Notes

How to Buy Bitcoin


Making investments in Bitcoin (BTCUSD) can seem complicated, but it is easy to take it apart into smaller steps. In order to invest or trade Bitcoin does not require an account with a service or an exchange, although more secure storage practices are recommended.





There are several items that prospective Bitcoin investors require to have: a cryptocurrency exchange account in addition to personal identification documents in the case of an Know Your Customer (KYC) platform as well as a secure connection to the Internet and a method for payment. It is also suggested to keep your own personal account outside of the exchange account. The most reliable methods to pay using this option include bank accounts as well as debit cards and credit cards. You can also take bitcoin at ATMs that specialize in bitcoin and via P2P exchanges.





KEY TAKEAWAYS


Its value Bitcoin is due to the fact that it is a popular store of value and payment method in addition to its finite supply and declining inflation.


* While it's virtually impossible to allow Bitcoin to be compromised yet, it's possible that your bank or exchange accounts to become compromised. That's why proper protection and storage measures are imperative.


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


* One method to hold bitcoin is to invest in businesses with bitcoin on their balance sheets.


Before You Buy Bitcoin


Security and privacy are vital concerns regarding security, privacy and confidentiality for Bitcoin investors. Anyone who acquires the private key to a public account through the Bitcoin blockchain can sign off on transactions.1 Private keys must be kept confidential as thieves could try to steal them should they learn of massive amounts. Remember that anyone is able see the balance of a public address you use. However, the flip side of this data being available to the public is that it allows an individual to make multiple public addresses for themselves. They can then distribute their wealth of Bitcoin over a variety of addresses. The best strategy is keeping large investments in public addresses that are not directly connected to ones that are used in transactions.





Anyone can view a history of transactions that have been recorded on the blockchain--even you. Although transactions are recorded publicly on the blockchainplatform, identifying details about the user is not. It is true that on the Bitcoin blockchain the only public keys are visible alongside a transaction--making transactions confidential however not completely anonyme. In that way, Bitcoin transfers are much easier to trace and traceable than cash because all of their transactions are made available to public analysis, unlike private transactions. However, Bitcoin transactions also include certain aspects of anonymity built to their design. It's very difficult trace the transacting parties--i.e. the sender and recipient of the bitcoin on the cryptocurrency's blockchain.





Researchers from around the world and the FBI claim to be able to verify transactions carried out on the Bitcoin blockchain to users' different online accounts, like their digital wallets.2 For example, when the user creates an account through Coinbase users must present their identification.3 Then, when that person purchases bitcoin, it is tied to their personal name. If they send it to an alternative wallet, it could still be traced back to the Coinbase transaction that is tied with the account's holder's ID. This should not worry the majority investors because Bitcoin remains legal throughout the U.S. and most other advanced countries.





Be sure to check out how legal, tax-related, and tax status of purchasing and selling bitcoins where you live prior to transacting.


Buying Bitcoin








We've explained the steps for buying bitcoin below. Be aware that you need to conduct your own research and pick the right option depending on your needs.





Step 1: Select a cryptocurrency trading service or venue


The first step in purchasing bitcoin is selecting a cryptocurrency trading service or venue. Most popular venues and trading services to buy cryptocurrencies include exchanges, payment services, and brokerages. Out of these, cryptocurrency exchanges are the most convenient option because they offer a range of features, and even more exchanges using cryptocurrencies.





Making an account with a cryptocurrency exchange will enable you to buy, sell, and keep cryptocurrency. It is generally recommended to select an exchange provider that allows its users to take crypto out of their personal online account for safekeeping. If you are looking to trade Bitcoin and other cryptocurrencies this option may not be necessary.





There are a variety from cryptocurrency-based exchanges. Since the Bitcoin concept is about independence and personal sovereignty, certain exchanges let users remain anonymous and don't demand that users enter private information. These exchanges are autonomous and are often decentralized meaning they don't have a central source of control.





Though these systems can be used for some nefarious ends, they also provide services to people who are not banked. Certain categories of people -- refugees or those who reside in countries with a lack of infrastructure for government credit or banking--anonymous exchanges can help move them into the mainstream economy.





The moment is, however, that the top exchanges are not controlled by a central authority and make users submit identifying documentation. In the United States, these exchanges comprise Coinbase, Kraken, Gemini, FTX, and Binance.US There are many others to mention. These exchanges have increased in the number of features they offer.





