Notes

How to Buy Bitcoin


Affording investments in Bitcoin (BTCUSD) is complicated, but it is much easier when you breakdown the process into smaller steps. It is possible to invest in or trade Bitcoin just requires an account with a company or exchange, however more secure storage practices are advised.





There are a number of things aspiring Bitcoin investors require such as a cryptocurrency exchange account along with personal identification documentation that you can use with a Know Your Customer (KYC) platform in addition to a secure connection the Internet and a method for payment. It is also suggested that you establish your own private wallet separate from the exchange account. Affordable methods to pay with this option include bank accounts credit cards, debit cards, and credit cards. You can also make bitcoin transactions at ATMs that are specialized or through P2P-based exchanges.





KEY TAKEAWAYS


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


While it's nearly impossible to allow Bitcoin to be hacked yet, it's possible that your bank or exchange account to be compromised. This is the reason proper storage and security precautions is imperative.


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


* One way to own bitcoin indirectly is to invest in companies with bitcoin in their balance and balance sheets.


Before You Buy Bitcoin


Privacy and security are important security and privacy concerns concerning security and security for Bitcoin investors. Anyone who gains the private secret key to a public address to the Bitcoin blockchain can authorize transactions.1 Private keys should be kept secret--criminals may attempt to take them away after they learn about huge accounts. Be aware that anyone can look up the balance for a public account you've used. However, the flip side of this data being available to the public is that anyone can make multiple public addresses for themselves. This means they can spread their stash of Bitcoin across several addresses. One option is to hold large investments at public addresses that are not directly connected to ones that are used in transactions.





Anyone can view a history of transactions on the blockchain--even you. Even though transactions are recorded publically in the blockchain, details about the user is not. In the Bitcoin blockchain, only a user's public key is recorded next to an transaction. This makes transactions secure but not secretive. In this sense, Bitcoin transfers are much easier to trace and traceable than cash since all of they are accessible for public analysis, unlike private transactions. But Bitcoin transactions also have added security features that protect the privacy of the transaction as part of their design. It's very difficult locate the transaction parties--i.e., those who send and receive bitcoin--through the blockchain used by the cryptocurrency.






International researchers and the FBI have claimed they can verify transactions carried out on the Bitcoin blockchain to other online accounts, such as their digital wallets.2 In the case of somebody creates a Coinbase account Coinbase you must supply their identification.3 After that, when the buyer buys bitcoin, that will be linked to their own name. If they transfer the funds to another account, it can still be tracked back to the Coinbase purchase which is tied to the account's owner's identity. This should not concern most buyers since Bitcoin will be legal in U.S. and most other developed countries.





Check out your legal and regulatory and taxation status for buying and selling bitcoin where you reside prior before making any transactions.


Buying Bitcoin








We've broken down the steps needed for buying bitcoin below. Make sure to do your homework and pick the right option according to the specifics of your situation.





Step 1: Choose one of the crypto trading services or venue


The first step of buying bitcoin consists of choosing a crypto trading site or a venue. Most popular venues and trading services to purchase cryptocurrencies include payments, exchanges and brokerages. Out of these, cryptocurrency exchanges are a good choice because they provide a range of features, and even more the use of cryptocurrencies in trading.





In signing up for a crypto exchange will enable you to purchase, sell, and keep cryptocurrency. It is generally best practice to use an exchange that lets its customers withdraw cryptocurrency into their personal online account for safekeeping. If you're planning to trade Bitcoin or any other cryptocurrency, this option may not be necessary.





There are several kinds from cryptocurrency-based exchanges. Because the Bitcoin concept is about autonomy and decentralization, some exchanges permit users to remain anonymous and don't require users to enter personal information. These exchanges operate on their own and are typically decentralized, so they don't have a central source of control.





While these systems are able to serve purposeful purposes, they also provide assistance to the large majority of the population who do not have access to banking. For certain groups of people, such as refugees or those in countries lacking infrastructure for government credit or banking--anonymous exchanges can help connect them to the world's economy.





In the moment, most popular exchanges are not controlled by a central authority and oblige users to submit identification documents. In the United States, these exchanges include Coinbase, Kraken, Gemini, FTX, and Binance.US just to mention a few. The exchanges have seen a significant increase in the number of options they offer.





The crypto-currency market has grown rapidly over the last decade with a multitude of new tokens which are competing with dollars from investors. With the exception of Bitcoin as well as a few prominent coins like Ethereum Not all of these tokens can be found on all exchanges. Each exchange has its own set of criteria to decide whether to allow or exclude trading on specific tokens.





