Buying Bitcoin: Tips, Tricks and Pitfalls to Avoid
How do you buy a virtual currency such as Bitcoin?
This is the question you are going to be asking yourself, especially if you have only just made the decision to try them. Surely, you will need to use either a credit card or have a PayPal account. Are you even able to buy them in a normal shop, are they regulated or can you find an authorised store to buy them from.
No matter how you buy Bitcoins, there are certain processes you must follow.
Get yourself a Bitcoin wallet
Since Bitcoin is electronic money, it can only be stored in a virtual wallet. This is the equivalent of the bank account that you open in a financial institution when you keep your money there. So having a wallet is the first step you must take before you buy any Bitcoins.
There are two options available to you. You can choose to have an online wallet that can only be accessed over the Internet from a computer or smart device. The other option is a wallet in the form of software that you store on your computer’s hard drive. It is important to know both of these solutions have their own strengths and weaknesses.
An online electronic wallet allows you to access your funds from anywhere in the world. However, although it can be protected by security systems, it is not 100% safe from hacking, especially if your security system is not reliable.
As for the wallet stored locally on a hard drive, it limits access to your funds. However, it is your responsibility to backup your wallet. If the hard drive is lost or breaks, you would lose all your Bitcoins. Backing your wallet up to an external hard drive, will allow you to restore your wallet from your original.
Exchange paper money for digital money
If you do not want to manage your own Bitcoin wallet, you can use an online service to manage your Bitcoins for you. This is a relatively recent option that rode the wave of the first Bitcoin bubble. Having a hosted wallet is highly recommended if you intend to use your Bitcoins for speculation or for regular trading.
Currently, there is considerable growth in the number of companies offering to exchange conventional currencies for Bitcoins. Their role is to take care of the storage for your money, just as a traditional bank would. They would become your Bitcoin wallet.
Having a company manage your wallet for you is much like the traditional banking system. However using a managed wallet, you lose some of the benefits of Bitcoins. The sign-up process for a managed account will immediately remove the guarantee of total anonymity which you benefit from the direct purchase of Bitcoins to your own wallet.
They also have long sign-up forms, proof of identity and detailed personal contact details. Most of these details are required by the local laws where you managed wallet is located.
Whichever wallet version you chose, once you have met all the requirements, your account will be set up. It may be linked to an existing bank account so that funds on it can be transferred to the new account by bank transfer.
The number of cryptocurrency exchange platforms has multiplied in recent years but, in order to avoid the many scam sites that abound, we advise you to use only the best known. We have selected 6 of them:
Depending on the country, you can even transfer your funds to Bitcoin accounts located abroad. The transfer fees are slightly higher in this case than a transfer to an internal account. In some cases, transactions can be made via a deposit at a shop or bank physical counter.
As soon as you feel the need, you can exchange your Bitcoins back into traditional currencies.