Now there is no sign that the Bitcoin industry is going to slow down or decline. Given the trend towards increasing in bitcoin value, the average person still doesn't understand how to buy and sell this currency. Even if you don’t want to rely on this crypto trend, investing in Bitcoin can be a good strategy to diversify your savings and potentially to raise more capital.
Where to Buy Bitcoin
If you don’t know where to start buying bitcoin - you are at the right place. The vast number of bitcoin exchanges makes it challenging to pick the best options. In 2014 there were only six largest trading services, today we have more than two hundred. That’s why there is no surprise that people are becoming confused when it comes to buying bitcoins.
Below is a table that summarizes all the largest exchanges to buy and sell bitcoin. The sites are ranked according to such parameters as a fee, ease-of-use, available payment methods, and reputation. The last column, ‘reputation,' is based on user reviews found on different forums. The sites also differ by ways to deposit money. Some of them have several methods while others have only one.
Choose the Wallet Type
We believe that this step is one of the most important when it comes to acquiring Bitcoin. Finding a safe storage can be a difficult task considering the number of parameters to deal with. In fact, the most convenient web wallets are commonly the most insecure. Luckily there are a lot of other safe options to store your bitcoins.
In the table below you can choose the best alternative regarding safety, convenience, and cost. As a rule, the safest wallets are usually those where the private keys are kept hidden from the outside world.
Sign Up for a Bitcoin Wallet
Before acquiring Bitcoin, you have to download a Bitcoin wallet or install it on your smartphone. Then you have to fill out an online form with your details.
Before buying Bitcoin you have to submit a series of identification documents to the trading website. Depending on the requirements, such documents may include copies of your passport, utility bills, or selfies. Several years ago, when the industry just started rising, none of the sites asked for documents. Today, in 2017 almost every bitcoin exchange is required to do full KYC procedure to get protected from cyber attacks and money laundering.
Having said that, users should be careful when looking for trading sites without obligatory identification process.
Use Money to Buy Bitcoin
As soon as you sign up and have a wallet, you can use a traditional credit card or a bank transfer to buy your first bitcoin. Some trading companies like Coinbase have an option to connect your bank account to your Coinbase wallet which significantly facilitates the future transfers. The site also offers to buy bitcoins automatically at regular intervals. For example, if you want to buy $100 in bitcoin every month you can set up an automatic buy for that amount.
However, take into account that if you set up an auto-buy, you will not have control over the price of a bitcoin due to the market fluctuations. Another issue is that when you buy from trading firms rather than from Bitcoin exchanges, you can face delays when executing orders. Thus, for traders, it is more reasonable to buy directly on bitcoin exchange such as BitStamp. There you can trade with other users and avoid mediators. There is a higher liquidity and absolutely no problems when it comes to finding another person for a trade. The fee starts at 0,5% and goes down to 0.2% depending on the sum you have traded in the previous month.
Where is Bitcoin Stored?
Technically bitcoins are not stored in a wallet. They are not kept anywhere. Bitcoin balances are maintained using private and public keys which are the numbers linked through an encryption algorithm. The public key is like a bank account and can be compared with ATM PIN. It is aimed to be kept in secret and is used to verify bitcoin transactions.
Hot vs. Cold Wallets
You may have heard of hot and cold wallets. The easiest way to describe the difference between a cold and hot wallet is the following: unlike the cold wallets, hot ones are connected to the Internet. Most people who use cryptocurrency possess both cold and hot wallets as they are designed for different purposes.Today almost every bitcoin exchange is required to do full KYC procedure to get protected from cyber attacks and money laundering.
Hot wallets resemble checking accounts while cold wallets are more like savings accounts. When users want to have some assets to spend in the nearest future, they usually keep a certain sum of money in their hot wallets for buying things. At the same time, they can keep most of their digital assets in their cold wallets.
Hot wallets are designed to do transactions on the go. For example, smartphone, web and desktop wallets can be called “hot” wallets. On the other hand, cold wallets are not connected to the Internet, and all private keys are kept offline. That’s why people use the terms “offline” and “cold” interchangeably. Without an Internet connection, cold wallets are more secured from cyber attacks and are less vulnerable to data leakages.
Having that said, you can learn by yourself after testing several different places. Thus you can decide the most suitable service. As soon as you have tried all the options, you can make the right decision and choose your favorite site to purchase Bitcoin.