I know you’re here to understand how to buy a bitcoin using your local currency like dollars or pounds or euros or rupees. You are in a right place to find out where to buy and how to buy bitcoin. Let’s get started…
To Start with — This article is purely for educational and informational purpose and not to encourage you to buy Cryptocurrency. You should always do your own research (DYOR), make your own decisions (MYOD) and be comfortable with the risks before making an investment. Investing in volatile cryptocurrencies involves an element of risk: prices of these currencies go up and down, (often in a manner that seems irrational).
This 10 baby steps guide would help you get started with your journey to cryptocurrency world
Any which way, if you have decided to invest in bitcoin(or any cryptocurrency) — you’ll have following questions in mind.
- What’s a reliable place to buy a Bitcoin?
- What’s the process associated and options available?
- Wallets, Deposits and Purchase
- Advanced users: A slightly better way.
Where can I buy my Bitcoin
Coinbase — This is the place where you can convert your fiat currency(US Dollars) into Bitcoin or other Cryptocurrencies.
I don’t work for Coinbase. I just find them convenient. There are a lot of alternative options but Coinbase is the recommend one!
Always — always pay your taxes and never try to evade them!
Bitcoin is not just the one to buy, there are other blockchain based currencies, which are different and in some terms superior to just being a currency. Few of which are Ethereum, Ripple, Monero. Litecoin is like silver if Bitcoin is Gold.
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Coinbase provides you ways to buy
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
What’s the process of buying on Coinbase?
- Signup on Coinbase
- Verify your identity
- Choose a payment method
Which payment method to choose?
Credit/Debit Card obviously has higher fees associated, so you might not want to go for that
Among Paypal and Bank Account, I would suggest you to choose Bank Account if you are in the US
Factors here are fees associated and limits allowed to transfer as you can see in the image here.
After linking Bank Account, What’s next?
Coinbase lets you to deposit money either to it’s USD Wallet or You can buy BTC/ETH/LTC directly. Depositing money to Coinbase takes some time i.e 4–5 business days. This is because of the ACH transfer from bank to Coinbase. This delay is one of the factors to be considered while depositing as you need to think of it and see if you want to deposit or buy directly — we’ll discuss about this as we go ahead. Before that what’s these wallets?
What’s these wallets?
Coinbase provides you with 4 types of wallets. Essentially each one of them is store specific currency.
- USD Wallet: To Deposit US Dollars, Store USD when you sell any of your currency. Transactions from USD Wallet to buy any of those coins is Instant.
- BTC Wallet: Your bitcoins will show up here after you buy using USD.
- ETH Wallet: This is the place where your Ethereum will be stored
- LTC Wallet: This is the wallet for storing your Litecoins.
Deposit to USD Wallet or Direct Buy
Depositing money from your Bank to USD wallet takes about 4-5 days. You can refer this article to understand why it takes so long. Meanwhile a lot can happen! These cryptocurrencies are so volatile that price may shoot up even 100% in 4 days. When I mentioned volatile, it’s equally possible that it may go down 100% or more in just 4 days! So it’s all about your own research about what exactly these coins are, what’s the right price — price of these coins mostly depends on supply vs demand as well as some technological breakthroughs and partnerships.
Even a direct buy takes 4 days for your bought currency to reflect in your wallet. The very same article explains it. It’s because of ACH transfer and bank takes 3–5 business days to process the request and send your money to Coinbase. However, you get a locked-in price for the selected coin if you buy directly!
So, if you think price of a Bitcoin or an Ethereum is right at this point of time, and you think if the price might go up in next 2–3 days and are sure that it will not go down in next 4–5 days — Then go for direct buying of the currency you are interested in.
So when you click on big blue button “Buy Ethereum” — you will lock your price to the current value on coinbase and acquire it. It shows on your ETH Wallet as Pending with the amount of Ethereum bought. In this case it would show as 13.82657643 ETH — arriving on Saturday 6/24/2017 and shows $5000 irrespective of current price.
This way, if the demand for ETH increases and the price soars to $450 by 6/24, you would have already made profits by then. Same is the case with losses — if it goes to $200 by 6/24, you still got 13.82657643 but valued at $200.
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When to deposit to USD Wallet?
If you think price is high or irrational at current point or you have not decided which coin to buy or not ready to invest, then deposit your money to USD Wallet, so that once you makea decision — it would be an instant buy of either of those coins from USD wallet.
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Advanced Users: There’s a slightly better way
What’s that — Trading via an Exchange — GDAX
GDAX: Global Digital Asset Exchange (formerly Coinbase Exchange) is a crypto currency exchange owned by coinbase. Advantage here is you can login to GDAX with your coinbase credentials.
An exchange, if you are into stocks before would understand easily — place where people buy and sell stuff. In this case, it’s BTC, ETH and LTC — GDAX is a place where people trade these 3 currencies.
GDAX allows you to deposit money in 4 ways
- Through ACH transfer (takes 4 days)
- Through wire transfer ($10 fee, available same day if deposited before 1PM PDT)
- From coinbase account, could be BTC/ETH/LTC/USD. (Instant & Free)
- From another address(wallets stored in another exchanges or elsewhere)
So what’s the key here?
Once you’ve your money deposited to GDAX, you can buy a currency (say ETH) at Market Price or Limit Price. Exchange is a place where someone sells a unit of currency and someone buys it. If both of them agree on a price, that will be the market price for that moment.
Eg: If someone wants to sell an ETH at $300 and there’s someone who want’s to buy at $299. Sale will never happen unless one of them compromises or a new guy places another order at $300. So one cannot sell unless someone buys at price he quotes and vice versa.
Market Price
In above example, you say “Buy at Market Price” you will be allotted the ETH at minimum sell order placed by someone i.e. $300 — So you’re called a Taker because someone made an offer and you took it.
Limit Price
If you’ve said “Buy at Limit Price” and set a Limit Price to $299.23; you will be allotted an ETH when someone sells an ETH for the amount you’ve asked for i.e. $299.23 — In this case, you’re called Maker because you made an offer and someone took it.
Same applies for Sell too.
Still, What’s the advantage here?
On GDAX, transaction fee for Maker is 0% and transaction fee for taker is between 0.10% and 0.25% for BTC books and 0.10% and 0.30% for ETH books. So you save transaction fee, if you understand how the trading works on an exchange and how to place a limit order for buy or sell. We’ll have an article soon on how to do this for beginners.
Lastly, if you found this article useful, feel free to leave at a tip of any amount at these addresses:
- BTC: 1P8ZCe4vUBCzd4eVCvfXYtYJ9HP1gbe38f
- ETH: 0xc347018DbfCFFBa91872635AC4CFc0521359A420
While you learn to buy cryptocurrency, you also need to be responsible and pay taxes on cryptocurrency trading. Here’s an article which tries to reduce confusion and provide clarifications on taxes on gains from crypto trading.
How to file taxes on Cryptocurrency gains using BearTax_There’s a pressing need for crypto-traders to calculate their gains from Bitcoin across Coinbase, GDAX, Gemini…_hackernoon.com
BearTax - Your Crypto Tax Assistant_Simple to use platform for crypto traders to import transactions, calculate gains and file taxes._bear.tax