Notes

How to Buy Bitcoin


Investing in Bitcoin (BTCUSD) might seem complicated, but it's much easier when you simplify it by smaller steps. If you are interested in investing or trading Bitcoin just requires having an account with a platform or an exchange, although additional storage methods that are safe are advised.





There are various things those who are aspiring Bitcoin investors require such as a cryptocurrency exchange account, personal identification documents should you be using an Know Your Customer (KYC) platform that has a secure connection the Internet and a method for payment. It is also recommended to keep a personal wallet that is separate from the exchange account. The most reliable methods to pay using these options include bank account including debit cards, banks, and credit cards. There is also the option to make bitcoin transactions at ATMs that are specialized and P2P transactions.





KEY TAKEAWAYS


Its value Bitcoin comes from its adoption as a store of value and payment method, as well as its finite supply and declining inflation.


While it's nearly impossible to for Bitcoin itself to be hacked but it is still possible that your bank or exchange account to be compromised. This is the reason that implementing appropriate security and storage practices are imperative.


* You can also purchase bitcoin through the main services like PayPal as well as Robinhood.


One way to get bitcoin indirectly is to invest into companies with bitcoin on their balance sheet.


Before You Buy Bitcoin


Security and privacy are essential concerns for Bitcoin investors. Any person who gains the private secret to an address using the Bitcoin blockchain can then authorize transactions.1 Private keys must be kept hidden from thieves, as they could try to take them away once they know of your large amounts. You should be aware that anyone is able to view the balance of a public address that you have. However, the flip side of this information being public is that you can establish multiple public address for themselves. Therefore, they could distribute their wealth of Bitcoin across multiple addresses. The best strategy is to hold large investments at public addresses that aren't directly linked to addresses that are used in transactions.





Anyone can review a log of transactions on the blockchain -- even you. While transactions are recorded publicly on the Blockchain, identifying the user's information isn't. It is true that on the Bitcoin blockchain there is only one private key appears in a transaction--making transactions confidential but not in any way anonymous. In this way, Bitcoin the transactions appear more clear and traceable than cash , since all of transactions are public scrutiny, unlike private cash transactions. However, Bitcoin transactions also come with an element of privacy built to their design. It's very difficult to trace the transacting parties--i.e. the receiver and sender of bitcoin--through the blockchain used by the cryptocurrency.





International researchers as well as the FBI have claimed that they can track transactions done on the Bitcoin blockchain with users' other online accounts, such as their digital wallets.2 For instance, if the user creates an account through Coinbase and then registers, they need to show their identification.3 If that person makes a purchase on Coinbase, it is linked to their account. If they decide to transfer it to other wallets, it could still be traced back to the Coinbase purchase that is connected to the identity of the account's owner. This should not concern most investors as Bitcoin is lawful in U.S. and most other developed nations.





Be sure to check out whether there are any legal or regulatory and taxation status for buying and selling bitcoin based on where you reside prior to making a transaction.


Buying Bitcoin








We have broken down the steps needed for buying bitcoin below. Remember do your research to select the best option to suit your specific circumstances.





Step 1: Choose a crypto-trading service or a venue


The first step of buying bitcoin consists of choosing a crypto trading company or venue. Some of the most well-known trading platforms and venues to purchase cryptocurrencies include exchanges, payment solutions, and brokerages. The cryptocurrency exchanges are the most efficient option due to their array of features as well as more cryptocurrency options for trading.





In signing up for a crypto exchange lets you purchase, sell, and keep cryptocurrency. It is generally best practice to go with an exchange which allows its users to transfer cryptocurrency to their secure online wallet for their personal. If you're planning to trade Bitcoin or other cryptocurrencies, this feature might not be relevant.





There are numerous types on cryptocurrency exchanges. Since the Bitcoin concept is about independence and personal sovereignty, some exchanges permit users to remain anonymous and do not make users fill out private information. These exchanges are autonomous and are often decentralized meaning they don't have a central point of control.





Even though these systems have some nefarious ends, they also provide services to the worldwide population of people who have no bank accounts. In certain cases, people who are refugees or those who live in countries that have no infrastructure for government credit or banking, anonymous exchanges could help move them into the mainstream economy.





