Notes

How to Buy Bitcoin


The process of investing in Bitcoin (BTCUSD) could seem complicated, but it is easy to breakdown the process into steps. When you invest or trade, Bitcoin does not require an account at a provider or exchange. However, additional storage methods that are safe are suggested.






There are many things hopeful Bitcoin investors require in order to invest: a cryptocurrency-exchange account and personal identification documents for those who use the Know Your Customer (KYC) platform, a secure connection to the Internet, and a method for payment. It is recommended that you have your own private wallet separate from your exchange account. The most reliable methods to pay using this option include bank accounts along with debit cards and credit cards. There is also the option to obtain bitcoin through ATMs that are specifically designed and via P2P exchanges.





KEY TAKEAWAYS


"The value and value that comes from Bitcoin is derived from its usage as a store of value, as well as a payment method along with its limited supply as well as the decreasing inflation.


* While it's virtually impossible to allow Bitcoin to be hacked but it is still possible that your bank or exchange account to get compromised. This is why practicing proper storage and security measures is imperative.


You can also purchase bitcoin using the mainstream service such as PayPal as well as Robinhood.


* One method to hold bitcoin indirectly is by investing in businesses that have bitcoin in their balance financial statements.


Before You Buy Bitcoin


Security and privacy is one of the major concerns with regard to Bitcoin investors. Anyone who acquires the private access to a public-facing address within the Bitcoin blockchain can authorize transactions.1 Private keys must be kept hidden from thieves, as they could try to steal them when they find out about large accounts. It is important to be aware that anyone can view the balance of a private address you've registered. But the upside to the public data is that one can create multiple public addresses to themselves. This means they can spread their wealth of Bitcoin over many addresses. One option is to store large amounts of money at public addresses that are not specifically linked to accounts that are used in transactions.





Anyone can access a history of transactions on the blockchain, even you. Although transactions are publicly recorded on the blockchainsystem, identifying details about the user is not. On the Bitcoin blockchain it is the only place where a public key is displayed next to the transaction, making transactions private however not completely secure. In this regard, Bitcoin transactions can be more easily trackable than cash transactions because all of them are open to public examination, unlike private transactions. But Bitcoin transactions also come with the element of anonymity built into the design. It is extremely difficult to find the transacting parties--i.e. recipients and senders of bitcoin - on the blockchain of the cryptocurrency.





International researchers as well as the FBI have claimed that they could monitor transactions on the Bitcoin blockchain and connect them to other accounts on the internet, including their digital wallets.2 In the case of you create an account on Coinbase users must present their identification.3 After that, when the person buys bitcoin, it is linked to their name. If they decide to transfer it to other wallets, it could still be traced back to the Coinbase transaction tied to the person who owns the account. This shouldn't worry most investors since Bitcoin can be legally used in the U.S. and most other developed nations.





It is important to know your legal and regulatory, and tax requirements for buying and selling bitcoin based on where you live prior to transacting.


Buying Bitcoin








We've simplified the steps of purchasing bitcoin in the following steps. Make sure to research your options and choose the best solution for you based on your circumstances.





Step 1: Choose a cryptocurrency trading service or a venue


The first step in buying bitcoin consists of choosing a crypto trading service or a venue. The most popular trading venues and services for buying cryptocurrencies are cryptocurrency exchanges, payment services, and brokerages. Of these, cryptocurrency exchanges are a good option as they provide a variety of features and currencies for trading.





By signing up to a cryptocurrency exchange allows you to purchase, sell and keep cryptocurrency. It is usually best using an exchange service that allows its users to withdraw cryptocurrency into their personal online wallets for safekeeping. If you are looking to trade Bitcoin or any other cryptocurrency, this feature may not matter.





There are various kinds that offer cryptocurrency exchanges. Since the Bitcoin philosophy is one of personal sovereignty and decentralization, certain exchanges permit users to remain anonymous and do not make users fill out any personal information. They operate independently and are typically decentralized, so they don't have a central point of control.





Although these systems can serve evil purposes, they also provide assistance to the majority of the world's population that is not banking. For certain categories of people--refugees and those living in countries that have no infrastructure for government credit or banking, anonymized exchanges can bring them into mainstream economy.





