Notes

How to Buy Bitcoin


An investment in Bitcoin (BTCUSD) may seem complicated, however it's easier to understand if you breakdown the process into steps. It is possible to invest in or trade Bitcoin does not require an account with a company or exchange, however further safe storage practices are recommended.





There are a number of things new Bitcoin investors require to have: a cryptocurrency exchange account in addition to personal identification documents If you're using the Know Your Customer (KYC) platform with a secure connection the Internet, and a method to pay. It is also suggested to have your own private wallet separate from your exchange account. Affordable methods of making payments using this approach include bank accounts such as debit cards, bank accounts, and credit cards. You can also receive bitcoin from ATMs with specialization and also through P2P exchanges.





KEY TAKEAWAYS


"The worth of Bitcoin is due to its adoption as a store of value and payment method along with its limited supply and decreasing inflation.


It is almost impossible to for Bitcoin itself to be hacked, it is possible for your wallet or exchange system to suffer a breach. This is why taking care of proper protection and storage measures are vital.


* You can also purchase bitcoin via mainstream services like PayPal and Robinhood.


* One way to own bitcoin indirectly is by investing in companies that hold bitcoin on their balance books.


Before You Buy Bitcoin


Security and privacy are key security and privacy concerns with regard to Bitcoin investors. Anyone who acquires the private key to the public address within the Bitcoin blockchain can approve transactions.1 Private keys should be kept secret as criminals may try to steal them when they discover large holdings. Remember that anyone is able check the balance on a publicly accessible address. On the other hand, this public information is that you can create multiple public addresses for themselves. Thus, they can distribute their wealth of Bitcoin across several addresses. A smart strategy is keeping large investments in public addresses that are not directly tied to the ones which are used for transactions.





Anyone can check the history in transactions done on blockchain, even you. Even though transactions are recorded publically on the blockchainplatform, identifying details about the user is not. In the Bitcoin blockchain there is only one public key is shown next to the transaction, making transactions private but not secretive. In this regard, Bitcoin transfers are much easier to trace and trackable than cash because all of them are open for public view, unlike private cash transactions. However, Bitcoin transactions also have elements of anonymity incorporated by their very design. It is extremely difficult to find the transacting parties--i.e., the receiver and sender of bitcoin - on the blockchain of the cryptocurrency.





International researchers and the FBI have claimed to be able trace transactions made through the Bitcoin blockchain to users' different online accounts, like their digital wallets.2 For instance, if the user creates an account through Coinbase they have to verify their identification.3 This means that when that buyer buys bitcoin, that can be traced back to their name. If they send it to another account, it can be traced to the Coinbase purchase tied with the account's holder's ID. This should not concern most investors because Bitcoin is lawful in U.S. and most other advanced countries.





Check out how legal, tax-related, and tax requirements for buying or selling bitcoin in the place you reside prior to making a transaction.


Buying Bitcoin








We've laid out the steps to buying bitcoin below. Remember to conduct your own research and choose the best solution to suit your situation.





Step 1: Select a crypto trading service or venue


The first step for buying bitcoin is choosing a crypto trading company or a location. Most well-known venues and trading services that allow the purchase of cryptocurrencies comprise cryptocurrency exchanges, payment services and brokerages. Out of these, cryptocurrency exchanges are the most efficient alternative because they have a large array of features as well as cryptocurrency options for trading.





When you sign up with a crypto exchange can allow you to buy, sell and hold crypto. It is generally best practice to use an exchange that lets its customers withdraw crypto into their personal online wallets for safekeeping. When it comes to trading Bitcoin or other currencies, this feature could not be of any importance.





There are numerous types on cryptocurrency exchanges. Because the Bitcoin philosophy is based on the individual sovereignty and decentralization, certain exchanges allow users remain anonymous and do not require users to enter personal details. The exchanges that operate in this manner are autonomous and are often decentralized this means they don't have a central source of control.





While these systems are able to serve harmful purposes, they serve as a service to the majority of the world's population that is not banking. For certain types of people - refugees or those in countries where there isn't much infrastructure for credit from the government or banking--anonymous exchanges may help connect them to the world's economy.