Coinbase, Kraken, and Gemini offer Bitcoin and a growing amount of altcoins. They're among ones of the easiest ways to get into crypto within the entire crypto industry. The Binance platform is targeted at an advanced traderand has greater trading capabilities and more altcoin options. FTX is a fast-growing digital exchange that has achieved millions of dollars in valuation, offers some limited altcoins for U.S. investors.4 However, traders outside in the U.S. have a greater choice of tokens on its platform.





The most important thing to consider when creating an account for cryptocurrency exchange is that you use secure Internet practices. cryptocurrency d&o insurance means two-factor authentication, as well as a long, unique password that includes a wide range of lowercase letters, capitalized letters in addition to special characters, as well as numbers.





El Salvador made Bitcoin legal tender on September 7, 2021. It was the only country to do so.5 The cryptocurrency can serve as a currency to pay for transactions in which businesses are able to accept it. The U.S. dollar continues to be El Salvador's principal currency.


Step 2: Attach your swap to your payment option


After you have chosen the exchange option, you'll need to gather your personal documents. In accordance with the exchange, you may need to include images of a driver's licence or Social Security card, as plus information on your employer and source of funds. Information you'll need may vary based on the state you reside in and the regulations that are in place within it. The process is similar to creating a typical brokerage account.





Once the exchange has confirmed your identity, you'll be required to connect an option for payment. On most exchanges you can connect to your bank account without a hassle or connect a credit or debit card. However, if you want to use a credit card to purchase cryptocurrency, it's not a wise choice because fluctuation in the price of cryptocurrency can raise the overall cost of purchasing coins.





Bitcoin remains legal across the United States, but some banks may not allow or suspend deposits on crypto-related websites or exchanges.6 It's best to do a little research to make sure that your bank allows deposits to the exchange you choose.





There is a variety of fees that apply to the deposit of money through a bank account such as debit or credit card. It is vital to look into the costs that come with each payment option to help select an exchange option or choose the option that is best for you.





Exchanges can also charge fees per transaction. The fees could be either a flat amount (if the amount traded is not large) or some percentage of the trading amount. Credit card transactions incur a processing fee in addition to the transaction fees.





Step 3: Make an order


Bitcoin can be purchased (or other cryptocurrency) by selecting an exchange , and then connecting a payment option. In recent times cryptocurrency exchanges slowly been gaining popularity. They have grown considerably in terms if liquidity and the range of features they offer. Changes in the operations at cryptocurrency exchanges are in line with the shift in the way people perceive cryptocurrencies. A sector that was previously thought of as a scam or one with unsound practices is slowly turning into legitimate, and has attracted attention from all of the major players in the financial services industry.





Nowadays, cryptocurrency exchanges' have developed to a point where they're nearly offering the same quantity of features available as their counterparts with stock brokerages. Crypto exchanges today offer an array of different order types and options to invest. Many crypto exchanges have limits and market orders. A few offer stop-loss options. Of the exchanges mentioned above, Kraken offers the most kinds of orders. Kraken supports market, limit, stoploss or stop-limit or take-profit limit orders.7





Apart from offering a variety of sorts of orders, exchanges provide the option of setting up ongoing investments, allowing investors to incorporate a dollar-cost average into their investments of choice. Coinbase for instance, allows users to make recurring purchases to be made every day, week or month.8





Step 4: Safe storage


Blockchains, cryptocurrency or Bitcoin can be the ideal way to store digital assets more securely. A crypto wallet that is separate from the exchange and inside the personal wallet of yours ensures only you control the private key to the funds. Additionally, it allows you to have the option to save your funds from an exchange , and reduce the possibility of your account being hacked and thereby losing your money.





While most exchanges offer clients with wallets, security is not their primary business. We generally do not recommend the use of an exchange wallet for larger or longer-term holdings in cryptocurrency.





Certain wallets come with more options than others. Some are Bitcoin only, while some provide the capability to store several types of altcoins. Certain wallets also have the ability to swap one token for another.





When it comes to choosing the right Bitcoin wallet, you have several options. The first thing you will require to know about cryptocurrency wallets is hot wallets (online wallets) and cold wallets (paper or hardware wallets).