As of now, all of the top exchanges in the world are decentralized , and they follow regulations that oblige users to submit identification documentation. On the United States, these exchanges include Coinbase, Kraken, Gemini, FTX, and Binance.US, to name a few. These exchanges have risen significantly in terms of the features they offer.





The crypto world has grown quickly in the past decade and a wide array of tokens are that are competing for dollars from investors. Except for Bitcoin and a few other prominent coins, such as Ethereum some of these coins are sold on all exchanges. Each exchange has its own set rules to decide if it's appropriate to include or exclude the trading of specific tokens.





Coinbase, Kraken, and Gemini offer Bitcoin along with a growing selection of altcoins. These three are the most accessible on-ramps into crypto that exist in the market. Binance targets a more sophisticated buyer, with more robust trading functions and more diverse altcoin options. FTX is a rapidly-growing crypto exchange that has garnered a multibillion-dollar valuation, offers the limited number of altcoins for U.S. investors.4 However, traders from outside these countries U.S. have a greater selection of tokens on its platform.





One thing you should remember when creating an account on a cryptocurrency exchange is to use safe Internet practices. This includes two-factor authentication and A long, unique password that can include a variety of lowercase characters, capitalized letters, special characters, and numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the very first country to do so.5 Bitcoin is able to serve as a form of currency in any transaction where a business can take it. In the end, however, it is still the U.S. dollar continues to be the primary currency in El Salvador.


Step 2. Link your Exchange to the payment option


After you have chosen an exchangeoption, you'll need to gather your personal documents. Depending on the exchange, these may include pictures from a driver's license and/or Social Security card, as plus information on your employer and the source of money. The information you'll require depends on the place that you reside in as well as the regulations that are in place within it. The process is generally the same as opening a traditional brokerage account.





After the exchange has verified your identity, you will be asked to connect a payment option. Most exchanges can connect your bank account straight away or you can connect a debit or credit card. Even though you can use a credit card to buy cryptocurrency, it is not advisable because the volatility of prices for cryptocurrency can boost the overall cost of purchasing coins.





Bitcoin is legal within the United States, but some banks may question or even suspend deposits on crypto-related websites or exchanges.6 It is an excellent idea to confirm to ensure that the bank you use allows deposits to your chosen exchange.





There are different charges for cash deposits from a bank account or debit card. It is important to research fees for the various payment options to assist you to pick an exchange option or determine which payment option is best for you.





Exchanges also charge fees per transaction. The fees could be one-time fees (if you trade at a not large) or some percentage of the trading amount. Credit cards are charged the processing fee as well as transaction fees.





Step 3. Make an order


You can purchase bitcoin (or other cryptocurrency) by selecting an exchange and linking a payment method. In the past few times Bitcoin exchanges have slowly gained more acceptance. They have seen a significant increase with regard to liquidity and their variety of features. Changes in operation at bitcoin exchanges are similar to the change regarding the perceived value of cryptocurrencies. An industry once believed to be a scam or with unreliable practices is slowly morphing into an established one that is attracting the attention of all the big players in the financial services sector.





These days, cryptocurrency exchanges have progressed to the point where they're nearly offering the same amount of features as their counterparts in the stock brokerage industry. Today, cryptocurrency exchanges offer several types of orders and investment options. Most crypto exchanges provide both market and limit orders, and some also offer stop-loss orders. Of the mentioned exchanges, Kraken offers the most possible types of orders. Kraken allows for market, limit, stop-loss, stop-limit or take-profit limit orders.7





In addition to a range of kinds of orders, exchanges allow users to set up regular investments, which allows clients to apply a cost-per-dollar average to the investments they prefer. Coinbase, for example, lets users create recurring purchases to be made every day, week, or month.8





Step 4: Safe storage


Digital wallets such as Bitcoin or Cryptocurrency provide an opportunity to save digital assets with greater security. Having your crypto outside of an exchange and placed in your personal wallet makes sure that only you are the only person who has control over the secret key to your cash. Additionally, it allows you to have the ability to separate your cash from an exchange and eliminate the risk of your exchange being hacked and thereby losing your money.





While most exchanges offer the option of wallets for their users security is not their primary business. We generally do not recommend using an exchange's wallet for significant or long-term investments in cryptocurrency.