However, at present, the majority of popular exchanges aren't fully decentralized. They also follow the laws that require users to provide identifying documents. The United States, these exchanges include Coinbase, Kraken, Gemini, FTX, and Binance.US There are many others to mention. The exchanges have seen a significant increase with regards to the amount of features they offer.





The world of crypto has expanded rapidly over the last decade with numerous new tokens offering investor dollars. With the exception of Bitcoin as well as some well-known coins like Ethereum but not all of the tokens listed are on all exchanges. Each exchange has its own set-of criteria to decide whether to allow or exclude trading in specific tokens.





Coinbase, Kraken, and Gemini provide Bitcoin and a rising number of altcoins. They are among one of the most simple on-ramps that crypto has that exist in the market. The Binance platform is targeted at an advanced marketer, providing an enhanced trading experience and more diverse altcoin choices. FTX is a booming crypto trading platform that has earned itself an impressive multibillion-dollar valuation, is offering only a limited amount of altcoins to U.S. investors.4 However, those who are not from these countries U.S. have a greater choice of tokens on its platform.





One thing you should remember when setting up an account on a cryptocurrency exchange is it is to utilize secure Internet methods. It is recommended to use two-factor authentication. lengthy, unique password that includes lowercase letters, capitalized letters, 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 is used as a payment method for any transactions when a business accepts it. In the end, however, it is still the U.S. dollar continues to remain El Salvador's currency of choice.


Step 2. Then connect the exchange an alternative payment method


If you've made a decision to go with an exchange, you'll need to gather your personal documents. If you are using an exchange, this could include images from a driver's license and/or Social Security card, as also information regarding your employer as well as the source of money. The information you need may depend on where you reside in and the rules within it. The process is largely the same as setting up a typical brokerage account.





After the exchange has verified your identity, you will be required to connect with a payment option. In most exchanges, you can connect your bank account to the exchange directly, or connect a credit or debit card. While you may use a credit card to buy cryptocurrency, it's not advisable because currency price volatility can inflate the overall cost of purchasing the coin.





Bitcoin has been legalized in the United States, but some banks may be suspicious of or stop deposits to crypto-related sites or exchanges.6 It is recommended that you check to see if your bank allows deposits at the exchange you have chosen.





There are various charges for payments made via bank accounts in the form of debit, credit, or card. It is crucial to investigate fees for each payment method in order to make a decision on an exchange or choose the option that is most effectively for you.





Exchanges may also charge fees for each transaction. They can be a flat fee (if your trading volume is not large) or proportional to the trading amount. Credit cards incur an additional processing charge in addition to transaction fee.





Step 3: Make an order


You can buy bitcoin (or other cryptocurrencies) after choosing an exchange and connecting a payment method. In recent years cryptocurrency exchanges have slowly becoming more prevalent. They have significantly increased in terms both of liquidity and their breadth of features. The operational changes of cryptocurrency exchanges mirror the changes in how they are perceived by the public. A sector that was previously believed to be a scam or one that has questionable practices is now slowly becoming a legitimate business that has attracted the attention of the top players in the financial services industry.





Now, cryptocurrency exchanges are become so popular that they're almost the same number of features and features as counterparts from stock brokerages. They offer different types of orders and investment options. A majority of cryptocurrency exchanges offer limit and market orders. Some also provide stop-loss orders. Of the exchanges listed above, Kraken offers the most orders of all types. Kraken offers market, limit, stop-loss, stoplimit also known as take-profit as well as limit orders.7





In addition to a range of different types of orders, exchanges allow users to set up the possibility of recurring investments. This allows customers to apply a cost-per-dollar average to their investments of choice. Coinbase, for example, lets users set up recurring purchase 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. Being able to store your cryptocurrency away from the exchange and inside your own wallet, you can be sure that only you are the only person who has control over the private key to your money. Additionally, it allows you to have the ability to store funds away from an exchange and avoid the possibility of your exchange being compromised and the loss of your funds.





While most exchanges provide the option of wallets for their users security is not their primary business. We generally do not recommend using an exchange's wallet for long-term or large-scale cryptocurrency holdings.





Some wallets are more advanced than others. Some are Bitcoin only, and some can store numerous types of altcoins. Some wallets additionally offer the ability to swap one token with another.





