How To Buy Bitcoin - Guide to Buying Bitcoins

Key Takeaways

• Bitcoin's maximum supply is 21 million BTC.
• Proper security measures are essential to keep Bitcoin safe in a cryptocurrency wallet.
• Traders can purchase Bitcoin on cryptocurrency exchanges like Redot or via more traditional payment means like in person.
• Based on control, Bitcoin storage could either be custodial or non-custodial.

Before You Buy Bitcoin

There are several questions you must answer before you buy your first digital assets. Where to buy it, how to buy it (payment methods), and how you will store it are three primary questions to set you on the course of your crypto journey.

1. Where to buy Bitcoin?

There are many centralized exchanges and decentralized exchanges where you can buy digital currencies, and the choice of which one to use depends on what criteria matter to you most. These exchanges differ in their offerings – enhanced security, unique user interface, low fees, and even the opportunity to speculate on the future price of your crypto assets. All these features hold different significance to different traders; hence your choice of where to buy Bitcoins will ultimately come down to which feature you value more.

2. Where will you store it?

After you have bought your cryptocurrency, the next question to answer is how to store it. Crypto newbies might not know, but both exchanges and external wallet providers are used for storing cryptocurrencies. Crypto custodians can be categorized based on several factors like their availability online, physical or computer-based, or on who controls the private keys. You can either use an exchange's inbuilt wallet or have digital wallets, either paper wallets, online wallets, trust wallets, or hardware wallets.

Not Your Keys, Not Your Bitcoin

The phrase “not your keys, not your Bitcoin” was coined to explain one of the key demerits of centralized cryptocurrency wallet providers. While centralized custodial wallets offer convenience and trust for traders in storing their crypto, some users seek decentralization. Private keys of users' accounts are usually managed by these wallets, and users only have to worry about their wallet credentials. Although these providers offer a trader the chance to access his wallet if his password is forgotten, a hack on the system means the private keys of multiple accounts are susceptible.

Identity Verification To Purchase Bitcoin

Some cryptocurrency exchanges will require you to fill in identity forms to aid Know Your Customer (KYC) and Anti Money Laundering (AML) reports to prevent money laundering and curb the activities of illegal businesses. However, it's important to note that the rules across various exchanges differ, and some exchanges, such as Redot, require only email to sign up and start trading.

Type of Wallets to Store Bitcoins

Hot Wallets vs. Cold Wallets

Bitcoin wallets can be distinguished by their connection to the internet. The hot wallet is a type of Bitcoin wallet connected to the internet. It is easy to set up, and transactions can be sent faster from it than its counterpart.

On the other hand, the cold wallet stores private keys perpetually offline, providing users with much higher safety measures. Of course, this wallet is only as safe as the user makes it by storing its private keys backup.

It is good practice for crypto users with large holdings to keep most of their cryptocurrencies in a cold wallet as it helps them keep their holdings safer from hackers.

Custodial vs Non-Custodial

Crypto wallets can be distinguished based on who holds the private key. In custodial wallets, the custodian is responsible for keeping the private key of the wallet on behalf of the user; non-custodial wallets, on the other hand, offer self-custody of the private keys to the user who is then fully responsible for his own holdings.

Desktop vs. Mobile

Software wallets can either be present on mobile devices or desktops. Mobile wallets are more accessible due to how handy smartphones are, but desktop browsers or apps are also a convenient method of storing one's coins.

How to Buy Bitcoin

What are the steps to take before buying your first Bitcoin? Here is a four-stage process to make your Bitcoin purchase successful and stress-free.

1. Choose an Exchange

Before buying Bitcoin, you need to decide which cryptocurrency exchange you want to use. Will you go for a centralized exchange or a decentralized one? If centralized, how do you know which one to choose from the hundreds of exchanges in the crypto market? There are a few things to note before choosing an exchange. They include;

Security

With the prevalent hacks in the cryptocurrency space, security is not a factor worth compromising when choosing a trading platform. What security measures do the exchanges on your radar employ? 2FA? U2F? You can also read reports from blockchain security platforms like Certik and Perkchield on the strength of the exchanges' security.

