Notes

How to Buy Bitcoin


The process of investing in Bitcoin (BTCUSD) might seem complex, but it's easier to understand if you reduce it into smaller steps. In order to invest or trade Bitcoin only requires an account at a provider or an exchange, although additional storage methods that are safe are suggested.





There are a variety of things new Bitcoin investors should have an account with a cryptocurrency exchange for personal identification that you can use with the Know Your Customer (KYC) platform with a secure connection the Internet as well as a method for payment. It is also recommended that you establish your own private wallet, separate from your exchange account. The most reliable methods to pay using this option include bank accounts including debit cards, banks, and credit cards. You can also make bitcoin transactions at ATMs that are specialized and also through P2P exchanges.





KEY TAKEAWAYS


"The worth of Bitcoin is due to the fact that it is a popular store of value and payment method, as well as its finite supply as well as its decreasing inflation.


* While it's almost impossible for Bitcoin itself to be hacked, it is possible that your bank or exchange system to suffer a breach. This is the reason proper protection and storage measures are essential.


* You can also buy bitcoin through popular services such as PayPal or Robinhood.


* One option to acquire bitcoin indirectly is by investing in companies that have bitcoin in their balance sheet.


Before You Buy Bitcoin


Security and privacy are key concerns concerning security and security for Bitcoin investors. Anyone who gains the private secret to an address via the Bitcoin blockchain can approve transactions.1 Private keys must be kept secret. Criminals might attempt to steal them should they learn of massive accounts. Remember that anyone is able view the balance of a private address you've registered. But the upside to these public records is that it allows an individual to have multiple addresses public for themselves. In this way, they can divide their stash of Bitcoin over multiple addresses. A great strategy is to invest large amounts at public addresses that aren't directly connected to ones that are used in transactions.





Anyone can look up a history of transactions on the blockchain, even you. Although transactions are publicly recorded in the blockchain, details about the user is not. On the Bitcoin blockchain users only have their public key is recorded next to any transaction. This makes transactions safe however not completely secretive. In this way, Bitcoin transactions are more transparent and trackable than cash , since all of them are public scrutiny, unlike private cash transactions. But Bitcoin transactions also have an element of privacy built to their design. It's extremely difficult to trace the transactions of the parties--i.e., the party who sent and received bitcoins on the cryptocurrency's own blockchain.





Researchers from around the world and the FBI have stated that they can track transactions made on the Bitcoin blockchain and connect them to various online accounts, including their digital wallets.2 As an example, if anyone creates an account on Coinbase you must supply their identification.3 In the future, when that user purchases bitcoin, it can be traced back to their name. If they transfer the money to another wallet, it can be traced back to the Coinbase purchase , which is linked to the account owner's identity. This should not concern most investors since Bitcoin may be used legally in U.S. and most other advanced countries.





Make sure you check all the regulatory, legal and tax consequences of purchasing and selling bitcoin in the country where you are located prior to conducting transactions.


Buying Bitcoin








We've broken down the steps involved in buying bitcoin below. Be aware that you need to do your homework and pick the right option for you based on your personal circumstances.





Step 1: Select a cryptocurrency trading service or a venue


The first step in purchasing bitcoin is selecting an online crypto trading platform or a venue. The most popular options for trading and venues to purchase cryptocurrencies include exchanges, payment solutions, and brokerages. In all of them, cryptocurrency exchanges are a good option because they offer a variety of features and different cryptocurrencies that can be traded.





Joining a cryptocurrency exchange allows you to buy, sell, and keep cryptocurrency. It is generally best practice to go with an exchange which allows users to move cryptocurrency to their secure online wallet for their personal. For those looking to trade Bitcoin or other currencies, this feature might not be relevant.





There are many kinds in cryptocurrency exchange. Since the Bitcoin principle of personal sovereignty and decentralization, certain exchanges permit users to remain anonymous and don't require the user to provide their personal details. They operate independently and are usually decentralized which means they do not have a central point of control.





Although these systems could serve purposeful purposes, they also provide benefits to the poorest of the world's inhabitants. Particularly for refugees or people living in countries lacking infrastructure for credit from the government or banking -- anonymous exchanges can bring them into mainstream economy.





