Bitcoin trading attracts more and more potential investors and traders interested in alternatives to government-issued money and traditional commodities.
The main reason why cryptocurrencies are gaining such significant momentum is the potential for an enormous profit and investment return. With more companies and retailers accepting cryptocurrencies as payment methods that come with very few associated fees and great importance paid to identity protection, many believe cryptocurrencies will be the future of money.
Before entering into the exciting journey of trading crypto yourself, it’s important to research and know how to buy and store bitcoin. To help you out, here are specific steps and measures necessary before you can go and look where to buy bitcoin:
- Prepare Everything You Need For Trading
Before trading, it’s important that you’re well-prepared. The most important things to look into and prepare before you can proceed to buy your first bitcoin are:
- Secure internet connection
When it comes to the bitcoin business, having a secure internet connection is one of the most important factors. That’s why you should never use public networks to access your bitcoins. It’s best to use only home networks or networks whose connection you can trust—a connection that isn’t vulnerable and susceptible to security flaws. Also, ensure the firewall and antivirus software on the device you’ll use for bitcoin trading is robust and up-to-date.
- Bitcoin currency exchange account
A bitcoin currency exchange is a digital marketplace where the bitcoin trade takes place. To trade and hold bitcoin, you must set up your bitcoin currency exchange account.
- Personal identification documents
Although bitcoin trade is associated with anonymity, lawmakers worldwide are introducing tighter regulations, making it more difficult or illegal to buy and trade bitcoins without providing personal identification documents.
The documents you’ll need to open a bitcoin currency exchange account depend on the bitcoin exchange platform you want to use and how much you expect to trade. The types of documents you may be asked to provide can range from an ID or driver’s license to a recent utility bill, passport copy, birth certificate, and social security number. Expect to disclose more sensitive personal information when you trade in larger amounts. Make sure that your connection is protected against online hackers as this is crucial in keeping your crypto secure.
- Choose A Cryptocurrency Exchange
Now that you know the things you need to prepare, it’s time to choose among more than 200 different cryptocurrency exchanges. It’s good to start with one of the two most common types of exchanges and consider the following:
- Centralized cryptocurrency exchange
These cryptocurrency exchanges are easy to use since it has a trusted middle man or third party helping conduct and complete transactions, much like in a bank setup. Centralized exchange can be used to conduct trade from government-issued money to cryptocurrency and vice versa. Also, it’s possible to trade between two different cryptocurrencies, which secures more liquidity. Transactors can also use the exchange’s network of users to find trading partners.
If funds get lost through companies’ fault and inadequate security, insurance is applicable. But if your computer and your account got compromised by your negligence and insufficient safety measures and precaution, most likely, you won’t be able to claim insurance.
- Decentralized cryptocurrency exchange
A decentralized type of exchange is closer to the bitcoin philosophy of having no central point of control. It’s an alternative to centralized exchanges with no middle man present. But since there’s no middle man to offer security and monitor assets and transactions, they can be viewed as untrustworthy. Although not as popular as centralized exchanges, traders who want to have sole control and access to their cryptocurrencies choose them.
By having no central point of control and not running on private servers in a single location, decentralized exchanges have a significantly lower risk of theft than centralized exchanges. They’re also more anonymous and it has a system that can prevent price manipulation or faked trading volume.
- Connect A Payment Option To Your Bitcoin Exchange
You can choose to connect one of the traditional payment methods such as a credit card, bank transfer (ACH), debit cards, and PayPal. Still, it’s best not to use credit cards since cryptocurrencies can be volatile.
But before you can connect a payment option, you’ll need to download a bitcoin wallet first. This is where your bitcoins will be stored for future spending or trading. Analog to physical wallets, bitcoin wallets protect bitcoins by keeping relevant information, such as the secure private key you need to access bitcoin. Depending on what you need and prefer, you can choose between two of the most common types of wallet:
- Hot wallets
A hot bitcoin wallet is a digital wallet using computer programs to secure and access bitcoin. Although more straightforward to use and access, these wallets are more susceptible to hacker attacks and bitcoin theft. You’d want to use a hot wallet if you regularly trade or spend bitcoin on everyday purchases.
- Cold wallets
Cold bitcoin wallets are physical devices where you can store bitcoin addresses and private keys without being connected to the internet and are generally more secure. It’s highly recommended to use cold wallets if you plan to own bitcoin worth more than USD$100 and do high-volume trading.
The downside to cold wallets is they don’t accept as many cryptocurrencies as hot wallets do. Also, cold storage devices are not free, whereas hot wallets are.
- Safely Store And Secure Your Bitcoin
Although there are ways and instances when you can recover scammed and stolen bitcoins, often there’s nothing or little to do. That’s why it’s vital to store and secure your bitcoins safely:
- Always use safe internet connections
- Opt for a hardware wallet, a multi-signature wallet, or a cold storage wallet
- Diversify investments in multiple wallets
- Keep your personal device safe with up-to-date antivirus software
- Change your password regularly and make it strong
- Be aware of phishing scams via malicious ads and emails
- Alternative Ways of Buying Bitcoin
Here are other ways of buying bitcoins:
- Bitcoin ATMs
Bitcoin ATM is a kiosk where you can buy bitcoin by using cash or debit card.
- P2P exchanges
Peer-to-peer exchanges are platforms matching buyers and sellers without any financial institution holding funds during the trade.
Bitcoin Trade Enters Mainstream
Bitcoin trade has come a long way since the inception of the world-first digital currency in 2009. Back then and in the following years, it was surrounded with much distrust and delegitimizing opinions. Even though the doubt and general confusion are still here, the bitcoin trade is slowly but surely entering the mainstream. Since it’s much more regulated, bitcoin is a more widely accepted currency to pay for goods or services and trade for other cryptocurrencies and government-issued money.