Often new Bitcoin traders and investors simply don’t know where to start. It can be really confusing and daunting, because let’s face it, everything is online! If you are like me (before I got started), with being more comfortable with seeing and feeling goods before buying, then anything that requires online transaction is like “clear as mud”.
So, to make it easy for beginners, we outline in simple steps required to purchase your first bitcoin:
Choose and purchase a digital wallet. This is needed to store your bitcoin (just like a real physical wallet for cash).
Choose an online Bitcoin exchange. An exchange will sell bitcoin to you.
Open an account with the exchange
Make a deposit to your account at the exchange. Make sure the exchange can accept your trading fiat currency, for example USD, CAD, AUD, NZD or EUR.
Make your purchase!
Receive your bitcoin virtually in the form of a “receipt”.
Transfer your bitcoin to your wallet. (Do NOT leave it on the wallet of the exchange)
Wallet for Bitcoin and Cryptocurrencies
The first thing you need before you even start purchasing Bitcoin is to have a wallet. But Stop! Don’t go out and buy a Louis Vuitton wallet or purse! A wallet for digital currency behaves like a real wallet with storing your cash, but because the currency is digital, it is actually the software coding, that you are storing. So a nicely designed and shaped piece of leather that holds paper and metal coins is no longer of use. It is hardware and online (cloud) storage that is important to us!
Below we list the best Wallets to use, before you start buying bitcoin. There are pro’s and con’s to each. So if you want to read more about each wallet, click here for more info.
Bitcoin and Cryptocurrency Exchanges
Once you have a wallet, then you need to find an exchange. Bitcoin and cryptocurrency exchanges can be either centralized traditional exchanges like a bank that changes currency for you, or decentralized and peer to peer where there are no middlemen. By far the most popular are the centralized traditional online exchanges. They have lower fees, and generally are more liquid. As a result, this will give you more bang for your buck, lower fees to eat into your investment, better exchange rates due to higher volume, and greater stability because of higher liquidity.
Which Bitcoin and Cryptocurrency Exchanges are Honest?
By and large most legitimate Bitcoin and Cryptocurrency exchanges are honest in most aspects. But where, they ALL tend to “exaggerate”, is their volume of transactions – both in quantity and in dollar value. Why? Because, by nature investors will generally seek a bigger exchange than a smaller one. A larger exchange will have the perception of economies of scale, a better platform, less latency, better exchange rates and lower transaction costs. It can also be interpreted as safer, secure and trustworthy.
Exaggerating volumes is not directly a detriment to investor. But it does distort, who truly is leading the market with the most investors and traders.
Can any cryptocurrency exchange be trusted?
The infancy of the cryptocurrency world has led to an inordinate number of scams, ponzi schemes and of course hacks. Without proper controls, unguarded exchanges are open prey to cyber attacks. Hackers can easily gain control and steal bitcoin and cryptocurrencies stored online by the exchange. Investors and traders of the exchange, are undoubtedly angered when this occurs, because often they place their trust in the exchange to have the proper cyber security implemented.
But on top of that, the most common question asked, is whether the owners and operators of the exchange can they themselves be trusted. With a lack of transparency, and sometimes obtaining licensing and regulations in territories that have questionable controls, then it may be asked, what is the real business of the exchange! Is it a front of a scam?
One of the most common scams is therefore when an online exchange is in fact a front for con artists. Investors and traders deposit their money with the exchange with the intention of receiving bitcoin in return. But, they end up with NOTHING! Many scams abound on the internet. You may have seen emails highlighting how much bitcoin has risen, selling the glory of easy, quick and amazing profits! Do NOT click on the link for these emails, even if they appear to be supported by celebrities or trusted members of the public. These are scams. Email marketing for bitcoin that promises easy, quick, safe and incredible returns are to be avoided at all costs. Delete the emails and report them as scams.
Can a licensed and regulated cryptocurrency exchange be trusted?
This is a very good question. It’s has only been in the past few years that many countries and jurisdictions within countries like the US, are getting serious about regulating the industry. But as we know each country (and state or province) can and usually work independently of each other. Heck, even sometimes the local counties may even operate with their own set of rules and laws.
Having a license and regulated cryptocurrency exchange DOES NOT MEAN that it is safe and secure. Some jurisdictions, such as Malta, is a haven for exchanges for obtaining licenses. There are two main reasons for this. Firstly, the regulations and compliance requirements are less stringent. Secondly, there are tax concessions for the exchange when they make a profit.
Opening an account with a Bitcoin Exchange
Each Bitcoin Exchange will have a similar process when opening an account. Where they vary is the level of Know-Your-Client (KYC) information required to first establish the account.
In opening an account, they will ask for the basic information such as:
- Date of Birth
- Contact details – email address, contact number
Additional information that some exchanges require are:
- Social ID number
- Driver’s license
- Utility bills
- Bank or credit card statements
KYC information is extremely important for exchanges to ensure that Money Laundering, illegal activity, or tax evasion is not taking place.
If you intend to find an exchange with lax KYC requirements, then don’t read further on this site. We do NOT condone any illegal activity or tax evasion, and would prefer that you find those exchanges through other means.
For investors and traders who are law abiding, it is in your interest to use an exchange that has strong KYC requirements because this means they are meeting regulatory and compliance in a jurisdiction that wants to protect you.
Deposit at the Bitcoin and Cryptocurrency Exchange
If you have used online payments for the purchase of goods and services, then you will be familiar with process.
Many of the top bitcoin and cryptocurrency exchanges offer a wide variety of deposit methods. They will accept credit card, direct debit and credit, wire transfers, bank transfers, PayPal, other e-wallets and of course cryptocurrency transfers.
Depending on the type of deposit method used, it could take several minutes through to several days.
We strongly recommend using a deposit method that is common, tried and tested, even though it may incur a higher transaction cost. There is a reason why the common and reliable deposit method costs more, and that is because they invest in technology to ensure your money is safe, secure and protected from unwanted cyber attacks.
Storing Bitcoin and Crypto in a Wallet
Once you have purchased your bitcoin and cryptocurrency, move it to your wallet. Do NOT leave your cryptocurrency in the hands of the exchange. Although the occurrence of an exchange being hacked is becoming less prevalent, there is still a risk. Why be exposed to this risk, when you can easily move your cryptocurrency to your own wallet which is more safe and secure.
Exchanges that offer the service of storing cryptocurrency for you, park your money in a wallet that is connected to the internet. In other words, the wallet allows for easy access by you (because it is connected to the internet). But this also leaves your wallet also accessible by hackers!
That is not to say that if you move your crypto to your own wallet (that could also be connected to the internet) that you do not face the same exposure. However, I guarantee you, that a would be hacker would be more interested in hacking into an exchange that holds hundreds of millions of bitcoin than targeting you.