As of now, the most well-known exchanges aren't decentralized and follow laws that demand users submit identifying documentation. If you're in the United States, these exchanges comprise Coinbase, Kraken, Gemini, FTX, and Binance.US To name a few. The number of exchanges has increased in terms of features they provide.





The cryptocurrency universe has grown rapidly in the last 10 years There are many new crypto tokens in competition with investor dollars. Except for Bitcoin as well as a few prominent coins, such as Ethereum there are a few exceptions to the fact that not all these coins are sold on all exchanges. Each exchange has its own set of criteria which determine whether to add or restrict trading of specific tokens.





Coinbase, Kraken, and Gemini offer Bitcoin along with a growing selection of altcoins. They are among the most convenient on-ramps to cryptocurrency within the entire crypto industry. Binance is for an sophisticated buyer, with more sophisticated trading options and more altcoin options. FTX is a rapidly-growing crypto exchange that has garnered an investment of multibillion dollars, offers an exclusive number of altcoins to U.S. investors.4 However, traders from outside their home country of the U.S. have a greater variety of coins available on its platform.





One thing you should remember when setting up accounts for cryptocurrency exchanges is that you use secure Internet procedures. This is done by using two-factor authentication. A long, unique password which includes a variety of lowercase letters, capitalized and capitalized letters or special characters as well as numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the very first country to do so.5 The cryptocurrency can serve as a payment method for any transactions when a business accepts it. For now, the U.S. dollar continues to constitute El Salvador's primary currency.


Step 2: Then connect the exchange a payment option


When you've selected an exchangeoption, you'll require your personal documents. According to the exchange you choose, this could include images of your driver's license, Social Security card, as additionally, information about your employer as well as the source of money. The information you'll require could depend on the specific region you reside in and regulations within it. It's basically similar to setting up a typical brokerage account.





Once the exchange has confirmed your identity, you'll be asked to connect with a payment option. On most exchanges you can connect your bank account to the exchange directly, or you can connect a credit or debit card. Though you could use a credit card to purchase cryptocurrency, it's not advisable because fluctuation in the price of cryptocurrency can raise the cost of buying the coin.





Bitcoin is legal within the United States, but some banks may question or make deposits unavailable to crypto-related sites or exchanges.6 It's an excellent idea to confirm to make sure that your bank is able to accept deposits at the exchange you choose.





There are different fees for cash deposits from a bank account either debit or credit card. It is crucial to investigate fees for each payment method in order to pick an exchange option or decide which option is best for you.





Exchanges may also charge fees for each transaction. The fees may be one-time fees (if your trading volume is very low) or some percentage of the trading amount. Credit cards incur the processing fee as well as transaction fee.





Step 3. Place an order


You can purchase bitcoin (or other cryptocurrencies) after choosing an exchange and linking a payment option. In recent years bitcoin exchanges have steadily become more popular. They have significantly increased in terms both of liquidity and their array of features. The operational changes of cryptocurrency exchanges match the change regarding the perceived value of cryptocurrencies. The business once dismissed as a fraud or one with questionable procedures is slowly changing into an authentic one, which is attracting the attention of all major players in the financial services sector.





Now, cryptocurrency exchanges are advanced to the point that they provide the same range of features that they have as their counterparts at stock brokerages. Crypto exchanges today offer different types of orders and methods to invest. Most exchanges in the crypto space offer limit and market orders, and some also offer stop-loss and limit orders. Of the exchanges listed above, Kraken offers the most options for order types. Kraken offers market, limit, stop-lossand stop-limit take-profit, and take profit limit orders.7





In addition to offering a range of options for orders, the exchanges offer ways to set up indefinite investments, allowing customers to create a dollar-cost-average into their chosen investments. Coinbase for instance, lets users set recurring transactions to be made every day, week, or month.8





Step 4: Safe storage


Blockchains, cryptocurrency or Bitcoin can be the perfect place to keep digital assets more safely. When you store your cryptocurrency outside of the exchange and within your own wallet will ensure that only you hold the private key to the funds. This gives you the option of keeping your money away from an exchange , and reduce the possibility of your account being hacked and causing loss of funds.





While many exchanges provide users with wallets, security is not their primary business. We generally don't recommend making use of an exchange account for larger or longer-term holdings in cryptocurrency.





