How to Buy Bitcoin (BTC)

Today, Just2Trade has prepared for you another helpful guide about the well-known cryptocurrency – Bitcoin. How to buy BTC and why is it worth doing? What important details should we keep in mind when purchasing this coin, and what actually do we need to know? All the key information is already here – let's dive a bit deeper into the crypto world together!

Table of Contents

• Step-by-Step Guide to Buy Bitcoin

• Hot Wallets vs. Cold Wallets

• How to Buy BTC With PayPal

• How to Buy Bitcoin With a Credit Card

• Alternative Ways to Buy Bitcoin

• Buying Bitcoin: Here's What to Watch for

• What Information Is Needed to Purchase Bitcoin?

• FAQ

Step-by-Step Guide to Buying Bitcoin

Below is a detailed guide on how to buy Bitcoin – just read carefully and follow each step carefully!

Step 1: Choose a Crypto Trading Service or Venue

Exchanges are a practical choice since they provide a wide range of functions and more cryptocurrencies for trading, allowing investors to buy, trade, and hold Bitcoin, as well as allowing users to withdraw money to their online Bitcoin wallet for storage.

Advice: Use two-factor authentication and a lengthy, complex password with a mix of lowercase, capital, special, and numeric characters when setting up an exchange account for cryptocurrencies.

Cryptocurrency exchanges come in a variety of forms. Some exchanges don't need users to provide personal information: they allow users to remain anonymous, and are decentralized. Anonymous transactions can assist certain groups in integrating into the mainstream economy, such as refugees or people who reside in nations with scant or no infrastructure for government credit or banking.

Popular exchanges in the United States adhere to laws that demand users to present identifying paperwork, and aren't decentralized. Among these Bitcoin exchanges are Coinbase, Kraken, Gemini, FTX, and Binance, which provide access to BTC and an increasing variety of alternative cryptocurrencies.

With more serious trading features and a wider selection of alternative cryptocurrencies, Binance targets more experienced traders. A small selection of altcoins is available to American investors through FTX, a rapidly expanding cryptocurrency exchange with a multibillion-dollar capitalization.

Step 2: Connect Your Exchange to a Payment Option

Depending on the exchange, you might need to provide proof of identity, which could include images of your driver's license or Social Security card, as well as details about your employer and financial sources. Similar to opening a standard brokerage account, the process is substantially the same.

On the majority of exchanges, you can connect a debit or credit card in addition to your bank account. While it's possible to buy cryptocurrencies using a credit card, the volatility of the cryptocurrency market's prices, when coupled with the interest charged by a credit card, may raise the overall price of purchasing a coin. Although it's legal to use Bitcoin in the US, some banks may query or even forbid deposits to exchanges and websites that deal in cryptocurrencies.

Exchanges additionally impose fees for each transaction for deposits made using a bank account, debit card, or credit card.

Step 3: Place an Order

Exchanges for cryptocurrencies have developed to mirror the same degree of features as those seen in stock brokerages. Cryptocurrency exchanges provide a variety of order types and investment options. Most crypto 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 provide methods for setting up recurring investments that let customers use dollar-cost averaging in their preferred investments. For instance, Coinbase enables users to schedule repeat purchases for each day, week, or month.

Step 4: Safe Storage

Secure digital asset storage can be accomplished with Bitcoin and cryptocurrency wallets. Cryptocurrency holders are guaranteed to have control of the private key to their cash by keeping their cryptocurrency outside of the exchange and in a personal wallet. For significant or long-term Bitcoin holdings, an exchange wallet is provided but isn't advised.

Hot Wallets vs. Cold Wallets

Now, let's have a look at the difference between hot and cold wallets – below you'll see detailed information about each of the types.

Hot Wallets

Online wallets, commonly referred to as hot wallets, are wallets that can be accessed from tablets, phones, or desktops. The private keys to your coins are generated by these wallets on these internet-connected devices.

Exchanges offer custodial accounts called exchange wallets. If you use this type of wallet to store cryptocurrency, you are not the actual owner of the private key, even though you have access to it. The exchange is ultimately responsible for private keys, so investor funds are put at risk if the exchange is hacked. Cryptocurrency forums and communities frequently use the adage "not your key, not your coin."

Holders of hot wallets who haven't put proper security in place run the risk of having money taken from them. The minimal requirements include two-factor authentication, secure Internet browsing, and strong passwords.