When it comes to selecting the right Bitcoin wallet, you have many options. The first thing you be able to comprehend about crypto wallets is the idea of hot wallets (online wallets) and cold wallets (paper or physical wallets).





Hot wallets


Internet-connected wallets have also been referred to as hot wallets. Hot wallets operate on devices that are connected to the Internet, such as phones, computers, or tablets. They can be vulnerable because these wallets store the private keys for your coins through these internet-connected devices. While a wallet that is hot can be extremely useful in the manner that you can access and conduct transactions on your assets swiftly, the fact that you store your private key via an Internet-connected device could make it more vulnerable to hack.





It may sound absurd although hot wallet users who aren't putting in enough protection run the risk having their money stolen. It's not a rare possibility, and can be triggered in many ways. One example is boasting on forums like Reddit about how much bitcoins are in your wallet when you're using little to none security and storing it in a wallet that is hot would not be wise. However, these wallets can be secured as it is taken care of. Secure secure passwords, 2-factor authentication, and secure Internet browsing are minimum necessities.





These wallets are perfect for small amounts of crypto or cryptocurrency that you're actively trading with an exchange. You could liken a hot wallet to a bank account. Traditional wisdom in finance would advise to store only money used for spending within a bank account that is a checking one, while the bulk of your money can be found in savings accounts and other investments accounts. The same can be said on hot wallets. Hot wallets can be described as mobile, desktop, web and exchange account custody wallets.





As previously mentioned, exchange wallets are custodial accounts provided by exchanges. The person who uses this wallet type is not the holder for the secret key to the cryptocurrency that is held in this wallet. If a situation were to occur where the exchange compromised or your account gets compromised, you'd lose your money. The expression "not your key, not your coin" is frequently utilized in cryptocurrency forums as well as communities.





Cold wallets


A simple description of an offline wallet is that it isn't connected to the Internet so it has significantly lower risk being at risk of being compromised. These wallets might also be known as offline wallets or even hardware wallets. They save the user's private key in a device which is not connected to the internet and can come with software that functions in parallel so that the user is able to see their account without putting their private key in danger.





The most secure method to store your cryptocurrency offline is via a paper wallet. Paper wallets are digital wallet that is created from specific websites. It generates both private and public keys that are printed out on a piece of paper. Access to digital currency from these addresses is only possible when you have the piece of paper with the private keys. Many people laminate these wallets in paper and put them in safe deposit boxes at their banks or in a safe at home. They are intended for security and long-term investment because they are not able to quickly sell or trade bitcoin stored by this method.





The most common kind of cold cash wallet is a wallet made of hardware. A hardware wallet is usually one that is a USB drive device that stores the user's private keys offline. Such wallets have serious advantages over hot ones since they are immune to viruses that could be infected by computer. Hardware wallets ensure that private keys never come into contact with your computer's network or software that could be vulnerable. They're also usually open source, which allows the community to verify their security via audits of code rather than a company that declares that they're acceptable to make use of.





It is believed that cold-money wallets provide the most secured way to store bitcoin or other cryptocurrencies. But they require more knowledge of technology to set up.





An excellent way to set up your wallets is by having three items including an exchange account that can be used for buying and selling the hot wallet, which can keep small to moderate amounts of cryptocurrency they want to trade with or sell in the future, and a cold wallet to hold larger amounts in the long run.





How to Buy Bitcoin With PayPal


Bitcoin can also be bought through payment processor PayPal Holdings, Inc. (PYPL). There are two ways to purchase bitcoin using PayPal. One, and probably the easiest method is to buy cryptocurrencies through your PayPal account, which is linked to a payment device that accepts debit card or bank account. Another option is to use the balance on account balances in your PayPal account to purchase cryptocurrencies through a third party service. This isn't so convenient as the former because very few third-party providers allow customers to purchase bitcoin with by clicking 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. You can also make use of your cryptocurrency to buy products as well as services via"Checkout With Coin "Checkout With Crypto" feature.10





In order to open a crypto account through PayPal it is necessary to provide the following details is required to establish a PayPal account: name, physical address (where applicable), birth date, along with a tax identification number.11





It isn't possible for a credit card to buy Bitcoin using PayPal. During the buying process, PayPal will display a price for the cryptocurrency. But that price is subject for rapid change because of the volatility of the cryptocurrency market. It's a good idea to make sure that you have more than the amount that you budgeted for the purchase in your bank account.





