Overview: Buying Bitcoin
Now that you already know the basics about bitcoins i.e. what they are, the next step is knowing how to buy them. There are a number of ways of buying bitcoins, the most notable being through bitcoin exchanges. Bitcoins can also be bought directly from other people through marketplaces, investment trusts and ATMs as discussed below.
In regards to payment, you can pay for bitcoin in a number of ways from using hard cash and wire transfers to using credit or debit cards. You can also pay for bitcoin using other cryptocurrencies. The mode of payment, however, depends mainly on the seller as well as your location.
It is, however, worth noting that it isn’t easy paying for bitcoin using payment modes like credit cards, debit cards or PayPal depending on your jurisdiction. There are many reasons behind this. First and foremost, bitcoin (as a currency) was invented for many reasons one of them being enhanced anonymity. Paying for them using payment modes such as PayPal, therefore, defies this purpose.
It’s also hard to buy bitcoin using PayPal or your credit card because such transactions can be reversed easily by simply calling your credit card company and requesting a chargeback. Given the fact that it’s hard to prove that any goods/services changed hands in such an instance, private sellers and exchanges avoid these payment methods.
Payment purchasing options have however grown in some countries like the US and the UK. For instance, some exchanges in the US i.e. Circle and Coinbase now offer bitcoin purchases with credit cards. Coinbase, as well as CoinCorner and Bittylicious, offer the same service in the United Kingdom accepting 3D Secure enabled credit and debit card on MasterCard and Visa networks.
Step 1: Get a wallet
To buy bitcoin, you must first get a bitcoin wallet i.e. a place where you will store your bitcoins. Bitcoin wallets are simply bank accounts for bitcoins. There are different kinds of wallets offering different security levels. Your main options include; a software wallet stored on your computer’s hard drive, an online web-based wallet and lastly, a “vault” service wallet which stores your bitcoins safely offline or in a multisig wallet which utilizes keys. It is important to note that all these wallets have their vulnerabilities although the third option is the safest. Online wallets are more vulnerable to hacking. Offline wallets may also lose your bitcoins if your hard drive becomes corrupt and you haven’t written down your secret key phrase.
Chose a Bitcoin wallet here: https://bitcoin.org/en/choose-your-wallet
I personally use mSigna on my PC and Bread on my phone.
Step 2: Find a good bitcoin exchange
There are many exchanges competing for business. Exchanges are simply marketplaces for bitcoins that allow people to buy and sell bitcoins, and other cryptocurrencies, using different currencies. Some exchanges are just for institutional bitcoin traders while others are simply wallet services with limited buying/selling capabilities. Many Exchanges have stopped taking US residents due to the US government cracking down on them. Exchanges are important when you are buying bitcoins for regular trading and speculations and also if you don’t require total anonymity.
Since there are many exchanges today most of which aren’t good, it’s important to choose wisely. The best exchange for you will depend on many factors including location. You should, however, stick to large renowned exchanges such as BitBay because they have been tested and proven and also because they offer the best and most flexible trading and payment options. Large exchanges are also the most liquid, so it’s easy to get your money back at any given time.
BitBay Exchange: https://bitbay.com
Step 3: Buy Bitcoin
Once you have a bitcoin wallet and exchange, you can proceed and buy bitcoin. Exchanges have current exchange rates clearly shown so you’ll be able to know the exact price you will pay for your bitcoin.
In order to do this you need to:
- Click on verify your account
- Fill out the information. In order to fund an exchange in fiat currency, you always need to verify your account and identity.
- Upload proof of address, usually a utility bill such a electricity or gas bill.
- Upload proof of identity such as drivers license or passport.
- Once your account is verified you can then transfer USD or EUR into your account via wire transfer.
- Click on “Wallets” under the “Account” in the left menu bar
- Then USD or EUR
- Then click “Deposit”
- Then click “Wire bank transfer”
- Get the details and enter them into your internet banking or go to a branch and make the transaction.
- Wait a couple of days for the wire transfer to complete.
- Now we will buy the bitcoin.
- Click on “Exchange” under “Market” in the left-hand side menu bar
- Select BTC (bitcoin) under the USD tab, or EUR if you funded the account with Euro.
- Click “Place an order”
- In the “I Want to buy” enter in the amount of bitcoin you want to buy and the rate you are willing to pay.
- Then click “BUY” button.
- Once your order is complete you want to withdraw the bitcoins to your personal wallet on your computer or mobile device. NEVER leave cryptocurrency on the exchanges. If they get hacked then your cryptos are gone.
Other options for buying bitcoin
Although it is advisable to buy bitcoins via exchanges, there are other options you can consider as well. These options include;
Over-the-counter (OTC) or face-to-face trades
This option is the easiest to follow when you prefer anonymity, live in a city, or you just want to avoid banking hassles. Using this option is easy. Such transactions are arranged as well as negotiated via LocalBitcoins. The website also offers escrow services to protect both parties. When using this method to buy bitcoins, it is however advisable to meet your local seller in a public place.
Local Bitcoins: https://localbitcoins.com/
You should also take all the necessary precautions when carrying a lot of cash. It is also worth noting that you need to have access to your wallet and confirm the transaction. A laptop, tablet or Smartphone with Internet access will help you do that perfectly. In case you aren’t comfortable with one-on-one trades, you can use sites like meeetup.com to find bitcoin meetup groups within your area. It’s also worth noting you might pay a higher price than the current exchange price for OTC or face-to-face trades. It’s therefore advisable to negotiate beforehand to ensure you get the best price possible.
Buying via investment trusts
You can also buy bitcoins through investment trusts like The Winklevoss ETF or Bitcoin Investment Trust. These trusts invest exclusively in bitcoins using high-tech protocols to store bitcoins on behalf of their shareholders. This option is however, open to serious investors only who want to invest a large amount of money.
You can also buy bitcoins from bitcoin ATMs. Although this option is relatively new, bitcoin ATMs are increasing in number. Using this option is easy. You just need to insert cash into the ATM and scan your Bitcoin mobile wallet QR code. You also have the option of receiving a receipt with codes that allow you to load bitcoins into your wallet. To use this option effectively, check the bitcoin ATM map periodically. You should also be on the lookout for the latest ATM updates/news.
Find a Bitcoin ATM near you: https://coinatmradar.com/countries/