Hot wallets are best used as storage for tiny sums of cryptocurrency or for cryptocurrency that is actively traded on an exchange.

Cold Wallets

Since a cold wallet is not online, it is less vulnerable to hacking. These offline wallets, also known as hardware wallets, keep a user's private key on a device that is not connected to the internet. They also include software that enables investors to examine their portfolios without putting their private keys at risk.

A paper wallet is a digital wallet created on some websites that prints both public and private keys on paper. Many people laminate these paper wallets and keep them in safes at their banks or even at home.

A hardware wallet is usually a USB device that securely maintains an individual user's private keys offline. Because they are immune to computer viruses that could harm a user's PC, such wallets have advantages over hot wallets. Private keys are never exposed to potentially susceptible software or network-connected computers when using hardware wallets.

The most secure method to store your Bitcoin or other cryptocurrencies safely is in a cold wallet. However, setting one up takes some technical know-how.

How to Buy BTC With PayPal

An online payment processor like PayPal Holdings, Inc. (PYPL) also allows you to purchase Bitcoin. There are two ways to buy Bitcoin: either by linking your PayPal account to a bank or debit card, or by using your PayPal balance to buy Bitcoin from a third-party seller.

Using PayPal, it is possible to buy four cryptocurrencies directly: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. All residents of the United States, excluding Hawaii, may use their current PayPal accounts or create new ones. Additionally, you can use the "Checkout With Crypto" function to pay for goods and services using your cryptocurrency.

PayPal makes money when you purchase Bitcoin through it 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 fees.

There are some drawbacks to buying cryptocurrencies using PayPal, including the inability to transfer cryptocurrency outside of PayPal's platform to an external cryptocurrency wallet or personal wallet, along with the fact that few exchanges and online traders accept PayPal as payment. One of the few online brokers that accept PayPal for Bitcoin purchases on its platform is eToro.

How to Buy Bitcoin With a Credit Card

Purchasing Bitcoin with credit cards is identical to doing it with debit cards or ACH transfers. Due to the associated processing costs and the possibility of fraud, not all exchanges permit the purchase of Bitcoin using credit cards.

Such transactions may incur additional costs 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, which results in high fees and interest rates.

Users of American Express will be charged a 25% annual percentage fee in addition to the current cash advance fee for these types of transactions. Additionally, consumers are only permitted to spend $1,000 each month on Bitcoin purchases according to the credit card provider.

Credit cards that offer rewards in the form of Bitcoin, like the BlockFi Bitcoin Rewards Credit Card, operate similarly to other rewards cards.

Alternative Ways to Buy Bitcoin

We would also like to provide you with information about some alternative ways to buy BTC – let's take a closer look at them together.

Bitcoin ATMs

ATMs that accept Bitcoin function like physical exchanges. People can insert cash into a machine to buy Bitcoin, which is subsequently sent to their online wallets. The retail behemoth Walmart Inc. (WMT) offers Bitcoin ATMs, which have grown in popularity in recent years.

ATM purchases of Bitcoin are subject to two fees: a purchase fee and a conversion fee for converting a fiat currency to Bitcoin. In comparison to alternative options, both costs are quite high. At a Bitcoin ATM, the average buying cost is 8.4% of the purchase price, while the average sales fee is 5.4%.

P2P Exchanges

Users can connect more directly with one another using some peer-to-peer (P2P) exchange services. A prime example of one of these exchanges is LocalBitcoins. Users can make requests to purchase or sell Bitcoin after creating an account, along with details on prices and payment options.

P2P exchanges give users the chance to compare prices, even if they don't provide the same level of anonymity as decentralized exchanges. Many of these exchanges also offer rating systems, allowing consumers to assess possible trading partners before making a purchase.

Crypto Exchange

As previously noted, cryptocurrency exchanges are designed to make buying Bitcoin easy, providing a safe and secure means to deposit money and acquire Bitcoin.

The best protection is usually provided by cryptocurrency exchanges, which keep your Bitcoin in offline vaults until you are ready to move it to your own digital wallet.

Mainstream Brokerages

The exchange Robinhood Markets, Inc. (HOOD) provides cryptocurrency trading capabilities. By sending its trading volume onto other trading platforms or brokerages, it earns money from the payments 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, can 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 offer Bitcoin investing for 401(k) accounts.

