Notes

How to Buy Bitcoin


It is easy to invest in Bitcoin (BTCUSD) might seem complex, but it's easy to simplify it by steps. Making investments or trading Bitcoin is easy if you have an account at a third party or exchange, however further safe storage practices are recommended.





There are various things new Bitcoin investors need the following: a cryptocurrency account as well as personal identification documents, should you be using a Know Your Customer (KYC) platform with a secure connection the Internet as well as a method for payment. It is also suggested that you keep a personal account outside of the exchange account. Payment methods that are accepted on this approach include bank accounts, debit cards, and credit cards. There is also the option to make bitcoin transactions at ATMs that are specialized or through P2P-based exchanges.





KEY TAKEAWAYS


"The worth of Bitcoin is due to its use as a store of value and a payment system and also its finite supply and decreasing inflation.


* Even though it's nearly impossible for Bitcoin itself to be hacked yet, it's possible for your exchange or wallet account to be compromised. This is the reason why implementing proper storage and security is crucial.


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


* One way to own bitcoin is to invest in companies that hold bitcoin in their balance sheets.


Before You Buy Bitcoin


Security and privacy are crucial aspects in the lives of Bitcoin investors. Anyone who has access to the private secret key to a public address to the Bitcoin blockchain can then authorize transactions.1 Private keys should be kept secret as criminals may try to take them away once they know of your large holdings. Be aware that anyone can examine the balance of a public address that you have. But the upside to this public information is that you can establish multiple public address for themselves. Therefore, they could distribute their stash of Bitcoin over a variety of addresses. A great strategy is to hold large investments at public addresses that are not directly linked to addresses that are used in transactions.





Anyone is able to see a complete history of transactions conducted on the blockchain--even you. Although transactions are publicly recorded by the blockchain, the identification of personal information of the user isn't. In the Bitcoin blockchain just a user's public key is visible next to any transaction. This makes transactions safe however not completely private. In that sense, Bitcoin transfers are much easier to trace and traceable in comparison to cash, as all of them are public inspection, in contrast to private cash transactions. However, Bitcoin transactions also include added security features that protect the privacy of the transaction inside their code. It's difficult to trace the transactions of the parties--i.e., both the parties who are sending and receiving bitcoin--through the blockchain used by the cryptocurrency.





International researchers as well as the FBI claim to be able to identify transactions made using the Bitcoin blockchain and connect them to other accounts on the internet, including their digital wallets.2 For instance, if someone opens an account at Coinbase they have to verify their identification.3 Now, when that person purchases bitcoins, it can be traced back to their name. If they transfer the funds to another wallet, it will still be tracked back to the Coinbase transaction, and is linked to the identity of the account holder. This should not be a concern for the majority of investors since Bitcoin may be used legally in U.S. and most other developed countries.





Check out what is legal, regulatory and tax consequences of purchasing or selling bitcoin in your area of reside prior to completing transactions.


Buying Bitcoin








We have broken down the steps involved in buying bitcoin below. Be aware that you need to research your options and choose the most suitable option that you can afford based on the circumstances you face.





Step 1: Select one of the crypto trading services or a venue


The initial step in purchasing bitcoin is to select the best crypto trading services or venue. The most popular trading venues and services for purchasing cryptocurrencies include cryptocurrency trading platforms, payment services and brokerages. In the list, cryptocurrency exchanges are the best option as they provide a variety of features and than cryptocurrencies to trade.





Joining a cryptocurrency exchange allows you to buy, sell and hold cryptocurrency. It is generally recommended to sign up with an exchange that lets its customers withdraw cryptocurrency into their personal online account for safekeeping. If you're looking to trade Bitcoin or other cryptos, this may not be a problem.





There are various kinds of exchanges for cryptocurrency. Because the Bitcoin principle of independence and personal sovereignty, certain exchanges allow users remain anonymous and don't demand that users enter private information. They are independent and are usually decentralized, this means they don't have a central source of control.





Although these systems could serve in a number of ways, they help the worldwide population of people who have no bank accounts. For certain kinds of people--refugees and those living in countries that have no infrastructure for credit from the government or banking--anonymous exchanges can help connect them to the world's economy.






At the moment, many of the major exchanges aren't decentralized and adhere to laws that require users to submit identifying documents. In the United States, these exchanges comprise Coinbase, Kraken, Gemini, FTX, and Binance.US among others. The number of exchanges has increased in the number of options they offer.