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





When it comes time to choose an Bitcoin wallet, you can choose from several choices. The first thing you will have to know about crypto wallets is the concept of hot wallets (online wallets) and cold wallets (paper or hardware wallets).





Hot wallets


They are known under the term hot wallets. Hot accounts run on devices connected to the internet, such as phones, computers, or tablets. This could lead to vulnerability since these wallets store the secret keys to your currency in these devices connected to the Internet. Although a mobile wallet can be quite convenient in the manner it allows you to connect to and perform transactions with your assets rapidly, storing your private key in an internet-connected device can make it more susceptible to a hack.





This may sound farfetched, but hot wallet holders who haven't setup enough security have the possibility of losing funds to theft. This is a frequent occurrence, and it can happen in a number of ways. As an example, announcing in a public forum, such as Reddit about the amount of bitcoin you've got while you have little or no security , and storing it in a wallet with a high temperature would not be the best idea. The fact is, these wallets can be made secure so long as precautions are taken. Strong passwords, two-factor authentication and safe Internet browsing are the minimum requirements.





These wallets are best to store small amounts of cryptocurrency or other cryptocurrency you are actively trading with an exchange. You can think of a hot wallet to a bank account. Common wisdom on finance suggests not to place money you use within a bank account that is a checking one, while the majority of your funds is kept in savings accounts, or other investments accounts. The same could be said to hot wallets. Hot wallets are mobile, desktop, web and exchange accounts custody wallets.





As previously mentioned, exchange clients are custodial wallets that are offered by exchange. The user of this wallet particular type of wallet is not owner to the encryption key for the cryptocurrency which is stored in the wallet. If an event should occur wherein the exchange is compromised or your account gets compromised, then you'd lose your money. The expression "not your key, not your coin" is frequently heard in cryptocurrency forums, and communities.





Cold wallets


The simplest description for a cold-wallet is that it is not linked to the Internet and therefore has significantly lower risk being breached. These wallets are also called offline wallets or even hardware wallets. They save the user's private keys on a device that isn't connected to the internet. They come with software that works in parallel, so users can access the entire portfolio without putting the private key in danger.





The most secure and secure method to store digital currency offline is with a paper wallet. A paper wallet is a wallet that you can create by visiting certain websites. It produces public and private keys that are printed out on a piece of paper. Access to crypto currency in these wallets is only possible when you've got that piece paper with the private key. A lot of people laminate their paper wallets , and then store them in safe deposit boxes at their bank or even in a safe in their home. These wallets are intended for high-security and long-term investments because you cannot quickly sell or trade bitcoin stored this way.





The most common kind of cold wallet is a hardware one. The typical hardware wallet is an USB drive that can store key information of the user offline. These types of wallets have distinct advantages over hot ones since they aren't affected by viruses that can infect a computer. With hardware wallets, your private keys are never in contact with your computer's network or software that might be vulnerable. The majority of these devices are open source, which allows people to check their security through audits of the code, not a company declaring that they are reliable to operate.





The cold wallet is the most secure way to store bitcoin or other cryptos. But they require more technical knowledge to setup.





The best way to set up your wallets would be to have three things one of which is an exchange bank account for trading and buying an exchange account, a hot bank account to hold small to medium amounts of crypto you'd like to trade, or sell and a cold physical account to store bigger amounts with a longer time-frame.





How to Buy Bitcoin With PayPal


You can also buy bitcoin through the payment processor PayPal Holdings, Inc. (PYPL). There are two ways to purchase bitcoin using PayPal. The most popular and easiest method is to purchase bitcoin by using your PayPal account that is connected with a payment instrument, such as a banking account, debit card or credit card. The second option is to utilize the balance of the balance of your PayPal account to buy cryptocurrencies through a third-party vendor. This option is not as easy as the first since only a handful of third-party sites allow customers to purchase bitcoin via 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 use your crypto to buy goods as well as services via"Checkout with Crypto" feature "Checkout With Crypto" feature.10





To create a crypto account through PayPal, the following information is needed such as name, physical address and birth date along with a tax identification number.11





It is not possible to use a credit/debit card to buy Bitcoin using PayPal. When you purchase, PayPal will display a price for the cryptocurrency. However, this price is subject fluctuation due to the fluctuation of markets for cryptocurrency. It's a good idea to make sure that you have more than the amount you planned for the purchase in your savings account.





