How to buy Bitcoin

How to buy Bitcoin

This is a continuation of the Bitcoin series.

Buying Bitcoin is possible:

We’ve taught you the basics about bitcoin. So now if you wanted to get ahold of some of these exciting and interesting coins. This guide will teach you how to buy Bitcoin.

You can buy bitcoins from exchanges or directly from other people in market places.

You can pay for them in a variety of ways; using cash, credit and debit cards, or wire transfers. You can also purchase them with other cryptocurrencies. But for the most part, I assume if you are reading about how to purchase bitcoins you don’t own much or any of the altcoins out there.

In the US, there are several options if you are wanting to use a credit card. However, in a lot of places exchanges won’t accept credit or paypay payments because a charge back is easy and the charge can be reversed with one phone call to the bank. Most private sellers avoid this possibility and won’t accept cards.

For the US credit card users there is Coinbase, which is FDIC insured. Bittylicious, CoinCorner and Coinbase offer this service in the UK, accepting credit and debit cards from Visa and MasterCard. I personally like Coinbase.

For consumers in the US that don’t have access to a bank or credit cards they can use Expresscoin, now accepts personal checks, money orders, and wire transfers.

  1. Get yourself a bitcoin wallet:

Seeing as how it’s a digital currency you won’t be receiving them in the mail or as a physical coin. You’ll need a place to store them in the digital world. These are called bitcoin wallets but they function just like a bank does.

Depending upon the level of security you want there are different wallet options. Some are high security wallets, while others are less secure and more for everyday spending.

There are a few options: A software wallet, a online web-based wallet, a vault based wallet.

A software wallet is stored on the hard drive of your computer or on your mobile phone and uses encryption to protect your assets.

A online web-based wallet is a wallet provided to you by a exchange like coinbase or poloniex. Those can be hacked into and stolen like with the Mt. Gox hack.

Finally, a vault based wallet is the most secure and uses multiple keys to protect your account. A vault can be online or offline. Coinbase is about to introduce a bitcoin vault.

Exchanges and online wallets:

There are a lot of exchanges and online wallets out there. Some offer trading options, while others are small wallets offering limited buying and selling capabilities. Most exchanges store both fiat and cryptocurrencies for you as does a bank.

Exchanges are good if you would like to trade and speculate in the crypto-markets and don’t mind giving up some anonymity due to the registration process, asking for proof of identity and address or other personal information.

Most exchanges I’ve ran into have to know their customer due to anti-money laundering regulations by the government. Even though there is little money laundering or terrorist funding going on in cryptocurrencies.

Currently the largest exchanges are: Bitfinex (Hong Kong), Bitstamp (US), BTC-e, Kraken (US), Huobi (China and Hong Kong), OkCoin (China), BTCC (China).

Coinbase and Gdax (coinbase’s professional exchange client) is a popular US based wallet and exchange service use USD and Euros to exchange for bitcoin, litecoin, and ethereum. Coinbase is available in a lot of other European countries as well.

Xapo is another option which offer deposits in fiat that are converted to bitcoin in your account. Or for Australians there Coinjar, an exchange and wallet provider. They released a debit card service in 2015 called Coinjar swipe and it’s a viable option for Australian crypto-consumers.

For the Indian market there is Unocoin. It’s an exchange for selling and buying bitcoins. You can deposit money from any national bank.

For software wallets and exchanges you’ll need to set up an account and link a bank account to the service. Once you do that you can arrange to move funds from your bank to the exchange and then purchase your digital currency, generally for a fee.

Warnings about exchanges and software wallets:

Even with proof of identity required for exchanges and wallets. Most don’t provide the same security banks do. Coinbase and gdax are FDIC-insured by the US government so they are some as far as online services go.

But for an example, there is often limited or no insurance for your account if the exchange goes out of business or is robbed by hackers, like the Mt. Gox case.

Bitcoin does not have a legal status with most countries and authorities generally don’t know how or don’t care to pursue a thief of cryptocurrencies. Some exchanges replace customer funds after a theft but they do not have to legally do so.

