With all the news about the ROI cryptocurrency can provide, you may be wondering how to safely buy bitcoin in the U.S.
While bitcoin—and other cryptocurrencies—are legal to purchase in the U.S., it certainly isn’t as easy as going to a bank. To purchase cryptocurrency, you have to have a digital wallet and an exchange account that needs to be set up online.
But digital money is a completely new concept that you may not be completely familiar with, and even though it’s secure, the process might seem daunting and stressful. But it doesn’t have to be. There are plenty of ways to safely buy bitcoin in the U.S. You just have to know how to do it.
In this article, you’ll learn how to Safely Buy Bitcoin in the U.S.
There is nothing at all illegal about buying bitcoin in the U.S. It is a legitimate form of currency and investment, even if not everyone accepts it as of yet.
What is Bitcoin?
Bitcoin is the most common and popular form of cryptocurrency. It was created in 2008 and first used as a digital form of payment in 2009.
Like all cryptocurrencies, bitcoin is a decentralized form of digital currency. This means there’s no administrator of the currency and no central bank that issues and regulates it.
Instead, bitcoin is exchanged on a peer-to-peer network, and doesn’t require an intermediary such as a payment processing company or traditional financial institution.
If you want to learn more about cryptocurrencies, keep reading:
Before You Buy Bitcoin, You Need to Know:
Buying bitcoin is not as complex if you understand the process and certain terms.
These are some important terms you need to understand before you buy bitcoin.
If you want to safely buy bitcoin in the U.S., you need to set up a cryptocurrency exchange account. Many platforms out there use Know Your Customer, or KYC, which ensures that advisers know detailed information about the risk tolerance, financial position, and investment knowledge of their clients.
In other words, KYC are guidelines to verify clients’ identity to avoid money laundering or other types of financial crimes.
If you wish to use a KYC platform to purchase bitcoin, you’ll need to provide personal identification documents.
While people may shy away from doing this because it goes against what bitcoin is about—anonymity—this only identifies that you have purchased bitcoin, not where you use it.
Still, if you desire, you can select a cryptocurrency exchange that will operate completely anonymously. In this case, you wouldn’t have to provide identifying information to set up your account or to purchase bitcoin.
Some of the more popular exchanges that do require KYC are Kraken, Coinbase, Binance U.S., and Gemini.
Types of digital wallets
If you want to know how to safely buy bitcoin, you should have a personal digital wallet. This is where you will store your bitcoins, and it’s very important that you have a safe and secure place to do so.
The two main wallets you can use are “hot” and “cold” wallets.
- A hot wallet is a completely digital wallet that can only be accessed on the internet.
- A cold wallet is a USB where your bitcoin can be stored. This is the more common type of cold wallets that most people use. They aren’t connected to the internet at all times, even though they are digital, so they are referred to as “cold.”
There are also cold wallets where you’ll print a QR code on paper. You’d only be able to access the wallet if you had that piece of paper—just like with physical cash.
Once you have made your purchase, you will be given a private key. This key allows you to access the public address on the blockchain that’s used for bitcoin. This is great because it provides you an added level of security that physical currency does not.
At the same time, there are also two major downsides. First, if you lose this information, there’s no way to retrieve your bitcoins. You will have lost your investment forever.
Second, if you give this private key to someone else—or if they obtain it somehow—then they’ll have free access to your bitcoins and can authorize any transaction with them.
Your public key will be available for anyone to view on the bitcoin blockchain. The transactions will be public, but your user information will not. This is how all bitcoin transactions are anonymous, even though every transaction is publicly recorded.
How to Safely Buy Bitcoin: step-by-step
1. Set up a digital wallet
You could simply use the wallet that the cryptocurrency exchange offers, but obtaining one from an outside source is preferable. The digital wallets created by specialized companies are more focused on best-in-class security, which is exactly what you need.
