Notes

How to Buy Bitcoin


Investing in Bitcoin (BTCUSD) might seem complicated, however it's much simpler if you breakdown the process into smaller steps. Investing or trading Bitcoin only requires an account at a service or exchange, however additional storage methods that are safe are suggested.





There are a variety of things hopeful Bitcoin investors need to have: a cryptocurrency exchange account and identification proof If you're using a Know Your Customer (KYC) platform in addition to a secure connection the Internet and a means to pay. It is recommended that you keep a personal wallet that is separate from the exchange account. Affordable methods to pay with this option include bank accounts such as debit cards, bank accounts, and credit cards. You can also acquire bitcoin using ATMs specifically designed for bitcoin and through exchanges P2P.





KEY TAKEAWAYS


"The worth of Bitcoin is due to its usage as a store of value as well as a payment system in addition to its finite supply and declining inflation.


It's not impossible for Bitcoin itself to be compromised but it is still possible for your exchange or wallet user account to compromise. This is why practicing proper storage and security measures are imperative.


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


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


Before You Buy Bitcoin


Security and privacy are vital security and privacy concerns in the lives of Bitcoin investors. Anyone who has access to the private secret key to a public address through the Bitcoin blockchain can authorize transactions.1 Private keys should be kept secret. Criminals might attempt to steal them when they find out about large assets. Be aware that anyone may see the balance of a public address you use. The other side of these public records is that anyone can have multiple addresses public for themselves. Thus, they can distribute their wealth of Bitcoin over multiple addresses. It is a good idea to safeguard investments with significant amounts at public addresses that aren't directly connected to addresses which are used for transactions.





Anyone can view a history of transactions made on the blockchain--even you. Although transactions are publically recorded on the blockchain, users' information is not. While on the Bitcoin blockchain just a user's public key is shown next to the transaction, making transactions private however not completely anonymous. This is why Bitcoin transactions are more transparent and trackable than cash since all of them are public viewing, in contrast with private cash transactions. However, Bitcoin transactions also include an element of anonymity built in their structure. It's difficult for anyone to locate the transaction parties--i.e., the person who sends and receives the bitcoin--on the cryptocurrency's blockchain.





International researchers and the FBI claim they are able follow transactions made via the Bitcoin blockchain to users' other accounts online, which include their digital wallets.2 For instance, if someone creates an account on Coinbase they have to verify their identification.3 Now, when that buyer purchases bitcoin, it is tied to their personal name. In the event that they transfer it another wallet, it may be traced to the Coinbase purchase which is tied to the account holder's identity. This should not worry the majority customers because Bitcoin remains legal throughout the U.S. and most other developed countries.





Make sure you check the legal, regulatory, and tax implications of buying and selling bitcoins where you reside prior before making any transactions.


Buying Bitcoin








We've detailed the steps to buying bitcoin below. Remember that you still need to do your research and decide on the best option according to your situation.





Step 1: Select an online trading platform or venue


The first step to purchase bitcoin consists of choosing a crypto trading site or a location. The most popular trading venues and services for buying cryptocurrencies are cryptocurrency exchanges, payment services, and brokerages. Out of all these, crypto exchanges offer the most practical option due to their broad range of options and cryptocurrencies for trading.





Signing up for a cryptocurrency exchange allows you to buy, sell, or keep cryptocurrency. It is usually best to sign up with an exchange that allows its users to withdraw cryptocurrency into their personal online wallets to ensure the safety of their. If you are looking to trade Bitcoin and other cryptocurrencies this feature may not matter.





There are many types of cryptocurrency exchanges. Since the Bitcoin principle of decentralization and individual sovereignty, certain exchanges permit users to remain anonymous and don't need users to input particular information about themselves. They are independent and are usually decentralized which means that they do not have a central point of control.





While these systems are able to serve harmful purposes, they also be a source of assistance to the majority of the world's population that is not banking. For certain categories of people--refugees or people living in countries which have little or no infrastructure for government credit or banking--anonymous exchanges are a great way to integrate them into the mainstream economy.





At the moment, all of the top exchanges in the world are decentralized and follow laws that demand users submit identifying documentation. To be specific, within the United States, these exchanges comprise Coinbase, Kraken, Gemini, FTX, and Binance.US Just to name a few. The number of exchanges has increased by the variety of features they provide.





