Anybody reading this realizing that Bitcoin is the future of money is probably trying to figure out the best place to buy Bitcoin. The fact the price of cryptocurrencies is trending upwards is probably increasing that sense of urgency.
Have no fear. There are many options both new and seasoned crypto investors have when it comes to buying Bitcoin. This post will lay them all out. Be aware that each option has its own set of advantages and disadvantages. It all depends on the investment goals of the individual, the level of desire they have to remain anonymous, and the need for convenience.
Why LocalBitcoins.com is the Best Place to Buy Bitcoin
Bitcoin is a decentralized peer-to-peer payment system. The payment system’s whole selling point is that no third party will ever govern its use. Bitcoin and its underlying blockchain enables individuals to exchange value in the purest way possible. However, those who want to kick it old school and avoid hiding behind technology in order to get their hands on digital gold will want to take things a step further and do the transaction in person.
The main advantage to this is the ability to maintain anonymity. When two people meet up in person to exchange bitcoins, there is no need to check each other’s driver’s licenses, home addresses or banking information. They simply agree on an exchange rate, pull out their Bitcoin wallets, trade send and receive addresses, exchange cash and complete the transaction.
In an era where more and more governments are trying to clamp down on digital currency transactions, remaining anonymous is becoming more and more difficult. LocalBitcoins.com is an online marketplace that allows people to connect with buyers and sellers who post their own buy and sell rates for cryptocurrency transactions. The parties agree to meet. They keep both their paper and digital money ‘off the map’ so to speak.
While remaining anonymous is an attractive benefit, there’s also a downside to using LocalBitcoins. Individuals don’t really know who they are meeting in person or where the proceeds exchanged in any transactions that occur really come from. This means the user is potentially meeting up with a dangerous criminal. There’s also the potential that something goes wrong during the exchange. A fight breaks out. The other party steals information or funds and walks away.
It’s for these reasons that many people getting into Bitcoin opt for safer options, using technology to complete transactions rather than meeting in person. Some of those options are more convenient than others, and some are more expensive than others. The option that’s best for investors really depends on individual circumstances.
Bitcoin ATM Machines
For anyone that has the desire to complete a physical exchange of value without having to put their trust in the hands of another individual, buying Bitcoin through an ATM machine is a viable option. It’s also possible to do just that anonymously, depending on the machine.
In this scenario, investors can simply Google an ATM machine in their area to get started. When Bitcoin launched in 2008, these ATM machines were nonexistent. Today, anybody living in a major city or surrounding suburbs can find hundreds of machines within a few miles of their home.
In the early days of ATM machines, users exchanging paper money for digital gold could do so without providing identification. Some of these machines still exist. However, there are many that now require a user to provide some sort of government issued identification before allowing a transaction to take place.
Completing a Bitcoin ATM Transaction
How does the process of completing an ATM transaction work?
Step one is deciding how much money to invest and researching the best rate. Bitcoin buy and sell rates are determined not only by the market value of Bitcoin, but also by the liquidity levels of the individual provider, and any convenience fees being charged (convenience fees are usually included in the exchange rate, just like exchanging fiat currency at a traditional bank). Much of this research can be done online but sometimes the best thing to do is to walk up to the ATM machine in person and see what the rate is. Users need to keep in mind that this rate fluctuates all of the time.
When it’s time to feed money into an ATM machine, it’s exactly like doing it at a bank. Tell the machine how much money you’re depositing and feed it.
Here’s where using a Bitcoin ATM machine is different.
A Bitcoin wallet app is what generates a send and receive address allowing the user to exchange value with the machine. A wallet address is just a long string of characters that registers transactions on Bitcoin’s public ledger. Transferring wallet address details to an ATM machine is as simple as scanning a QR code on an app. The machine then instantly transfers cryptocurrency to the wallet once the transaction confirms on the blockchain.
NOTE: since using an ATM machine is an instant way to acquire Bitcoin, the fee for the transaction is usually higher. Charging a higher fee is how ATM machines earn their revenue.
Buy Bitcoin with a Credit Card
The best place to buy Bitcoin with a credit card is hands down Coinbase.com. Users can buy BTC and several other cryptocurrencies (Ethereum, Bitcoin Cash and Litecoin) instantly. Just like using an ATM machine, users do pay a premium on the fee in exchange for the convenience. While certain ATM machines may not ask for identification, Coinbase certainly will. The company may turn over the names of individuals to tax authorities at any time. The IRS is insisting big cryptocurrency companies disclose the nature of their business. That’s especially true now that Bitcoin is making headlines on a regular basis.
Upon completing this verification process, a user can register their credit card with Coinbase and make purchases up to a maximum limit. This maximum limit usually starts at or around $500 and only increases at Coinbase’s discretion. Users can’t do anything to increase that limit beyond making consistent purchases and building up their reputation as loyal customers.
Unlike other merchants, Coinbase displays their fee as a set amount rather than a percentage. The fee can change depending on the level of demand at the time of the transaction.