As of now, the most well-known exchanges aren't in a decentralized manner and are subject to laws that make users submit identifying documents. To be specific, within the United States, these exchanges comprise Coinbase, Kraken, Gemini, FTX, and Binance.US Just to name a few. These exchanges have seen significant growth in the number of features they provide.





The crypto world has grown rapidly in the last 10 years with numerous new tokens competing for investor dollars. With the exception of Bitcoin and some prominent coins like Ethereum some of these tokens are available at all exchanges. Each exchange has specific criteria to decide whether to allow or exclude trading on specific tokens.





Coinbase, Kraken, and Gemini provide Bitcoin along with a growing selection of altcoins. They're among the most straightforward on-ramps for crypto within the entire crypto industry. Binance is designed for the more sophisticated marketer, and provides higher-quality trading features as well as a better variety of altcoin choices. FTX is a fast-growing digital exchange that has earned an impressive multibillion-dollar valuation, is offering the limited number of altcoins for U.S. investors.4 However, investors from outside those from the U.S. have a greater selection of tokens on its platform.





The most important thing to consider when setting up accounts with cryptocurrency exchange companies is to make use of secure Internet procedures. This means two-factor authentication. using a long, unique username that can include a variety of lowercase letters, capitalized letters in addition to special characters, as well as numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. The country was the first to do so.5 Bitcoin is able to serve as the currency of any transaction that a business is able to accept it. It is the U.S. dollar continues to be El Salvador's main currency.


Step 2. Join your currency to an alternative payment method


After you've picked the exchange option, you'll need to gather your personal documents. Depending on the exchange, it could be necessary to have photos of a driver's certificate or Social Security card, as and information about your employer and source of money. The information you'll require will depend on the area your home is located in and laws that apply to it. The process is almost similar to opening a traditional brokerage account.





Once the exchange has confirmed the authenticity of your account, you will be asked to join an option for payment. In most exchanges, you can connect your bank account straight away or connect a credit or debit card. Though you could use a credit card to purchase cryptocurrency, it's not advisable because the volatility of cryptocurrency prices could increase the price of buying a coin.





Bitcoin remains legal across the United States, but some banks might be suspicious or make deposits unavailable to crypto-related sites or exchanges.6 It is important to research to ensure that your bank accepts deposits to the exchange you prefer.





There are varying fees for deposits via a bank account such as debit or credit card. It is vitally important to know fees for each option of payment to help you choose an exchange, or determine which payment option is best for you.





Exchanges may also charge fees for each transaction. These fees can be in the form of a flat charge (if the amount of trading is very low) or a percentage of the trading amount. Credit card transactions incur the processing cost in addition to transaction costs.





Step 3: Make an order


It is possible to purchase bitcoin (or other cryptocurrencies) when you select an exchange option and connecting a payment method. In the past few years bitcoin exchanges have steadily been gaining popularity. They have significantly increased in terms of liquidity as well as the variety of features available. The operational changes at bitcoin exchanges are similar to the change in how they are perceived by the public. An industry that was once considered to be a scam or one that had questionable practice is gradually evolving into a legitimate one that has attracted the attention of all the big players in the financial services sector.





Today, cryptocurrency exchanges have been able to reach a point at which they provide the same level of features as their counterparts at stock brokerages. These exchanges provide an array of different order types and methods to invest. The majority of crypto exchanges offer both market and limit orders. Some offer stop-loss and limit orders. From the above exchanges, Kraken offers the most available order types. Kraken supports market, limit, stop loss, stop limit, take-profit, and take-profit limit orders.7





In addition to offering a range of order types, exchanges provide the option of setting up the possibility of recurring investments. This allows customers to create a dollar-cost-average into their investment options. Coinbase, for example, lets users create recurring purchases for every day, week, or month.8





Step 4: Secure storage


Bitcoin and cryptocurrency wallets can be storage options for digital assets in a more secure way. A crypto wallet that is separate from the exchange and within your own wallet, you can be sure that only you hold the private keys to your accounts. This also gives you the possibility of storing your funds away from an exchange and avoid the possibility that your exchange's security being compromised and thereby losing your money.





While most exchanges provide wallets to their customers, security is not their primary business. We do not generally recommend using an exchange wallet for the long-term, large-scale holdings of cryptocurrency.





Some wallets are more advanced than other wallets. Some are Bitcoin only, and others allow the storage of multiple types of altcoins. Some wallets even offer the possibility of swapping one token with another.





