Notes

How to Buy Bitcoin


Making investments in Bitcoin (BTCUSD) may appear complex, but it's much simpler if you reduce it into smaller steps. If you are interested in investing or trading Bitcoin only requires an account with a company or exchange, but other safe storage practices are advised.





There are several items that future Bitcoin investors need: a cryptocurrency exchange account and personal identification documents for those who use a Know Your Customer (KYC) platform that has a secure connection the Internet and a method of payment. It is recommended that you keep a individual wallet apart from the exchange account. Alternative payment options for this path include bank accounts including debit cards, banks, and credit cards. It is also possible to access bitcoin ATMs at special locations as well as through P2P exchanges.





KEY TAKEAWAYS


"The value" of Bitcoin is derived from its popularity as a storage of value and a payment system and also its limited supply and declining inflation.


While it's nearly impossible for Bitcoin itself to be compromised, it is possible for your wallet or exchange access to your account be altered. This is the reason that implementing appropriate safeguards and storage is vital.


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


* One way to own bitcoin in indirect ways is to invest in companies with bitcoin on their balance sheet.


Before You Buy Bitcoin


Privacy and security are important concerns in the lives of Bitcoin investors. Anyone who obtains the private key to a public address on the Bitcoin blockchain can then authorize transactions.1 Private keys should be kept secret. Criminals might attempt to take them away in the event of learning of huge accounts. You should be aware that anyone is able to examine the balance of a public account you've used. One advantage of these public records is that it allows an individual to establish multiple public address for themselves. So, they can share their stash of Bitcoin over a variety of addresses. An effective strategy is to safeguard investments with significant amounts at public addresses that are not directly linked to addresses which are used for transactions.





Anyone is able to see a complete history of transactions conducted on the blockchain -- even you. Even though transactions are recorded publically by the blockchain, the identification of users' information is not. When using the Bitcoin blockchain, only a user's private key appears in the transaction, making transactions private however not completely private. This is why Bitcoin the transactions appear more clear and traceable over cash as all them are open to public view, unlike private cash transactions. But Bitcoin transactions also have an element of security built into their design. It's very difficult find the transacting parties--i.e. those who send and receive bitcoin--through the blockchain used by the cryptocurrency.





Researchers from around the world and the FBI have claimed that they could identify transactions made using the Bitcoin blockchain to other online accounts, which includes their digital wallets.2 In the case of someone registers on Coinbase, they must provide their identification.3 This means that when that person makes a purchase on Coinbase, it is linked to their identity. If they transfer the funds to another account, it can be traced back to the Coinbase purchase which is tied to the identity of the account holder. This should not be a concern for the majority of investors since Bitcoin is officially legal within the U.S. and most other developed countries.





Be sure to research all the regulatory, legal, and taxation status for buying and selling bitcoins where you reside before you make any transactions.


Buying Bitcoin








We have broken down the steps needed for purchasing bitcoin in the following steps. Be aware that you need do your research to pick the most appropriate option for you based on the specifics of your situation.





Step 1: Select the best crypto trading service or a venue


The first step for buying bitcoin consists of choosing a crypto trading service or a venue. A variety of popular services and venues to buy cryptocurrencies include exchanges, payment services, and brokerages. These exchanges are the most convenient option since they come with a range of features, and even more crypto currencies to trade.





By signing up to a cryptocurrency exchange lets you buy, sell, and keep crypto. It is usually best to use an exchange that lets its customers withdraw crypto to their own account online for safe keeping. When it comes to trading Bitcoin or any other cryptocurrency, this may not be a problem.





There are a myriad on cryptocurrency exchanges. Since the Bitcoin ethos is about independence and personal sovereignty, certain exchanges allow users to remain anonymous and don't demand that users enter the personal details of their users. They operate independently and are usually decentralized therefore, they do not have a central source of control.





Although these systems could serve malicious purposes, they also offer services to the majority of the world's population that is not banking. For certain categories of people--refugees or those who live in countries with no infrastructure for credit from the government or banking--anonymous exchanges can help make them part of the mainstream economy.





As of now, all of the top exchanges in the world are decentralized , and they follow regulations that need users to present identifying documents. In the United States, these exchanges comprise Coinbase, Kraken, Gemini, FTX, and Binance.US just to mention a few. These exchanges have grown significantly in the range of services they provide.





