| Bitcoin return | |||
|---|---|---|---|
| 1 day | 1 week | 1 month | 1 year |
| 0.36% | -5.464% | 10.86% | 122.86% |
Source: TradingView
How to buy Bitcoin
Step 1: Select a cryptocurrency trading service or venue
Exchanges are a useful option as they offer a wide range of features and more cryptocurrencies for trading. Exchanges also allow investors to buy, sell, and hold cryptocurrencies, and users can also transfer and store their cryptocurrencies in online wallets.
There are many cryptocurrency exchanges, but there are only two types: centralized and decentralized. Decentralized exchanges allow users to maintain pseudo-anonymity and typically do not require personal information. For certain populations, such as refugees and people living in countries with little or no government credit or banking infrastructure, decentralized exchanges enable access to the global economy.
Popular exchanges in the United States and many other countries are centrally managed and follow laws that require users to provide identification documents. These exchanges include Coinbase, Kraken, Gemini, and Binance. They offer Bitcoin, a growing number of altcoins, and fiat exchange services.
When creating an account on a cryptocurrency exchange, use two-factor authentication and a long, unique password that includes a variety of lowercase, uppercase, special characters, and numbers.
Step 2: Connect your exchange to your payment options
Depending on the exchange, identity verification may be required. This means you may need to include a photo of your driver's license or Social Security card, as well as information about your employer and funding sources. The process is similar to setting up a regular brokerage account.
Most centralized exchanges allow you to connect your bank account directly or link your debit or credit card. You can also purchase cryptocurrencies using a credit card, but fluctuations in the price of cryptocurrencies can inflate the overall cost of purchasing tokens when combined with credit card interest. Although Bitcoin is legal in the United States, some banks may question or suspend deposits to crypto-related sites and exchanges without notification of the activity from their customers.
Fees vary depending on whether you deposit by bank account, debit card, or credit card, and exchanges also charge a fee for each transaction.
Step 3: Place your order
Cryptocurrency exchanges have evolved and now mimic the same functionality as traditional stock exchanges. Cryptocurrency exchanges offer several order types and investment or trading methods. Almost all cryptocurrency exchanges offer both market and limit orders, and some also offer stop-loss orders.
Kraken offers most order types including market orders, limit orders, stop loss orders, stop limit orders, take profit orders, and take profit limit orders.
The exchange also offers a way to set up recurring investments, allowing customers to dollar-cost average their chosen investments. For example, Coinbase allows users to set up daily, weekly, or monthly subscriptions.
Step 4: Safe storage
A cryptocurrency wallet is a place to store your digital asset keys. Detaching cryptographic keys from exchanges and storing them in unconnected wallets (cold wallets) gives users control over their keys. Investors can use exchange-provided wallets, but they are not recommended for holding large amounts or long-term cryptocurrencies.
Hot wallet and cold wallet
hot wallet
Online wallets, also known as hot wallets, are apps on devices such as computers, mobile phones, and tablets. These wallets generate private keys for your coins on a device connected to the internet.
Hot wallet owners who do not build in adequate security risk losing their funds due to theft. Strong passwords, two-factor authentication, antivirus programs, and secure internet browsing should be considered as minimum requirements.
Hot wallets are ideal for cryptocurrencies with small amounts or those that are actively traded on exchanges. Another use is like a checking account, where you put only what you need for a particular transaction into your hot wallet.
cold wallet
Cold wallets are not connected to the internet, so they are less likely to be compromised. These wallets store your private keys on your device or item without any connection. Some come with software that allows investors to view their portfolio without risking their private keys. Types of cold wallets include paper, hardware, and even metal stamped with private keys.
A paper wallet is just a piece of paper with your private key written on it. Some people laminate these paper wallets and store them in bank safe deposit boxes or home safes. There are websites and programs that can generate nifty printable versions with quick response codes, but these should be avoided as they unnecessarily expose your private key.
Cold wallets are the safest way to store Bitcoin and other cryptocurrencies.
How to buy Bitcoin with PayPal
You can purchase Bitcoin through payment processors such as PayPal Holdings Inc. (PYPL). There are two ways to purchase Bitcoin using PayPal. You can connect your account to a debit card or bank account, or use the balance in your PayPal account to purchase cryptocurrencies from third-party providers.
You can also use PayPal to directly purchase four cryptocurrencies: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. With the exception of those living in Hawaii, residents of all other states can use their existing PayPal account or set up a new account to purchase Bitcoin. Additionally, you can also purchase products and services using cryptocurrencies through our “Checkout With Crypto” feature.
When you buy Bitcoin directly from PayPal, you earn money from the crypto spread, the difference between the market price of Bitcoin and the exchange rate with the US dollar. For each purchase, PayPal also charges a transaction fee based on the purchase amount.
