How to Buy Bitcoin
Investing in Bitcoin (BTCUSD) may appear difficult, but trading Bitcoin simply needs a service or exchange account, and secure storage methods are advised.
Investors in bitcoin require a cryptocurrency exchange account, personal identity papers, a secure Internet connection, a payment method, and a personal wallet separate from the exchange account (if you’re utilizing a Know Your Client (KYC) platform).
Bank accounts, debit cards, and credit cards are all acceptable forms of payment for bitcoin. Bitcoin may also be obtained via specialist ATMs and through peer-to-peer exchanges.
How to Buy Bitcoin
KEY TAKEAWAYS
- The value of bitcoin comes from its use as a store of wealth, payment mechanism, and limited quantity.
- The wallet or exchange account used to store bitcoins might be hacked, thus it’s crucial to follow safe storage and security procedures.
- Through platforms like Coinbase, PayPal, and Robinhood, one may buy bitcoin.
Before You Buy Bitcoin
Investors who have the private key to a public address on the Bitcoin blockchain can approve transactions, which raises serious privacy and security concerns. Investors must be aware that the balance of a public address is accessible, and private keys should be kept hidden.
People can generate many public addresses and split their Bitcoin holdings among them. Keeping sizeable investments at public addresses that are not directly related to those used in transactions is a smart move.
On the blockchain, transaction histories are accessible, but user identification data is not. Transactions on the Bitcoin blockchain are private but not anonymous since only the user’s public key is shown next to them.
Less Than 1 Bitcoin
Less than one bitcoin can be purchased by investors. Investors are equally vulnerable to the ups and downs whether a wallet contains one bitcoin, fifteen bitcoins, or even one-hundredth of a bitcoin. A $2.00 minimum investment is needed at Coinbase.
Because Bitcoin transactions are visible to everyone and the persons involved are very difficult to identify on the blockchain of the cryptocurrency, they are more traceable than cash transactions. The FBI and academics, however, assert that they can follow transactions performed on the Bitcoin blockchain to individuals’ other online accounts, including their digital wallets.
When an investor registers for a Coinbase account, they are required to submit identification, and even if they transmit that identification to another wallet, it may still be linked to the account holder’s identity through a Coinbase purchase.
WARNING: When an investor registers for a Coinbase account, they are required to submit identification, and even if they transmit that identification to another wallet, it may still be linked to the account holder’s identity through a Coinbase purchase.
Bitcoin Price up to March 14, 2022
In USD
Bitcoin Returns
How to Buy Bitcoin
Step 1: Choose a Crypto Trading Service or Venue
Exchanges are a practical choice since they provide a variety of services and additional cryptocurrencies for trading, allowing users to withdraw bitcoin to their online wallet for storage and allowing investors to purchase, trade, and store cryptocurrencies.
TIP:Use two-factor encryption and decryption and a lengthy, complex password that encompasses a mix of lowercase, capital, special, and numeric characters when opening a bitcoin exchange account.
Exchanges for cryptocurrencies come in a variety of forms. Some decentralized exchanges do not require users to input personal information and let users to remain anonymous. A select group of people, such refugees or individuals who reside in nations with scant or no infrastructure for government banking or credit, can be helped by anonymous transactions to integrate into the mainstream economy.
Popular American exchanges adhere to rules that demand users to produce identification documents and are not decentralized. These exchanges, which provide access to Bitcoin and an increasing variety of other cryptocurrencies, include Coinbase, Kraken, Gemini, FTX, and Binance.
By providing more serious trading features and a wider selection of cryptocurrency options, Binance appeals to more experienced traders. FTX, a rapidly expanding cryptocurrency exchange with a multibillion dollar value, only provides a small selection of altcoins to American investors.
Step 2: Connect Your Exchange to a Payment Option
Personal identity documents, which may include images of your driver’s license or Social Security card as well as details about your employment and financial sources, may be required depending on the transaction. Similar steps are taken to open a conventional brokerage account during this procedure.
You may instantly connect your bank account or a debit or credit card at the majority of exchangers. Although you may use a credit card to buy cryptocurrencies, the volatility of the cryptocurrency market’s price mixed with the interest charged by a credit card might increase the overall cost of buying a coin. Although it is legal to use bitcoin in the US, certain banks may still refuse to process deposits to websites or exchanges that deal in cryptocurrencies.