The cryptocurrency market has expanded rapidly in the last 10 years and a wide array of tokens are to compete for investors' dollars. The exception is Bitcoin as well as some well-known coins, such as Ethereum However, not all these coins are sold on all exchanges. Each exchange has specific criteria to decide whether to allow or restrict trading of specific tokens.





Coinbase, Kraken, and Gemini offer Bitcoin and a steady stream of altcoins. These three are likely to be the most convenient on-ramps to cryptocurrency within the entire crypto industry. Binance caters to a more advanced trader, offering more sophisticated trading options and more altcoin choices. FTX has been a rapid-growing crypto exchange that has earned its valuation to be multibillion dollars, also offers only a limited amount of altcoins to U.S. investors.4 However, investors outside of within the U.S. have a greater choice of cryptocurrency options on the platform.





One important aspect to take into consideration when creating the account for a cryptocurrency exchange to adhere to safe Internet procedures. This includes two factor authentication and lengthy, unique password that can include a variety of lowercase lettersand capitalized ones as well as special characters and numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the only country to do so.5 The cryptocurrency can serve as a form of currency in any transaction in which the business will accept it. The U.S. dollar continues to be the currency of El Salvador.


Step 2: Join your currency to your payment option


If you've chosen an exchangeoption, you'll have to collect your personal documents. Based on the exchange, these may include pictures of your driver's license, Social Security card, as well as information about your employer as well as the source of money. What information you'll need will vary depending on the area that you reside in as well as the laws in it. The process is in general the same as setting up a typical brokerage account.





Once the exchange has confirmed the authenticity of your account, you will be asked to connect with a payment option. The majority of exchanges can connect your bank account straight away or you can connect a debit or credit card. While you are able to use a credit card to purchase cryptocurrency, it's not recommended as it could cause volatility in the price of buying a coin.





Bitcoin can be legally used in the United States, but some banks may be reluctant to accept or stop deposits to crypto-related sites or exchanges.6 It's advised to look to see if the bank you use allows deposits to the exchange you prefer.





There are varying fees for cash deposits from a bank account (debit, credit) or credit card. It is crucial to investigate the costs associated with each payment method so you can determine the best exchange for you or choose which payment option works best for you.





Exchanges may also charge fees for each transaction. These fees can either be an all-inclusive fee (if the trading amount is lower) or an % of the trading amount. Credit cards incur the processing cost as well as transaction fee.





Step 3: Make an order


It is possible to purchase bitcoin (or other cryptocurrency) after selecting the exchange you want to use and then connecting it to a payment option. In recent years bitcoin exchanges have steadily became more accepted. They have grown dramatically in terms both of liquidity and their breadth of features. Changes in operation at cryptocurrency exchanges are in line with the shift in how people view cryptocurrencies. An industry once considered to be a scam or one that was based on questionable practices is slowly morphing into legitimate and has attracted the attention of all of the major players in the industry of financial services.





Today, cryptocurrency exchanges have gotten to a point where they're equipped with the same level of features as their counterparts from stock brokerages. There are now crypto exchanges that offer various types of orders and methods to invest. A majority of cryptocurrency exchanges offer limits and market orders, and some also offer stop-loss order. The exchanges listed above, Kraken offers the most options for order types. Kraken accepts market, limit, stoploss, stop-limit takes-profit, take-profit and limit orders.7





Aside from a variety of order types, exchanges also provide the option of setting up the possibility of recurring investments. This allows customers to apply a cost-per-dollar average to their funds of choice. Coinbase is one example. It allows users to make recurring purchases for each week, day or month.8





Step 4: Safe storage


In addition, bitcoin and cryptocurrency wallets are an excellent way to store your digital assets more securely. A crypto wallet that is separate from the exchange and in the private wallet of your wallet ensures only you hold the private key to your funds. Also, it gives you ability to separate your cash without an exchange and protect yourself from the risk of your account being hacked and losing your funds.





Although many exchanges offer wallets for their customers, security isn't their main business. We generally do not recommend using an exchange-based wallet for long-term or large-scale cryptocurrency holdings.





Certain wallets have more features than other wallets. 3 ways to buy bitcoin are Bitcoin only, and some are able to hold diverse altcoins. Some wallets are also equipped with the possibility of swapping one token with another.