The cryptocurrency universe has grown rapidly in the last 10 years and there are a myriad of new tokens offering investor dollars. Except for Bitcoin and a few other prominent coins like Ethereum There aren't all of the tokens listed are on all exchanges. Each exchange has its own set-of criteria to decide if it's appropriate to include or exclude trading in specific tokens.





Coinbase, Kraken, and Gemini provide Bitcoin and a steady stream of altcoins. They're among the most user-friendly on-ramps of crypto that exist in the market. Binance is for an advanced trader, and offers more serious trading functionality and an increased variety of altcoin options. FTX is a rapidly expanding crypto trading platform that has earned itself the highest valuation in terms of dollars per share, has an limited selection of altcoins to U.S. investors.4 However, traders outside these countries U.S. have a greater option of tokens offered on its platform.





The most important thing to consider when setting up a cryptocurrency exchange account is to use safe Internet methods. This means two-factor authentication, as well as A long, unique password that includes lowercase letters, capitalized and capitalized letters along with special characters and numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the first country to do so.5 Bitcoin can be used as a payment method for any transactions that a business is able to accept it. A U.S. dollar continues to be the currency of El Salvador.


Step 2: Connect your exchange to a payment option


After you have chosen the exchange option, you'll be required to gather your personal documents. According to the exchange you choose, these could include photographs of a driver's license or Social Security card, as and information about your employer and the source of money. The details you'll need will vary depending on the area you reside and the rules within it. The process is almost similar to creating a typical brokerage account.





After the exchange has verified the authenticity of your account, you will be asked to connect with a payment option. Most exchanges can connect to your bank account through the account or connect a credit or debit card. Although you can utilize a credit card to purchase cryptocurrency, it is not advisable because cryptocurrency price volatility could inflate the price of buying a coin.





Bitcoin remains legal across the United States, but some banks might be suspicious or block deposits to crypto-related websites or exchanges.6 It is an excellent idea to confirm to ensure that your bank allows deposits at the exchange you prefer.





There is a variety of fees that apply to the deposit of money through a bank account as well as debit and credit card. It is vitally important to know the fees that are associated with each payment option to help choose an exchange or to decide which option is most effectively for you.





Exchanges can also charge fees per transaction. These fees can either be one-time fees (if your trading volume is very low) or as a percentage from the trading amount. Credit cards incur fees for processing, as well as transaction fee.





Step 3. Make an order


Bitcoin can be purchased (or other cryptocurrencies) after choosing an exchange option and connecting a payment option. In recent years, cryptocurrency exchanges have slowly become more widespread. They have risen significantly by virtue of their liquidity, and the range of features they offer. The operational changes at cryptocurrency exchanges coincide with the change on the perception of cryptocurrency. A business that was considered to be a scam or one with unsound techniques is slowly changing into a legitimate one that has drawn interest from all major players in the field of financial services.





Now, cryptocurrency exchanges are become so popular that they have nearly the same level of features as their counterparts in the stock brokerage industry. They offer several types of orders and investment options. A majority of cryptocurrency exchanges offer limits and market orders. A few offer stop-loss-orders. Out of the exchanges mentioned above, Kraken offers the most options for order types. Kraken allows for market, limit, stoploss stop-limit take-profit, and take profit limit orders.7





In addition to offering a range of order types, exchanges also provide methods for setting up regular investments, which allows clients to apply a cost-per-dollar average to their investment of choice. Coinbase, for example, allows users to make recurring purchases for each day, week, or month.8






Step 4: Secure storage


Blockchains, cryptocurrency or Bitcoin are the ideal way to store digital assets more securely. With your cryptocurrency out of the exchange and inside your personal wallet ensures that only you control the private key to the funds. Also, it gives you ability to keep your funds separate out of an exchange. This will help you avoid the possibility of your exchange getting hacked and causing loss of funds.





While the majority of exchanges have users with wallets, security isn't their main business. We do not generally recommend the use of an exchange for massive or long-term holdings of cryptocurrency.





Certain wallets have more features than other wallets. Some are Bitcoin exclusive, while others have the capacity to store multiple altcoins. Certain wallets also have the ability to exchange one token with another.





If you are looking to select the right Bitcoin wallet, you have several options. The first thing you will be required to know about crypto wallets is the idea of hot wallets (online wallets) and cold wallets (paper or physical wallets).





