Cryptocurrency continues to dominate many media stories, thanks to the attention it receives in the investment and financial sectors.
Nevertheless, many individuals lack the knowledge needed to purchase Bitcoin. Fortunately, carrying out this task remains easier than many imagine, and now is the time to buy. What do individuals need to know about this process?
Important Points
The first step in buying cryptocurrency involves downloading a wallet, as this is where users store bitcoins for spending or trading. Credit cards, bank transfers or ACH, and debit cards all serve as ways to purchase cryptocurrency for storage in this wallet.
Before buying cryptocurrency, most platforms authorized in the United States require the buyer to provide a photo ID along with additional information to ensure the funds won't be used illegally. Sadly, criminals use cryptocurrency in money laundering operations or to cheat on taxes.
Price volatility remains a concern with this new asset class, and investors must recognize a great deal of uncertainty exists regarding the legal and tax status of cryptocurrency in America and around the world. The following are five things every investor needs to know when buying bitcoin in the United States from xCoins.
Digital Wallets
Before conducting transactions using Bitcoin, men and women must get a cryptocurrency wallet. This currency isn't physical, thus the wallet isn't physical either. Users store and use the currency virtually and maintain their balances using public and private keys. These keys consist of letters and numbers linked through the mathematical encryption algorithm responsible for creating them.
The network refers to the location where transactions occur as the public key. Users deposit and withdraw funds from this location, and the key serves as the user's digital signature when it appears on the blockchain ledger. Many compare the public key to a person's username on a social media platform.
In contrast, the private key functions as the user's password, and this key allows the user to buy, sell, or trade the cryptocurrency in the wallet. Users must safeguard private keys to prevent unauthorized use of the funds, and men and women often choose to protect this information by encrypting their wallet with a strong password. In addition, quite a few benefit from the cold storage option which allows them to store their wallet offline.
Don't use the bitcoin wallet for long-term storage. Users need to hold their bitcoins or the key in a secure wallet and should select a wallet making use of a multi-signature facility for added security.
Personal Documents
Before buying or selling cryptocurrency, users must verify their identity when registering their digital wallets. The United States Securities and Exchange Commission put this measure into place to reduce the risk of the funds being used in money laundering operations. Users must provide several personal documents, such as their driver's license and their social security number.
Security
When doing anything with a cryptocurrency wallet, users must make certain they utilize a secure internet connection. Insecure or public Wi-Fi networks make the wallet more susceptible to being compromised and the funds lost. Once lost, the owner lacks any legal recourse to recoup them.
Purchasing Bitcoin
Individuals find possession of a cryptocurrency wallet allows them to purchase the currency using a debit or credit card or with the help of a bank transfer or ACH. Once the transaction completes, the bitcoins enter the wallet. Users must learn the permitted payment methods in the jurisdiction where the transaction takes place and the exchange selected for the transaction. Upon selecting an exchange, visit the cryptocurrency interface and click on the appropriate tab. The user then chooses the currency along with the payment method used.
Each exchange sets its own terms and conditions, thus users must learn the benefits and drawbacks of paying with each method on that exchange. For example, most users find credit and debit cards remain the preferred method of payment for their ease of use. However, individuals must provide identification when paying by credit or debit card, and many exchanges impose higher fees with this option. Bank transfers come with lower fees, but transferring funds takes longer in most cases.
Cryptocurrency Exchanges
After selecting a cryptocurrency wallet, individuals must determine where they want to buy the currency. Many options exist for this purpose, and quite a few decide to make use of an online marketplace known as an exchange. These marketplaces function much like stock exchanges and connect the buyer directly to the cryptocurrency marketplace. Upon arrival at this marketplace, the user trades conventional currencies for cryptocurrencies.
Users must recognize the cryptocurrency exchange differs from the cryptocurrency wallet. The exchange functions much like a foreign exchange market and serves as a place to exchange fiat currency for cryptocurrency. Exchanges offer wallet capabilities, but this isn't their primary function. Users need a secure wallet to store their funds, and exchanges are only designed to store small amounts of cryptocurrency for short periods of time.
After purchasing the funds, the user must transfer them to a secure wallet. Remember to use a multi-signature facility to safeguard your investment. Use due diligence when selecting an exchange or wallet, so your funds aren't lost forever.
Additional Points
Other options exist for those looking to purchase cryptocurrency. Bitcoin ATMs, for example, function like in-person bitcoin exchanges. An individual inserts cash into a machine and purchases cryptocurrency before transferring it to their secure digital wallet. In the past few years, these machines began popping up in many locations.
Peer-to-peer exchanges provide another means for purchasing cryptocurrency. Men and women who prefer a direct connection when spending their money appreciate having this option, as they choose who they work with when buying and selling their digital currency, and there is less anonymity. Users find they can shop around for the best deal when using this method.
Consider all options when buying or selling cryptocurrency. Individuals trade funds using a peer-to-peer network, and no centralized authority oversees the transactions. The responsibility of researching different wallets, exchanges, and more falls on the user. Do your homework carefully for this reason.