An Investment Trust

A type of collective investment known as investment trust pools the funds of its investors from the sale of a certain number of shares, which may cause some trust concerns when the trust first goes public.

People can acquire exposure to the cryptocurrency market without having to buy or store it directly thanks to the Grayscale Bitcoin Trust (GBTC), the first publicly traded investment instrument tied to Bitcoin. GBTC only invests in Bitcoin, and the value of GBTC is based on the price of BTC. For other crypto assets, Grayscale also provides a variety of investing packages.

Investing Apps

Several well-known investment applications, like Robinhood, Webull, and a few more, provide cryptocurrency trading services, including the option to buy Bitcoin.

Although you can purchase Bitcoin using these "no fee" trading applications, you should be aware that you cannot retain ownership of your Bitcoin, as the majority of them prevent you from moving your Bitcoin outside of the platform (though Robinhood will soon).

Buying Bitcoin: Here's What to Watch For

Before you decide where to buy Bitcoin, or even whether you should buy it at all, you should consider the following factors:

• Ownership. What precisely do you want to possess? You have the option of directly owning Bitcoin or a derivative that pays you based on the direction the currency takes, like a futures contract.

• Upside/downside. Whether you own the currency directly or through a futures contract directly affects your potential profits. With every dollar that the value of Bitcoin rises, your profit rises by one dollar if you hold it directly. In comparison, futures allow you to profit significantly more quickly with a smaller initial investment. You can lose more money with futures, but your downside is more limited when you own directly.

• Cost. Depending on how you buy Bitcoin, commissions can vary greatly. While some brokers may charge you several percent to buy directly, futures contracts give you a significant piece of the action for relatively little money. Even while a few percent may not seem like much, if you frequently enter and exit the market, it will quickly reduce your gains.

• Security. Making sure an investment is secure is one of the major worries investors face. Some more recent cryptocurrency users have experienced significant security issues. For instance, in 2022, hackers stole BNB coins from Binance valued at around $570 million. More established brokers may provide better security, since they have dealt with the problem for a longer period..

Additionally, you might get Bitcoins through business dealings. Any Bitcoin transactions, regardless of how you acquired your coins, must be reported to the IRS during tax season.

What Information Is Needed to Purchase Bitcoin?

You must supply basic personal information when opening an account with a standard brokerage or a cryptocurrency exchange. The company will also need information like your Social Security number, Bitcoin address, phone number, and bank account number in addition to your name, which you must submit. Depending on the institution, you may also be required to describe how much trading experience you have and how at ease you are with trading.

The company will use this information to confirm your identity. This is particularly crucial around tax time when the broker or exchange compiles the records of your gains and losses and generates the reports you'll need to properly submit your taxes.

FAQ

Still have any questions connected with Bitcoin? If so, take a closer look at our FAQ list below – all the outstanding issues to your questions can be easily found right there.

How can a beginner buy Bitcoins?

You will require a cryptocurrency exchange where buyers and sellers can meet to trade money for coins to purchase Bitcoin or any other cryptocurrency. Numerous exchanges exist, but as a newbie, you should pick one that strikes a balance between user-friendliness, minimal costs, and excellent security.

How do I purchase Bitcoin?

In this detailed guide, we've listed all the possible ways to buy BTC, including financial apps, crypto exchanges, traditional brokers, Bitcoin ATMs, etc.

Can I buy 1 Bitcoin?

The current price of Bitcoin (as of November 2022) is about $17K. However, you can puchase fractions of Bitcoin for smaller amounts. No matter how much Bitcoin you own – 1 Bitcoin, 15 Bitcoins, or even just a fraction – you are equally vulnerable to its ups and downs.

What is the safest way to buy Bitcoin?

Coinbase is regarded as one of the top marketplaces for buying and selling Bitcoin, boasting a user base of over 13 million. This exchange platform is safe, regulated, insured, user-friendly, and open to investors of all experience levels.

How do I buy Bitcoin as a company?

Here are brief step-by-step instructions:

• Create an account on a business cryptocurrency exchange. The first step in purchasing Bitcoin as a business is to open an account with a cryptocurrency exchange that offers special corporate accounts, such as Gemini, Kraken, Coinbase, or River.

• Purchase Bitcoin.

• Protect your Bitcoin.