When it comes down to picking a Bitcoin wallet, you can choose from many options. First, you'll be able to comprehend about crypto wallets is the concept of hot wallets (online wallets) and cold wallets (paper or hardware wallets).





Hot wallets


It is also known as hot wallets. Hot wallets are those that run on Internet-connected devices such as computers, phones or tablets. These wallets can pose security risks because these wallets create the private keys that you use to access your funds on devices that have Internet connectivity. Although a hot wallet may be extremely convenient in ways that you can get access to and transactions made with your assets rapidly, storing your private keys using an Internet-connected device may make it more vulnerable to attack.





This may sound ridiculous however, hot wallet owners with inadequate security have the possibility of losing funds to theft. This is a frequent instance, and it can be triggered in many ways. One example is boasting on a popular forum like Reddit about how much bitcoin you own while you're using little to no security and storing it in a wallet that is hot would make sense. But, these wallets can be secured as you take the proper precautions. Strong logins that require two authentication, and safe Internet browsing are minimum standards.





They are ideal for small amounts or any cryptocurrency that you're actively trading on an exchange. You could liken a hot wallet to a bank account. The conventional wisdom of finance is to store only money used for spending in a checking or savings account while the bulk of your money is saved in savings or other investment accounts. Similar could be said on hot wallets. Hot wallets are mobile, desktop, web, and exchange accounts custody wallets.





As previously mentioned, exchange wallets are custodial account that is provided by exchange. The owner of this form is not holder to the encryption key to the cryptocurrency in this wallet. Should an incident occur in which the exchange was hacked or your account becomes compromised, it would be lost the funds you have invested. The expression "not your key, not your coin" is often frequented in cryptocurrency forums and communities.





Cold wallets


The most basic description of the term "cold wallet" is that it is not interconnected to the Internet and , therefore, has significantly lower risk being affected. These wallets may also be referred to as offline wallets or even hardware wallets. These wallets store a user's private keys on a device but isn't connected the internet. They are also equipped with software which operates in parallel so that the user has access to the entire portfolio without putting the personal key at risk.





Perhaps the most secure method for storing cryptocurrency offline is through a paper wallet. A paper wallet is a account that can be generated from certain websites. It then generates private and public keys which are printed out on paper. Access to cryptocurrency in these addresses is only possible if you have the piece of paper that contains the private key. A lot of people laminate their papers wallets and place them in safe box at their bank or even in a safe in their home. These wallets are designed for long-term investments and high security because they are not able to quickly sell or trade bitcoins stored in such a way.





The most popular type of cold cash wallet is a wallet made of hardware. A hardware wallet is typically comprised of a USB drive that is used to store the user's private keys offline. The benefits of such wallets are substantial over hot wallets since they aren't affected by viruses that could infect one's computer. With hardware wallets, private keys never come into contact with your computer's network or software that could be vulnerable. They are also generally open source, which allows the community to judge their security using an audit of the code instead of a corporation stating they're completely safe for you to utilize.





These are considered to be the best and most secure method of storing your bitcoin or any other cryptocurrency. However, they require a greater amount of technical knowledge to setup.





A great method to set your wallets is to set up three things that you need: an exchange account to buy and sell as well as a hot wallet that can keep small to moderate amounts of cryptocurrency that you plan to trade or sell in the future, and a cold account to store bigger amounts with a longer time-frame.





How to Buy Bitcoin With PayPal


You can also purchase bitcoin via the payment processor PayPal Holdings, Inc. (PYPL). There are two ways to purchase bitcoin using PayPal. The most popular and easiest method is to buy cryptocurrencies using your PayPal account, which is linked to a financial institution that accepts credit card, bank account or debit card. The other option is to use the balance in the balance of your PayPal account to purchase cryptocurrency via a third-party supplier. This option is not as easy as the first because few third-party websites allow users to purchase bitcoin with their 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 purchase goods and services through"Checkout With Coin "Checkout With Crypto" feature.10





To create a crypto account through PayPal it is necessary to provide the following details is required including name, physical address and birth date as well as a tax ID number.11





It isn't possible to make use of a credit card to purchase Bitcoin through PayPal. When you purchase, PayPal will display a price for the cryptocurrency. But , the price can be subject changing rapidly due the fluctuation of markets for cryptocurrency. It's a good idea to ensure you have more than what you have budgeted for your purchase in your account at the bank.