Hot wallets


Digital wallets also referred to as hot wallets. Hot wallets are those that run on devices that are connected to the Internet, such as phones, computers or tablets. They can be vulnerable because these wallets store the private keys to your money on devices that have Internet connectivity. Although a hot wallet may be very convenient in the ways that you can gain access to and complete transactions using your assets swiftly, the fact that you store your private keys via an Internet-connected device could make it more susceptible to a attack.





This may seem a bit nebulous however, hot wallet owners who don't have sufficient security have the possibility of losing money to theft. This is a frequent occurrence, and it can occur in a variety of ways. For instance, boasting in a public forum, such as Reddit about the amount of bitcoins are in your wallet when you have little or no security , and storing it in a wallet that is hot would not be wise. It is true that these wallets may be secured as you take the proper precautions. Strong encryption, strong passwords and two factor authentication and secure Internet browsing are minimum necessities.





The best wallets for hot wallets are for smaller amounts of cryptocurrency or currency you are already trading on an exchange. You could think of a hot wallet to a checking account. Financial wisdom is generally believed to put only money you spend in a checking account while the bulk of your money is held in savings accounts or other investment accounts. Similar can be said for hot wallets. Hot wallets include mobile, desktop, web, and exchange accounts custody wallets.





As we have mentioned before, exchange wallets serve as custodial banks provided by exchange. The person who uses this wallet types is not actually the holder of the key private to the cryptocurrency stored in the wallet. If a situation were to occur wherein the exchange is compromised or your account is compromised, you'd have to forfeit your money. The phrase "not your key, not your coin" is often repeated within cryptocurrency forums and communities.





Cold wallets


The most simple way to describe a cold or cold-weather wallet is that it isn't in connection with the Internet and therefore is at greater risk of being susceptible to being compromised. These wallets could also be called offline wallets or even hardware wallets. These wallets are used to store a customer's private key in a device which is not connected to the internet. They also come with software working in parallel, so that the user is able to see their portfolio , without putting their private keys at risk.





Perhaps the most secure way to save cryptocurrency offline is by using a paper wallet. Paper wallets are wallet that can be created through certain websites. It can then generate both private and public keys which you print out on a piece of paper. Access to crypto currency in these wallets is only possible if you've got the piece paper with the private code. Many people laminate these paper wallets and store them in safe deposit boxes at banks or in a safe in their home. These wallets are for security and long-term investment because it is impossible to quickly sell or trade bitcoins stored in using this method.





A more popular kind of cold type of wallet is the hardware. A hardware wallet is typically an USB drive device that stores a user's private keys securely offline. These wallets offer significant advantages over hot wallets as they are immune to viruses that could infect one's computer. With hardware wallets, your private keys never come into contact with your computer's network or potentially vulnerable software. These devices are generally open source, which allows the community to determine the security of their devices through audits of code rather than a business stating that it is safe to use.





Cold wallets are the most safe method of keeping your bitcoin or other cryptos. But they require more technical understanding to setup.





An ideal way to set your wallets is to set up three items the exchange account you use to purchase and sell items in hot wallets, a hot account to hold small to moderate amounts of cryptocurrency which you'd like to trade sell and a cold hard-copy wallet to hold larger amounts with a longer time-frame.





How to Buy Bitcoin With PayPal


You can also buy bitcoin through payment processor PayPal Holdings, Inc. (PYPL). There are two methods to buy bitcoin through PayPal. The first and most convenient method is buying cryptocurrencies by using your PayPal account that is connected to a payment mechanism, such as a credit card, bank account or debit card. The other option is to use the balance of you PayPal account to purchase cryptocurrency from a third-party provider. This option is not quite as user-friendly as the previous since very few of the third-party sites allow customers to purchase bitcoin by using it's 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 or services by using"Checkout With Crypto" "Checkout With Crypto" feature.10





To set up a crypto account with PayPal The following information is required including name, physical address the date of birth in addition to a tax-identification number.11





It is not possible to make use of a credit card to purchase Bitcoin via PayPal. When you purchase, PayPal will display a price for the cryptocurrency. But , the price can be subject change rapidly due to the fluctuation of markets for cryptocurrency. It's a good idea to ensure you have more than the price you set for the purchase in your savings account.





