Hello Reader,
Last time we went through the various ways that you can get hold of some crypto currency and Bitcoin. In this article, I am going to take you through the most common method of getting bitcoins. Purchasing them with fiat currency!
Buying bitcoins can be harder than you might initially expect as the industry is still in it's fledgling years. However, there are still many different ways, so let's take a look at each of them in turn.
In person via a Bitcoin ATM
The absolute easiest way is to use a "Bitcoin ATM" machine. These work in a very similar way to the typical bank ATM / cash machine:
- Walk up to the machine
- Use the touchscreen to select "buy bitcoins"
- Scan your wallet app's QR code to give the machine your bitcoin address
- Insert your money into the machine
- Tada, bitcoins will appear in your wallet
But where do I actually find one?
You can find your nearest ATM using one of the many "ATM finder" websites available online. Try coinatmradar.com to get started.
What are the advantages?
Ease, speed and anonymity tend to be the main advantages. Plus it's a pretty cool experience.
What are the disadvantages?
They are only tend to be in major cities and charge really high fees so are far from the cheapest way to buy.
From another person using an online local service
Just like you can buy a sofa from a neighbour using craigslist or ebay, you can also buy bitcoins from regular people using an online matching service.The most popular service is localbitcoins.com and it works like this:
- Create an account
- Select a seller that you would like to buy from (making sure to choose one that is willing to sell as much as you wish to buy, with a high feedback rating)
- Read the sellers terms and check that you agree
- Enter how many you wish to buy
- Once the seller has agreed to sell, you will be given payment details. The most common form of payment is via bank transfer (using the faster payments service in the UK)
- Using your online banking, send the selected amount to the sellers bank account details
- Mark "payment sent" on the local bitcoins site
- Once your seller has received payment, you will typically receive your bitcoins in your local bitcoins wallet within a few hours
- Send your bitcoins from your local bitcoins wallet to your private wallet
What are the advantages?
Ease, speed and anonymity tend to be the main advantages.
What are the disadvantages?
Prices are typically higher than other methods (though cheaper than an ATM). Additionally, you need to trust a third party so be sure to thoroughly review their feedback before sending any money.
From an instant purchase site using a credit card or bank transfer
The fastest and most popular way to buy bitcoins online is using an instant purchasing site, popular options include coinbase.com, bittylicious.com, cex.io, xapo.com and bitbargain.co.uk.Let's use coinbase.com as an example given it's the most popular:
- Sign up for an account and complete the initial verification process
- Press "Buy / Sell"
- Select the crypto currency you wish to buy, Bitcoin in this case
- Select your payment method (credit card or bank account) or select "add payment method" to enter new details
- Enter the amount you wish to purchase up to your weekly limit
- Press "Buy instantly"
- Complete credit card security check if required
- Your coins should be available in your account immediately (though it may take a few days for your first purchase)
- Send your coins from your coinbase wallet to your private wallet using the "Send/Request" button
What are the advantages?
Speed and security tend to be the primary advantages. Coinbase is the largest player in the crypto currency market and has millions of customers.
What are the disadvantages?
The verification process can be slow and cumbersome. Additionally, buying through a credit card incurs significant fees (though typically cheaper than an ATM or local bitcoins). The initial weekly limits are low, but do rise with repeated use.
From a full crypto currency exchange
A crypto currency exchange is an online website which allows you to buy and sell crypto currencies at the market rate using a wide array of order types. They work just like stock exchanges by automatically matching up buyers to sellers. There are many exchanges, but the largest and most popular ones are kraken.com (EU), bitstamp.com (EU), gdax.com (US) and gemini.com (US).I'm from the EU, so I'm going to use kraken.com as an example:
- Register for an account, you will need to complete anti money laundering / know your client (AML / KYC) identify verification which is more onerous than with other methods but worth the effort
- Select "Funding" from the main dashboard
- Select "Deposit" and choose your currency. If sending from the UK, it's generally cheaper to send EUR via a SEPA bank transfer
- Use online banking to send a SEPA transfer to the details provided. Double check that they are correct and don't send more than your daily limit.
- Wait 2-3 working days for the transfer to be credited to your account
- Select "Trade" from the main dashboard
- Choose the "currency pair" that you wish to trade from the drop down menu at the top. In this case we want to exchange EUR for Bitcoins so we will select XBT/EUR (XBT is the currency code for bitcoin)
- Press "new order"
- Enter the about of bitcoin you wish to buy
- If you use a "market" order, you will buy at the latest available market spot rate. If you use a "limit" order, you can enter your desired price per bitcoin and the exchange will buy when the price hits it (if ever). In this simple example, we will buy at the market rate, so choose "market"
- Press "Buy XBT with EUR"
- Confirm the transaction
- Once the transaction has completed, the bitcoin will be visible on the "overview" tab, but you can view the status of the transaction on the "orders" tab at any time
- If you've finished buying, remember to withdraw your funds from the kraken wallet to your private wallet
What are the advantages?
Exchanges are tend to be some of the largest crypto currency entities and have been around for multiple years with millions of customers. They are therefore one of the safer methods, but bankruptcies do happen so remember to withdraw your coins (have a read about the disaster that was mtgox). The main advantage of crypto currency exchanges however is that they are by far the cheapest way to purchase and you can generally buy much larger amounts. You will typically only pay a relatively tiny fee and so will be able to acquire bitcoins for very close to market rate.
What are the disadvantages?
The two main disadvantages are the length of time it takes to get your funds to the exchange and the lengthy verification process that you are required to go through. Note however, that there is generally nothing nefarious about the verification process. Rather it is a mark of the exchanges legitimacy as it is a requirement of the various regulations that they are required to comply with.
So what do you recommend?
This depends on what I am trying to achieve:
- If I absolutely have to buy right now as I think the market is about to shoot up, I use coinbase.com and eat the fees.
- If the market is stable, I use a proper exchange with kraken, bitstamp and gemini being my favourites.
Closing remarks
So now you know how to create a wallet and fill it with bitcoins. But wait, young grasshopper! Before you dive into buying some (virtually) shiny new coins, make sure you have done the following:
- Setup a private wallet and fully understood how to operate it
- Checked and double checked that your computer is virus free
- Googled your banks policy on transfers to bitcoin sellers
- Setup 2 factor authentication on any exchanges or services you use
- Have at least performed a cursory read of the tax implications of using crypto currency in your country
Once you are ready to transfer the coins from whatever service you choose, withdraw them back to your private wallet. Remember, if you don't own the private keys you don't own the coins!
Assuming you're clear on all of the above, it's time to get on board the crypto train. If not, never fear, I'll be covering many of the remaining topics in a new post some time soon.
If you have any questions, please do get in touch via the comments for this thread. It would be fantastic to hear from you. I promise I don't bite and will happily answer your questions.
And that, as they say, is that.
Yours, X.
Sources
Content: Xexr.com
Image: Pixabay.com