If you purchase bitcoin straight from PayPal and it earns money via the crypto spread. It is the differences between Bitcoin's value as well as its rate of exchange with USD. PayPal is also charged a transaction cost for every purchase. These charges are based on amount in dollars of the purchase. For example, a flat fee of $0.50 is per purchase between $100 and $200. The fee thereafter is proportional to the total dollar amount. A typical example is a charge of 2% of the total amount is per transaction for crypto transactions between $100 and $200.12





One disadvantage of purchasing cryptocurrency through PayPal is that you are not able to transfer the cryptocurrency outside of the payment processor's platform. Therefore, it is not possible for you to transfer bitcoin purchased from PayPal's wallet into an additional crypto wallet or your personal wallet.11





The downside of using PayPal is that the majority of trader and exchanges accept you to make use of the payments processor in order to buy payments. eToro is among the few online marketplaces that allow payment through 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 for purchasing it using debit or credit cards. You can also purchase it through Automated Clearing House (ACH) payments. The buyer must enter the credit card information to the online trading or exchange company and also authorize the transaction. However, generally speaking, it's not the best decision to buy bitcoin using credit cards. There are a few reasons why this is.





First, not all exchanges allow bitcoin purchase with credit card due to processing charges and the risk of committing fraud. This choice could be in the best interests of the customers. This is because credit card processing could apply additional charges to transactions. As a result, instead of paying transaction fees, you will end up with processing costs which the exchange will pass on to you.





The third reason is that transactions made with credit cards may be costly. Some credit card companies treat bitcoin transactions as cash advances and charge high fees and interest rates for such advances. For example, American Express and Chase both treat purchases of cryptocurrency in cash-advance transactions. Thus, if it is possible to purchase one hundred dollars worth of bitcoin through an American Express card, you must pay $10 (current cash advance fee for these transactions) and an annual rate of 25%. Furthermore, the credit card's company also limits you to $1000 worth of bitcoin purchases per month.14





An alternative way to purchase bitcoin with credit card is to buy an Bitcoin reward credit card. These cards function similarly to your usual rewards credit card but they grant rewards in cryptocurrency bitcoin. They invest the cash back earned from purchases into Bitcoin. One illustration of the Bitcoin rewards credit card would be BlockFi Bitcoin Rewards Credit Card.15 Be aware, however of the fact that annual fees for these cards might be high as well as the charges for the conversion between fiat and crypto currencies.





Exchanges like Coinbase and Binance remain among the most popular options to buy Bitcoin However, they're not the only option.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Individuals can plug cash into machines that can be used to purchase bitcoin, which is later transferred to online wallets for users. Bitcoin ATMs have been increasingly well-known in recent years. Retail massive Walmart Inc. (WMT) is conducting a test program that offers its customers the option of purchasing bitcoin. Coin ATM Radar can help find the nearest ATMs.





However ATMs can be expensive option. There are two costs that come along with ATM bitcoin transactions which are a purchase charge and the cost of conversion for changing an exchange rate from fiat to bitcoin. Both charges are quite high compared to those of other alternatives. For instance, the global average purchase fee that Bitcoin ATMs charge is 8.4% (of the amount of purchase) and 5.4 percent for sales at ATMs.16





Be aware that Bitcoin ATMs are becoming increasingly dependent on IDs issued by the government as of 2020.


Exchanges P2P


In contrast to decentralized exchanges that offer buyers and sellers a secure way to communicate and can facilitate every aspect of the trade, there's peer-to-peer (P2P) exchanges which offer a more direct relationship between users. LocalBitcoins is one example of such an exchange. After registering for an account users can request to purchase and sell bitcoin, as well as information about payment options and prices. They can then peruse listings of both buy and sell deals as well as select the partner with whom they wish to trade.





LocalBitcoins helps with certain aspects of the trade. Although P2P exchanges may not provide the same level security and anonymity as traditional exchanges, they do give users an opportunity to compare prices to find the best price. Most of these exchanges offer rating system so that users are able to assess prospective trade partners prior to committing.