When it comes to selecting the best Bitcoin wallet, there are several choices. First, you'll have to know about crypto wallets is the notion of hot wallets (online wallets) and cold wallets (paper or hardware wallets).





Hot wallets


There are online wallets that are known by the name of hot wallets. Hot wallets are wallets that run on devices that are connected to the Internet, such as computers, phones, or tablets. These wallets can pose security risks because hot wallets create secret keys to your currency on these devices with Internet connectivity. Although a hot wallet may be extremely convenient in manner that you can access and transact with your assets in a short time, storing your private keys in a device that is connected to the Internet makes it more susceptible to a attack.





It may sound absurd however, hot wallet owners who haven't set up enough security run the risk of the loss of funds due to theft. This is not an infrequent situation and it could happen in a number of ways. For instance, boasting on a forum like Reddit about the amount of bitcoins you've stored while you have little or any security, and then storing it in a hot account would not be the best idea. It is true that these wallets are secure as they are protected by the appropriate measures. Secure secure passwords, 2-factor authentication, and safe Internet browsing are essential specifications.





These wallets are suitable for smaller amounts of cryptocurrency or cryptocurrency you're engaging in exchange trading. You can compare a hot wallet to a checking account. It is common knowledge to only put money spent within a bank account that is a checking one, while the majority of your funds is kept in savings accounts, or other investments accounts. Similar can be said to hot wallets. Hot wallets comprise mobile, desktop, web and exchange accounts custody wallets.





As previously mentioned, exchange wallets are custodial services provided by exchanges. The user of this wallet particular type of wallet is not owner on the personal key for the cryptocurrency which is stored within the wallet. If an event should occur where the exchange hacked or your account becomes compromised, then you'd lose your money. The phrase "not your key, not your coin" is heavily heard in cryptocurrency forums, and communities.





Cold wallets


A simple description of an offline wallet is that it isn't in connection with the Internet and is therefore at lower risk of being compromised. The wallets may also be referred to as offline wallets or even hardware wallets. These wallets store a user's private keys on a device but isn't connected the internet. They can also come with software that works in parallel so that the user can look at their account without putting their private keys in danger.





Perhaps the most secure method to keep cryptocurrency offline is to use a paper wallet. Paper wallets are wallet that you can create off of certain websites. It will then produce both private and public keys that you print out on paper. The ability to access crypto currency in these wallets is only possible when you've got that piece paper that is protected by the private key. Many people laminate these wallets in paper and put them in safe box at their bank or even in a secure in their home. These wallets are meant for high-security and long-term investments because they are not able to quickly sell or trade bitcoins stored in by this method.





A more frequent type of cold cash wallet is a wallet made of hardware. A hardware wallet is generally a USB drive device that keeps users' private keys offline. The benefits of such wallets are substantial over hot wallets since they are unaffected by viruses that can infect a computer. Hardware wallets ensure that private keys don't come in contact with your network-connected computer or software that could be vulnerable. They are also generally open source, which allows the community to determine the security of their devices through an audit of the code instead of a company claiming that they are secure to be used.





Cold wallets are the best and most secured way to store bitcoins or other cryptocurrencies. But they require more expertise to set up.





An ideal way to set up your wallets is with three things such as an exchange account to purchase and sell items the hot wallet, which can store small or moderate amounts of cryptocurrency you'd like to trade, or sell in the future, and a cold wallet to keep larger quantities with a longer time-frame.





How to Buy Bitcoin With PayPal


Bitcoin can also be bought via the payment processor PayPal Holdings, Inc. (PYPL). There are two methods to buy bitcoin through PayPal. The most popular and easiest method is to purchase bitcoin through your PayPal account that is connected to a payment method like a deposit card or a bank account. The second option is to utilize the balance in one's PayPal account to purchase cryptocurrency by a third party. This option is not much as user-friendly because very few third-party providers allow customers to purchase bitcoin with Paypal. 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 use the cryptocurrencies you have to buy items or services using"Checkout With Coin "Checkout With Crypto" feature.10





In order to open a crypto account with PayPal you need the following information is needed including name, physical address and date of birth and tax identification number.11





It isn't possible for a credit card to purchase Bitcoin using PayPal. During the buying process, PayPal will display a price for the cryptocurrency. However, this price can be subject for rapid change because of the fluctuation of markets for cryptocurrency. It is a good idea to ensure that you have more than the price you had budgeted to purchase in your savings account.





