Bitcoin is undoubtedly the most famous cryptocurrency and also the OG amongst other cryptos. This peer-to-peer money system has now turned into digital gold thanks to its market value and the recent spot Bitcoin ETF entry into the market space.If you too are looking to buy Bitcoin as a means to diversify your investment portfolio, here are some essential tips and tricks worth considering:
Here are the easy steps that you need to follow to buy Bitcoin:
Step 1: Choose a Cryptocurrency Platform
Firstly select a cryptocurrency exchange, which offers a wide range of features and various cryptocurrencies for trading. Exchanges allow users to buy, sell, and store cryptocurrency securely in online wallets.
Cryptocurrency exchanges come in different types. Some are decentralized and anonymous, and easy to access, especially for people who do not have access to traditional banking services. In the U.S., popular exchanges like Coinbase, Kraken, Gemini, and Binance comply with regulations, requiring users to provide identification.These exchanges not just offer Bitcoin but other cryptos as well.
Step 2: Link Your Payment Method
If you want to begin trading, you first need to connect your exchange account to a payment option. Depending on the exchange, this may involve submitting personal identification such as a driver's license or Social Security details, similar to setting up a brokerage account.
Most exchanges support linking bank accounts directly or using debit/credit cards for transactions. While credit cards are accepted, there might be potential higher costs due to cryptocurrency price fluctuations and interest charges applied by banks wary of crypto transactions.
Step 3: Place Your Order
Modern cryptocurrency exchanges offer a variety of order types, similar to stock markets. Options include market orders, limit orders, and more advanced types like stop-loss or take-profit orders. Some platforms, like Kraken, provide extensive order options for different trading strategies.
Additionally, many exchanges offer features for setting up recurring purchases, allowing users to invest regularly in cryptos like Bitcoin.
Step 4: Secure Storage
After buying, one must store their Bitcoin securely. Cryptocurrency wallets serve as secure digital storage for your assets. It's recommended to keep significant amounts of Bitcoin in personal wallets rather than leaving them on exchanges, where you don't control the private keys.
Overall, buying Bitcoin involves choosing a reliable exchange, connecting your payment method, placing orders, and ensuring secure storage to secure your investment. Always keep yourself updated about fees, security measures, and market trends to make informed decisions on crypto investments.
There are two kinds of wallets meant as different methods for buying crypto:
Hot Wallets
Hot wallets, such as those on computers, phones, or tablets, are online apps that generate private keys for your cryptocurrencies. They're convenient but less secure because the exchange holds the private keys. This setup means that if the exchange gets hacked, your funds could be at risk. It's crucial for hot wallet users to enhance security with strong passwords, two-factor authentication, and safe internet practices. Hot wallets are ideal for smaller cryptocurrency amounts or active trading.
Cold Wallets
Cold wallets, unlike hot wallets, are offline and not connected to the internet. These hardware or paper wallets store your private keys securely, away from potential online threats. Paper wallets print both public and private keys and are often stored in safe deposit boxes or safes. Hardware wallets, typically USB devices, keep private keys offline, making them immune to computer viruses. Cold wallets offer the highest level of security for storing larger amounts of bitcoin or other cryptocurrencies, though they require some technical know-how to set up.
Buying Bitcoin with Apps like PayPal
PayPal allows users to buy bitcoin through their accounts, either by linking a debit card or bank account or using their PayPal balance to buy from third-party providers. Users in most U.S. states can purchase bitcoin directly through PayPal, and they can use cryptocurrencies to pay for goods and services via the "Checkout With Crypto" feature. PayPal charges transaction fees and earns from the difference between bitcoin's market price and its exchange rate with the U.S. dollar. You can also send bitcoin purchased through PayPal to external digital wallets, ensuring control over your assets.
Buying Bitcoin with a Credit Card
Buying bitcoin with a credit card is similar to using a debit card or bank transfer, but not all exchanges support credit card purchases due to higher processing fees and fraud risks. Credit card issuers treat bitcoin purchases as cash advances, subjecting them to substantial fees and interest rates. Limits may also apply on monthly bitcoin purchases via credit cards.
Alternative Ways to Buy Bitcoin
Bitcoin ATMs and peer-to-peer (P2P) exchanges offer additional methods to purchase bitcoin. Bitcoin ATMs allow users to buy bitcoin with cash, while P2P exchanges like Bitvalve, WazirX, LocalCoinSwap and others connect buyers and sellers directly. These methods provide flexibility but may involve higher fees or require careful evaluation of trade partners.
Precaution:
Private keys should be kept secret, and investors must keep in mind that the balance of a public address is visible. Individuals can create multiple public addresses and distribute their collection of bitcoin over many addresses as a means for securing their assets.
All in all, buying bitcoin involves choosing a secure storage method, whether by using hot or cold wallets, and selecting a reliable payment option like PayPal or credit cards. Each method has its pros and cons, so understanding these factors and conducting thorough research is essential before making any cryptocurrency transactions.