The cryptocurrency universe has grown rapidly in the last 10 years as a number of new coins have been in competition with investor dollars. With the exception of Bitcoin and some prominent coins like Ethereum There aren't all of these tokens are available at all exchanges. Each exchange has their own set of rules that determine whether they will include or deny trading certain tokens.





Coinbase, Kraken, and Gemini provide Bitcoin and a growing number of altcoins. These three are probably ones of the easiest ways to get into crypto that exist in the market. Binance caters to a more advanced trader, offering higher-quality trading features as well as more altcoin options. FTX is a fast-growing digital exchange with its valuation to be multibillion dollars, also offers limited number of altcoins for U.S. investors.4 However, traders outside to the U.S. have a greater selection of options on its platform.





A crucial thing to keep in mind when creating accounts for cryptocurrency exchanges is to adhere to safe Internet practices. This means two-factor authentication, as well as a long, unique password that comprises a variety lowercase letters, capitalized or lowercase letters, special characters, and 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 where a business can take it. In the end, however, it is still the U.S. dollar continues to be El Salvador's main currency.


Step 2. Join your currency to an option for payment


When you've selected the exchange option, you'll be required to gather your personal documents. Dependent on the exchange, these may include pictures of a drivers license or Social Security card, as additionally, information about your employer as well as the source of your funds. The information you need will vary depending on the area which you reside and regulations within it. The process is generally the same as setting up a typical brokerage account.





After the exchange has verified your identity, you'll be asked to connect to a payment method. On most exchanges you can connect your bank account straight away or connect a credit or debit card. Although you are able to use your credit card to purchase cryptocurrency, it's not advisable as cryptocurrency price volatility could inflate the price of buying coins.





Bitcoin may be legal throughout the United States, but some banks may be suspicious of or restrict deposits to crypto-related sites or exchanges.6 It's important to research to ensure that the bank you use allows deposits to your chosen exchange.





There are various fees associated with deposits made through a bank account (debit, credit) or credit card. You should research the costs that come with each payment method in order to select an exchange option or decide which one works most effectively for you.





Exchanges also charge fees per transaction. They may charge in the form of a flat charge (if the amount traded is small) or a percentage of the trading amount. Credit cards incur fees for processing in addition to transaction costs.





Step 3. Make an order


You can purchase bitcoin (or other cryptocurrencies) by selecting an exchange as well as connecting to a payment option. In recent years crypto exchanges have slowly become more mainstream. They have risen significantly with regard to liquidity and their array of features. The operating changes that have occurred at exchanges for cryptocurrency are mirrored by the change in the perception of cryptocurrencies. One industry that was seen as a fraud or one that had questionable practices is slowly morphing into a legitimate business that has attracted interest from the top players in the financial services industry.





In the last few years, cryptocurrency exchanges have evolved to the point where they provide the same feature set as their counterparts who are stock brokers. These exchanges provide an array of different order types and options to invest. A majority of cryptocurrency exchanges offer limit and market orders, and some also provide stop-loss orders. Of the mentioned exchanges, Kraken offers the most sorts of orders. Kraken can accommodate market, limits, stop-loss orders, stop limit, take-profit, and take-profit limit orders.7





In addition to a range of different types of orders, exchanges allow users to set up indefinite investments, allowing customers access to a daily cost average of their investment of choice. Coinbase is one example. It lets users create recurring purchases to be made every day, week or month.8





Step 4: Safe storage


Cryptocurrency and Bitcoin wallets can be an excellent way to store your digital assets with greater security. When you store your cryptocurrency outside of the exchange and inside your own wallet, you can be sure that only you have control over the private key that you have to your funds. This also gives you the possibility of storing your funds away from an exchange , and reduce the risk of your exchange being compromised and the loss of your funds.





Although many exchanges offer the option of wallets for their users security isn't their main business. We do not generally recommend using an exchange wallet to manage long-term or large-scale cryptocurrency holdings.





Certain wallets have more features than others. Some are Bitcoin only, and others can store multiple types of altcoins. Some wallets provide the option of swapping one token with another.





In the case of choosing the best Bitcoin wallet, you can choose from several choices. The first thing you need to learn about crypto wallets is the concept of hot wallets (online wallets) and cold wallets (paper or physical wallets).