If you purchase bitcoin straight through PayPal it earns revenue from the crypto spread. This is the variance between Bitcoin's current market price and the rate at which it exchanges with USD. PayPal has a transaction cost for every purchase. These fees are contingent on the dollar amount of the purchase. For example, a flat charge of $0.50 is applied to purchases between $100 and $200. Thereafter, the fee is a percentage of the overall dollar amount. For instance, a charge of 2 percent from the total amount paid for purchases in the range of $100 and $200.12





The main drawback of buying cryptocurrencies through PayPal is the fact that you can't transfer the currency outside the company's platforms for payment. Therefore, it is not possible for you in order to transfer your Bitcoin purchase through PayPal's bank account to the external cryptocurrency wallet, or your personal wallet.11





Another disadvantage to using PayPal is that the majority of trader and exchanges accept using the processor to make payments. eToro is one of the very only a few online sellers that allow it to utilize PayPal to purchase bitcoin 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 Automated Clearing House (ACH) transfer. You'll need to input the details of your credit card with the online trading or exchange company and then approve the transaction. It is generally accepted that it's not a smart choice to buy bitcoins using credit cards. There are a few reasons why this is.





First of all, many exchanges do not support bitcoin purchases with credit cards because of the processing costs and the risk of fraud. The decision could be for the benefit of consumers. This is due to the fact that credit card processing may apply additional charges to transactions. So, in addition paying transaction fees you'll be left paying processing costs that the exchange might charge you.





Another reason is that buying credit card products can be costly. Issuers of credit cards view bitcoin transactions as cash advances and they charge huge fees and charges on these advances. For example, American Express and Chase both treat purchases of cryptocurrency like cash transactions. In other words, if one purchases $100 worth worth of bitcoin using an American Express card, you have to pay the amount of $10 (current cash advance charges for such transactions) and an annual percentage rate of 25 percent. The credit card's provider limits the amount of bitcoin purchases per month.14





An alternative method of purchasing bitcoin by using a credit card is to apply for the Bitcoin reward credit card. These cards function as a regular rewards credit card, but they can offer rewards in way of bitcoin. So, they invest the profits from purchases into Bitcoin. One example of one Bitcoin rewards card could be called the BlockFi Bitcoin Rewards Credit Card.15 Beware, however of the fact that annual fees for the cards could be hefty and there could be additional costs associated with the transformation of fiat currencies in crypto.





Although exchanges such Coinbase as well as Binance remain among the most popular ways to purchase Bitcoin however they are 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 buy bitcoin. It is then transmitted to web-based wallets of users. Bitcoin ATMs have been increasingly famous in recent months. Retail giant Walmart Inc. (WMT) is testing a pilot program that will provide customers with the possibility of buying bitcoin. Coin ATM Radar can help find the nearest machines.





However ATMs are expensive alternative. There are two charges associated with ATM bitcoin transactions which are a purchase charge and the cost of conversion for changing a fiat currency to bitcoin. The fees for both are quite steep in comparison to other alternatives. In the case of Bitcoin, for instance, the average price of purchases 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 increasingly require Government-issued IDs starting in 2020.


P2P exchanges


Contrary to decentralized exchanges, which match buyers and sellers anonymously and can facilitate every aspect of the exchange, there are peer-to-peer (P2P) exchanges that provide a more direct communication between users. LocalBitcoins is an example of such an exchange. After creating an account, users can submit requests to purchase Bitcoin, or sell it, along with information about payment methods and prices. Users then browse through listings of deals to buy and sell by selecting the partners who they would like to conduct business.





LocalBitcoins provides a variety of benefits to the trade. While P2P exchanges may not provide the same anonymity as decentralized exchanges, they do give users an opportunity to shop around for the best deal. Many exchanges offer rating systems to ensure that users have the ability to evaluate prospective trade partners prior to committing.