When you buy bitcoin directly through PayPal it earns profit via the crypto spread. It is the variance between Bitcoin's current market price and exchange rate with USD. The company has a transaction cost per transaction. The amount charged is contingent upon the dollar amount of the purchase. For instance the flat rate of $0.50 is due for purchases ranging from $100 and $200. Following that, the cost is determined by a percentage percentage of the dollar amount. For instance, a charge of 2 percent on the total amount is applicable for purchases that range from $100 to $200.12





The main drawback of buying cryptocurrencies through PayPal is that you are not able to transfer the crypto outside the Payment processor's own platform. Therefore, it is not possible for you to transfer your bitcoin purchase from PayPal's wallet into an external crypto wallet or your personal wallet.11





The third disadvantage of PayPal is that not many marketplaces and online retailers allow to use the service to make payment. eToro is among the few online traders that allow the use of PayPal to purchase bitcoins through its platform.13





How to Buy Bitcoin With a Credit Card


The procedure to purchase bitcoin with credit cards is similar to the procedure when buying it through debit card or through Automated Clearing House (ACH) transactions. You'll need to input your credit card's information into the exchange or online trading company and then approve the transaction. However, generally speaking, it's not a wise decision to buy bitcoin using credit cards. There are a few reasons.





First, the majority of exchanges don't allow bitcoin purchases using credit cards due to processing fees and the chance of being a victim of fraud. This may be in the best interests of customers. This is because credit card processing will add additional charges onto transactions. Therefore, in addition to the transaction fee you'll be left with processing charges that the exchange might charge you.





The second reason is because the purchases made using credit cards are costly. The issuers of credit cards treat bitcoin purchases as cash advances, and are able to charge large fees as well as interest rate on these advances. For example, American Express and Chase each count cryptocurrency purchases as transactions that are cash advances. So, if you buy 100 dollars worth of bitcoin with the American Express card, you must pay $10.00 (current cash advance cost for these transactions) plus the annual percentage rate of 25%. The credit card company also limits customers to only $1,000 worth of bitcoin transactions per month.14





An alternative to buying bitcoin with credit card is to buy an Bitcoin Rewards credit card. These cards function similar to your regular rewards credit card, but they can offer rewards in type of bitcoin. The cards invest cashback from purchases into Bitcoin. One illustration of a Bitcoin points card for rewards is the BlockFi Bitcoin Rewards Credit Card.15 Beware however, that annual fees for these cards can be very high and may also be added expenses associated with the conversion of fiat currencies into crypto.





Exchanges like Coinbase and Binance remain as the most popular method to purchase Bitcoin They aren't the only means.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Individuals can plug cash into the machine and then use it to purchase bitcoin. The bitcoin is then moved to online accounts for users. how does jay z make money have grown more popular in recent times. Even retail major Walmart Inc. (WMT) is developing a pilot project that will give its customers the option of purchasing bitcoin. Coin ATM Radar can help to track down the closest ATMs.





However ATMs can be expensive option. There are two charges associated with ATM bitcoin purchases including a charge for purchasing the item and a conversion fee for converting any fiat currency to bitcoin. Both are quite high when compared with other alternatives. For instance, the world average cost for purchases that Bitcoin ATMs charge is 8.4% (of the amount of purchase) and 5.4 percent for sales made at ATMs.16





Be aware, however, that Bitcoin ATMs are increasingly required to have government-issued IDs from early 2020.


Exchanges between P2P


Instead of decentralized exchanges, that make it possible to connect buyers and sellers in an anonymous manner and allow for all aspects of the transaction, there are some peer-to-peer (P2P) exchanges which provide a direct connections between users. LocalBitcoins is one of these exchange. After registering for an account users can make requests to purchase or sell bitcoin. This includes details regarding payment methods as well as costs. The users can then look through the listings of buy and sell offers in order to choose the business partners with whom they wish to transact.





LocalBitcoins provides a variety of benefits to the trading. While P2P exchanges may not provide the same protections as decentralized exchanges, they give users an opportunity to compare prices to find the best price. Some of these exchanges offer rating systems to ensure that users are able evaluate potential trade partners before making any transactions.





