouse (ACH) payments. It is necessary to enter the details of your credit card with the exchange or online trading firm and then authorize the transaction. However, generally speaking, it's not a wise option to buy bitcoin with credit cards. There are a couple of reason for this.





First of all, many exchanges do not support bitcoin buying with credit cards due to processing fees and the risk of fraudulent transactions. This could work to be in the best interest of consumers. This is because credit cards can charge additional fees to transactions. Therefore, in addition to paying transaction fees and transaction fees, you'll also be charged being charged processing fees which the exchange might pass on to you.





The second reason is because purchase with credit cards can be costly. Credit card issuers view bitcoin purchases as cash advances and have to charge high-cost fees and rates for these advances. For instance, American Express and Chase both consider cryptocurrency purchases into cash advance transaction. In other words, if one purchases one hundred dollars worth of bitcoin through the American Express card, you must pay $10.00 (current cash advance fee applicable to these transactions) plus an annual percentage of 25%. What's more, the credit card company is also able to limit customers to only $1,000 worth of bitcoin transactions per month.14





An alternative way to purchase bitcoin with a credit-card is by acquiring one of the Bitcoin Rewards credit card. They function just like your regular rewards credit or debit card, however, they also offer rewards in way of bitcoin. They invest the cash-back earned from purchases into Bitcoin. One illustration of an Bitcoin rewards card could be called the BlockFi Bitcoin Rewards Credit Card.15 Beware however, that the annual cost for such cards can be high and may also be added charges for the conversion of fiat currencies into crypto.





Exchanges like Coinbase or Binance remain among the most used methods to buy Bitcoin however, they're not the only option.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. People can deposit cash into the machine and use it to purchase bitcoin. Bitcoin is then made available to the online wallets of users. Bitcoin ATMs have been more famous in recent months. Retail industry giant Walmart Inc. (WMT) is trialling a pilot program that offers customers the possibility of buying bitcoin. Coin ATM Radar can help locate nearby machines.





However, ATMs are an expensive option. There are two fees that are associated with ATM bitcoin transactions they charge a cost for the purchase as well as one for conversion fees to convert money from fiat into bitcoin. Both charges are quite high when compared to other options. As an example, the average fee for transactions with Bitcoin ATMs is 8.4% (of the amount of purchase) and 5.4 percent for sales made at ATMs.16






Be aware that Bitcoin ATMs are becoming increasingly dependent on identification cards from the government since early 2020.


Exchanges P2P


The decentralized exchanges are able to match sellers and buyers anonymously and facilitate all aspects of the transactions, there are peer-to-peer (P2P) exchange services that facilitate a better communication between users. LocalBitcoins is an example of such an exchange. After having an account, customers can post their requests to purchase or sell bitcoin. It also includes details about payment methods, as well as costs. They can then peruse listings of offers to buy and sell selecting the trading partners with whom they want to do business.





LocalBitcoins simplifies certain aspects of the trade. While to make money on tiktok may not provide an identical level of security and privacy as decentralized exchanges, they give users the opportunity to search to find the most affordable deal. Many exchanges have rating systems in place so that buyers can evaluate prospective trade partners prior to committing.





Mainstream brokerages


A few major brokerages provide the ability to buy and trade bitcoin due to the uncertainty over the status of cryptocurrencies in the eyes of the regulators. Robinhood Markets, Inc. (HOOD) is an application that is popular among retail investors, is one of the exchanges that offer crypto trading capabilities. It charges 0% commission for cryptocurrency transactions and purchase and makes profit from payments for order flow passing its trading volume onto other trading platforms or brokerages.17





The absence of a commission fee might sound appealing for newcomers, but there are a couple of drawbacks to that proposition. For one, Robinhood doesn't have the number of features or coins provided by prominent cryptocurrency exchanges like Coinbase. Robinhood had made trading possible on its platform for seven different cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 Contrary to Coinbase, you can trade more than 100 cryptocurrency with Coinbase.19 It also has various types of orders that help minimize risk and mitigate losses during trading.





The Robinhood platform doesn't offer an online wallet. In other words, if one wants to buy cryptocurrency on Robinhood the platform, you'll have to account for additional costs for an online wallet provider.





Bitcoin and other cryptocurrency investment options are not protected by insurance from this organization. Securities Investor Protection Corporation (SIPC). In the case of regular brokerages and brokerages, the firm is responsible for the loss of cash and securities brokerage accounts that have a total of $500,000with a maximum of $250,000 cash limit.20 This protection is not available to customers trading on crypto-currency exchanges. Cryptocurrency exchanges such as Coinbase have crime insurance to protect their infrastructure against attacks. However, that policy does not protect individual customers from password theft.21


How to Sell Bitcoin


It is possible to sell bitcoin on similar places to where you bought the cryptocurrency, such as cryptocurrency exchanges and P2P platforms. In general, the process of selling bitcoin through these platforms is the same as the method of buying it.





For example, you may only be required to click to select an order type (i.e. it is whether the cryptocurrency is to be sold immediately at the cheapest price or it is necessary to sell it to prevent losses) for the sale. Depending on the market composition and the level of demand at the site and the location, the price at which you can offer Bitcoin can be different. For instance, exchanges within South Korea traded bitcoin at the kimchi price during the rise in bitcoin prices back in 2018.





The cryptocurrency exchanges charge a portion of the sale price in fees. For instance, Coinbase charges 2.49% percent of total transaction amounts as fees.22





Exchanges typically have daily and monthly withdrawal limitations. This means that cash earned from a large sale may not be readily available to the buyer. There is no limit on the amount of cryptocurrency you can sell however.





What Are the Steps for Purchasing Bitcoin?


The process for purchasing bitcoin is comprised from four phases: choosing the location and exchange you want to make your purchase then selecting a method of payment in order to secure the storage to store your bitcoin. Depending on the type of venue you select in the first step, there could be additional steps to follow in the process. For example, if you choose to purchase the cryptocurrency through Robinhood you could need to take into account additional costs for an online wallet as well as the custody of your bitcoins since it doesn't offer these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most widely used venues for buying bitcoins include cryptocurrency exchanges, brokerages (crypto in addition to mainstream) and payment service like PayPal. You can also purchase Bitcoin through P2P marketplaces. In the case of indirect ownership of bitcoin you could invest in companies which hold bitcoin on their balance sheets, like Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


The typical cost for buying bitcoin includes the cost of trading plus the cost for converting a foreign currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment providers earn revenue through this conversion spread.) A fee for each trade is dependent on how much money is involved in the trade. Higher amounts of trade have higher charges. The cost of the purchase is dependent on the features offered by the retailer. For example, Robinhood does not currently have an online option for storing bitcoin. So, you'll need to budget online wallet costs for your purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also purchase bitcoin from the following stores:


* Through Bitcoin ATMs


By using online payment services such as PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


No, your bitcoin transaction is not protected by SIPC.20 Certain exchanges, such as Coinbase that accept fiat funds, balances on individual accounts could be insured by the FDIC in the amount of $250,000 per account.21





The Bottom Line


The process of purchasing bitcoin is a bit more complex than the process to buy traditional equity or stocks. This is mainly because the infrastructure and ecosystem for cryptocurrency aren't as robust than the conventional trading.





The process for buying bitcoins consists from four steps: choosing a service or venue for the purchase, connecting to a payment method, placing an order, and making sure you have safe storage for the cryptocurrency. Each step requires extensive research and a careful assessment of the pros and pros of each service. You can also buy bitcoin at Bitcoin ATMs, as well as from payment services such as PayPal or major brokerages like Robinhood.












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