One of the finest ways to understand bitcoin and other cryptocurrencies in the market is by simply buying them and trying them out. Investing in a cryptocurrency like Bitcoin may seem complicated, but it is comprehensible once you break it down into small steps. The legitimacy and wallets and exchanges are growing, and buying Bitcoin is becoming easier.
The all-important thing you need to know about getting a bitcoin is that you will need two things:
- An exchange — a place to buy Bitcoin
- A wallet — a place to store your Bitcoin
While it is almost unlikely for Bitcoin to be hacked, your wallet or exchange account can still be compromised. That is the very reason why security measures and having proper storage are imperative.
Before You Buy Bitcoin
Are you buying Bitcoin for the first time? There are many things that an aspiring crypto investor need. Before purchasing a Bitcoin, you will need a/an:
- Exchange account
- Personal identification
- Secured internet connection
- Method of payment
- Digital wallet
It is also advised to have your own personal wallet outside your exchange platform. Credit, debit, and bank accounts are some valid payment methods you could use in buying Bitcoin. Getting Bitcoin via P2P exchanges and specialized ATMs is also a possible way to get a Bitcoin. However, by early 2020, Bitcoin ATMs started to require government-issued IDs strictly.
Security and privacy are essential for Bitcoin investors.
Bitcoin is run-of-the-mill encrypted and backed with an outstanding system called the blockchain. Though your account’s protection is certain, it is still not a good idea to brag about large holding in your account. Private keys should be kept confidential as anyone who gains a public key to a public address can authorize Bitcoin transactions.
Anyone can view the balance in your public address, so it is important to hold investments on public addresses that are not directly connected to the address you use for transactions.
Transaction history made on the blockchain is accessible to anyone. And even though transactions are recorded publicly, user information remains confidential, and the public key is the only thing that appears next to a transaction. Apparently, Bitcoin transactions are more traceable compared to cash.
The Federal Bureau of Investigation (NBI) and international researchers claimed that they could trace transactions made on the Bitcoin blockchain, including their digital wallets. For instance, when you create an account on Coinbase, you are required to give your identification.
Now, once you buy a Bitcoin, the system will tie it to your name. NBI and international researchers can still trace the transaction back to Coinbase, connected to your identity, even after sending it to another wallet. Nevertheless, this should not be a disquietude for investors in the U.S. and developed countries as Bitcoin is established legally.
Step 1: Choose where to buy
Engaging in a cryptocurrency exchange will enable you to buy, hold and sell cryptocurrency. It is best to choose an exchange that will allow you to withdraw your crypto to your personal online wallet for safer protection.
There is a variety of crypto exchanges because the Bitcoin ethos is about individual sovereignty and decentralization. Some exchanges allow authorizing user’s identity to remain confidential and do not necessitate users to give their personal information. These exchanges are decentralized and have no central point of control and operate autonomously.
Though criminals can use such systems for fraudulent and illegal activities, they are beneficial for the unbanked population in the world. For refugees or those living in countries with small-scale infrastructure for baking or government credit, the anonymous exchange could help them access the mainstream economy.
You can buy Bitcoin from countless crypto exchanges in the market. Some charge a fee for the purchase price. Here are some exchanges you may want to try:
- Binance – Binance is the arm of the world’s biggest exchange by volume among cryptocurrencies. Binance.US fix a charge of 0.1% payment for all cryptocurrency trade and a withdrawal fee. This exchange platform offers a 50+ selection of cryptocurrencies, in addition to a broad scope of crypto-to-crypto trading pairs, which is larger than any other U.S. crypto exchanges.
- Kraken – This exchange presents price information to the Bloomberg Terminal and gives cryptocurrency-to-fiat-money trading. The transaction fee may cost €0.25 + 3.75% for credit card acquisitions, 0% to 0.26 per trade, and $0.10 + 1.7% for the online banking.
- Coinmama – This platform exchange trades Bitcoin along with eight cryptocurrencies. Coinmama charges 5.9% for the transaction fee with an additional 5% charge for credit card purchases with a minimum requirement of $60 per purchase.
- Gemini – Gemini is a U.S.-based exchange that trades ether, bitcoin, bitcoin cash, zcash, and litecoin. The exchange transaction fee ranges from $0.99 to 1.49%, depending on your sale or purchase size.
Gemini, Kraken, and Coinbase grant an increasing number of altcoins and Bitcoin. These exchanges are most probably the simplest in the entire industry when it on-ramping to crypto. Binance offers advanced traders more functional features and a wide variety of altcoins to pick from.
One essential thing you should not neglect in creating a crypto account is utilizing safe internet practices. Do not forget to use unique and long, hard-to-guess passwords and two-factor authentication.
Step 2: Connect Exchange to Your Payment Option
After choosing an exchange, you need to collect your personal documents like your social security number, driver’s license, source of funds, and information about your employer. The data they might ask for depends on the region where you reside according to the laws within it. The process goes the same as setting up a common brokerage account.
Once the exchange ensures the legitimacy of your identity, you will be able to connect to a payment option. In most exchanges, you can connect a credit or debit card or connect your bank directly. Even when you can pay using a credit card to buy cryptocurrency, this is something you should not put too much of your hope into because of the volatility in the market.
Even when Bitcoin is legal in the United States, some banks do not really kindly approve of the idea. Some banks may question to the extent that they may even stop deposits to cryptocurrency-related exchanges or sites. Make sure to check if your bank allows deposits in your preferred exchange.
For deposit fees, Coinbase has a 1.49% charge for bank accounts with a 3.99% fee for credit and debit cards. It is crucial to research the costs associated with deposits to help pick a payment option that suits best for you.
Exchanges have charge fee for every transaction, and it may either be a percentage of the trading amount or a flat fee in your trading amount is low. There’s also a processing fee for credit cards in addition to transaction charges.
Step 3: Order Placement
After choosing an exchange and connecting a payment option, you are now illegible to buy a Bitcoin and any other cryptocurrency. In the past few years, exchanges in crypto have become more mainstream and advanced significantly in the breadth of features and liquidity.
Cryptocurrency exchanges today offer a wide array of order types and ways to invest. Out of the exchanges mentioned earlier, Kraken gives off most order types and allows stop-limit, limit, take-profit limit, stop-loss, and profit.
Step 4: Safe Storage
Crypto wallets are a place when you can store your digital assets securely. You should have a crypto wallet outside of the exchange and make sure that only you know your wallet’s private key. Having safe storage also helps to avoid the risk of losing your funds and getting hacked.
Key Takeaways
Buying bitcoin or any other cryptocurrency is a fun way to explore a new venture in an investment, and create your wealth in your 20’s.
And aside from the steps to buy a bitcoin mentioned above, you could also buy Bitcoin through PayPal, Bitcoin ATMs, and P2P Exchanges. However, note that just like cigarettes, Bitcoin has a warning label that says, “Bitcoin may be harmful to your finances. Do not buy what you can’t afford to lose.”