Mainstream brokerages


Only a handful of mainstream brokerages have bitcoin purchase and trading capabilities due to uncertainty about regulations for cryptocurrencies. Robinhood Markets, Inc. ( how to buy bitcoin to use ) is an application which is popular with investors in retail, is one exchange that offers cryptocurrency trading facilities. It charges no commissions for cryptocurrency transactions and purchases , and earns money from the transaction flow that it receives, passing its trading volume onto other trading platforms or brokerages.17





The lack of a commission fee is a tempting option for beginners, but there are a couple of drawbacks to that proposition. It is the first. Robinhood does not have the wide range of features or coins provided by prominent cryptocurrency exchanges such as Coinbase. Robinhood had made trading possible on its platform for seven currencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 However, you can trade more than 100 crypto currencies with Coinbase.19 The exchange also offers various order types in order to limit the risk and reduce losses in trading.





The Robinhood platform also does not have an online wallet. Therefore, if you want to buy cryptocurrency through Robinhood you'll need to factor in additional costs to an online wallet service.





Bitcoin and different cryptocurrency investments aren't protected by insurance from the Securities Investor Protection Corporation (SIPC). When you use regular brokerages like those, the organization protects against the loss of securities and cash in brokerage accounts that have a total of $5000, with a $2500-dollar cash limit.20 This facility isn't available to customers from cryptocurrency exchanges. Coinbase is one of the cryptocurrency exchanges. Coinbase are covered by insurance against crime to safeguard their infrastructure from hacks. However, this insurance doesn't protect individual customers from password theft.21


How to Sell Bitcoin


You can sell bitcoin in the same venues where you bought the cryptocurrency, such as cryptocurrency exchanges and P2P platforms. Usually, the process of selling bitcoin on these platforms is similar to the process for purchasing it.





For instance, you might only have to click to select an order type (i.e. to decide if the cryptocurrency is sold immediately at available prices or whether 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 demand at the venue, the offering price for Bitcoin could vary. In the case of exchanges, for instance, South Korea traded bitcoin at an alleged kimchi premium in the peak in prices in the year 2018.





A percentage of cryptocurrency exchanges will charge you a fraction of the sale price as fees. For example, Coinbase charges 2.49% of the overall transaction amount as fees.22





Exchanges generally have daily and monthly withdrawal limitations. Therefore, money from the sale of a significant amount may take a while to reach the trader. There is no limit on the amount of bitcoin you can sell however.





What Are the Steps for Purchasing Bitcoin?


The process to buy bitcoin consists of four parts: choosing an appropriate exchange or location to place your order in, choosing a payment method and then ensuring a secure storage for your bought cryptocurrency. Based on the venue selected in the initial step, there might be additional steps needed in the process. If, for instance, you choose to purchase the cryptocurrency through Robinhood it is possible to factor in additional costs for an online wallet or custody of your bitcoin as they do not provide these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most widely used venues for buying bitcoins include cryptocurrency exchanges as well as brokerages (crypto and conventional) as well as payment services like PayPal. It is also possible to purchase Bitcoin by using P2P-based exchanges. To own bitcoin indirect you can invest in 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 price for buying bitcoin includes one fee per trade in addition to the cost of converting a conventional currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment services earn money from this conversion spread.) Fees per trade are dependent on what amount in dollars is the trade. A greater amount of trades will attract higher fees. The total cost of purchase is contingent on the features provided by the company. For instance, Robinhood does not currently provide an online wallet for the storage of bitcoin. Thus, you'll have to budget charges for your online wallet purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also purchase bitcoin at these places:


* Through Bitcoin ATMs


By using online payment services such as 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 Certain exchanges, like Coinbase that accept fiat funds, balances on individual accounts are insured by the FDIC 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 equity or stock. This is mainly because the blockchain and cryptocurrency infrastructure is not as well-developed similar to the one used in traditional trading.





The process for buying bitcoins consists of four steps: selecting the right service or location for the purchase, connecting with an online payment system, making an order, and making sure you have the security of your cryptocurrency. Each step involves a lot of research and careful study of the pros & benefits of each choice. You can also buy bitcoin at Bitcoin ATMs or via payment companies like PayPal and other major brokerages, such as Robinhood.












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