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    Home»Bitcoin»Buying Bitcoin Is Easier Than Ever. Read This Before Taking the Plunge
    Bitcoin

    Buying Bitcoin Is Easier Than Ever. Read This Before Taking the Plunge

    By Justin Jaffe, Julian Dossett
    February 20, 2022By Cnet.com6 Mins ReadNo Comments
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    Looking to buy bitcoin, ether or other cryptocurrencies? Here’s what to know.

    During and after this year’s Super Bowl, cryptocurrency ads have flooded TV screens. And with bitcoin attracting the attention of finance, art, seemingly-unrelated businesses and politicians and regulators, investors are also looking for ways to get in on the action.

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    If all this made you interested in buying bitcoin or any other cryptocurrency, take some time to learn the ropes first. The industry is complex, and you can lose money fast.

    Though in recent years it’s become much easier to invest in the industry, the long-term utility of bitcoin and its cohort of virtual tokens remains unproven. The largest cryptocurrencies by market cap have taken a nosedive since their peak in November 2021, underscoring the sharp volatility that’s typical in cryptocurrency markets. Due to this unpredictability, here’s a good rule of thumb: Don’t invest more than you’re ready to lose. 

    While buying bitcoin today can be as simple as logging into PayPal, where you buy cryptocurrency makes a difference. Some exchanges charge higher fees than others, and not every company selling crypto will transfer the assets to a crypto wallet under your own control. Instead, the company could hold it for you — which may or may not be something you want. 

    Here’s what to keep in mind before buying cryptocurrency for the first time.

    Where can I buy bitcoin?

    The two buying options for beginners are crypto exchanges, such as Coinbase, or money apps, such as PayPal or Venmo. Exchanges require more know-how than money apps, but often charge lower fees and give you more control over your assets. If you don’t want to take the time to learn about how to use a cryptocurrency exchange, you can just buy bitcoin on PayPal or Venmo.

    Cryptocurrency exchanges generally provide more options than a money app. For example, with exchanges like Coinbase and FTX US, you’ll be able to choose between dozens of crypto assets. However, more isn’t always better, as many of the lesser-known crypto assets are highly volatile and rife with scams. 

    With money apps like PayPal and Venmo, you can choose to buy only a few cryptocurrencies, such as bitcoin and ether. These assets are definitely more acceptable investments in the arena of mainstream finance — but remember that almost all crypto comes with significant risk.

    When deciding between a money app and an exchange, consider the type of wallet that will store your cryptocurrency. Crypto wallets are kept secure through private keys — usually a series of passwords. Money apps like PayPal generally keep your cryptocurrency in a “custodial” wallet, meaning the company controls the private keys that access it.

    Exchanges often let you move your crypto to your own “noncustodial” wallet, giving you more control over your assets.

    Can I play the bitcoin market without buying bitcoin?

    The financial industry continues to search for ways to integrate crypto into conventional investments. If you want exposure to the cryptocurrency market without immediately buying bitcoin, you have a couple options. 

    You can buy a bitcoin futures contract, which is an agreement to buy a set amount of bitcoin for a set price at a future date. You might also be able to buy into a few exchange-traded funds, or ETFs, that include bitcoin futures contracts.

    The first bitcoin futures ETF began trading on the New York Stock Exchange in November 2021. And Fidelity, one of the largest asset managers in the world, recently filed to list their own bitcoin ETF, but the proposal was rejected by the SEC in January 2022.

    If you’re interested, you could also invest in companies that are working with blockchain technology. Check out this article from CNET’s Farnoosh Torabi for more ideas on ways to research the industry or get involved without necessarily buying in. 

    Factors to consider when buying bitcoin

    Every cryptocurrency exchange has its own protocols and rules, some more stringent than others. Several require you to verify your identity before buying and selling. Some enforce strict buying limits, while others will take any amount of money you’re inclined to part with.

    All in all, cryptocurrency comes risk for investors. Compared to more traditional investment assets, such as stocks or property, crypto is extremely volatile. If you sell cryptocurrency, you’ll need to keep track of the amount, transaction date and other details because you’ll need that information for filing taxes. The environmental impact of bitcoin mining is also substantial.

    Do I need to verify my identity to buy bitcoin?

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    Most major exchanges require identification verification and sensitive financial information to establish and fund an account. Exchanges that are registered with regulators must confirm your identity before doing business in an effort to protect against fraud and money laundering. 

    If you plan to buy and sell bitcoin and other cryptocurrencies, expect to have to verify your identity. Coinbase, for example, requires identity verification of account holders in order to comply with Know Your Customer guidelines. Venmo has also begun to ask their users to verify their identities. 

    There’s always a danger whenever you provide personal and financial details to any entity, especially online. And if you get an email from a cryptocurrency exchange or a money app asking you to confirm your identity, make sure it’s from the company. Phishing emails that claim to be from known companies requesting personal information are common. 

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    What type of fees can I expect to pay?

    Though there are no inherent transaction costs with bitcoin, expect to pay a fee if you plan to buy, trade or sell cryptocurrency.

    Exchanges commonly charge for buying and selling. For example, Coinbase charges up to 0.5% per trade when you trade one cryptocurrency for another. If you buy or sell cryptocurrency with US Dollars, Coinbase charges another fee (unless you use ACH). 

    Fees are also common with money apps. For example, Venmo charges up to 2.3% per transaction for cryptocurrency purchases and sales. We should note that Venmo cryptocurrency transaction fees under $200 are changing to flat fees on March 21, 2022.

    How do I keep my bitcoin safe?

    When dealing with cryptocurrency, it’s important to prioritize security so you don’t fall victim to scams. If you’re trading small amounts, the wallet provided by your exchange or another software wallet (there are plenty to choose from) may offer enough security. But if you’re going big, you almost certainly want a hardware wallet, and there are a number of encryption-related options. 

    Whatever wallet type you choose, make sure you understand its technical requirements before transferring your cryptocurrency. Buying and selling cryptocurrency stored in hardware wallets is generally complicated and requires more steps than using a custodial wallet hosted on an exchange or a money app.

    And if you decide to use your own noncustodial wallet, you’ll have to set up and keep track of your private keys, which are usually a series of passwords you type into the wallet’s interface to gain access to the assets inside.

    If you created private keys when you set up your wallet, make sure to keep them in a safe place. If you lose the private keys, you lose what’s inside the wallet, as well. 

    Read full story on Cnet

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