Hot wallets


Digital wallets also known as "hot" wallets. Hot wallets run on devices connected to the internet, such as phones, computers or tablets. This is a security risk since hot wallets can generate private keys for your coins using these devices that are connected to the Internet. Although a hot-wallet can be very convenient in the ways that you can access and make transactions with your assets swiftly, the fact that you store your private key on a device connected to the internet makes it more vulnerable to hack.





This may seem a bit nebulous it's not, but those who do not have adequate security risk the loss of funds due to theft. This is a frequent incident, and it can happen in a number of ways. For example, you could boast on a platform like Reddit about how much bitcoins you've stored while you're using little to no security and keeping it in a hot wallet might make sense. In reality, the wallets can be secured so they are protected by the appropriate measures. Strong usernames, two-factor authentication and secure Internet browsing are the minimum prerequisites.





These wallets can be used for small amounts or cryptocurrency you're already trading on an exchange. A hot wallet to a bank account. Common wisdom on finance suggests to put only money you spend in a savings or checking account, but the bulk of your money is stored in savings accounts or other investment accounts. The same is true with hot accounts. Hot wallets include mobile, desktop, web, and exchange accounts custody wallets.





As was mentioned earlier, exchange wallets are custodial accounts provided by the exchange. The owner of this type is not the holder for the secret key for the cryptocurrency held within the wallet. If an incident were to occur wherein the exchange is damaged or your accounts are compromised, you'd lose your funds. The phrase "not your key, not your coin" is frequently repeated in cryptocurrency forums and communities.





Cold wallets


The simplest description of cold wallets is that it is not attached to an Internet and therefore has an extremely low risk of being breached. They can also be known as offline wallets or hardware wallets. These wallets save a user's private key in a device but isn't connected the internet. They are also equipped with software that runs in parallel, so that users can see the entire portfolio without putting the private keys at risk.





The most secure and secure method to store cryptocurrency offline is by using a paper wallet. A paper wallet is a paper wallet that you create off of certain websites. It can then generate both private and public keys that are printed out on a piece of paper. The ability to access bitcoin and other digital currencies is only possible if you have that piece of paper with the private key. A lot of people laminate their cash wallets with paper and store them in safe deposits at their bank or even in a safe at home. These wallets are intended for long-term and secure investments since you are unable to swiftly sell or trade bitcoin stored with these wallets.





The most popular type of cold card is a a Hardware wallet. Hardware wallets are generally an USB drive device that stores key information of the user offline. These wallets offer significant advantages over hot wallets because they are unaffected by viruses that can infect one's computer. Hardware wallets ensure that private keys are never in contact with your computer's network or potentially vulnerable software. The majority of these devices are open source, allowing users to assess the security of their devices through code audits , rather than a company declaring that they are completely safe for you to utilize.





Cold-wallets are among the most safe way to store your bitcoin or other cryptos. But they require more knowledge of technology to set up.





The best way to set up your wallets is having three things: an exchange account to purchase and sell items Hot wallet to hold small to medium amounts of crypto they want to trade with or sell or trade, and a cold wallet to store larger holdings to last for a long time.





How to Buy Bitcoin With PayPal


You can also buy bitcoin via the payment processor PayPal Holdings, Inc. (PYPL). There are two options to buy bitcoin through PayPal. One and the easiest method is to buy cryptocurrency by using your PayPal account that is connected to a payment method such as a credit card, bank account or debit card. Another option is to utilize the balance in funds in your PayPal account to purchase crypto from a third party provider. This option is not exactly as efficient as the other because very few third-party sites allow customers to purchase bitcoin through the PayPal button.





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





To set up a crypto account with PayPal you need the following information is required include: name, physical addresses or address, birth date as well as a tax ID number.11





It isn't possible using credit cards to purchase Bitcoin through PayPal. During how to buy bitcoin metamask buying process, PayPal will display a price for the cryptocurrency. However, this price is subject changing rapidly due the volatility of cryptocurrency markets. It is a good idea to make sure you have more than the price you planned for the purchase in your bank account.