Certain wallets have more features than others. Some are Bitcoin only, and others offer the ability to store many altcoins. Some wallets even offer the ability to exchange one token for another.





When you're trying to decide on the right Bitcoin wallet, you have several options. The first thing you will need to understand about crypto wallets is hot wallets (online wallets) and cold wallets (paper or hardware wallets).






Hot wallets


It is also referred to also as hot wallets. Hot wallets are wallets that run via Internet-connected devices, including computers, phones, or tablets. The risk of vulnerability is that they create private keys to the coins in these devices connected to the Internet. While a hot account can be extremely convenient due to the manner that you can connect to and perform transactions with your assets rapidly, storing your private keys on a device connected to the internet makes it more vulnerable to attack.





This may seem a bit nebulous, but hot wallet holders that don't put in place enough security have the chance of losing funds to theft. This is not an infrequent situation and it could happen in a number of ways. You can, for example, brag on forums like Reddit about the amount of bitcoins you've saved up while you're using little to no security and keeping it in a hot bank account would not be a good idea. These wallets can be secured as when precautions are made. Secure security measures, such as two-factor authentication and safe Internet browsing should be considered minimum specifications.





These wallets are best for smaller amounts or cryptocurrency you're actively trading with an exchange. You can compare a hot wallet to a checking account. A common sense financial advice is to only put money spent in a check account while the majority of your funds is saved in savings or other investment accounts. It is the same about hot wallets. Hot wallets comprise mobile, desktop, web, and exchange account custody wallets.





As mentioned previously, exchange wallets are custodial services provided by exchange. The user of this wallet particular type of wallet is not holder to the encryption key to the cryptocurrency stored in this wallet. If an incident were to occur , where the exchange becomes compromised or your account is compromised, you could lose your money. 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 or cold-weather wallet is that it is not attached to an Internet so it has significantly lower risk being breached. These wallets can be known as offline wallets or even hardware wallets. These wallets store a user's private key in a device and isn't connected the internet and can come with software that operates in parallel so the user is able to view their portfolio without placing their personal key at risk.





One of the safest ways for storing cryptocurrency offline is with a paper wallet. A paper wallet is a wallet you can make through certain websites. It can then generate both private and public keys which you print on a piece of paper. Access to bitcoin and other digital currencies is only possible when you have the piece of paper that contains the private key. Many people laminate these paper wallets , and then store them in safe deposit boxes at banks or even in a safe at home. These wallets are made for high-security and long-term investments because you cannot quickly sell or trade bitcoin stored using this method.





A more typical type of cold wallet is a hardware one. Hardware wallets are typically a USB drive that holds the private keys of a user offline. These wallets offer significant advantages over hot wallets , as they are unaffected by viruses that could harm a computer. Hardware wallets ensure that private keys are not in contact with your network-connected computer or software that could be vulnerable. They're also open source, allowing the community to verify their safety through audits of code rather than a company declaring that they are safe to use.





These are considered to be the most secure method of storing your bitcoins or other cryptocurrencies. However, they require additional technical knowledge to setup.





A great method to set up the wallets you want to use is to have three items An exchange account to buy and sell as well as a hot wallet that can hold small to moderate amounts of cryptocurrency they want to trade with or sell, and a cold hardware wallet to store your larger assets to last for a long time.





How to Buy Bitcoin With PayPal


Bitcoin can also be bought via the payment processor PayPal Holdings, Inc. (PYPL). There are two options to buy bitcoin with PayPal. One and the easiest option is to purchase cryptocurrency with your PayPal account that is connected to a method of payment, such as a banking account, debit card or credit card. The other option is to make use of the balance on an existing PayPal account to purchase cryptocurrencies from a third-party provider. This isn't more convenient than the first since a small percentage of third-party websites allow users to buy bitcoin with that 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 crypto to buy 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 in order to set up a PayPal account: name; physical address along with date of birth the tax identification number.11





It is not possible to use a credit/debit card to buy Bitcoin using PayPal. In the course of purchasing, PayPal will display a price for the cryptocurrency. The price, however, is subject to rapid changes because of the fluctuation of markets for cryptocurrency. It's best to be sure to have greater than the price you had budgeted to purchase in your savings account.