Hot wallets


These wallets may also be known as "hot wallets. Hot accounts run on devices that are connected to the Internet, such as computers, phones, or tablets. These wallets can pose security risks because these wallets produce private keys to the coins when connected to the internet. While a hot wallet could be extremely convenient in method that you can connect to and perform transactions with your assets quickly, storing your private key via an Internet-connected device could make it more susceptible to a attack.





This may sound farfetched it's not, but those who haven't setup enough security are at risk of losing their money to theft. This is not an infrequent incident, and it can be triggered in many ways. One example is boasting on a social media platform like Reddit about how much bitcoins you have in your account when your wallet is essentially no security and storing it in a hot wallet might not be prudent. But, these wallets could be secure so long as the necessary precautions are in place. Strong logins that require two authentication, and safe Internet browsing should be considered as minimum necessities.





They are ideal for small amounts of crypto as well as cryptocurrency that you are actively trading on an exchange. You can compare a hot wallet to a checking account. Common wisdom on finance suggests to store only money used for spending in a check account while most of your money is saved in savings or other investments accounts. It is the same on hot wallets. Hot wallets encompass mobile, desktop, web, and exchange accounts custody wallets.





Like we said earlier, exchange clients are custodial wallets that are offered by exchange. The user of this wallet kind isn't the owner on the personal key to the cryptocurrency stored within the wallet. In the event that an incident would occur , where the exchange becomes stolen or your wallet is compromised, it would be lost the funds you have invested. The expression "not your key, not your coin" is heavily frequented in cryptocurrency forums and communities.





Cold wallets


The simplest description of the cold wallet is that it's not attached to an Internet which means it is at greater risk of being in danger of being hacked. The wallets may also be called offline wallets or even hardware wallets. These wallets are used to store a customer's private keys on a device remote from the internet. They also come with software that operates in parallel, so that the user has access to the entire portfolio without putting the private key in danger.





The most secure and secure method to keep your money offline is by using a physical wallet. Paper wallets are wallet that can be created by visiting certain websites. It will then produce both public and private keys that are printed out on a piece of paper. Access to bitcoin and other digital currencies is only possible when you've got the piece paper that is protected by the private key. A lot of people laminate their money wallets made of paper and store them in safe deposit boxes in their banks or even in a secure in their home. They are intended for security and long-term investment because you can't quickly sell or trade bitcoin stored such a way.





A more frequent type of cold card is a a Hardware wallet. A hardware wallet is usually a USB drive that can store the private keys of a user offline. The benefits of such wallets are substantial over hot wallets , as they are immune to virus that could infect your computer. With hardware wallets, private keys will not be in contact with your network-connected computer or potentially vulnerable software. The devices are usually open source, allowing users to assess their security via audits of the code, not a company that declares that they're safe to use.





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





An excellent way to set up the wallets you want to use is to have three things that you need: an exchange account for selling and buying with a hot or hot wallet that will keep small to moderate amounts of cryptocurrency you'd like to trade, or sell or trade, and a cold wallet to store larger holdings with a longer time-frame.





How to Buy Bitcoin With PayPal


Bitcoin can also be purchased through the payment processor PayPal Holdings, Inc. (PYPL). There are two methods to buy bitcoin through PayPal. The first and most practical method is to buy cryptocurrencies using your PayPal account that is connected to a method of payment like a cash card or debit card. The second option is to use the balance on you PayPal account to purchase cryptocurrency via a third-party supplier. This option is not as convenient as the first since only a handful of third-party sites allow customers to purchase bitcoin 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. It is also possible to use your cryptocurrency to buy products as well as services via"Checkout With Coin "Checkout With Crypto" feature.10





To set up a bitcoin account through PayPal you need the following information is needed in order to set up a PayPal account: name; physical address or address, birth date and tax identification number.11





It is not possible for a credit card to purchase Bitcoin through PayPal. In the course of purchasing, PayPal will display a price for the cryptocurrency. However, that price is subject to rapid change due to the fluctuation of markets for cryptocurrency. It's a good idea to ensure that you've got more than the price you planned for the purchase in your bank account.