The crypto market has grown rapidly in the last 10 years, with many new tokens seeking investor dollars. With the exception of Bitcoin as well as a few prominent coins, such as Ethereum There aren't all of the coins are available on all exchanges. Each exchange has different criteria to decide if it's appropriate to include or not allow trading of certain tokens.





Coinbase, Kraken, and Gemini offer Bitcoin and a broader range of altcoins. They are among the most user-friendly on-ramps of crypto within the entire cryptocurrency industry. The Binance platform is targeted at an advanced buyer, offering more sophisticated trading options and more alternative cryptocurrency choices. FTX has been a rapid-growing crypto exchange that has garnered a multibillion-dollar valuation, offers only a limited amount of altcoins for U.S. investors.4 However, investors from outside their home country of the U.S. have a greater variety of tokens available on its platform.





The most important thing to consider when creating an account for cryptocurrency exchange is to follow safe Internet methods. It is recommended to use two-factor authentication. having a unique and long 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 country to do so.5 The cryptocurrency is used as a currency for any transaction that the company 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 an alternative payment method


If you've chosen the exchange option, you'll need to gather your personal documents. Dependent on the exchange, it could be necessary to have photos of your driver's license, Social Security card, as and information about your employer and the source of funds. What information you'll need is contingent on the location which you reside and regulations within it. The process is in general the same as the process of setting up a standard brokerage account.





After the exchange has verified your identity, you'll be required to connect an option for payment. On most exchanges you can connect your bank account to the exchange directly, or connect a debit or credit card. While you are able to use a credit card to buy cryptocurrency, it's not recommended as the price fluctuations of cryptocurrency could raise the total cost of purchasing coins.





Bitcoin is legal within the United States, but some banks may question or even make deposits unavailable to crypto-related sites or exchanges.6 It's it's a good idea to make sure that your bank allows deposits to the exchange you have chosen.





There are various costs for deposits via a bank account either debit or credit card. It is crucial to investigate the fees associated with the various payment options to assist you to decide on a payment option or decide which one works best for you.





Exchanges can also charge fees per transaction. They may charge in the form of a flat charge (if the amount traded is low) or some percentage of the trading amount. Credit card transactions incur processing fees in addition to transaction fee.





Step 3. Place an order


Bitcoin can be purchased (or other cryptocurrencies) when you select an exchange option and connecting a payment method. In recent times cryptocurrency exchanges have slowly become more mainstream. They have grown significantly in terms of liquidity and their number of features. The operating changes that have occurred at bitcoin exchanges are similar to the change in the way people perceive cryptocurrencies. An industry that was once considered a fraud or one that had questionable procedures is slowly changing into legitimate, and has attracted the attention of every major player in the world of financial services.





The cryptocurrency exchanges of today have developed to a point where they're able to provide nearly the exact feature set as their counterparts who are stock brokers. Exchanges for cryptocurrency today offer many different kinds of orders as well as ways to invest. Nearly all exchanges allow limit and market orders, and some also offer stop-loss order. Of the exchanges listed above, Kraken offers the most sorts of orders. Kraken allows for market, limit, stop-loss, stop-limit taking-profit, and take-profit limit orders.7





Apart from the various kinds of orders, exchanges offer methods to set up the possibility of recurring investments. This allows customers to create a dollar-cost-average into their chosen investments. Coinbase for instance, allows users to set up recurring purchases to be made every day, week, or month.8





Step 4: Secure storage


Blockchains, cryptocurrency or Bitcoin provide a place to store digital assets with greater security. With your cryptocurrency out of an exchange and placed in your own wallet, you can be sure that only you have control over the private key to your money. This gives you the possibility of storing your funds away out of an exchange. This will help you avoid the risk of your exchange being compromised and losing your funds.





While most exchanges provide the option of wallets for their users security is not their primary business. We do not generally recommend using an exchange wallet to manage big or long-term cryptocurrency investments.





Certain wallets have more features than other wallets. Some are Bitcoin only, while some can be used to store multiple types of altcoins. Certain wallets also have the ability to exchange one token for another.





When it comes to selecting an Bitcoin wallet, there are several options. The first thing you have to be aware of about crypto wallets is that they are made up of hot wallets (online wallets) and cold wallets (paper or physical wallets).