When you purchase bitcoin through PayPal this company, you earn from the spread of crypto or the gap between the price at which Bitcoin is traded plus its price of exchange USD. PayPal can also charge you a cost for each transaction. These fees are contingent on the amount in dollars of the purchase. For instance it is possible to pay a flat amount of $0.50 is paid for purchases between $100 to $200. Following that, it is proportional to the total dollar amount. For example, a fee of 2 percent of the total amount is to be paid for crypto purchases between $100 to $200.12





The disadvantage of buying cryptocurrency via PayPal is that you are unable to transfer the crypto outside the payments processor's system. Thus, it's not possible to transfer bitcoin purchased from PayPal's wallet to an alternative crypto wallet or your personal wallet.11





Another drawback to using PayPal is that only a handful of online and offline traders permit you to make use of the payments processor in order to buy payments. eToro is one of the very only a few online sellers that allow users to use PayPal to buy bitcoin on its platform.13





How to Buy Bitcoin With a Credit Card


The process for purchasing bitcoin using credit cards is similar to the process when buying it through debit cards as well as through automatized clearing house (ACH) and transfers. The buyer must enter the details of your credit card with the online trading or exchange firm and then authorize the transaction. The general rule is that it's not a good idea to purchase bitcoin using credit cards. There are several reasons for this.





First of all, most exchanges will not allow Bitcoin purchases with credit cards due to associated processing fees as well as the risk of fraud. This choice could be to be in the best interest of customers. This is because credit card processing could charge additional fees to transactions. This means that in addition to the transaction fee You will be charged with processing fees that the exchange might charge you.





The second reason is because buying credit card products can be expensive. The issuers of credit cards treat bitcoin purchases as cash advances and add significant fees and interest charges on these advances. For example, American Express and Chase both classify purchases of cryptocurrencies being cash advance purchases. In other words, if one purchases $100 worth in bitcoin using the American Express card, you must pay just $10 (current cash advance fees for such transactions) and an annual percentage charge of 25 percent. In addition, the credit card's company also limits your purchase to $1,000 of bitcoin transactions per month.14





Another way to buy bitcoin with a credit card is to buy the Bitcoin Rewards credit card. They function just like your typical rewards credit card except they provide rewards in the form of bitcoin. Thus, they put the earnings from purchase into Bitcoin. One example of a Bitcoin loyalty card, which is also known as the BlockFi Bitcoin Rewards Credit Card.15 Beware however, of the fact that annual fees for such cards can be high and there could be additional expenses associated with the exchange of fiat currencies into crypto.





Although exchanges like Coinbase or Binance remain among the most popular methods to purchase Bitcoin However, they're not an all-inclusive solution.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Individuals can insert cash into machines and use it to buy bitcoin. The bitcoin is then stored in online wallets for users. Bitcoin ATMs have grown increasingly well-known in recent years. Retail big Walmart Inc. (WMT) is conducting a test program that will give customers the option of purchasing bitcoin. Coin ATM Radar can help locate nearby ATMs.





However ATMs aren't cheap option. There are two expenses associated with ATM bitcoin transactions that include a fee for purchase and the cost of conversion for changing the fiat currency into bitcoin. Both fees are hefty relative to the other options. In the case of Bitcoin, for instance, the standard purchase price that Bitcoin ATMs charge is 8.4 percent (of the purchase amount) and 5.4% for sales at ATMs.16





Be aware that Bitcoin ATMs are now requiring government-issued IDs since the beginning of 2020.


Exchanges P2P


As opposed to decentralized exchanges which allow sellers and buyers to meet anonymously and facilitate all aspects of the transfer, there's a few peer-to-peer (P2P) exchanges which provide a direct connection between the users. LocalBitcoins is one example of such an exchange. After registering an account, users can post requests to buy bitcoin or sell it, with information about payment options and costs. After that, they can browse through the lists of offer to buy or sell, choosing the trading partners who they would like to conduct business.





LocalBitcoins assists in certain aspects of the trade. While P2P exchanges do not offer the same degree of security as decentralized exchanges, they allow users the ability to shop around to find the most affordable deal. A large portion of these exchanges offer rating mechanisms so that their users have a way to evaluate prospective trade partners prior to committing.





