How to Buy Bitcoin: Best Practices, Where to Buy, Tips

65 / 100

BITCOIN BUYING GUIDE: BEST PRACTICES, WHERE TO BUY, AND TIPS

Before Investing in Bitcoin:

First and foremost, you will want a storage facility before purchasing Bitcoin. In the realm of cryptocurrencies, such a location is known as a ‘wallet,’ and it may take many different forms. Varied types of wallets offer different levels of protection, storage, and access to Bitcoin owners.

It’s worth noting, though, that your wallet doesn’t actually keep your Bitcoins. Instead, it has private keys, which are required to access a Bitcoin address and spend the cash. These digital keys are needed to sign a transaction, and if they are lost, the user loses access to their Bitcoins.

Desktop, mobile, internet, hardware, and paper are the top five forms of BTC wallets.

If you decide to purchase Bitcoins on an exchange, you should transfer your funds to your own wallet and ensure that it is safe and secure. Consider this quick guide about cryptocurrency investing, how to buy, sell, store, and monitor cryptocurrencies, as well as tax regulations in the space.

Types of Bitcoin Wallets

1. Desktop

On the user’s PC, a desktop wallet is installed, giving them total control over their cash and the budget’s relative safety. There are powerful desktop wallets that enable users to download network blocks and verify their validity, as well as maintain their funds’ security independently. Thin wallets, on the other hand, do not demand users to download blocks and may be simply transferred to a mobile device.

2. Mobile

A mobile wallet’s key benefit is that the user’s money is always available. Scanning QR codes to pay for things is a pretty easy way to do so. Users may sometimes utilize their smartphone’s near-field communication function to just touch their phone against a scanner without having to enter any information. All mobile wallets have one thing in common: they aren’t complete bitcoin clients. This is due to the fact that a full Bitcoin client must download the whole Blockchain, which is continually expanding and takes up many gigabytes of storage space.

3. Online

Users’ private keys are stored online, on a server owned by someone else, and linked to the Internet if they use a web-based wallet. While they make it possible for consumers to access their cash from any device, anywhere in the world, there’s still the chance that the server will be hacked or that the company offering the service will seize possession of your Bitcoins. However, by applying a range of security measures, this danger may be considerably decreased.

4. Hardware

Hardware wallets are specialized portable devices that store private keys and aid in payment processing. Hardware wallets come in a variety of shapes and sizes, but they all allow users to carry almost any amount of money in their pockets.

5. Paper

A paper wallet is just two QR codes issued by a recognized provider, and it’s one of the safest ways to store Bitcoin. One of these is a public key, which is an address for receiving BTC. The other one is a private key, which may be used to spend Bitcoins held at that address.

Learn more about wallets: BITCOIN WALLETS: ALL YOU NEED TO KNOW

Where Can You Buy Bitcoin?

Purchasing Bitcoins is not as simple as one may think. The number of alternatives, on the other hand, is always growing. Everyone may find a bitcoin buying option that meets their needs, and some of them don’t even require an internet connection or a Bitcoin wallet.

1. ATMs

Buying Bitcoins via an ATM is the most discreet way to do it.

Despite the fact that Bitcoin ATMs are still a relatively new idea, they are popping up in cities all over the world, and their number is steadily increasing. The machines take a 3% to 8% fee on the standard exchange rate, but they give consumers the most secure Bitcoin purchase experience possible.

Simply deposit cash into the ATM and scan the QR code with your mobile wallet, or obtain a printed receipt with the codes and instructions for transferring the funds to your wallet. As Bitcoin becomes more popular, such ATMs may be one of the most prevalent methods to purchase bitcoin.

Bitcoin ATMs are uncertain to appear in nations where Bitcoin is illegal or outlawed. Using a mapping application like CoinATMRadar, you can discover the closest Bitcoin ATM to you.

2. Gift Certificates

Bitcoin gift cards can help you save a significant amount of money.

Because Bitcoins are anonymous and can often be cheaper than cash, they are frequently used to purchase gift cards. Gift cards, on the other hand, maybe exchanged for Bitcoin. Simply purchase any gift card from a merchant, then log in through one of the Bitcoin exchanges where gift cards are accepted (e.g. Paxful, LocalBitcoins, etc.) and finish the transaction.

Depending on the vendor, they may require a physical photograph of the gift code on the back of the card as well as a receipt from the business where it was purchased, while some may accept only an online or electronic code. The quantity of BTC you desire to acquire will be immediately kept on the website after you make a deal, ensuring that you may safely supply the seller with your gift card details.

Buying Bitcoins this way may save you a lot of money because there are a number of online stores selling gift cards for up to 60% off their face value. Given how BTC’s value swings, gift cards are indeed a good option to keep it. Nevertheless, as with any other method of purchasing Bitcoin, you must always be aware of scammers attempting to defraud you, so always trade with reputable vendors.