Othertimes, banks will refuse to deal with money that has been acquired from trading or dealing with cryptocurrencies citing regulatory pain.

Then there are hardware wallets which have several major advantages over standard software wallets:

  1. Private keys are stored in a protected area and cannot be transferred out of the device
  2. immune to computer viruses that steal from software wallets
  3. can be used securely and interactively as opposed to a paper wallet which has to be imported to software at some point
  4. much of the time, the software, is open source, allowing users to validate the entire operation of the device.

Hardware wallets are more expensive than a software wallet typically but offer higher security and safety for the extra cost.

Here are a two good hardware wallets:

Trezor: The Bitcoin Safe

Buy Bitcoins, Bitcoins, Cryptocurrency, Ethereum, ETH, Coins, Cryptomarkets, Trading, Blockchain

Ledger Nano S

Buy Bitcoins, Bitcoins, Cryptocurrency, Ethereum, ETH, Coins, Cryptomarkets, Trading, Blockchain

Secondly, you can buy them face to face.

If you live in the city or somewhat populace area one option might be to meet a seller face to face, it’s a good option for those who want to remain anonymous to the online world.

LocalBitcoins is the primary site where people are arrange prices, make trade agreements, and schedule a meet up spot.

Obviously, be careful about exchanging cash for bitcoins especially if the trade is a sizeable one. Meet in a public place and bring another person with you. Don’t meet in homes or weird areas of the city and take the normal precautions you would when you walk around with large amounts of cash in public.

Remember to check you received your bitcoin by having a smartphone to check your wallet or internet access of some kind. There are sometimes bitcoin exchange formed on Meetup.com. This is where large groups of people meet to exchange and talk about bitcoin.

Another consideration is if you want to pay a premium price as in person meet ups generally cost about 5-10% more than exchange prices. Most sellers want cash but some will take paypal. Just be careful.

Third, “mining”:

Bitcoin mining was profitable until around late 2015. With the recent boom in bitcoin prices it’s profitable again but even for powerful PC or graphics cards it’s barely turning a profit. You’re better of getting some powerful mining-specific devices called ASICs and mining with those. However, those are expensive and require a lot of time to recoup investment on them. Depending on electricity prices in your area it could already not be profitable. Checking a mining profitability calculator can help you decide.

As well with increased supply of miners and the extremely powerful machines mining bitcoins increases the block difficulty (how hard it is for miners to mine) and it increases at an exponential rate. With even more miners it increases faster than with fewer miners. For most hobby miners it’s just not really that profitable anymore for mining bitcoins.

Most mining these days are done by large groups, companies, or original miners who got in with the beginning and kept up with the technology buying the newest ASICs on the market.

Most people who claim to make money using an ordinary PC are either lying or trying to sell you something.

Investment Trust:

If you don’t like the idea of going through all the hassle to buy and safely store bitcoins then you can turn to an investment trust, like Bitcoin Investment Trust (OTCMKTS) or The Winklevoss ETF.

The trust invests in bitcoin and uses protocols to store them safely for their investors. This is a decent option for those who don’t want to deal with the actual worries of bitcoin.

Bitcoin ATMs:

Bitcoin ATMs are a new concept but they are growing in number. They are like a face to face exchange but with a machine. You insert your cash and either scan your mobile wallet OR code or receive a paper receipt with the codes necessary to load the coins into your wallet.

The fees put onto the normal exchange rate is about 3-8%. There are many different vendors like Genesis Coin, Lamassu, and Robocoin.

You can look at the locations worldwide.

Conclusion:

Buying bitcoin isn’t always easy. But there are lots of options to buy them and it’s getting easier all the time. Altcoins are a different beast. But the easiest option right now is likely just using Coinbase. They have an Android and IOS app which allows easy access to their buying and selling. Good luck investing in crypto!

 

The CryptoDivision uses referral links, donations, and ads as a source of income, but does not endorse any particular exchange or wallet. The owner does use Gdax, Coinbase, and Kraken. If you wish to support us please use the referral links.

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