When you buy bitcoin directly via PayPal it earns you money through the crypto spread or the gap between the price at which Bitcoin is traded as well as its rate of exchange with USD. The company additionally charges you a transaction cost for every purchase. The amount charged is contingent upon the cost of the purchase. For instance it is possible to pay a flat amount of $0.50 is due for purchases ranging from $100 to $200. After that, fees are proportional to the total dollar amount. trading youtube is a charge of 2% of the entire amount is applicable for purchases that range from $100 to $200.12





One disadvantage of purchasing cryptocurrencies via PayPal is that you are not able to transfer the cryptocurrency out of the PayPal's payment processing system. Therefore, it is not possible for you to transfer the bitcoin you purchased from PayPal's wallet to an external crypto wallet or your personal wallet.11





The second disadvantage of using PayPal is that only a few merchants and exchanges allow that use of the processing company for payments. eToro is among the few online traders that allow for the usage of PayPal to purchase bitcoin on its platform.13





How to Buy Bitcoin With a Credit Card


The procedure for buying bitcoin with credit cards follows the same procedure to buy it using debit or credit cards. You can also purchase it through automatized clearing house (ACH) funds transfers. The buyer must enter your credit card's details with the online trading or exchange company, and then you can authorize the purchase. In general, however, it's not a smart decision to buy bitcoin using credit cards. There are several reasons.





First of all, most exchanges will not allow Bitcoin transactions using credit cards due to associated processing fees and the chance of being a victim of fraud. This could work in the best interests of the customers. This is because credit card processing can add additional charges on transactions. So, in addition to paying transaction fees the customer will be charged with processing fees that an exchange might pass on to you.





Another reason is that credit card purchases are costly. Issuers of credit cards view bitcoin transactions as cash advances, and have to charge high-cost fees and rates on these advances. For instance, American Express and Chase both count purchases made with cryptocurrencies as cash advance transactions. Therefore, if, for example, you purchase $100 worth of bitcoin on an American Express card, you have to pay the amount of $10 (current cash advance cost for these transactions) and an annual rate of 25 percent. In addition, the credit card's company also limits you to $1,000 worth of bitcoin transactions per month.14





An indirect method of purchasing bitcoin with a credit or debit card is to acquire the Bitcoin rewards credit card. These cards function similar to your typical rewards credit , but they offer rewards in the shape of bitcoin. Therefore, they invest earnings from purchase into Bitcoin. One example of an Bitcoin cards that reward you is called BlockFi Bitcoin Rewards Credit Card.15 Beware, however, that the annual fee for these cards might be high as well as the costs associated with the transformation of fiat currency into crypto.





Though exchanges like Coinbase or Binance remain among the most used methods to purchase Bitcoin however they are not the only options.


Alternative Ways to Buy Bitcoin


Bitcoin ATMs


Bitcoin ATMs act like in-person bitcoin exchanges. Customers can simply insert money into the machine which can then be used to buy bitcoin that is then transferred to online wallets for users. Bitcoin ATMs have become increasingly commonplace in recent years. Retail company Walmart Inc. (WMT) is testing a trial program that provides customers with the option to purchase bitcoin. Coin ATM Radar can help in locating the nearest ATMs.





However ATMs are expensive alternative. There are two fees that are associated with ATM bitcoin transactions they charge a cost for the purchase as well as an additional fee for conversion of one currency that is fiat to bitcoin. Both are quite high in comparison to other options. In the case of Bitcoin, for instance, the average fee for transactions from Bitcoin ATMs starts at 8.4 percent (of the amount of purchase) and 5.4 percent for sales at ATMs.16





Be aware, however, that Bitcoin ATMs are now requiring Government-issued IDs starting in 2020.


Exchanges between P2P


Contrary to decentralized exchanges, which are able to match sellers and buyers anonymously while facilitating all aspects the trade, there's peer-to-peer (P2P) exchange services that provide a more direct connection between customers. LocalBitcoins is one of these exchange. After signing up, users can make requests to purchase or sell bitcoin. It also includes information on payment methods as well as costs. After that, they can browse through the lists of offers to buy and sell selecting the trading partners with whom they wish to transact.





LocalBitcoins aids in some aspects of the trading. Although P2P exchanges do not offer the same level of privacy as decentralized exchanges however they do provide users an opportunity to shop around for the best deal. Many of these exchanges also provide rating systems so users can review potential partners for trade prior to doing business with them.