Some of the most popular digital cryptocurrency wallets are:
2. Choose an exchange platform
Here you’ll have to make your due diligence and find a cryptocurrency exchange that fits your needs. Some of the most popular are:
Recently, PayPal also began offering customers the option of purchasing bitcoin. You can either link a payment account through PayPal or use your current PayPal balance to purchase bitcoin. Know that PayPal abides by KYC, so you’ll need to provide identifying information.
3. Open an account
Now that you’ve decided where to buy bitcoin, you’ll need to set up your cryptocurrency exchange account. For this you will need a secure connection to the internet.
In this step, you’ll need to register using your email address and creating a password, although some services allow you to create an account by linking your Google or Facebook account.
Know that you may have to complete some extra steps depending on the service you choose, like receiving an authentication code in your smartphone.
4. Purchase bitcoin
Now you’re ready to join the cryptocurrency game. Remember that most—if not all—cryptocurrency exchange platforms will allow you to buy fractions of bitcoin (so if, for example, one bitcoin costs $50,000, you can just buy half of a bitcoin and pay $25,000).
The smallest fraction you can buy is one hundredth million of a bitcoin.
Either when you create your account or when you purchase, you’ll need to add a method of payment. Most exchange accounts will accept credit cards, debit cards, and wire transfers.
Note that all cryptocurrency exchanges will charge a fee for making this purchase. This is how they make their money. In a way, you can think of it as a credit card processing fee.
5. Provide personal information
If you are using a KYC service, you’ll have to complete this extra step. When you have to complete this step will vary depending on the exchange service you choose.
Either when you create your account or finish the purchase process, the service will ask you to provide identification documents or other personal details.
How to safely buy bitcoin: alternatives
There are a couple of alternative ways to buy bitcoins:
- Using a bitcoin ATM (find them here)
- Through P2P (peer-to-peer) exchange services (like Local Bitcoins)
Investing in bitcoin is not exactly like investing in a stock.
Tips to Invest in Bitcoin
Many experts will tell you not to look at the current price of bitcoin when making their decision to invest in it. They will tell you that you should instead look at the percentage of the total market capitalization that you are going to purchase. The closer that bitcoin gets to that market cap, then the greater the demand will be for people to sell bitcoin later on down the line.
Another tip is to set a price at which you would sell your bitcoin—before you actually buy it. This will give you a benchmark to track your investment.
Because bitcoin—and all cryptocurrency—can be so volatile, this clearly-set benchmark will allow you to stay on track and cash out when you make a nice profit.
If you don’t do this, you could easily be sucked into keeping your investment, hoping for it to explode in value. This can be quite dangerous, as bitcoin’s value has plummeted in a few short days at times in the past.
What to Consider Before Investing in Cryptocurrency
Now that you know how to safely buy bitcoin in the U.S., there are a few things to keep in mind.
First, it’s completely legal to do so. You shouldn’t worry that you’re doing anything illegal or that you’re doing anything even shady. Bitcoin is simply an alternative investment.
Second, and actually most important, bitcoin’s value can be quite volatile. While it can be extremely valuable, it can also drop in value very quickly.
In 2021, the value of bitcoin began at $29,388. As of mid-May, the price rose all the way to almost $50,000.
At the same time, that value was a 21% decrease from its all-time high not too long ago. In less than 24 hours in February of 2021, bitcoin lost $10,000 in value!
The fact that bitcoin isn’t regulated by a central bank is the reason why it’s so popular for so many people around the world. At the same time, it’s the main reason why it’s so volatile.
It’s very important to understand how risky the investment can be before investing in bitcoin or any other form of cryptocurrency.
Are You Ready to Safely Buy Bitcoin?
It’s simple to learn how to safely buy bitcoin in the U.S. The most popular cryptocurrency is becoming more mainstream every day, and it’s no longer even taboo for people to own it.
Bitcoin can be a great investment, but it’s also extremely volatile. As long as you follow the steps above to know how to safely buy bitcoin, and also know that it’s a volatile investment, then you’ll go into it with a better plan to try to make a solid return on investment.
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