Mainstream brokerages


The majority of brokerages do not offer bitcoin purchase and trading capabilities due to uncertainty about the status of cryptocurrencies in the eyes of the regulators. Robinhood Markets, Inc. (HOOD) A mobile app very popular among investors from retail, is an exchange which offers cryptocurrency trading facilities. It charges 0% commissions for cryptocurrency transactions and purchases and makes money from payment for order flow transferring its trading volume to other trading platforms or brokerages.17





The absence of a fee for commissions is a tempting option in the beginning, but there are a few limitations to the service. Primarily, Robinhood doesn't have an array of features and coins offered by well-known crypto exchanges such as Coinbase. Robinhood has enabled trading on its platform for seven currencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 While Coinbase is a different story, you can trade more cryptocurrencies than 100 with Coinbase.19 It also offers different types of orders to reduce the risk and reduce losses in trading.






The Robinhood platform does not have an online wallet. In other words, if one wants to purchase cryptocurrency using Robinhood however, you'll need add on additional costs for an online wallet provider.





Bitcoin and other cryptocurrency investment options are not covered by insurance under the Securities Investor Protection Corporation (SIPC). At traditional brokerages, this agency is able to protect against the loss of securities and cash in brokerage accounts containing up to $500,000 with a $250,000 cash limit.20 This facility isn't available to customers that use crypto exchanges. Cryptocurrency exchanges like Coinbase offer insurance against crime to safeguard their infrastructure from attacks. However, this insurance doesn't safeguard individual customers against password theft.21


How to Sell Bitcoin


Bitcoin can be sold at those same places that you bought the cryptocurrency, including cryptocurrency exchanges, and P2P platforms. In general, the procedure of selling bitcoin through these platforms is similar to the method of buying it.





For instance, you might only have to press on a button and select an order type (i.e. how much, if the cryptocurrency can be sold instantly with the highest price available or if the sale should be made to stop losses) for the sale. Based on the composition of the market and demand in the area the selling price for Bitcoin can differ. For instance, some exchanges in South Korea traded bitcoin at Kimchi's premium, also known as the time of the increase in prices in the year 2018.





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





Exchanges generally have monthly and daily withdrawal limits. Therefore, the proceeds from an extensive sale may not be available for immediate withdrawal to the trader. There are no limitations on the amount of bitcoin you can sell however.





What Are the Steps for Purchasing Bitcoin?


The process to purchase bitcoin is comprised of four parts: selecting an appropriate exchange or location for your order, selecting a payment method and ensuring secure storage for your purchase. Depending on the location chosen in the very first step, there are additional steps involved in the process. For instance, in the event that you acquire the cryptocurrency using Robinhood you may need include additional expenses for an online wallet or custody for your bitcoin because Robinhood does not provide these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most widely used venues for buying bitcoins is through cryptocurrency exchanges and brokerages (crypto and mainstream) and payment service like PayPal. You can also purchase Bitcoin by using P2P-based exchanges. To own bitcoin indirect investors can choose to invest in companies that have bitcoin on their balance sheets, like Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).2324





How Much Should I Expect to Pay to Purchase Bitcoin?


Typically, the cost of purchasing bitcoin is the cost of trading plus the cost of converting a traditional currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment companies make money on this conversion spread.) The fee per trade will be a function of your dollar amount for the trade. A greater value of trade will cost more. The total purchase price also is dependent on the features offered by the retailer. For instance, Robinhood does not currently offer an online wallet for saving bitcoin. So, you'll need be prepared for costs associated with an online wallet purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also purchase bitcoin in the following locations:


* Through Bitcoin ATMs


* Through online payment solutions like PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


You are not protected by your bitcoin purchase. is not covered by SIPC.20 In certain exchanges, like Coinbase, fiat balances in individual accounts may be insured by FDIC in the amount of $250,000 per account.21





The Bottom Line


The process of buying bitcoin is more involved than purchasing traditional equity or stocks. This is due to the blockchain and cryptocurrency infrastructure isn't as well developed as those of mainstream trading.





A bitcoin purchase process consists in four steps: choosing the service or the location of making the transaction, connecting to an option for payment, placing an orderand providing an appropriate storage space for your cryptocurrency. Each of these steps involves a lot of research and careful examination of the pros as well as cons of each service. You can also purchase bitcoin through Bitcoin ATMs or by using payment services like PayPal and the major brokerages like Robinhood.












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