Hot wallets


Online wallets are also known by the name of hot wallets. Hot wallets are ones that run with Internet-connected devices, like computers, phones, or tablets. The risk of vulnerability is that hot wallets can generate private keys that you use to access your funds via these connected devices. While a hot account can be extremely useful in the way you are able to gain access to and complete transactions using your assets swiftly, the fact that you store your private keys on an Internet-connected device makes it more susceptible to a attack.






This may seem absurd and a bit naive, but wallets who haven't set up enough security are at risk of being robbed of their funds. This is not an infrequent possibility, and can occur in several ways. For example, you could boast on a platform like Reddit about how much bitcoins are in your wallet when you are using little to no security and keeping it in a hot wallet would not be prudent. It is true that these wallets can be made secure as provided that proper precautions are taken. Secure secure passwords, 2-factor authentication and secure Internet browsing should be considered as minimum specifications.





These wallets can be used for small amounts of cryptocurrency or cryptocurrency that you are already trading on an exchange. You can think of a hot wallet to a checking account. Traditional wisdom in finance would advise that you should keep your money only for spending within a bank account that is a checking one, while most of your money is in savings accounts or other investment accounts. Similar can be said of hot wallets. Hot wallets can be described as mobile, desktop, web and exchange account custody wallets.





As stated previously, exchange wallets serve as custodial banks provided by exchange. The owner of this model is not holder to the encryption key for the cryptocurrency stored in the wallet. If an event should occur wherein the exchange is hacker-proof or your account is compromised, you'd lose the funds you have invested. The phrase "not your key, not your coin" is heavily used on cryptocurrency forums as well as communities.





Cold wallets


The simplest description of a cold wallet is that it is not tied to Internet and therefore stands at lower risk of being breached. These wallets can also be referred to as offline wallets or hardware wallets. They save the user's private key in a device that is not connected to the internet. They could also be equipped with software that functions in parallel so that the user is able to see their portfolio without putting their private keys in danger.





Perhaps the most secure method to store your cryptocurrency offline is by using a paper wallet. 3 ways to buy bitcoin is a wallet that can be created by visiting certain websites. It produces public and private keys that are printed out on a piece of paper. Access to the cryptocurrency contained in these addresses is only possible when you possess the piece of paper that is protected by the private key. A lot of people laminate their wallets in paper and put them in safe box at their bank or even in a safe in their home. These wallets are for higher security and longer-term investments since they are not able to quickly sell or trade bitcoins stored in through this method.





The most popular type of cold device is a hardware wallet. A hardware wallet is usually a USB drive that is used to store a user's private keys securely offline. These types of wallets have distinct advantages when compared to hot wallets as they aren't affected by malware that could affect a computer. Hardware wallets ensure that private keys will not be in contact with your network-connected computer or potentially vulnerable software. The devices are usually open source, which allows users to test the security of their devices through an audit of the code instead of a firm declaring that they're secured to work with.





Cold wallets are the most safe way to store your bitcoin or other cryptos. But they require a greater amount of technical knowledge to set up.





An effective way to set your wallets is to have three items An exchange account to purchase and sell items in hot wallets, a hot account to hold small to medium amounts of crypto you'd like to trade, or sell and a cold physical wallet to store your larger assets that will last longer.





How to Buy Bitcoin With PayPal


You can also buy bitcoin through the payment processor PayPal Holdings, Inc. (PYPL). There are two ways to purchase bitcoin using PayPal. One and the easiest method is to purchase cryptocurrencies through your PayPal account that is connected to a payment device that accepts credit card, bank account or debit card. Another option is to utilize the balance in one's 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 providers permit users to buy bitcoin with this 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 cryptocurrency to purchase goods and services through"Checkout With Crypto" "Checkout With Crypto" feature.10





In order to open a crypto account through PayPal it is necessary to provide the following details is needed: name, physical address and date of birth also a tax identification number.11





It isn't possible for a credit card to purchase Bitcoin using PayPal. While you are buying the Bitcoin, PayPal will display a price for the cryptocurrency. However, the price is subject change rapidly due to the fluctuation of markets for cryptocurrency. It's a good idea to make sure that you have greater than the price you set for the purchase in your savings account.