When you buy bitcoin online via PayPal they earn money from the crypto spread. This is the difference between the market price of Bitcoin as well as its rate of exchange with USD. The company will also charge a transaction cost for each purchase. These fees depend on amount of money spent. For how to buy bitcoin for someone else , a flat charge of $0.50 is per purchase between $100 to $200. Thereafter, the fee is in the form of a percentage of total dollar amount. As an example, a percentage of 2% on the total amount is to be paid for crypto purchases between $100 and $200.12





One of the disadvantages of buying cryptocurrency via PayPal is that it isn't possible to transfer the currency outside the PayPal's payment processing system. Thus, it's not possible for you in order to transfer your Bitcoin purchase from PayPal's wallet into another crypto-wallet or your personal wallet.11





Another disadvantage of using PayPal is the fact that very few marketplaces and online retailers allow using the processor for payment. eToro is one of the few online marketplaces that allow for the usage of PayPal to buy bitcoin through its platform.13





How to Buy Bitcoin With a Credit Card


The procedure of purchasing bitcoin with credit card is the same as for purchasing it through debit cards , or through electronic clearinghouse (ACH) and transfers. The buyer must enter the credit card information to the online trading or exchange company and also authorize the transaction. In general, however, it's not a smart option to buy bitcoin with credit cards. There are a couple of causes for this.





First, there are some exchanges that do not permit bitcoin purchase using credit cards due to associated processing fees and the potential for fraud. This may be for the benefit of customers. This is since credit card processing can tack additional charges onto such transactions. This means that in addition to paying transaction fees, you will end up with processing costs which the exchange can pass onto you.





The third reason is that credit card purchases can be expensive. Issuers of credit cards view bitcoin transactions as cash advances, and apply hefty fees as well as high interest rate on these advances. For instance, American Express and Chase both count purchases of cryptocurrencies for cash advance as. In other words, if one purchases 100 dollars worth of bitcoin with an American Express card, you will pay the amount of $10 (current cash advance charge for the transactions) and an annual percentage of 25 percent. In addition, the credit card's provider limits you to making $1,000 worth of bitcoin transactions per month.14





A second method of buying bitcoin with a credit or debit card is to obtain the Bitcoin reward card. The cards function the same way as your regular rewards credit card, but they also offer rewards in kind of bitcoin. In other words, they convert the earnings from purchase into Bitcoin. One illustration of an Bitcoin Rewards card to use is BlockFi Bitcoin Rewards Credit Card.15 Be aware, however that the annual cost for these cards can be very high and could also come with additional costs associated with the conversion of fiat currencies into cryptocurrency.





Although exchanges , such as Coinbase or Binance remain one of the most well-known ways to purchase Bitcoin However, they're not the only options.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. The user can add cash to a machine which can then be used to buy bitcoin, which is later stored in online wallets for users. Bitcoin ATMs have been increasingly well-known in recent years. Retail massive Walmart Inc. (WMT) is testing a trial program that offers customers the option to purchase bitcoin. Coin ATM Radar can help locate nearby machines.





However ATMs can be expensive alternative. There are two charges associated with ATM bitcoin purchases including a charge for purchasing the item and one for conversion fees to convert money from fiat into bitcoin. Both charges are very high when compared with other alternatives. For instance, the global typical purchase cost at Bitcoin ATMs is 8.4 percent (of the purchase amount) and 5.4% for sales at ATMs.16





Be aware, however, that Bitcoin ATMs have increasingly required government-issued IDs as of early 2020.


Exchanges between P2P


Different from decentralized exchanges that are able to match sellers and buyers anonymously while facilitating all aspects the transaction, there's peer-to-peer (P2P) exchanges that offer a closer connection between users. LocalBitcoins is one example of such an exchange. Once they have created an account, users can request to buy or sell bitcoin. The request must include details on payment methods and costs. They can then peruse listings of offers to buy and sell to select the trading partners who they would like to transact.





LocalBitcoins provides a variety of benefits to the trade. Although P2P exchanges may not provide the same level of anonymity as decentralized exchanges, they allow users the opportunity to shop around to find the most affordable deal. A lot of these exchanges offer rating systems to ensure that users are able evaluate potential trade partners before transacting.





