How to Buy Bitcoin?
Buying bitcoin may seem like a complicated and challenging thing to do, but when you break down this process into more straightforward and more manageable steps, this whole procedure won’t be complex anymore. With the increase in the popularity of Bitcoin exchanges and wallets, the purchase of Bitcoin is becoming easier.
Important Things to Remember
Before buying or investing in Bitcoin, every person should have the following things:
- Cryptocurrency Exchange Account
- Proof of Identification
- Secure Internet Connection
- Payment Method
You should have your wallet outside of the cryptocurrency exchange. You can choose bank accounts, debit cards, and credit cards as your payment method. There are also specialized ATMs and P2P exchanges which you can use to buy Bitcoin. However, these bitcoin exchanges require government ids to become legitimate.
Privacy and security are the major concerns for every bitcoin investor. Although Bitcoin is not physical, there are still high chances that hackers and scammers can steal Bitcoin. If anyone has access to your private key, he/she can easily do transactions of your Bitcoin. To make Bitcoin more transparent and easier to track, it is recommended that your transactions should be confidential. In this way, you can make it secure. However, you also have the option to do transactions anonymously. There are several claims that if you have registered an account on a bitcoin exchange, your transactions can be tracked even though you use a different wallet. This not a matter of concern as Bitcoin is legal in the US and other developed countries.
Let’s breakdown the process of buying Bitcoin into steps:
Step1: Select an Exchange
Having a cryptocurrency exchange account will allow you to buy, sell, and hold Bitcoin. Choosing an exchange that will allow you to withdraw money in your other personalized wallets is a better approach. There are many cryptocurrency exchanges and brokerage companies that don’t provide this feature. Still, if you are looking to do bitcoin transactions regularly, then this won’t concern you.
There are several exchanges that you can choose to signup for. Some businesses don’t require you to provide your personal information and allow you to continue doing transactions anonymously. Such types of exchanges are usually decentralized, which means they don’t have a center of control. No legal authority or person controls these exchanges, which might be a problem when there is any illegal activity going on the exchange. This is true that these exchanges have a higher potential for unlawful activity. Still, at the same time, it is helpful for those people who are living in under-developed countries, as they have a chance to use Bitcoin without providing any legal documents and rise from poverty.
At the moment, the most used exchanges in the US are not decentralized. These exchanges are Coinbase, Kraken, Gemini, and Binance US. All of these exchanges have several different features. Coinbase, Kraken, and Gemini offer Bitcoin and several other growing cryptocurrencies. These three exchanges are perfect for investors who are new to this industry. At the same time, Binance offers more advanced features for experienced investors.
One of the essential security-related recommendations is to use Multi-Factor-Authentication for your exchange accounts and to use a strong password.
Step 2: Connecting Payment Method
After you are done signing up for an exchange account, you now need to provide your personal information. Some exchanges may require you to upload the picture of your driver’s license, social security number, and document proof of your source of income. This process is the same as creating a typical brokerage account. When the verification of your identity documents is completed, you now require to integrate your payment method. The exchanges mentioned above allow you to connect your bank account, debit card, and credit card. Some banks in the US don’t allow you to trade cryptocurrency. That’s why it will be convenient if you check with your bank first if they are allowing cryptocurrency transactions or not. There is a specific fee that every exchange charges you, depending on the payment method you use—typically, depositing through bank accounts directly costs you less than depositing via credit and debit cards.
Step 3: Order Placement
Choosing an exchange and connecting a payment method with it will now allow you to trade cryptocurrency. It is undeniable that these exchanges and Bitcoin have become legitimate and trusted sources of transactions that were once considered a scam and illegal. Cryptocurrency exchanges are now at the same level as traditional brokerage companies. There are several types of orders that you can place through cryptocurrency exchanges. You can do market orders, limit orders, and loss-stop orders with these exchanges. Among the exchanges mentioned above, Kraken offers more types of orders, including market, loss-stop, limit, stop-limit, and take-profit-limit orders.
Step 4: Safe Storage
Wallets are the online storages where you can keep your Bitcoin and other cryptocurrencies safe. If you have wallets outside of the exchange, it means you have your private key to control your funds. In this way, your funds will be secured even if the exchange has been hacked. There are several different features that different wallets offer. Some wallets offer you to store only Bitcoin, while other wallets have the feature to store all types of cryptocurrencies. You can also swap tokens by using some wallets. There are two types of cryptocurrency wallets which are as follows:
1. Hot Wallets
Hot wallets are those wallets that are accessible only through those devices which are connected to the internet. This feature offers more services but at the same time makes your wallet vulnerable to cyberattacks.
2. Cold Wallets
Cold wallets are not connected to the internet. You will access the content of the wallet with 3rd party application. These wallets are less risky and less exposed to cyberattacks.
Other Means of Buying Bitcoin
There are some other resources through which you can purchase Bitcoin:
Bitcoin ATMs work like regular ATMs and are easier to use. You need to insert cash into this machine, and it will buy Bitcoin for you equivalent to the price of the cash you have inserted. It will then transfer Bitcoin into your secure wallet.
P2P exchange offers the user to buy/sell bitcoin from/to other users on the exchange. Users have the option to put on buy/sell request on their portfolio simply, and then they have the opportunity to choose the best rates out there and perform the transaction. It is different from decentralized exchanges as users can directly communicate with other users to perform cryptocurrency transactions.