When you buy bitcoin directly via PayPal they earn money on the crypto spread or the difference between Bitcoin's price in the market and its exchange rate with USD. The company additionally charges you a transaction cost for each transaction. The fees are based on the value of the purchase. For example there is a flat rate of $0.50 is applicable for purchases that are between $100 and $200. Following that, the cost is in the form of a percentage of total dollar amount. For instance, the fee of 2% of the total amount is applied to purchases made with cryptos between $100 and $200.12





One disadvantage of purchasing cryptocurrencies through PayPal is that it isn't possible to transfer the currency outside the company's platforms for payment. Therefore, it is not possible for you to transfer the Bitcoin you bought through PayPal's bank account to an external crypto wallet or your personal wallet.11





The third disadvantage of PayPal is that the majority of trading platforms and exchanges allow payments through the PayPal processor for payments. eToro is one of the few online brokers that allow the use of PayPal to purchase bitcoins through its platform.13





How to Buy Bitcoin With a Credit Card


The procedure for buying bitcoin with credit card is the same as the method to buy it using debit or credit cards. You can also purchase it through computerized clearinghouse (ACH) transfers. It is necessary to enter 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 the best choice to buy bitcoins using credit cards. There are several reasons.





First of all, not all exchanges allow bitcoin transactions using credit cards due to associated processing fees as well as the risk of fraud. The decision could be in the best interests of the customers. This is because credit card processing can be able to add additional charges to transactions. Thus, in addition to paying transaction fees in the end, you'll be charged paying processing costs that the exchange could pass on to you.





The second reason is because credit card purchases can be expensive. Credit card issuers view bitcoin transactions as cash advances and charge high fees and interest charges on these advances. For instance, American Express and Chase each count cryptocurrency purchases as transactions that are cash advances. In other words, if one purchases $100 worth in bitcoin using the American Express card, you have to pay $10.00 (current cash advance fee applicable to such transactions) and an annual percentage rate of 25 percent. What's more, the credit card company will also limit the amount you can spend on bitcoin purchases per month.14





An alternative method of purchasing bitcoin with credit card is to get a Bitcoin rewards credit card. Such cards function like your typical rewards credit credit card except they offer rewards in the cryptocurrency bitcoin. The cards invest earnings from purchase into Bitcoin. One example of one Bitcoin rewards credit card would be BlockFi Bitcoin Rewards Credit Card.15 Beware however, that annual fees for these cards could be quite high and could also come with additional costs associated with the conversion of fiat currencies to cryptocurrency.





Although exchanges such Coinbase or Binance remain among the most popular ways to buy Bitcoin, they are not an all-inclusive solution.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Users can place cash in machines and use it to purchase bitcoin. Then, the bitcoin is transferred to online wallets for users. Bitcoin ATMs have become increasingly popular in recent times. Even retail big Walmart Inc. (WMT) is trying out a pilot program that provides customers with the possibility of buying bitcoin. Coin ATM Radar can help to find the closest ATMs.





However ATMs aren't cheap option. There are two charges that are associated with ATM bitcoin transactions: a purchase fee and an additional fee for conversion of Bitcoin into fiat currency. Both are quite high as compared to other options. For example, the worldwide average price for purchases made at Bitcoin ATMs is 8.4% (of the amount of purchase) and 5.4 percent for sales at ATMs.16





Be aware that Bitcoin ATMs are increasingly required to have identification cards from the government since early 2020.


Exchanges between P2P


Instead of decentralized exchanges, that allow sellers and buyers to meet anonymously and can facilitate every aspect of the transactions, there are peer-to-peer (P2P) exchanges that provide a more direct interaction between users. LocalBitcoins is an example of this type of exchange. After having an account, users can post requests to purchase or sell bitcoin. They can also provide details about payment methods, as well as prices. After that, they can browse through the lists of buy and sell offers in order to choose the business partners who they would like to conduct business.





LocalBitcoins assists in certain aspects of the trade. Although P2P exchanges may not provide the same protections as decentralized exchanges but they provide users with an opportunity to shop around to find the best price. A majority of these exchanges have rating systems, so that customers are able evaluate potential partners for trade prior to doing business with them.