3. Exchanges

Personal information will be required by the majority of bitcoin exchanges.

Every new Bitcoin buyer will be confronted with a plethora of exchanges vying for their business. Choosing the correct one is influenced by a variety of elements, the most essential of which is location. A government-regulated exchange must comply with ‘know your customer’ and anti-money laundering regulations. As a result, you must go through extensive bureaucratic procedures to open an account and begin trading on any current exchange. Most exchanges, for example, demand you to link an existing bank account before you could even begin trading, which often entails disclosing comprehensive personally-identifying information, removing Bitcoin purchasers’ privacy.

Exchanges, on the other hand, provide an unequaled range of trading choices. You will discover an exchange to meet your needs, whether you are searching for a full platform for institutional traders or a simplified option for a one-time deal. Furthermore, most platforms are accessible from both desktop and mobile devices, enabling users to trade from any location. Payment choices, security levels, buying limits, fees, and verification criteria all differ between exchanges.

4. Bitcoin trading platforms

The exchanges are categorized according to their market capitalization in cryptocurrency.

Name Payment Method Security Verification Levels Commission
Bitfinex Bank transfer, Ethereum, Dash Monero, Zcash Email Encryption, 2-Step Verification, Universal Second Factor, Withdrawal Security, Advanced Key Permission API Not necessary to make a cryptocurrency deposit, USD or EUR deposits demand ID verification 0% – 0.1%
BitFlyer Bank transfer, credit card, Bitcoin Transaction verification by real humans, cold storage Account creation using just one email id, plus features that require further verification  0.01% -0.15%
BitStamp Bank transfer, credit card,

SEPA transfer, SWIFT transfers

The Financial Sector Surveillance Commission regulates the exchange and requires two-step authentication. Verification of your identity (ID scan, proof of residence) 0.1% -0.25%
BTCC wire transfer Cold storage, SSL encrypted traffic, real-time internal controls Verification of your identity (ID scan) 0.1% -0.2%
Coinbase Bank transfer, link your bank account directly to Coinbase, credit card, Paypal Vault feature (share an account with 2 or more users, each transaction requires approval from all users), FDIC insurance is available to US residents. Cold storage To increase limits, identity verification (ID scans) and credit card verification are required. 1.49% -3.99%
GDAX Bank transfer, Credit card Cold Storage, 2-Step Authentication, and Encrypted Email Service Verification of your identity (ID scans) 0.01% -0.25%
Gemini Bitcoin, Ethereum, wire transfer, and ACH 2-Step Authentication, FDIC Insurance for US Residents, and Cold Storage Verification of your identity (ID scans) 0.25%
itBit Wire transfer 2-Step Authentication, FDIC Insurance for US Residents, and Cold Storage Verification of your identity (ID scans, proof of residence) None
Kraken Bank transfer, Altcoins Encrypted Email Service, 2-Step Verification, Master Key for Account Recovery, Global Settings Lock Full Name, Date of Birth, Country, Phone Number, and Address Verification 0.16% – 0.26%

Apart from trading, most exchanges provide Bitcoin wallet services; nevertheless, this is likely the least secure method of storing your cash. Despite the fact that they are registered financial institutions, Bitcoin exchanges do not provide the same level of security as traditional banks. Hacker assaults are common, and exchanges might go insolvent, withholding customer payments. As a result, while Bitcoin exchanges are the ideal alternative for frequent cryptocurrency trading, the bureaucracy, possible hazards, and lack of anonymity connected with them make it inappropriate for some traders.

5. P2P

You may keep your transactions anonymous by using a peer-to-peer cryptocurrency exchange. If you want to keep your Bitcoin transactions private, avoid dealing with banking issues, and reside in a city, a face-to-face transaction with a local seller would be the most convenient way to acquire Bitcoins. LocalBitcoins is by far the most popular platform for facilitating such transactions among various websites and forums, and it also offers an escrow facility to further secure both parties and their cash.

When Bitcoin was first introduced, such transactions were frequently conducted at the sellers’ residences. People are becoming more aware of fraudsters and taking security precautions as BTC grows more popular. The majority of these transactions now take place in public settings, and both parties must take all of the usual precautions when transferring and exchanging significant sums of money. Additionally, the buyer must access their wallet to validate the purchase, thus having a smartphone or laptop on hand, as well as active internet connectivity, is a must.

Those who prefer not to meet one-on-one may always attend a local Bitcoin event, where they can acquire the cryptocurrency in a social environment while also expanding their understanding of BTC. Meetup.com and other such websites have information about these events.

Of course, you don’t have to deal with a vendor face to face to complete a transaction. Some merchants may bargain via the Internet, and you must exercise extreme caution since you risk losing your money. Although there are payment methods such as PayPal that guarantee receipt of goods, the majority of sellers nowadays prefer non-reversible cash owing to the price of Bitcoin’s continual fluctuation.

