Entering the Bitcoin World – How To Purchase Bitcoin

Buying Bitcoins safely requires some research and due diligence. While the process is relatively simple, finding a safe, reliable seller can be a bit more difficult.

bitcoin imageIs Bitcoin Unregulated?

Even though bitcoin is currently unregulated, many sites that sell Bitcoin follow federal regulations, such as “know your customer” and “anti-money laundering” which can lead to a somewhat lengthy setup process, but it is definitely worth the time it takes if you want to be assured of dealing with a reputable company to make your purchase.

Reliable Places To Buy Bitcoin

Many people get started buying Bitcoin by using some well known sites such as Quoine, Coinbase and Expresscoin, to name a few. 

(We have an updated where to buy bitcoin with a credit card article too.)

These sites provide a (relatively) easy process for anyone to start purchasing Bitcoin, but they don’t support “trading” between users such as what you will find with “cryptocurrency exchanges” such as Cryptsy.com, Bittrex.com, Bleutrade.com, and others.

Cryptsy, Bittrex, and Bleutrade (among others) are “cryptocurrency exchanges” where you can send your newly purchased Bitcoin(s) and use them to purchase other kinds of cryptocurrency/alt coins (such as Litecoin, Dogecoin, Blackcoin, et al).

It should be noted that there are some cryptocurrency exchanges (such as Cryptsy) that do support the purchase of Bitcoin directly with Dollars (you will need a “verified” account), but many trading exchanges do not, so it is possible (once you have acquired some Bitcoin or a portion thereof) to trade your virtual currencies anonymously – you just need to supply an email address when setting up your account.  See this article about the Bleutrade Cryptocurrency Trading Exchange.

How Does It Work?

A buyer creates an account and in the process a virtual wallet is created for them on the site.  Once that is completed the buyer arranges for transfer of funds to the site for purchasing bitcoin. The exact process depends on the individual website/business itself.

Many people just connect their personal bank account (such as what people have been doing for years with Paypal) and once their identity is confirmed they can then make a purchase of however many Bitcoins (or portion of a Bitcoin) they desire.  Most sites will start you off with a limit though.

mt gox fail image

image source: Mashable.com

Is It Safe?

Even reputable exchanges are not without some dangers in these relatively early days of digital currency.

The first and largest Bitcoin trading exchange Mt. Gox filed for bankruptcy because the exchange’s servers were hacked and they lost over 850,000 of their customer’s bitcoins.

Mt. Gox was not an isolated incident as other cryptocurrency trading exchanges have been hacked and funds stolen, but the sources mentioned above (Quoine, Coinbase, and Expresscoin) are actually set up quite a bit differently than Mt. Gox was in that much stronger customer (and funds) protection is in place, and you can’t buy and sell your Bitcoin(s) directly with other people. – you can only do so with the website/business itself.

What Can I Use To Purchase Bitcoin From These Sites?

Depending on what website/business you decide to use to make your initial purchase of Bitcoin the money can come from cash, credit/debit cards, personal checks, PayPal, ACH money transfers directly from your bank account, and even money orders. Which sources a buyer can use depends on the site he chooses.

What To Watch Out For

According to Coindesk, some of these sites avoid using credit cards or PayPal because transactions can be reversed quickly and easily. In addition, some traditional banks, fearing potential illicit activity, are not (yet) digital currency friendly, and have been known to close accounts simply at the mention of bitcoin.

Again, research is key here. Know what sources of money the site your are dealing with accepts and whether or not your bank is friendly to this burgeoning marketplace.

localbitcoins.com image

It is possible to buy bitcoins with cash by finding a seller via sites like LocalBitcoins.com

Any Other Options To Purchase Bitcoins?

Buyers interested in a different option, can purchase bitcoin directly from other people, either in person or online using a website such as Local Bitcoins.

According to CNN Money this method can be risky, so buyers should take care to research their seller and only meet only in public places, and.

One must also take care to not make an initial purchase for a large amount as this might be construed by law enforcement as an illicit activity, such as illegal gambling or the purchase of illegal drugs.

However you choose to enter the world of digital currency, research is key. Be sure to know the current exchange rates as well as the reputation of your seller and your bank’s rules regarding bitcoin.  As more businesses begin to accept digital currency, these concerns will fade, and the Bitcoin market will become easier to navigate.

Article Written By: Kirsten Maki

Sources:
CNN money: www.money.cnn/infographic/technology/

Bitcoin FAQ: https://bitcoin.org/en/faq

Coindesk: www.coindesk.com/information/how-can-i-buy-bitcoin/

How To Buy Bitcoin – A Video

Editors Note:  In the interest of our reader’s education we have included below a Video that talks about How To Buy Bitcoin.

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One Response to “Entering the Bitcoin World – How To Purchase Bitcoin”

  1. I really appreciate and thank you for such a compilation of data for newbies like me – for bitcoin let’s earn!

    Reply

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