Exchanges also tack on transaction fees for deposits made with debit, credit, or bank accounts.
Step 3: Place an Order
Exchanges for cryptocurrencies have developed to mirror the same degree of functionality as those seen in stock brokerages. Cryptocurrency exchanges provide a variety of order types and investment options. Most cryptocurrency exchanges allow users to place market and limit orders, and some even let them place stop-loss orders.
The majority of order types, including market, limit, stop-limit, take-profit, and take-profit limit orders, are offered by Kraken.
Exchanges also offer ways to set up recurring investments, allowing clients to dollar-cost average into their investments of choice. Coinbase, for example, lets users set recurring purchases for every day, week, or month.
Step 4: Safe Storage
Wallets for cryptocurrencies like bitcoin allow you to keep digital assets more safely. Investors retain ownership of the private key to their money when they store cryptocurrency outside of an exchange and in a personal wallet. Although an exchange wallet is provided, it is not advised for significant or long-term bitcoin holdings.
Hot Wallets vs. Cold Wallets
Hot Wallets
Wallets on computers, phones, or tablets are referred to as online wallets or hot wallets. On these internet-connected devices, these wallets produce the private keys for your currencies.
The private key of the coin stored in this wallet type does not belong to the user. Custodial accounts are offered by the exchange as exchange wallets. Investor money is at risk if the exchange is breached. Within bitcoin forums and groups, the adage “not your key, not your coin” is frequently used.
Holders of hot wallets who haven’t put proper security in place face the danger of having money taken from them. The minimal needs should include two-factor authentication, secure Internet surfing, and strong passwords.
The finest hot wallets are used as a bank account for tiny sums of bitcoin or for cryptocurrency that is actively traded on an exchange.
Cold Wallets
Since a cold wallet is not linked to the Internet, it is less vulnerable to hacking. These offline wallets, also known as hardware wallets, save a user’s private key on a device that is not connected to the internet and include software that enables investors to examine their portfolio without endangering their private key.
An online wallet that prints both the public and private keys on paper is known as a “paper wallet.” Many individuals laminate these paper wallets and keep them in a safe at home or in a safe deposit box at their bank.
A hardware wallet is often a USB drive device that securely and off-line holds a user’s private keys. As opposed to hot wallets, these wallets are immune to computer infections, giving them a benefit. Private keys never come into touch with a network-connected device or possibly susceptible software while using hardware wallets.
The safest approach to keep your bitcoin or other cryptocurrencies is in a cold wallet. But to put them up, you need more technical know-how.
How to Buy Bitcoin With PayPal
Additionally, you may purchase bitcoin through a payment processor such as PayPal Holdings, Inc. (PYPL). There are two methods to buy bitcoin: either by using your PayPal balance to buy cryptocurrency from a third party source or by linking your PayPal account to a debit card or bank account.
PayPal allows for the direct purchase of four cryptocurrencies: Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Bitcoin. Residents of all states can either utilize their current PayPal accounts or create new ones, with the exception of those who reside in Hawaii. Through the “Checkout With Crypto” function, you may also make purchases of goods and services using your cryptocurrency.
PayPal makes money when you purchase bitcoin straight from them because of the cryptocurrency spread, which is the difference between the market price of bitcoin and the exchange rate in US dollars. Additionally, the business levies a transaction fee on each purchase. The amount of the purchase determines these costs. 11
The inability of an investor to move cryptocurrency outside of PayPal’s platform to an external cryptocurrency wallet or personal wallet, along with the fact that few exchanges and online dealers accept PayPal as payment, are drawbacks of buying cryptocurrencies using PayPal. One of the few online brokers that accepts PayPal for bitcoin purchases on its platform is eToro.
How to Buy Bitcoin With a Credit Card
Similar to using debit cards or ACH transfers, using credit cards to purchase bitcoin is convenient. However, due to related processing costs and the possibility of fraud, not all exchanges permit the purchase of bitcoin using credit cards.
Such purchases may incur extra fees due to credit card processing, which the exchange may pass along to the buyer in addition to transaction fees. Bitcoin purchases are treated as cash advances by credit card companies, who slap steep fees and interest rates on them.
Users of American Express will be charged a 25% annual percentage fee in addition to the current cash advance cost for such transactions. The credit card provider also places a $1,000 monthly purchase cap on bitcoin transactions.