Fees

Another thing to consider before choosing an exchange is trading fees. Although Bitcoin has a minimum network fee, centralised exchanges often collect extra fees for facilitating Bitcoin transactions. Mind you, not every exchange necessarily charges trading fees, in fact, there are exchanges that pay commissions to people who trade.

Available Coins

The number of coins available on an exchange is a determining factor in if you should use it. For new traders, overexposure to a lot of coins can leave you confused. It's a good practice to stick to the already-popular cryptocurrencies like Bitcoin and Ethereum to avoid spreading yourself thin. Decentralised exchanges can offer a wider array of cryptocurrencies and tokens, but these coins could be illegitimate, and some of them are easily rug-pulled.

2. Fund Your Account

Funding your crypto exchange is usually straightforward but can vary from one exchange to another. Due to AML requirements, some centralised exchanges mandate Know-Your-Customer processes. This helps you seamlessly send fiat from your bank account to the crypto exchange without any issues.

It is worth noting that funding your account is not the same as buying a cryptocurrency. The latter is made possible by the amount you fund your account with. Some exchanges also offer the ability to purchase crypto seamlessly and instantly with debit/credit card.

3. Place an Order

After you have funded your account, the next thing is to buy your Bitcoin. There are basically two types of crypto orders: market order and limit order. A market order allows you to buy Bitcoin at the spot price, while a limit order allows you to tweak to the price you want the buy order to be triggered.

4. Practice Safe Storage

When you have bought your Bitcoin, the next thing to do is keep it safe. Most centralized cryptocurrency exchanges have automatic wallets, so you can skip this step, but if you prefer hardware wallets or you have bought a large amount of crypto, you might decide to send your crypto from the exchange to your self-hosted wallet. It is important to back up your private keys, though, as your crypto cannot be recovered if you lose access to your decentralized wallet. You should also read exchange reviews on review platforms to understand other users' experience using the wallet provider.

How to Buy Bitcoins With PayPal

Payment processors like PayPal are known methods of payment for purchasing Bitcoin, although its major flaw is that the crypto cannot be transferred to another wallet. PayPal's fees are flexible, with a flat transaction fee of $0.5 on transactions below $25.

PayPal might be a good payment option for a new investor who wants to dabble in cryptocurrencies without leaving the TradFi Environment.

How do You Buy Bitcoins With a Credit Card

Like debit cards, credit cards can be used to make instant purchases of Bitcoin on several exchanges. The card providers still view this purchase as an advance, so some extra fees might be incurred.

How to Get Bitcoins With a Bank Account

You can buy Bitcoin from your bank account. If you have some cash in it, you can initiate a payment method using fiat deposit on exchange, and after putting down some necessary details, your money will be transferred to the exchange.

Alternative Ways to Buy Bitcoin

Apart from these, several other unconventional funding methods to buy Bitcoins include the Bitcoin ATM, Peer-to-Peer transactions, or OTC marketplaces.

Bitcoin ATMs

Like your normal bank ATMs, Bitcoin ATM allows traders to buy and sell cryptocurrencies any time of the year. And no, you cannot withdraw Bitcoins; rather, when you sell Bitcoins, you get cash.

P2P Exchanges

Peer-to-Peer transactions occur in the cryptocurrency market. Here, a buyer and seller usually interact with an escrow service to facilitate transactions. P2P offers a wide array of flexibility, and many of them do not charge transaction fees. However, one needs to be very careful not to fall for a scam.

Mainstream Brokerages

Crypto platforms or brokerage services have been increasing in recent years. Many of them are location-based due to the fragmented regulatory framework and different levels of identity verification documents across various countries, but a few of them have cross-border relevance and are known across defined boundaries.

How to Purchase Bitcoins With Redot Exchange

Create Account

To create an account on Redot follow these steps.

