How can I buy Bitcoins?

How can I buy Bitcoins?

Now you’ve learn the basics and you ask yourself “How can I buy Bitcoins?”

This guide will tell you what you need to know to buy your first coin.

You can buy Bitcoins either exchanges, or directly from other people.

You can pay for them in many ways, from hard cash to credit and debit cards and to wire transfers, or even other cryptocurrencies.

In some countries, buying Bitcoins is easier than in others.

In the US, some websites offer purchases with credit cards like Coinbase and Circle. In the UK, Bittylicious, CoinCorner and Coinbase offer this service and accept 3D Secure-enable credit and debit cards on the Visa and Master networks.

 

YOU NEED TO GET A BITCOIN WALLET FIRST

You’ll need a place to store your Bitcoins, there is a word for it, ‘wallet’.

Depending how secure you want to be, different wallets will provide different security levels. Some are just like your everyday wallet, some are like a military base security.

You have 3 main options:

1) A software wallet stored on the hard drive of your computer

2) Web-base service

3) A ‘vault’ service that keeps your Bitcoins protected offline

Each of those has its vulnerabilities:

1) You need to backup your wallet regulary in case of your computer breaks down

2) Many hackers are trying attack those services and steal Bitcoins despite their employing vary security methods to prevent hacking and stealing.

 

EXCHANGES AND ONLINE WALLETS

As a newcomer, you will be flooded by a variety of exchanges and wallets competing for their business.

Bitcoin newcomers will find a variety of exchanges and wallets competing for their business.

Some are full-blown exchanges for institutional traders, while others are simpler wallet services with a more limited buying and selling capabilities.

Most exchanges and wallets will store amounts of digital and/or fiat currency for you, much like a regular bank account.

Exchanges and wallets are the best option if you want to engage in regular trading and speculation, don't need total anonymity and don't mind lengthy bureaucratic setup procedures that usually involve proof of identity and supplying detailed contact information.

This is the law in most countries and no regulated exchange can get around it, as any company interfacing with the current financial system must meet 'know your customer' (KYC) and anti-money laundering (AML) requirements.

The best exchange option also depends where you're located.

At this time, the largest full trading exchanges by volume are Bitfinex (Hong Kong), Bitstamp (US), BTC-e (unknown), Kraken (US), Huobi (China and Hong Kong), OKCoin (China) and BTCC (China).

Coinbase is a popular wallet and exchange service that will also trade US dollars and euros for bitcoins. The company has web and mobile apps. Originally a US-only service, Coinbase has recently opened up to a large number of European countries.

Circle offers users worldwide the chance to store, send, receive and exchange bitcoins. Currently only US citizens are able to link bank accounts to deposit funds, but credit and debit cards are also an option. Apps for iOS and Android are now available.

Wallet and bitcoin debit card provider Xapo has also recently entered the fray, offering deposits in fiat currency that are converted to bitcoin in your account.

Coinjar, an exchange and wallet provider, is the market leader in Australia. The Melbourne-based startup raised $500k AUD in venture funding and won an award at Finovate Europe 2015 for their user experience. The company released a debit card service, 'Coinjar Swipe' in February 2015.

Unocoin is an exchange aimed at the Indian market, allowing users to buy, sell and store bitcoin. Deposits can be made via any national online bank or through NEFT/RTGS. Registration with a PANcard is necessary to use the site's services.

Once you've set up your account, you'll probably need to link an existing bank account and arrange to move funds between it and your new exchange account via wire transfer. This usually entails a fee. Some exchanges allow you to make a deposit in person to their bank account (that is, via a human teller, not an ATM).

While people in most countries can transfer money to overseas accounts, fees are much higher and you may face more long delays changing your bitcoins back into fiat currency (should you still wish to do that).

If you are required to link a bank account to use the exchange, it may only admit banks from that country.

 

WARNING ABOUT EXCHANGES. WALLETS AND BANKS

Despite the proof of identity requirements, remember exchanges and wallets don't provide the same protections banks do.

For example, there is often no or limited insurance for your account if the exchange goes out of business or is robbed by hackers, such as was the case with the infamous failed exchange Mt Gox.

Bitcoin does not have legal status as a currency in most of the world, and authorities usually do not know how best to approach thefts. Some larger exchanges have replaced customer funds after a theft from the exchange itself, but at this stage they are not legally obliged to do so.

Further, if a theft from your personal wallet occurs due to a security or password lapse on your part, you do not have any guaranteed way to recover your funds.

Some existing banks see digital currency refuse to work with funds that were the result of digital currency transactions, citing regulatory uncertainty.

Check the list below first to see if your bank may have taken action against users in the past, and for your protection, open an account with a bank known to be more bitcoin-friendly.

Here are some banks known to discriminate against bitcoin.

 

Face-to-face, or 'over-the-counter' (OTC) trades

If you live in a city, prefer anonymity or don't want bank hassles, the easiest option to acquire bitcoin is to make a face-to-face trade with a local seller.

LocalBitcoins is the primary site where such transactions are arranged and prices negotiated. The site also provides an escrow service as an added layer of protection for both parties.

There are security considerations for both buyers and sellers, especially if the trade is a sizeable one. Always meet in a busy public place, don't meet in private homes and take all the precautions you'd usually taken when walking around with large amounts of cash.

Remember, if you're meeting face-to-face somewhere, you'll need to have access to your bitcoin wallet. Whether it's a smartphone, tablet or laptop, you'll also need live Internet access to confirm the transaction.

If one-on-one trades aren't your thing, check out Meetup.com to see if your area has a bitcoin meetup group, where you can do it all in a group setting and learn a lot from the other members in the process.

 

Depending on the seller, you may pay a premium of around 5-10% over the exchange price for a face-to-face trade, for convenience and privacy. A reputable trader will negotiate the price before a meeting, but many won't want to wait too long in case bitcoin's value takes a dramatic shift.

Some sellers may let you use a PayPal account to pay, though most prefer non-reversible cash for the reasons described earlier.

 

It's also wise to check first if such trades are legal in your local area. There is also a slight danger you'll arouse police suspicion by exchanging cash in a public place, if they think you're trading something more illicit.

 

An investment trust

If you don’t like the idea of having to buy and safely store a large quantity of bitcoins, you can turn to an investment trust, such as the Bitcoin Investment Trust (BIT) or The Winklevoss ETF.

This trust invests exclusively in bitcoins and uses a state-of-the-art protocol to store them safely on behalf of its shareholders. So far, the fund has been exclusively for serious (i.e.: very rich) investors, but is to open to all, hopefully by the fourth quarter of 2014.

The Bitcoin Superfund is a new option soon to launch in the UK.

 

Bitcoin ATMs

Though a relatively new concept, bitcoin ATMs are growing in number.

More are on the way, from a number of different vendors including BitAccessCoinOutletGenesis CoinLamassu and Robocoin.

Like a face-to-face exchange but with a machine, you insert your cash and either scan your mobile wallet QR code or receive a paper receipt with the codes necessary to load the bitcoins onto your wallet.

Exchange rates vary, and may be anything from 3% to 8% on top of a standard exchange price.

Keep up with the latest bitcoin ATM news and also view the locations worldwide on our bitcoin ATM map.

 

Conclusion

Buying bitcoins is not always as easy as newcomers expect. The good news is the number of options is increasing, and it is getting easier all the time.

 

Some may not even necessarily require a wallet or Internet access. Other ideas have included bitcoin debit cards, physical bitcoin 'coins' with a wallet value pre-loaded, and stored-value cards.

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