How To Buy, Sell And Manage Bitcoin

 

Before Buying Bitcoin, Privacy and security are important issues for Bitcoin investors. Anyone who gains the private key to a public address on the Bitcoin blockchain can authorize transactions. Private keys should be kept secret—criminals may attempt to steal them if they learn of large holdings.

 

• Step 1: Choose A Crypto Trading Service Or Venue

The first step in buying bitcoin consists of choosing a crypto trading service or venue. Popular trading services and venues for purchasing cryptocurrencies include cryptocurrency exchanges, payment services, and brokerages. Signing up for a cryptocurrency exchange will enable you to buy, sell, and hold cryptocurrency.

 

• Step 2: Connect Your Exchange To A Payment Option

After you have chosen an exchange, you will need to gather your personal documents. Depending on the exchange, these may include pictures of a driver’s license or Social Security card, as well as information about your employer and source of funds.

How To Buy And Sell Bitcoin

The information you may need can depend on the region you live in and the laws within it. The process is largely the same as setting up a typical brokerage account.

After the exchange has verified your identity, you will be asked to connect a payment option. At most exchanges, you can connect your bank account directly or you can connect a debit or credit card.

See Also: How Do You Sell An NFT?

 

• Step 3: Place An Order

You can buy bitcoin (or other cryptocurrencies) after choosing an exchange and connecting a payment option. In recent years, cryptocurrency exchanges have slowly become more mainstream. They have grown significantly in terms of liquidity and their breadth of features.

 

• Step 4: Safe Storage

Bitcoin and cryptocurrency wallets are a place to store digital assets more securely. Having your crypto outside of the exchange and in your personal wallet ensures that only you have control over the private key to your funds.

 

How To Buy And Sell Bitcoin

How to Buy Bitcoin With PayPal

You can also buy bitcoin through the payment processor PayPal Holdings, Inc. (PYPL). There are two ways to purchase bitcoin using PayPal. The first and most convenient method is to purchase cryptocurrencies using your PayPal account that is connected to a payment mechanism, such as a debit card or bank account.

The second option is to use the balance of your PayPal account to purchase cryptocurrencies from a third-party provider. This option is not as convenient as the first because very few third-party sites allow users to purchase bitcoin using the PayPal button.

To set up a crypto account with PayPal, the following information is required: name, physical address, date of birth, and tax identification number.

See Also: Rise: Bitcoin Legal Defense Fund

How to Buy Bitcoin With a Credit Card

The process for purchasing bitcoin with credit cards is similar to the process for buying it with debit cards or through automated clearing house (ACH) transfers. You will need to enter your credit card details with the exchange or online trading firm and authorize the transaction.

In general, however, it is not a good idea to purchase bitcoin with credit cards. Credit card purchases can be expensive. Credit card issuers treat bitcoin purchases as cash advances and charge hefty fees and interest rates on such advances.

For example, American Express and Chase both count purchases of cryptocurrencies as cash advance transactions. Thus, if you purchase $100 worth of bitcoin using an American Express card, you will pay $10 (current cash advance fee for such transactions) plus an annual percentage fee of 25%. What’s more, the credit card company also limits you to $1,000 worth of bitcoin purchases per month.

 

How to Sell Bitcoin

You can sell bitcoin at the same venues where you purchased the cryptocurrency, such as cryptocurrency exchanges and P2P platforms. Typically, the process of selling bitcoin on these platforms is similar to the process for purchasing it.

For example, you may only be required to click a button and specify an order type (i.e., whether the cryptocurrency should be sold instantly at available prices or whether it should be sold to limit losses) to conduct the sale. Depending on the market composition and demand at the venue, the offering price for Bitcoin may vary. For example, exchanges in South Korea traded bitcoin at a so-called kimchi premium during the run-up in its prices back in 2018.

Cryptocurrency exchanges charge a percentage of the crypto sale amount as fees. For example, Coinbase charges 2.49% of the overall transaction amount as fees.

Exchanges generally have daily and monthly withdrawal limits. Therefore, cash from a large deal may not be immediately available to the trader. There are no limits on the amount of cryptocurrency you can sell, however.

 See Also: Non-Fungible Token (NFT): Everything You Need To Know

What Are the Most Popular Venues for Buying Bitcoin?

The most popular venues for buying bitcoins are cryptocurrency exchanges, brokerages (crypto and mainstream), and payment services like PayPal. You can also buy Bitcoin from P2P exchanges. For indirect ownership of bitcoin, you can invest in companies that hold the cryptocurrency on their balance sheets, such as Tesla, Inc. (TSLA) or MicroStrategy Incorporated (MSTR).

 

How Much Should I Expect to Pay to Purchase Bitcoin?

Typically, the price for purchasing bitcoin consists of a fee per trade plus the cost to convert a fiat currency (generally dollars) to bitcoin. (Cryptocurrency exchanges and payment services make money off of this conversion spread.)

The fee per trade is a function of the dollar amount of the trade. A higher trade amount will carry higher fees. The overall purchase cost also depends on features offered by the venue. For example, Robinhood does not currently offer an online wallet for storing bitcoin.

Therefore, you will need to budget for online wallet costs for your purchase.  You can also buy bitcoin at the following locations:

1. Through Bitcoin ATMs
2. Through online payment services like PayPal
3. At mainstream brokerages like Robinhood

FAQ:

• Is My Bitcoin Purchase Protected by SIPC?

Your bitcoin purchase is not protected by SIPC. At certain exchanges, like Coinbase, fiat balances in individual accounts may be FDIC-insured to the tune of $250,000 per account.

• Who gets the money when you buy Bitcoin?

Well, the majority of Bitcoin transactions are like any other financial transaction. A buyer and seller agree on a price and a trade is executed over an exchange. So our $50k investor buys that amount of bitcoins and the seller receives the $50k in the form of a cash deposit.

• How much Bitcoin should a beginner buy?

If you’re still afraid of investing in your first pieces of Bitcoin, follow this advice that will help you get started smoothly: Invest even $10 on any recommended cryptocurrency exchange or broker.

This way you’ll get started and you’ll have a much better understanding of what it is to be a cryptocurrency investor.

 

• Should I invest in Bitcoin now?

Investing in crypto assets is risky but also potentially extremely profitable. Cryptocurrency is a good investment if you want to gain direct exposure to the demand for digital currency, while a safer but potentially less lucrative alternative is to buy the stocks of companies with exposure to cryptocurrency.

How To Buy And Sell Bitcoin

SOURCES

Adam Hayes. (2022, March 08). How to Buy Bitcoin. https://www.investopedia.com/articles/investing/082914/basics-buying-and-investing-bitcoin.asp