If you purchase bitcoin directly via PayPal they earn money via the crypto spread. It is the difference between the market price of Bitcoin plus its price of exchange USD. The company additionally charges you a transaction cost per transaction. The fees are based on the dollar value of the purchase. For example, a flat charge of $0.50 is charged for purchases between $100 to $200. Following that, it is an amount that is a percentage of the total dollar amount. As an example, a percentage of 2% of the total amount is per transaction for crypto transactions between $100 to $200.12





One disadvantage of purchasing cryptocurrency via PayPal is that you are unable to transfer the cryptocurrency out of the pay processor's website. This means it's not possible to transfer the Bitcoin you bought from PayPal's wallet into an alternative crypto wallet, or your personal wallet.11





The other disadvantage of using PayPal is that only a few online and offline traders permit users to utilize the credit card processor to make payment. eToro is one of the few online merchants that permit the use of PayPal to purchase bitcoin through its platform.13





How to Buy Bitcoin With a Credit Card


The procedure to purchase bitcoin with credit card is the same as the method for purchasing it through debit cards or through an automated clearinghouse (ACH) and transfers. You'll have to input the details of your credit card with the online trading or exchange firm and sign the transaction. The general rule is that it's not a smart idea to purchase bitcoin using credit cards. There are a couple of reasons for this.





First of all, many exchanges do not support bitcoin buying with credit cards due to processing fees as well as the risk of fraud. This could work to be in the best interest of consumers. This is because credit card processing could charge additional fees to transactions. So, in addition to paying transaction fees in the end, you'll be charged with processing fees that an exchange could pass on to you.





The other reason is that purchase with credit cards can be costly. Issuers of credit cards view bitcoin transactions as cash advances, and are able to charge large fees as well as interest rates for these advances. For example, American Express and Chase each count cryptocurrency purchases in cash-advance transactions. Thus, if you purchase $100 worth in bitcoin using the American Express card, you are required to pay just $10 (current cash advance fee applicable to the transactions) plus an annual fee of 25%. What's more, the credit card company also limits you to $1000 worth of bitcoin purchases per month.14





Another way to buy bitcoin with a credit or debit card is to use a Bitcoin reward credit card. These cards function in the same manner as your typical rewards credit , but they give rewards in the way of bitcoin. Thus, they put the earnings from purchase into Bitcoin. One example of one Bitcoin rewards card is the BlockFi Bitcoin Rewards Credit Card.15 Beware however, that the annual fees associated with the cards could be hefty and may also be added expenses associated with the exchange of fiat currency into crypto.





Even though exchanges such as Coinbase and Binance remain among the most popular methods to purchase Bitcoin however, they're not the only choice.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Customers can simply insert money into an ATM and use it to purchase bitcoin. Bitcoin is then stored in online wallets of users. Bitcoin ATMs have grown increasingly frequent in recent years. Even the retail major Walmart Inc. (WMT) is trying out a pilot program that gives customers the option to purchase bitcoin. Coin ATM Radar can help to find the closest machines.





However, ATMs are an expensive alternative. There are two costs that come along with ATM bitcoin transactions: a purchase fee and an additional fee for conversion of one currency that is fiat to bitcoin. The fees for both are quite steep as compared to other alternatives. For instance, the global standard purchase price for Bitcoin ATMs is 8.4 percent (of the purchase amount) and 5.4% for sales at ATMs.16





Be aware that Bitcoin ATMs are becoming increasingly dependent on government-issued IDs beginning in 2020.


Exchanges between P2P


As opposed to decentralized exchanges which allow sellers and buyers to meet anonymously as well as facilitate all aspects of the transaction, there are peer-to-peer (P2P) exchanges with a greater direct communication between users. LocalBitcoins is one such exchange. Once they have created an account, users are able to post requests to purchase or sell bitcoin. It also includes information about payment methods and costs. Customers can then browse through lists of deals to buy and sell selecting the trading partners with whom they want to trade.





LocalBitcoins helps with certain aspects of the trade. While P2P exchanges aren't able to provide the same degree of security as decentralized exchanges, they do give users the ability to shop around to find the most affordable deal. A large portion of these exchanges offer rating systems to ensure that users can assess potential trade partners before making any transactions.