When you buy bitcoin online through PayPal it earns you money off the crypto spread or the differences between Bitcoin's value in addition to its conversion rate with USD. The company also charges a transaction cost for each purchase. These fees depend on price of the purchase. For instance there is a flat rate of $0.50 is per purchase between $100 to $200. Following that, it is a percentage of the overall dollar amount. For instance, a fee of 2 percent of the amount total is per transaction for crypto transactions between $100 to $200.12





A disadvantage to buying cryptocurrency through PayPal is the fact that you can't transfer the crypto outside the company's platforms for payment. Therefore, it is not possible for you to transfer your purchased bitcoin from PayPal's wallet into the external cryptocurrency wallet or your personal wallet.11





Another disadvantage to using PayPal is that only a few websites and exchanges permit using the processor for payment. eToro is among the few online marketplaces that allow PayPal to be used on PayPal to purchase bitcoin through its platform.13





How to Buy Bitcoin With a Credit Card


The process for purchasing bitcoin with credit card follows the same procedure when buying it through debit cards or by electronic clearinghouse (ACH) transfer. You will need to enter your credit card's details into the exchange or online trading company and then approve the transaction. However, generally speaking, it is not a good idea to purchase bitcoin using credit cards. There are several factors to consider.





First, there are some exchanges that do not permit bitcoin purchasing using credit cards due to processing charges and the potential for fraud. This decision may work out to be in the best interest of consumers. This is due to the fact that credit card processing may be able to add additional charges to transactions. Therefore, in addition to paying transaction fees you'll be left with processing costs which the exchange may pass onto you.





Another reason is that credit card purchases can be expensive. The credit card issuers regard bitcoin purchases as cash advances and have to charge high-cost fees and rates for advances. For example, American Express and Chase both classify purchases of cryptocurrencies as cash advance transactions. If, for instance, you purchase $100 worth of bitcoin with the American Express card, you are required to pay just $10 (current cash advance charge for these transactions) plus an annual percentage of 25%. The credit card provider also restricts customers to only $1,000 worth of bitcoin purchases per month.14





An indirect method of purchasing bitcoin with credit card is to purchase an Bitcoin Rewards credit card. These cards function similarly to your normal rewards credit cards, except that they grant rewards in shape of bitcoin. In other words, they convert the earnings from purchase into Bitcoin. One example of an Bitcoin Rewards card to use is BlockFi Bitcoin Rewards Credit Card.15 Be aware that the annual charges for these cards could be quite high and there could be additional costs associated with the transformation of fiat currencies to crypto.





Although exchanges such as Coinbase or Binance remain one of the most well-known ways to buy Bitcoin but they're certainly not the only means.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. People can deposit cash into machines that can be used to purchase bitcoin. The bitcoin is then stored in online wallets for users. Bitcoin ATMs are becoming increasingly well-known in recent years. Retail large Walmart Inc. (WMT) is trialling a pilot program that will give customers the option to purchase bitcoin. Coin ATM Radar can help locate the nearest machines.





However ATMs aren't cheap option. There are two fees that are associated with ATM bitcoin purchases: a purchase fee and an exchange fee to convert the fiat currency into bitcoin. Both costs are quite costly relative to the other options. For instance, worldwide, the typical purchase cost with Bitcoin ATMs is 8.4% (of the purchase amount) and 5.4 percent for sales made at ATMs.16





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


P2P exchanges


In contrast to decentralized exchanges that allow sellers and buyers to meet anonymously and handle all aspects of the transfer, there's a few peer-to-peer (P2P) exchange services which provide a direct connection between customers. LocalBitcoins is one of these exchange. After signing up, users can make requests to purchase Bitcoin, or sell it, along with details regarding payment methods and costs. Users then browse through listings of both buy and sell deals in order to choose the business partners with whom they wish to do business.





LocalBitcoins assists in certain aspects of trading. Although P2P exchanges do not have the same level security and anonymity as traditional exchanges, they give users the opportunity to shop around to find the most affordable deal. A large portion of these exchanges offer rating mechanisms so that their users can review possible trade partners before committing to.