Mainstream brokerages


A small percentage of the major brokerages offer bitcoin trading and purchase capabilities due to uncertainty about how cryptocurrencies are regulated. Robinhood Markets, Inc. (HOOD) is an app well-liked by investors who are retail, is one exchange offering cryptocurrency trading services. It charges 0% commission for cryptocurrency transactions and purchases . It also earns money from payment for order flow, transferring its trading volume to another trading platform or brokerages.17





The absence of commissions might be an appealing option for those who are new to crypto, however there are some drawbacks to that proposition. One is, Robinhood does not have the range of features and coins offered by well-known crypto exchanges like Coinbase. Robinhood offered trading on its platform for seven cryptocurrency: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 However, you can exchange more than 100 cryptocurrency with Coinbase.19 Additionally, the exchange offers various order types to lower the risk and reduce losses in trading.





The Robinhood platform does not offer a hosted wallet. So, if you'd like to buy cryptocurrency through Robinhood and you want to purchase cryptocurrencies, you'll need to factor in additional costs for an online wallet provider.





Bitcoin and other cryptocurrency investments do not come protected by insurance policies from this organization. Securities Investor Protection Corporation (SIPC). The regular brokerages of the agency protects against the loss of securities and cash in brokerage accounts that have a total of $500,000 with a $250,000 cash limit.20 This insurance option isn't available to customers trading on crypto-currency exchanges. Exchanges for cryptocurrency like Coinbase have insurance for crime to guard their infrastructure against attacks. But this insurance will not guarantee protection for individual customers against password theft.21


How to Sell Bitcoin


You can sell bitcoin at the same venues where you bought the cryptocurrency like cryptocurrency exchanges or P2P platforms. In general, the procedure of selling bitcoin on these platforms is similar to the method of buying it.





For instance, you might just need to click to select an order type (i.e., whether the cryptocurrency should be offered immediately at the lowest price, or whether it is necessary to sell it to minimize losses) in order to conclude the sale. Based on the composition of the market and demand at the place and the location, the price at which you can offer Bitcoin will vary. For instance, exchanges within South Korea traded bitcoin at the so-called kimchi rate during the peak in prices back in 2018.





A percentage of cryptocurrency exchanges will charge you a fraction of the total amount sold as fees. For instance, Coinbase charges 2.49% from the total transaction amount as fees.22





Exchanges typically have daily and monthly withdrawal limitations. Thus, cash from an extensive sale may not be available for immediate withdrawal to the buyer. There are no limitations on the amount of crypto you can sell however.





What Are the Steps for Purchasing Bitcoin?


The procedure to buy bitcoin is comprised from four phases: selecting the best location or exchange for your order and selecting a payment method, and ensuring safe storage for the cryptocurrency you purchased. Depending on the type of venue selected in the initial step, there are other steps to be taken in the process. For instance, in the event that you purchase the cryptocurrency from Robinhood you could need to take into account additional costs for an online wallet and the custody of your bitcoin since the company does not offer these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most popular options for purchasing bitcoins include cryptocurrency exchanges brokers (crypto and traditional) and payment service such as PayPal. You can also buy Bitcoin via P2P online exchanges. In order to acquire bitcoin in indirect form you can invest in businesses that hold bitcoin on their financial statements, like Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Typically, the cost for purchasing bitcoin is one fee per trade in addition to the cost to convert dollar-based currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment processing services make money by selling 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 bring higher costs. The total purchase price also will depend on the features offered by the vendor. For example, Robinhood does not currently offer an online wallet for depositing bitcoin. Therefore, you'll need to budget costs for online wallets for your purchase.






Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also purchase bitcoin at the following locations:


* Through Bitcoin ATMs


* Through online payment providers such as PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


It's true that your purchase made with bitcoin is not covered by SIPC.20 For certain exchanges such as Coinbase Bitcoin, the balances of the fiat currency in individual accounts are FDIC insured at $250,000 per account.21





The Bottom Line


The process for purchasing bitcoin is more involved than purchasing regular equity or stock. This is due to the fact that the cryptocurrency ecosystem and infrastructure aren't as robust as those for traditional trading.





A bitcoin purchase process comprises of four steps: deciding on an option or a place to make purchases, joining to the payment method of your choice, placing an order, as well as ensuring safe storage for your purchased cryptocurrency. Each of these steps requires extensive research and careful analysis of both the pros and negatives of each service. You can also buy bitcoin at Bitcoin ATMs or from payment services such as PayPal or major brokerages like Robinhood.












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