In addition to the initial price of the exchange, you may be required to pay a fee of 5 to 10 percent for privacy and convenience, depending on the seller. Some sellers will agree on a price before the meeting, as some will only sell Bitcoins at the precise BTC rate agreed upon during the transaction. This must be done in the event that the worth of Bitcoin plummets dramatically.

6. A trusted Investment

You may use Bitcoin Investment Trust to operate with cryptocurrencies without having to acquire or store it. An investment trust is a type of collective investment in which money is generated from investors via the selling of a certain number of shares that the trust issues when it first starts up. With Bitcoin at the heart of the financial world, it was only a matter of time until a BTC-focused investment trust emerged.

The first publicly listed Bitcoin-related investment vehicle, the Bitcoin Investment Trust (BIT), allows consumers to obtain exposure to the cryptocurrency without having to purchase or keep it directly. In BIT, you invest just in Bitcoin and derive the value of your investment solely from the price of BTC. The trust’s current market value is $ 1.8 billion, representing a 1,600 percent increase in two years. Despite the positive results, other investors believe it was nothing but a bubble about to burst.

The fact that Bitcoin Investment Trust is among the first its type contributes significantly to its exorbitant price. There have been rumors that more funds with a similar structure may enter the market, but BIT remains the sole major competitor. However, as the cryptocurrency sector matures, comparable funds will certainly enter the market, reducing pressure on BIT while also cementing Bitcoin’s role as an internationally recognized currency.

Buying Bitcoin: Difficulties

1. Credit Card or PayPal

It may surprise you, but buying Bitcoins using a credit card or PayPal, depending on where you are, is still difficult. Instead of using such payment methods, exchanges demand users link their bank accounts. The majority of private vendors are leery of such transactions and prefer to deal in cash.

This is as a result of so-called “refunds.” The majority of credit card and PayPal transactions may be readily canceled by phoning the card issuer. Because Bitcoin transactions are irrevocable and it might be difficult to show that any merchandise was transferred in a Bitcoin transaction, this payment method is often avoided.

Precautions When Purchasing Bitcoin

1. Legality problems in your country

Law enforcement agencies, tax authorities, and legal regulators are all interested in Bitcoin. They’re attempting to figure out how bitcoin fits into established systems. Your Bitcoin activities are legal or illegal depending on who you are, where you reside, and what you do with it. In most nations, the answer is simple: you are not breaching any laws if you do not use your Bitcoins on anything unlawful.

Because Bitcoin has been there for a long time, most countries have had ample opportunity to consider its legality. BTC is only outlawed in Vietnam, Iceland, Bolivia, Ecuador, Kyrgyzstan, and Bangladesh as of September 2017. Other nations have remained silent on the matter, while Thailand and Russia first outlawed all digital currencies but then reversed their positions. To counteract unlawful transactions, Russian authorities have recently discussed legally recognizing Bitcoin and other digital currencies ( Vedomosti ).

2. Protection risks

It’s important to note that, despite the fact that almost all exchanges and wallets require users to show evidence of identification, they don’t offer the same level of security as banks. For example, in the event that the exchange goes bankrupt or is hacked, the exchange’s insurance for user cash is frequently very minimal or non-existent. This was the situation with Mt Gox, the iconic failing Chinese exchange that filed for bankruptcy protection and admitted to losing 750,000 Bitcoins to its customers. Because Bitcoins are not recognized as legal tender in most parts of the globe, authorities are confused about how to deal with thefts.

Furthermore, if a cryptocurrency theft occurs as a result of a security or password breach on the user’s end, there is no assurance that the assets will be recovered. Due to regulatory uncertainties, some institutions are refusing to work with funds gained through digital currency transactions.

Buying Bitcoins: Helpful tips

It’s critical to consider your private key (akin to an ATM PIN) as a protected secret when trading Bitcoins and to use it only to approve BTC transactions. Because the private key is held in your wallet, it’s a good idea to keep it safe. You may, for example, encrypt your wallet with a strong password, back it up, or use cold storage, which essentially means keeping it offline.

For storing your keys, some exchanges even include multiple vault options. With a public key, many persons can control a portion of an address using multiple signature addresses. So, if someone wants to spend part of the Bitcoins held at that address, they’ll need a few of these users to sign their transactions alongside them. When the parties engaged in constructing the address decide on the number of signatures needed, they usually agree on a number.

Finally, while most exchanges provide wallet functionality to their consumers, it is critical to realize that this is not their primary business. Furthermore, there is a long history of cryptocurrency exchanges collapsing and disappearing with their consumers’ cash. As a result, if you decide to purchase Bitcoins on an exchange, you should transfer your funds to your own wallet and ensure that it is safe and secure.

close
Subscribe

Don’t Miss the Latest News!