You can send cryptocurrencies, including Bitcoin, from PayPal to external digital asset wallets that you own and control, or that are owned and controlled by another person, such as a friend or family member. To send Bitcoin outside of PayPal, you need to specify the wallet address to which you want to send the assets. If you want to send Bitcoin, you must use a wallet that accepts Bitcoin.
Social trading and multi-asset investment company eToro is one of the few online traders that allows you to purchase Bitcoin using PayPal.
How to buy Bitcoin with credit card
Purchasing Bitcoin using a credit card is similar to using a debit card or automated clearinghouse (ACH) transfer. However, not all exchanges allow you to buy Bitcoin with a credit card due to the processing fees and fraud risks involved.
Credit card processing may incur additional charges for these transactions. In addition to paying blockchain transaction fees, exchanges may pass on processing fees to buyers. Credit card issuers treat Bitcoin purchases as cash advances and charge high fees and interest.
For example, American Express users will pay current cash advance fees for such transactions, but the fees charged vary by exchange. Credit card companies also limit users' Bitcoin purchases to the equivalent of $1,000 per month.
Another way to buy Bitcoin
Bitcoin ATM
Bitcoin ATMs work like in-person Bitcoin exchanges. Individuals insert cash into the machine, use it to purchase Bitcoin, and the Bitcoin is transferred to their wallet. Bitcoin ATMs have become increasingly popular in recent years and are available at retail giants like Walmart (WMT).
Bitcoin ATMs began requiring government-issued IDs in early 2020.
ATM Bitcoin purchases incur two fees: a purchase fee and a conversion fee for converting fiat currency to Bitcoin. Both prices are quite high compared to other options. For example, CoinHub charges a 12.5% markup over the Bitstamp spot rate and a $4.95 retailer fee.
P2P exchange
Some P2P exchange services provide more direct connections between users. LocalBitcoins is an example of such an exchange. After creating an account, users can post requests to buy or sell Bitcoin, including information about payment methods and prices.
P2P exchanges don't offer the same anonymity as decentralized exchanges, but they give users the opportunity to shop around for the best deals. Many of these exchanges also offer rating systems so that users can rate potential trading partners before trading.
mainstream securities company
Robinhood Markets Inc. (HOOD) is one of the exchanges that offers cryptocurrency trading. We charge 0% fees for trading and purchasing cryptocurrencies, earn revenue from order flow payments, and pass trade volumes to other trading platforms and brokerages. Robinhood has enabled trading of cryptocurrencies such as Bitcoin, Bitcoin Cash, Litecoin, Ethereum, Dogecoin, and Ethereum Classic on its platform.
In contrast, Coinbase lets you trade thousands of cryptocurrencies, and starting in 2022, traditional brokers like Fidelity Investments started including Bitcoin in their 401(k) accounts.
Investments in Bitcoin and other cryptocurrencies are not protected by Securities Investor Protection Corporation (SIPC) insurance. At a typical brokerage firm, the agency protects against losses on securities and cash in a brokerage account, including up to $500,000, with a cash limit of $250,000. Cryptocurrency exchanges like Coinbase come with crime insurance to protect their infrastructure from hacking. However, that insurance does not protect individual customers from password theft.
How to sell Bitcoin
Bitcoins can be sold in the same places you buy cryptocurrencies, such as cryptocurrency exchanges and P2P platforms. The process of selling Bitcoin on these platforms is usually similar to the process of buying Bitcoin.
Most crypto exchanges charge a percentage of the crypto sales as fees. For example, Coinbase says it may charge a fee when customers convert their cryptocurrencies into cash, depending on the payment method they choose.
Exchanges usually have daily and monthly withdrawal limits. Therefore, traders may not have immediate access to cash from large sales. However, with Coinbase, for example, there is no limit to the amount of cryptocurrency you can sell.
How do beginners buy Bitcoin?
The best way for beginners to buy Bitcoin is to create an account at a reputable, regulated exchange, deposit funds, and make your purchase.
How can I buy $100 worth of Bitcoin?
Regulated exchanges are the safest way to buy Bitcoin, but you can also buy through Bitcoin ATMs and PayPal.
What would happen if you invested $100 in Bitcoin today?
Today's $100 in Bitcoin could become $200 or more in the future, but it's just as likely to become $1. Bitcoin is highly volatile, so before investing you should consider your financial situation and decide whether you can afford to lose the money you invest.
conclusion
Buying Bitcoin may seem complicated if you've never done it before, but it's relatively easy. All you need is an account with a service or exchange and a way to safely store your purchases.
To buy Bitcoin, you need to choose the right service or location, connect a payment method, place an order, and secure stable storage for your purchased cryptocurrency. Each of these steps requires research and careful evaluation of the pros and cons of the services involved. Bitcoin can be obtained from Bitcoin ATMs, payment services such as PayPal, and mainstream brokerages such as Robinhood and Coinbase.