A word of caution here. Coinbase keeps credit card information on file, hiding the first few digits from public display. This means users don’t have to repeatedly enter credit card information on the site. It also means hackers accessing an account don’t need to know the credit card number in order to make a purchase. As such, it’s very important users secure their accounts using two-step verification and never keep assets on a merchant’s site they cannot afford to lose. More on securing accounts in a moment.
Buying Bitcoin Using Exchanges
A cryptocurrency exchange is similar to that of a foreign currency exchange or stock trading platform. Users can see both a buy and sell order book, a candle stick chart with accompanying analytics tools, and dialog boxes offering different buy and sell order types. Binance.com is by far the most popular exchange in the industry today. It provides more liquidity and a greater number of trading pairs than any other competitor.
For the majority of users, Binance will only work with digital assets, meaning it’s not possible to send the company fiat currency via wire transfer. Some exchanges like Kraken do allow that. Nevertheless, using Binance means depositing cryptocurrency on the site and making trades to acquire alternative coins.
Although Binance runs its operation in China, customers must still provide Know Your Client documentation. Upon acceptance, setting up two-step verification through a random number generating apps like Google Authenticator is a good idea.
Binance actually rewards users with higher withdrawal limits as an incentive to complete higher, more detailed levels of verification. The maximum an individual can withdraw from the site at any given time is two full bitcoins.
Again, anybody using exchanges to trade digital assets needs to be wary of keeping those assets on the Binance platform. All cryptocurrency websites in the business of holding onto assets for customers are vulnerable to hackers. With no central authority or customer support team empowering the individual user to recover stolen assets in the event of a hack, it’s better to be safe than sorry and protect digital assets proactively.
Buying Larger Amounts of Bitcoin
Enthusiasts hoping to buy cryptocurrency in large amounts have two main options. Hooking up a direct debit through a bank account, or using a custodial service that enables users to buy hundreds of thousands or millions of dollars’ worth of cryptocurrency in a single transaction. Since the average user reading this won’t be spending millions of dollars, registering a bank account is the more likely option.
Most exchanges offering to take deposits from a bank account will require name, address and telephone information. They will also need personal identification, bank account and routing numbers, and most likely a void cheque.
Bank transfers usually require 3 to 5 business days to post, which means it’s not a way to get Bitcoin instantly. In some cases using an Interac electronic transfer may be sufficient for users who need convenience. However, Interac doesn’t take transfers that amount to more than a few hundred dollars, so anyone looking to convert say a little more than $2,000 will probably have to use a bank account.
Keep in mind that banks and credit card companies are constantly trying to avoid accepting cryptocurrency-related requests, so exchanges offering direct debit options will often change their payment provider. This means users may need to upload their personal information to new payment providers on a regular basis in order to maintain access to their direct deposit option.
Those looking to buy cryptocurrency in the millions need to look to something like Coinbase Custody. Coinbase Custody serves institutional investors. It’s the big time. The platform only caters to accredited investors, meaning those with a net worth of at least $1 million USD. The average retail investor won’t ever need custodial services.
Securing Bitcoin after Buying
Securing Bitcoin after making a purchase of it is a must. Remember, there’s nobody to complain to when cryptocurrency gets stolen. Sure, calling the authorities is an option for filing a complaint. However, a police department can’t demand that a user receive Bitcoin or any other compensation from a public blockchain nobody owns.
The best way to secure Bitcoin is to keep private keys and wallet addresses offline when they are not in use. A simple, cheap way to do this is to print off one’s private key (a private key is a digital signature represented by a string of characters) on paper and store it somewhere safe.
The other option is to invest in a hardware cryptocurrency wallet. A hardware wallet is essentially a USB key that a user can plug into a computer. A publicly available software application allows users to view the contents of their hardware wallet on a computer. Transferring digital assets into and out of the wallet occurs the same way it does on a website. The difference is that the cryptocurrency stays on the USB key. When it’s not plugged in, a hacker can’t get to it. That means no matter which major website gets hacked, the user’s cryptocurrency is safe. Keep in mind, every website mentioned in this post has been hacked.
Trezor and Ledger Nano S of the two most popular brand names in the hardware wallet industry. Both provide the user with a 12 or 24-word password that protects the private keys. On top of that, both products allow users to add a Pin number to the mix. It’s also possible to store many different types of cryptocurrency on a hardware key. This means users aren’t limiting themselves to just Bitcoin.
Stealing digital assets off of a hardware key without knowing the private key or PIN information is impossible. Keep in mind knowing a wallet address is not enough. A wallet address is simply a way for two people to exchange value. If a user can’t access a wallet, they can’t steal anything.
Everybody’s Buying In
There it is. The best ways to buy Bitcoin. Relative to 2008, there are many viable options. Find out what yours is, and experience the real world value of the blockchain. You have to! Even U.S. Senators are coming around to Bitcoin for goodness sake. The time to join the party is now!