Mainstream brokerages


Few major brokerages provide bitcoin trading and purchase capabilities due to the uncertainty over the legal status of cryptocurrency. Robinhood Markets, Inc. (HOOD) A mobile app very popular among investors from retail, is one platform that offers crypto-based trading. It charges no fee for cryptocurrency trades or purchases . It earns its money through payments for order flow transferring its trading volume to others trading platforms or brokerages.17





The absence of commissions could be an attractive proposition in the beginning, but there are a few downsides to the offer. The first is that Robinhood doesn't have the full range of features and coins offered by well-known crypto exchanges like Coinbase. Robinhood allowed trading on its platform for seven different cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 But, in contrast, you can trade more than 100 different cryptocurrencies through Coinbase.19 The exchange also has different order types to help reduce risks and compensate for losses during trading.





The Robinhood platform doesn't offer an online wallet. Therefore, if you want to purchase cryptocurrency using Robinhood then you'll have be prepared to pay additional fees to an online wallet service.





Bitcoin and other cryptocurrency investments are NOT covered by insurance coverage from Insurance companies such as the Securities Investor Protection Corporation (SIPC). For regular brokerages, the corporation protects against loss of cash and securities in brokerage accounts that have a total of $500,000 with a $250,000 cash limit.20 That facility is not accessible to clients of cryptocurrency exchanges. Cryptocurrency exchanges such as Coinbase are covered by insurance against crime to protect their infrastructure against attacks. However, that insurance won't shield individual customers from password theft.21


How to Sell Bitcoin


The ability to sell bitcoin is available at the same locations where you bought the cryptocurrency including cryptocurrency exchanges, and P2P platforms. In general, the process of selling bitcoin on these platforms is similar to how you purchase it.





For instance, you might only be required to click in a button to specify the type of order (i.e. to decide if the cryptocurrency is sold immediately with the highest price available or if it is sold to make sure that losses are not incurred) to make the sale. Based on the composition of the market and the level of demand at the site the cost of selling Bitcoin can be different. The example is that exchanges in South Korea traded bitcoin at an alleged kimchi premium in the upswing in its prices in the year 2018.





Coinbase and other cryptocurrency exchanges charge a certain percentage of the sale price in the form of fees. For instance, Coinbase charges 2.49% from the total transaction amount as fees.22





Exchanges typically have monthly and daily withdrawal limits. Therefore, money from an extensive sale may not be immediately available to the trader. There are no restrictions on the amount of cryptocurrency you can sell however.





What Are the Steps for Purchasing Bitcoin?


The procedure to buy bitcoin consists of four steps: selecting an exchange or a location to make your purchase in, choosing a payment method and ensuring that your data is safe to store your bitcoin. Based on the venue you select in the first process, there may be additional steps to follow in the process. For example, if purchase the cryptocurrency from Robinhood you could need to add additional charges for an online wallet and the custody of your bitcoin since it doesn't provide these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most popular venues to buy bitcoins are exchanges, brokerages (crypto or mainstream), and payment services such as PayPal. You can also buy Bitcoin by using P2P-based exchanges. For indirect ownership of bitcoin you can be a shareholder in companies who hold the cryptocurrency in their balance sheets. For instance, Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Typicallythe cost for buying bitcoin usually includes the fee for each trade as well as the cost to convert non-fiat currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment service providers make money through this conversion spread.) The cost per trade is dependent on an amount in dollars that is associated with the trade. An amount that is higher will result in higher costs. Also, the total cost for purchasing will depend on the features offered by the company. For example, Robinhood does not currently provide an online wallet for depositing bitcoin. So, you'll need to budget the costs of a wallet online for your purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


Bitcoin can also be purchased in the following locations:


* Through Bitcoin ATMs


* With online payment services such as PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


No, your bitcoin transaction is not protected by SIPC.20 Certain exchanges, like Coinbase and Coinbase, the balances of bitcoin in individual accounts are insured by the FDIC in the amount of $250,000 per account.21





The Bottom Line


The process for purchasing bitcoin is more involved than purchasing common equity or stock. This is due to the fact that the ecosystem and infrastructure for bitcoin aren't as well-developed as the traditional trading.





A bitcoin purchase procedure consists of four stages: choosing the best option for a location or service for the purchase, connecting to a payment method, placing an orderand providing the safe storage of your purchased cryptocurrency. Each step needs research and an in-depth study of the pros & negatives of each service. You can also buy bitcoin at Bitcoin ATMs or pay service providers like PayPal and traditional brokerages like Robinhood.












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