Mainstream brokerages


The majority of brokerages do not offer the capability to trade and buy bitcoin because of the uncertainty around how cryptocurrencies are regulated. Robinhood Markets, Inc. (HOOD) is an app highly regarded by investors at retail, is an exchange which offers the ability to trade in crypto. It charges 0% commission for cryptocurrency trades and purchases , and earns money from money received for order flow and transferring its trading volume to any other platform for trading, as well as brokerages.17





The absence of a commission charge might be an appealing option for those just starting out, but there are a couple of problems with this offering. Primarily, Robinhood can't offer the full range of features and the coins offered by some of the top crypto exchanges like Coinbase. Robinhood had enabled trading on its platform for seven cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic.18 Contrary to Coinbase, you can trade over 100 cryptocurrencies on Coinbase.19 It also has various types of orders that help minimize the risk of losing money during trading.





The Robinhood platform does not offer a hosted wallet. So, if you wish to buy cryptocurrency on Robinhood and you want to purchase cryptocurrencies, you'll need take into account additional charges for an online wallet provider.





Bitcoin and other cryptocurrency investments do not come secured by insurance provided by an insurance company like Securities Investor Protection Corporation (SIPC). In regular brokerages the organization protects against the loss of securities and cash in brokerage accounts with a maximum of $500,000, which includes a $250,000 cash limit.20 This insurance option isn't accessible to clients from cryptocurrency exchanges. Cryptocurrency exchanges like Coinbase have crime insurance to safeguard their infrastructure from hacks. But that insurance does not cover individual customers from password theft.21


How to Sell Bitcoin


Bitcoin is sold on those same places that you bought the cryptocurrency like cryptocurrency exchanges or P2P platforms. In most cases, the process for selling bitcoin on these platforms is similar to the method of buying it.





In this case, for instance, you could only be required to click the button and choose an order type (i.e., whether the cryptocurrency should be offered immediately with the highest price available or if it is to be sold to prevent losses) for the sale. Depending on the market composition and the demand at the location the pricing for Bitcoin can differ. The example is that exchanges in South Korea traded bitcoin at the kimchi price during the rise in bitcoin prices in the year 2018.





Currency exchanges that trade in crypto charge a proportion of the amount sold in fees. For instance, Coinbase charges 2.49% of the transaction total as fees.22





Exchanges typically have monthly and daily withdrawal limitations. This means that the money earned from a large sale may not be accessible immediately to the trader. There is no limit on the amount of crypto you can sell, however.





What Are the Steps for Purchasing Bitcoin?


The process of purchasing bitcoin is made up comprising four steps: selecting a venue or exchange to place your order, selecting a payment method and then making sure you have a safe place to store for your purchased cryptocurrency. According to the location chosen in the very first step, there are more steps involved in this process. If, for instance, you purchase the cryptocurrency using Robinhood you could need to factor in additional costs for an online wallet or custody of your bitcoin because it does not offer these services.





What Are the Most Popular Venues for Buying Bitcoin?


The most widely used venues to purchase bitcoins are exchanges, brokerages (crypto in addition to mainstream) and payment service such as PayPal. You can also buy Bitcoin via P2P exchanges. For the indirect ownership of bitcoin you may invest in businesses that 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?


In general, the cost of buying bitcoin is comprised of fees per trade, plus the cost for converting a fiat currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment service providers make money from this conversion spread.) The fee per trade is dependent on how much money is involved in the trade. A larger trade volume will carry higher fees. The overall purchase cost also depends on features offered by the venue. For instance, Robinhood does not currently provide an online wallet for depositing bitcoin. Therefore, you will need to budget for costs for online wallets for your purchase.





Besides Cryptocurrency Exchanges, Where Else Can I Buy Bitcoin?


You can also buy bitcoin at these locations:


* Through Bitcoin ATMs


Payments can be made online using payment service providers such as PayPal


* At mainstream brokerages like Robinhood





Is My Bitcoin Purchase Protected by SIPC?


No, your bitcoin transaction is not covered by SIPC.20 For certain exchanges such as Coinbase account balances with fiat currencies in individual accounts may be FDIC-insured at $250,000 per account.21





The Bottom Line


The process of buying bitcoin can be a little more difficult than the process to buy common equity or stock. This is mainly because the blockchain and cryptocurrency infrastructure are not as well developed than the conventional trading.





The process for buying bitcoins consists of four phases: selecting the appropriate service or place for payment, connecting to the payment method of your choice, placing an order and ensuring secure storage for the purchased cryptocurrency. Each of these steps requires thorough research and an study of the pros & pros of each option. Bitcoin can be purchased through Bitcoin ATMs or via payment service providers like PayPal and major brokerages such as Robinhood.












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