How to buy Bitcoins?
Get a Bitcoin Wallet
The first and foremost thing you need on your journey to buying Bitcoins, is a wallet. Like normal money needs a wallet to hold it, Bitcoins need Bitcoin specific wallets to hold them.
What is a Bitcoin Wallet? A Bitcoin wallet is a program that helps you send and receive Bitcoins. Bitcoin Wallets also auto-generates a Bitcoin address which, when receiving money, acts as your personal address.
There are two types of Bitcoin Wallets; online and offline. When buying little amounts of Bitcoin, any trusted software wallets will do - whether mobile or desktop based. These are online wallets.
When transferring bigger amounts of Bitcoin, you should use an offline wallet or, in other words, paper or hardware wallets. This eliminates the risk of someone stealing your money; unless they are holding your physical and real wallet.
You will need your Bitcoin address in the future so, after picking your preferred Bitcoin Wallet copy your address.
The next step after getting you Wallet and address is to figure out the amount of money you are prepared to invest.
As Bitcoin is one of the riskiest assets, you shouldn't invest more than you are willing to lose. If you are a beginner and this is your first time buying Bitcoin, think your decision through and only invest an amount that you can afford to lose.
Remember: you can buy less than one Bitcoin. Since it is a digital currency, one Bitcoin can be split up to 8 decimal points meaning that you can even buy 1/100 of a Bitcoin.
Choosing the amount of money that you will invest in Bitcoin will lead you to the next step.
Choosing a Bitcoin exchange is hard and confusing work as each has their own rules, payment methods, fees and other factors.
There are six things you need to look out for when choosing an exchange:-
1. Do they accept users from your country?
Bitcoin is a worldwide currency but not all exchanges accept users from around the world.
2. Do they accept your preferred payment method?
A majority of exchanges accept all available payment methods but some strictly only accept wire transfers.
Payment methods such as credit cards and PayPal may have higher fees as you are allowed to ask for your money back, which in turn puts the exchange at risk.
3. What are the transaction fees?
The three types of fees are; deposit, transaction and withdrawal fees. Each is different and can impact what you get.
4. The exchange rate
Some have low fees but high exchange rates, this means that the fees are embedded in the exchange rate.
5. Know your buying limit
Your payment method and identity verification level will determine your buying limit. Due to their low limits, dome exchanges will not allow you to buy big amounts of Bitcoins.
The reputation of an exchange is just as important as everything else on this list. Choose an exchange with a good and trustworthy name and reputation.
Brokers vs. Trading Platforms
The difference between brokers and trading platforms is minimal;
Trading platforms are the cheapest and easiest way to get Bitcoins as they connect buyers and sellers automatically. Buyers buy from sellers who place sell orders on the site and the platform takes a small fee out of the transaction. Trading platforms have a slight learning curve and can confuse an inexperienced user with technical terms like 'stop loss'.
Brokers, on the other hand, are sites that allow you to buy Bitcoins at a predetermined price - effectively making the process faster and easier. Although being simpler, brokers are more expensive than trading platforms.
If you're buying extremely large amounts of Bitcoins, there are specific Trading Platforms, Brokers and Exchanges for such transactions.
The differences between trading platforms and brokers are small and you should choose the company that has the best reputation, most attractive fees and that will make the process as hassle free as possible.
Buying the Bitcoins
Once you know the amount you want to invest and have chosen an exchange, its time to buy your Bitcoins. Many exchanges have a Know Your Customer (KYC) process which will come up during the sign up.
The more mainstream that Bitcoin becomes, the more that strict rules and regulations created by the government force exchanges to request information such as an ID, proof of residence and proof of income - all part of the KYC process.
After the registration and identity verification, you can finally purchase your Bitcoin.
It is highly advised that after a transaction is complete, you move your Bitcoins to a personal Wallet.
Removing your Bitcoins from the Exchange
Keeping your money on the exchange means that it is the exchange that owns the money; not you. By keeping your money on the exchange you risk losing it should the exchange be hacked, or become insolvent - this has happened with exchanges like BTC-e, Bitfinex and MT.Gox.
To get your Bitcoins out of the exchange, simply withdraw them to your Bitcoin address and once they are securely in your Wallet, you can confidently say that you have successfully purchased your first Bitcoins!
Some people prefer to bypass exchanges and buy Bitcoins directly from individuals. If you would also like to buy Bitcoins from an individual, use these three simple steps to identify a good candidate;
1. Verify Sellers Identity
To reduce and avoid the risk and possibilty of being scammed, try and verify the identity of the seller. While many people prefer to remain anonymous, others will offer the information.
2. Escrow Service
Using an escrow service will ensure that the seller will only get paid after you receive the Bitcoins. Never use permanent payment methods without getting your Bitcoin and, if an escrow service is not an option, meet in person and do the exchange then.
Buying Bitcoins from an individual involves a lot of risk and uncertainty and because of this most transactions require two or three confirmations before the deal is done.