Mainstream brokerages


A few major brokerages provide the capability to trade and buy bitcoin due to the uncertainty surrounding the legal status of cryptocurrency. Robinhood Markets, Inc. (HOOD) which is an app well-liked by investors who are retail, is an exchange that provides bitcoin trading capabilities. It charges 0% commission on cryptocurrency trades and purchases . It earns its money through payment for order flow, passing its trading volume onto another trading platform or brokerages.17





The absence of commission fees can be a enticing option for beginners, but there are a few downsides to the offer. The first is that Robinhood isn't equipped with the breadth of features and coins offered by prominent crypto exchanges like Coinbase. Robinhood has enabled trading on its platform for seven cryptocurrency: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 However, Coinbase can trade more than 100 cryptocurrencies on Coinbase.19 The exchange also has various types of orders that help minimize risk and mitigate losses during trading.





The Robinhood platform does not offer a hosted wallet. Therefore, if you want the purchase of cryptocurrencies via Robinhood and you want to purchase cryptocurrencies, you'll need add on additional costs for an online wallet provider.





Bitcoin and other cryptocurrency investment options are not protected by insurance through Securities Investor Protection Corporation (SIPC). Securities Investor Protection Corporation (SIPC). In the case of regular brokerages and brokerages, the insurer protects against losses of cash and securities account with brokerages that are up to $5000, with a $2500-dollar cash limit.20 This facility isn't accessible to clients from cryptocurrency exchanges. The cryptocurrency exchanges such as Coinbase have crime insurance to guard their infrastructure against attacks. However, this insurance doesn't safeguard individual customers against password theft.21


How to Sell Bitcoin


The ability to sell bitcoin is available at the same places where you purchased the cryptocurrency including cryptocurrency exchanges, and P2P platforms. Typically, the process of selling bitcoin on these platforms is similar to the process of purchasing it.





In this case, for instance, you could only have to click to select the type of order (i.e. it is whether the cryptocurrency is to be sold immediately at the lowest price, or whether it is to be sold to minimize losses) in order to conclude the sale. Based on the composition of the market and the level of demand at the site the price of offering for Bitcoin can be different. The example is that exchanges in South Korea traded bitcoin at a so-called kimchi premium during the escalating price of Bitcoin in the year 2018.





Currency exchanges that trade in crypto charge a proportion from the cryptocurrency sold amount as fees. For example, Coinbase charges 2.49% from the total transaction amount as fees.22





Exchanges typically have monthly and daily withdrawal limits. Therefore, money from the sale of a significant amount may not be readily available to the trader. There is no limit to the amount of cryptocurrency you can sell, however.





What Are the Steps for Purchasing Bitcoin?


The process for purchasing bitcoin consists of four steps: choosing an exchange or a location to make your purchase by selecting a preferred payment method and ensuring secure storage for the cryptocurrency you purchased. In the case of the place you have chosen for the first phase, there will be additional steps that are involved in the process. For instance, if, for example, you are purchasing the cryptocurrency with Robinhood you may need to be aware of additional costs associated with an online wallet or custody of your bitcoin since they do not provide these services.





What Are the Most Popular Venues for Buying Bitcoin?


Most popular locations to purchase bitcoins are exchanges as well as brokerages (crypto or mainstream) as well as payment solutions like PayPal. You can also purchase Bitcoin through P2P marketplaces. In order to acquire bitcoin in indirect form you can also purchase shares of companies that hold the cryptocurrency on their balance sheets, like Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Usually, the cost for buying bitcoin is the fee for each trade as well as the cost to convert conventional currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment services make money from this conversion spread.) The price per trade is a function of what amount in dollars is the trade. A higher trade amount will be charged more. The total price of purchase is dependent on the features offered by the location. For example, Robinhood does not currently provide an online wallet to keeping bitcoin. Thus, you'll have to plan for charges for your online wallet purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also buy bitcoin at these locations:


* Through Bitcoin ATMs


* Through online payment solutions like PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


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





The Bottom Line


The process for purchasing bitcoin is a bit more complex that the process of buying regular stocks or equity. This is due to the cryptocurrency's ecosystem and infrastructure are not as well developed that those of traditional trading.





The process of buying bitcoin consists of four stages: choosing the appropriate service or place for payment, connecting with an option for payment, placing an orderand providing secure storage for the purchased cryptocurrency. Each step calls for research as well as a careful analysis of the pros and advantages of each one. You can also purchase bitcoin through Bitcoin ATMs or from payment companies like PayPal and other major brokerages, such as Robinhood.












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