1. On the home page, click on Start Trading.

2. You will be redirected to the registration page. On the registration page, please input your email and any chosen password (The password must be a combination of numbers and letters which at least contain 8 characters, one UPPER CASE letter, and one number).

3. Once you do, accept the terms and conditions. Then, the Create Account tab will turn clickable. Click it and go to the next stage.

4. Check your email for the verification link. (It is only valid for 10 minutes).

5. After clicking the link sent to your email, the following page will appear to show you have successfully registered.

That's it - you're set to start trading!

Fund Account

• After the login, Click Wallet on the left sidebar menu.

• Click on Deposit/ Withdraw. Select Bitcoin from the list.

• You can deposit through a crypto transfer or a credit/debit card purchase.

• After you have made your deposit, check the progress under Funds transfers.

Withdraw Bitcoins to Your Wallet

• Select the withdrawal tab on the screen

• Select Bitcoin on the left sidebar.

• Input the withdrawal address.

• Input the amount

• Click on the link sent to your email to confirm the transaction.

• Voila, the transaction is confirmed.

How To Invest In Bitcoin

Buy from a spot market

You can buy Bitcoin from a spot market, either from an exchange or a peer-to-peer platform. Buying Bitcoin from the spot market requires little strategy but adequate knowledge of the market timing, as a wrong timing can leave you buying the top and needing years to recover.

Buy Bitcoin futures

Another strategic way to invest in Bitcoin is to buy Bitcoin futures. Bitcoin futures are a good way to predict the future price of the cryptocurrency. Although it can yield good returns when used with leverage, it requires a high level of knowledge and understanding of market timing.

Buy or Sell Bitcoin Options

Buying Bitcoin options is a low-cost approach to investing in Bitcoin. With only the premium at stake, buyers can minimize their losses if the price of Bitcoin does not go as planned.

Selling, on the other hand, involves writing options contracts. The seller pockets the premium and can still keep his Bitcoin if the price doesn't reach the strike price.

Mining

A contrarian investment in Bitcoin can involve investing in Bitcoin mining rigs. Although the entry cost is huge, as the space is crowded and recurring energy bills could be a burden, investing in mining could pay off in a longer run, especially if done on the scale.

Final Thoughts

An advancement in technology has given rise to different payment services for buying Bitcoins, from online payment methods to payment apps. Newbie traders can learn how to buy Bitcoin online in just a few minutes, and this has given rise to wider crypto adoption. You can run a comparison of payment methods and simple interfaces to ease you on your crypto journey.

FAQ

Сan I Buy a Portion Of a Bitcoin

Yes. You can buy fractions of Bitcoin. The smallest Bitcoin unit is called Satoshi and represents 0.00000001 BTC.

How Many Bitcoins Can I Get for My Money

It depends on the market price of Bitcoin and the amount you're willing to invest.

What Happens When You Buy Bitcoin?

It depends on what you intend it for. If you want to save for the long term, you can just keep Bitcoin in your wallet, but if you want to trade with the coins, you're better off keeping them in the exchange reading account. You usually cannot buy Bitcoin from wallet providers, but they can come in handy when you want to store them.

What Is the Safest Way to Buy Bitcoin?

There is no best way to buy Bitcoins safely. Whether through Peer trading platforms or through exchanges, the important thing to note before you buy a Bitcoin is the platform's track record in keeping crypto safe. If they are relatively new, you can check their trading volume, security features and perhaps check third-party review sites to understand how strong or weak the security infrastructure is.

*This communication is intended as strictly informational, and nothing herein constitutes an offer or a recommendation to buy, sell, or retain any specific product, security or investment, or to utilise or refrain from utilising any particular service. The use of the products and services referred to herein may be subject to certain limitations in specific jurisdictions. This communication does not constitute and shall under no circumstances be deemed to constitute investment advice. This communication is not intended to constitute a public offering of securities within the meaning of any applicable legislation.