Credit cards that give rewards in the form of bitcoin, like the BlockFi Bitcoin Rewards Credit Card, operate similarly to regular rewards cards.
Alternative Ways to Buy Bitcoin
Bitcoin ATMs
Bitcoin ATMs function similarly to physical bitcoin exchanges. People may put cash into a machine and use it to buy bitcoin, which is subsequently sent to customers’ online wallets. In recent years, bitcoin ATMs have grown in popularity and are now accessible at Walmart Inc., a major retailer.
A purchase fee and a conversion fee for changing a fiat money to bitcoin are both related with ATM purchases of bitcoin. Both costs are rather high when compared to those of alternative solutions. The average cost charged at Bitcoin ATMs throughout the world is 8.4% of the buying price and 5.4% of the amount sold.
P2P Exchanges
A more direct link between users is made possible by some peer-to-peer (P2P) exchange systems. An illustration of such an exchange is LocalBitcoins. Users may submit requests to purchase or sell bitcoin, along with details on prices and payment options, after registering an account.
Although P2P exchanges may not provide the same level of anonymity as decentralized exchanges, they do provide users the chance to compare prices. In order to provide consumers a method to assess possible trading partners before engaging in a transaction, several of these exchanges also offer rating systems.
Mainstream Brokerages
The exchange Robinhood Markets, Inc. (HOOD) is one that provides cryptocurrency trading capabilities. By sending its trading volume onto other trading platforms or brokerages, it earns money from the payment for order flow while charging no commission on cryptocurrency trades and purchases. Seven cryptocurrencies, including Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin, and Ethereum Classic, may now be traded on Robinhood’s platform.
On the other hand, Coinbase allows you to trade over 100 different cryptocurrencies, and as of 2022, conventional brokers like Fidelity Investments aim to provide bitcoin trading for 401(k) accounts.
WARNING : The Securities Investor Protection Corporation’s insurance does not provide protection for investments in bitcoin and other cryptocurrencies (SIPC). In standard brokerage accounts with a maximum balance of $500,000 and a cash limit of $250,000, the agency provides protection against the loss of securities and cash. 20 Customers of bitcoin exchanges cannot use that function. The infrastructure of cryptocurrency exchanges like Coinbase is protected against hackers by crime insurance. However, such insurance does not offer password theft protection for specific clients.
How to Sell Bitcoin
The same places where you bought bitcoin, such P2P networks and cryptocurrency exchanges, are also where you may sell it. On these sites, selling bitcoin usually follows a similar procedure to buying it.
Exchanges for cryptocurrencies take a cut of the sale price as commission. For instance, Coinbase levies fees equal to 2.49% of the whole transaction value.
The majority of exchanges have daily and monthly withdrawal limits. As a result, the trader might not have access to the money from a sizable transaction right once. There are no restrictions on how much bitcoin you may sell, though.
What Are the Steps for Purchasing Bitcoin?
Four phases make up the buying procedure for bitcoin: picking a location or exchange to place your order, choosing a payment method, and making sure your cryptocurrency is stored safely. An online wallet could come at an added expense.
What Are the Most Popular Venues for Buying Bitcoin?
The best places to acquire bitcoins are at brokerages, cryptocurrency exchanges, and payment processors like PayPal. Investors can opt to invest in businesses like Tesla, Inc. (TSLA) or MicroStrategy Incorporated that have bitcoin listed as a holding on their balance sheets for indirect ownership of bitcoin.
How Much Should I Expect to Pay to Purchase Bitcoin?
A charge per trade and the cost of converting a fiat money to bitcoin often make up the price of buying bitcoin. The charge per transaction depends on the trade’s dollar value. Higher fees will apply to larger trading amounts.
Bitcoin FAQs
How Much Should I Expect to Pay to Purchase Bitcoin?
The cost of buying bitcoin typically consists of a trading commission plus the cost of converting a fiat money to bitcoin. The amount of the trade determines the charge per trade. Greater fees are associated with higher trading amounts.
Is My Bitcoin Purchase Protected by SIPC?
No, SIPC does not provide protection for your bitcoin purchase. Fiat holdings in individual accounts at some exchanges, including Coinbase, may be FDIC-insured up to $250,000 per account.