How to buy Bitcoin
Investing in Bitcoin can seem difficult at first, but it becomes much simpler once you break it down into stages. Purchasing Bitcoin is becoming easier by the day, and the trustworthiness of exchanges and wallets is increasing.
Key Notes on Bitcoin
- Bitcoin's value stems from its widespread use as a store of value and payment mechanism, as well as its limited supply and low inflation.
- Although it is almost impossible to hack Bitcoin itself, it is possible for your wallet or exchange account to be hacked. This is why proper storage and security procedures are important.
- The only requirement for investing or trading Bitcoin is an account on an exchange, though additional secure storage practices are suggested.
Before Buying Bitcoin: Get Acquainted;
Every aspiring Bitcoin investor requires several items. An exchange account for cryptocurrency, identification documents when you use the Know Your Customer Platform (KYC), a secure Internet connection and a payment method. It's also a good idea to have your wallet separate from your exchange account. Bank accounts, debit cards, and credit cards are all acceptable payment methods on this route. Bitcoin can also be obtained via specialized ATMs and peer-to-peer (P2P) exchanges. Be conscious, however, that as of early 2020, Bitcoin ATMs were increasingly needing government-issued IDs.
For Bitcoin investors, privacy and security are major considerations. Even if there are no actual Bitcoins, boasting of big holdings is typically a bad idea. Anyone who obtains the private key to a Bitcoin public address can initiate transactions. Private keys should be kept hidden; once criminals learn of large holdings, they will try to steal them. Be aware that the balance of a public address that you use can be seen by anyone. As a result, it's a good idea to keep large investments at public addresses that aren't linked to the ones used for transactions.
Anyone, including you, has access to the blockchain's transaction history. However, although transactions are publicly registered on the blockchain, personal information about users is not. Only a user's public key appears next to a transaction on the Bitcoin blockchain, rendering transactions private yet not anonymous. Bitcoin transactions are more straightforward and traceable than cash transactions in some ways, but the cryptocurrency may also be used anonymously.
1. Find the Perfect Exchange
You can purchase, sell, and keep cryptocurrency by signing up for a cryptocurrency exchange. It is commonly recommended that users use an exchange that allows them to withdraw their cryptocurrency to their online wallet for safekeeping. This function may not be essential to those looking to trade Bitcoin or other cryptocurrencies.
Cryptocurrency exchanges come in a variety of shapes and sizes. Some exchanges enable users to remain anonymous and do not require them to enter personal details since the Bitcoin ethos is based on decentralization and individual sovereignty.
Such exchanges operate autonomously and are typically decentralized, which means there is no centralized point of control.
Although such exchanges can be used for malicious purposes, they are often used to provide services to the unbanked population of the world. Anonymous exchanges can help bring certain groups of people into the mainstream economy, such as refugees or those living in countries with little to no infrastructure for government credit or banking.
However, at the moment, the most popular exchanges are not decentralized and do require KYC. To name a few, these exchanges are Coinbase, Kraken, Gemini, and Binance. The number of features available on each of these exchanges has increased significantly.
While opening a cryptocurrency exchange account, it's crucial to follow secure internet practices. This involves using two-factor authentication and creating a password that is both unique and long, with a mix of lowercase, capitalized, special, and numeric characters.
2. Connect a Payment Method to Your Exchange
You'll need to gather your documents once you've decided on an exchange. This may include copies of your driver's license, your social security number or BVN for Nigerians, and details about your employer and source of funds, depending on the exchange. The information you require may be influenced by your location and the laws that govern it. The process is similar to that of opening a traditional brokerage account.
You can now connect a payment method after the exchange has verified your identity and legitimacy. Most exchanges allow you to link your bank account or a debit or credit card directly. Although it is possible to buy cryptocurrency with a credit card, it is generally recommended to avoid doing so due to the uncertainty that cryptocurrencies can encounter.
Although Bitcoin is legal in some parts of the world, some banks are wary of the concept and may challenge or even refuse deposits to cryptocurrency-related websites or exchanges. It's a good idea to double-check that your bank allows deposits at the exchange you've selected.
Deposits made with a savings account, debit card, or credit card have different fees. Coinbase is an excellent exchange for beginners, with a rate of 1.49 per cent for bank accounts and 3.99 percent for debit and credit cards. It's crucial to learn about the fees associated with each payment methods before deciding on an exchange or which payment method is better for you.
Exchanges also charge transaction fees. This fee may be a flat fee (if the amount traded is small) or a percentage of the amount traded. In addition to transaction fees, credit cards have a processing fee.
3. Place an Order
You can now buy Bitcoin and other cryptocurrencies after selecting an exchange and linking a payment method. Cryptocurrency exchanges have gradually become more mainstream in recent years. In terms of liquidity and feature set, they have greatly expanded. The developments in cryptocurrency exchange operations correspond to the shift in public opinion of cryptocurrencies. An industry that was once thought to be a scam or one with dubious practices is steadily transforming into a credible one that has piqued the attention of all of the financial services industry's major players.
Cryptocurrency exchanges have now evolved to the point that they offer almost the same functionality as their stock brokerage equivalents. You're ready to go once you've found an exchange and linked a payment method.
Today's crypto exchanges have a variety of order forms and investment options. Almost all cryptocurrency exchanges accept market and limit orders, and some also accept stop-loss orders. Kraken has the most order types of the exchanges listed above. Market, limit, stop-loss, stop-limit, take-profit, and take-profit limit orders are all supported by Kraken.
Aside from various order forms, exchanges often provide ways for clients to set up recurring investments. For example, Coinbase allows users to schedule recurring purchases for every day, week, or month.
4. Storing Your Bitcoins
Wallets for bitcoin and other cryptocurrencies are a safe way to store digital assets. Keeping your crypto in your wallet rather than on an exchange means that only you have access to the private key to your funds. It also allows you to store funds outside of an exchange, reducing the chance of your funds being stolen if your exchange is hacked.
Although most exchanges provide their users with wallets, security is not their main business. For large or long-term cryptocurrency holdings, we don't suggest using an exchange wallet.
Some wallets have a greater number of features than others. Some are Bitcoin-only, while others allow you to store a variety of altcoins. Some wallets also allow you to exchange one token for another.
You have a variety of choices when it comes to selecting a Bitcoin wallet. The definition of hot wallets (online wallets) and cold wallets is the first thing you can learn about crypto wallets (paper or hardware wallets).