Mainstream brokerages


Most brokerages don't offer the capability to trade and buy bitcoin due to the uncertainty of the legal status of cryptocurrency. Robinhood Markets, Inc. (HOOD), an app highly regarded by investors at retail, is one exchange offering crypto-based trading. It charges 0% commissions for cryptocurrency trading and purchases . It makes money from payment for order flow passing its trading volume onto different trading platforms, or brokerages.17





The absence of a commission fee is a tempting option for those who are new to crypto, however there are some drawbacks to that proposition. One is, Robinhood doesn't have the broad range of features and coins that are offered by the most prominent crypto exchanges such as Coinbase. Robinhood has made it possible to trade on its platform for seven currencies: 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 It also has diverse order types that can help you minimize risks and compensate for losses during trading.





The Robinhood platform does not offer a hosted wallet. So, if you'd like to purchase cryptocurrency using Robinhood, you will have to consider additional fees for an online wallet provider.





Bitcoin and other cryptocurrency investments aren't secured by insurance provided by this organization. Securities Investor Protection Corporation (SIPC). For regular brokerages, the insurer protects against losses of cash or securities brokerage accounts that have a total of $5000, with a $2500-dollar cash limit.20 This isn't accessible to clients of cryptocurrency exchanges. Coinbase and other cryptocurrency exchanges Coinbase are covered by insurance against crime to protect their infrastructure against attacks. But , this type of insurance cannot guarantee protection for individual customers against password theft.21


How to Sell Bitcoin


You can sell bitcoin through the same places where you bought the cryptocurrency, for instance, cryptocurrency exchanges and P2P platforms. Usually, the process for selling bitcoin through these platforms is similar to how you purchase it.





In this case, for instance, you could only need to click on a button, and then specify an order type (i.e. what type of order, whether the cryptocurrency should be sold instantly at the most competitive prices or it is sold to stop losses) to complete the sale. Depending on the market composition and demand at the place the cost of selling Bitcoin can differ. As an example, the exchanges in South Korea traded bitcoin at the so-called kimchi rate during the escalating price of Bitcoin in the year 2018.





Cryptocurrency exchanges charge a percentage of the cryptocurrency sale amount as fees. For instance, Coinbase charges 2.49% from the total transaction amount as fees.22





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





What Are the Steps for Purchasing Bitcoin?


The process of buying bitcoin is made up of 4 steps: choosing the best location or exchange to make your purchase and selecting a payment method and making sure that you have secure storage of your bitcoin purchase. Depending on what venue selected in the initial process, there may be additional steps involved in the procedure. For example, if you purchase the cryptocurrency from Robinhood there may be a need to be aware of additional costs associated with an online wallet as well as the custody of your bitcoins since it doesn't offer these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most sought-after places for buying bitcoins include cryptocurrency exchanges brokers (crypto in addition to mainstream) and payment processing services like PayPal. It is also possible to purchase Bitcoin through P2P exchanges. To acquire indirect ownership of bitcoin it is possible to buy shares in companies that keep bitcoin on their balance sheets, such as Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


The typical cost for buying bitcoin includes an amount per transaction plus the cost of converting a foreign currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment solutions make money off of this conversion spread.) The fee per trade will be a function of how much money is involved in the trade. A larger trade volume will be charged more. Cost of purchasing depends on the features available by the location. For example, Robinhood does not currently offer an online bank account for storage of bitcoin. Therefore, you'll need to budget the cost of an online wallet 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 like PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


Your bitcoin purchase is not protected by SIPC.20 On certain exchanges like Coinbase accounts, the balance of your fiat in individual accounts are insured by the FDIC at $250,000 per account.21





The Bottom Line


The process for purchasing bitcoin is somewhat more complicated in comparison to the purchase of common equity or stock. This is mainly because the crypto ecosystem and infrastructure are not as well developed as those of mainstream trading.





The process of buying bitcoin consists of four steps: choosing the service or the location of buying, connecting with a payment method, placing an order, and ensuring the security of your cryptocurrency. Each step calls for research as well as a careful review of the pros and pros of each option. Bitcoin can be purchased through Bitcoin ATMs or by using payment companies like PayPal and the major brokerages like Robinhood.












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