Mainstream brokerages


Most brokerages don't offer the capability to trade and buy bitcoin due to uncertainty about the legal status of cryptocurrency. Robinhood Markets, Inc. (HOOD), an app widely used by retail investors is an exchange which offers cryptocurrency trading services. It charges no commission for crypto trades and purchases . It makes money from money received for order flow and transferring its trading volume to other trading platforms or brokerages.17





The absence of commission fees can be a enticing option for newbies, but there are a couple of disadvantages to this offer. To begin, Robinhood hasn't got the range of features and cryptocurrency offered by popular crypto exchanges like Coinbase. Robinhood offered trading on its platform for seven different cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 While Coinbase is a different story, you can exchange more than 100 cryptocurrency on Coinbase.19 It also has diverse order types that can help you minimize the risk and minimize losses when trading.





The Robinhood platform doesn't offer an online wallet. So, if you'd like to buy crypto through Robinhood then you'll have to take into consideration additional expenses for an online wallet provider.





Bitcoin and other cryptocurrency investments do not come covered by insurance offered by this organization. Securities Investor Protection Corporation (SIPC). At traditional brokerages, this organization protects against the loss of cash and securities in brokerage accounts that have a total of $5000, with a $2500-dollar cash limit.20 That facility is not accessible to clients of cryptocurrency exchanges. Cryptocurrency exchanges such as Coinbase have insurance for crime to protect their infrastructure against hacks. However, the insurance does not protect individual customers from password theft.21


How to Sell Bitcoin


You can sell bitcoin in exactly the same places you purchased the cryptocurrency including cryptocurrency exchanges, and P2P platforms. In general, the procedure of selling bitcoin on these platforms is the same as the procedure for buying it.





In this case, for instance, you could only need to click in a button to specify the type of order (i.e. how much, if the cryptocurrency should be offered immediately at the most competitive prices or it is necessary to sell it to be able to limit losses) in order to conclude the sale. Based on the composition of the market and the level of demand at the site the pricing for Bitcoin can vary. The example is that exchanges in South Korea traded bitcoin at a so-called kimchi premium during the upswing in its prices back in 2018.





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





Exchanges generally have daily and monthly withdrawal limitations. So, the cash generated from an enormous sale might take a while to reach the buyer. There is no limit on the amount of cryptocurrency you are able to sell however.





What Are the Steps for Purchasing Bitcoin?


The process of purchasing bitcoin is made up in four stages: choosing an appropriate exchange or location for your order choosing a payment method and ensuring secure storage to store your bitcoin. The type of option you pick in the initial step, there are additional steps required in the procedure. For instance, if, for example, you buy the cryptocurrency via Robinhood you may have to factor in additional costs for an online wallet or custody for your bitcoin because Robinhood does not provide these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most popular venues to purchase bitcoins are exchanges and brokerages (crypto as well as mainstream), and payment services such as PayPal. There is also the option of buying Bitcoin via P2P exchanges. For indirect ownership of bitcoin, you can purchase shares of companies that hold bitcoin on their books of accounts, such as Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Typically, the cost for buying bitcoin is fees per trade and the cost of converting a money that is fiat (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment service providers make money by selling this conversion spread.) The cost per trade is a function of your dollar amount for the trade. A greater amount of trades will be charged more. Cost of purchasing depends on the services offered by the company. For instance, Robinhood does not currently offer an online bank account for storage of bitcoin. This means that you'll have to budget costs associated with an online wallet purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also buy bitcoin at these places:


* Through Bitcoin ATMs


Payments can be made online using payment service providers like PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


Yes, your bitcoin purchase is not covered by SIPC.20 On certain exchanges such as Coinbase Bitcoin, the balances of the fiat currency in individual accounts may be FDIC-insured at $250,000 per account.21





The Bottom Line


The process for purchasing bitcoin is a bit more complex in comparison to the purchase of ordinary equity or stocks. This is due to the infrastructure and ecosystem for cryptocurrency is not as well-developed as those for traditional trading.





The process of buying bitcoin consists in four steps: choosing the appropriate service or place for purchases, joining with a payment option, placing an order, as well as ensuring safe storage for the cryptocurrency. Each of these steps requires research and a careful analysis of both the pros and cons of every service. You can also buy bitcoin at Bitcoin ATMs and from payment services such as PayPal and major brokerages such as Robinhood.












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