Mainstream brokerages


Few major brokerages provide bitcoin purchasing and trading features due to uncertainty about the regulatory status of cryptocurrencies. Robinhood Markets, Inc. (HOOD), an app very popular among investors from retail, is one platform that offers cryptocurrency trading services. It charges 0% commission for cryptocurrency transactions and purchases . It also earns money from the flow of orders, transferring its trading volume to any other platform for trading, as well as brokerages.17





The absence of commission fees is a tempting option for beginners, but there are some catches to that offer. First, Robinhood doesn't have the full range of features and coins offered by prominent crypto exchanges like Coinbase. Robinhood has enabled trading on its platform for seven different cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 While Coinbase is a different story, you can trade more than 100 cryptocurrency through Coinbase.19 Additionally, the exchange offers various order types to lower the risk of loss and protect against losses during trading.





The Robinhood platform doesn't offer a hosted wallet. So, if you'd like to purchase cryptocurrency using Robinhood then you'll have to account for additional costs for an online wallet provider.





Bitcoin and other cryptocurrency investments are not covered by insurance coverage from The Securities Investor Protection Corporation (SIPC). At regular brokerages, the organization protects against the loss of cash or securities brokerage accounts with an amount of up $500,000with a maximum of $250,000 cash limit.20 This protection is not available to customers of exchanges for cryptocurrency. The cryptocurrency exchanges such as Coinbase have insurance for crime to protect their infrastructure against attacks. However, that insurance won't provide protection to individual customers against password theft.21


How to Sell Bitcoin


Bitcoin is sold on the same outlets where you bought the cryptocurrency including cryptocurrency exchanges, and P2P platforms. In most cases, the process for selling bitcoin on these platforms is the same as the procedure for buying it.





For instance, you might only have to press a button and specify an order type (i.e. how much, if the cryptocurrency is to be sold immediately with the highest price available or if the sale should be made to minimize losses) to conduct the sale. Based on the composition of the market and demand at the venue the price of offering for Bitcoin can vary. In the case of exchanges, for instance, South Korea traded bitcoin at the kimchi price during the rise in bitcoin prices in the year 2018.





Cryptocurrency exchanges charge a percentage of the amount sold in the form of fees. For instance, Coinbase charges 2.49% percent of total transaction amounts as fees.22





Exchanges typically have monthly and daily withdrawal limitations. Therefore, money from an enormous sale might not be accessible immediately to the seller. There is no limit to the amount of bitcoin you can sell however.





What Are the Steps for Purchasing Bitcoin?


The process to buy bitcoin consists of 4 steps: deciding on an exchange or venue to place your order by selecting a preferred payment method and then making sure you have a safe place to store for your cryptocurrency purchase. Depending on the type of choice made in the first section, there may be additional steps that are involved in the process. For example, if purchase the cryptocurrency using Robinhood you may need add additional charges for an online wallet or custody for your bitcoin because it doesn't offer these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most popular venues for purchasing bitcoins include cryptocurrency exchanges as well as brokerages (crypto and mainstream) and payment companies like PayPal. You can also purchase Bitcoin via P2P exchanges. For indirect ownership of bitcoin, you can invest in companies which 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?


Typicallyspeaking, the cost of purchasing bitcoin consists of an amount per transaction plus the cost of converting a conventional currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment services make money from this conversion spread.) The fee per trade will be dependent on what amount in dollars is the trade. A larger trade volume will bring higher costs. Cost of purchasing depends on the services offered by the store. For instance, Robinhood does not currently have an online option for storage of bitcoin. So, you'll need to plan for costs for online wallets for your purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


Bitcoin can also be purchased at the following locations:


* Through Bitcoin ATMs


* Through online payments services such as PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


Yes, your bitcoin purchase is not protected by SIPC.20 For certain exchanges such as Coinbase account balances with fiat currencies in individual accounts could be 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 the process to buy regular equity or stock. This is due to the fact that the cryptocurrency's ecosystem and infrastructure aren't as developed as those for traditional trading.





A bitcoin purchase process consists of four phases: selecting a venue or service to complete payment, connecting to a payment option, placing an order, and then ensuring secure storage for the purchased cryptocurrency. Each step needs research and an in-depth review of pros and pros of each service. You can also purchase bitcoin at Bitcoin ATMs, as well as from payment services such as PayPal and major brokerages such as Robinhood.












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