How to Buy & Sell Bitcoin 2020 – Complete Beginners Guide

Bitcoin is the world’s first and still de-facto cryptocurrency of choice. In what started as a digital token worth just a fraction of a cent has since grown to a multi-billion dollar asset class boasting an all-time high of $20,000. Although Bitcoin is yet to regain its previous heights, many believe that the cryptocurrency will play a major role in the future of money.

As such, if you’re looking to join the cryptocurrency revolution by investing in Bitcoin, be sure to read our guide on How to Buy, Sell & Trade Bitcoin in 2020. Within it, not only will we show you how you can buy Bitcoin from a third-party exchange, but we’ll also give you the ins and outs of what the cryptocurrency is and how it works.

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What is Bitcoin?

In its most basic form, Bitcoin is a digital currency that allows you to send and receive funds without requiring a third-party. Launched in 2009, it is the world’s first cryptocurrency, and still the largest in terms of market capitalization. Back in the early days of Bitcoin, you could purchase a coin for less than one cent. Fast forward to late 2017 and the price of Bitcoin hit an all-time high of $20,000. As such, those who backed Bitcoin in the early days are now potentially very wealthy people.

So what sets Bitcoin apart from traditional currencies like the dollar? Well, first and foremost, it is a digital currency, meaning that it only exists in the virtual form. The underlying technology that supports Bitcoin is also revolutionary. Known as the blockchain, the technology operates in a decentralized nature, meaning that no single person or authority controls the system. Moreover, the cryptocurrency is not backed by any central bank or nation-state. Instead, Bitcoin transactions are confirmed by “miners”.

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Anyone can be a miner, as you simply need to connect specialist hardware into your computer. In doing so, the hardware helps solves cryptic calculations, which how the system remains decentralized. In return, miners have a chance of earning Bitcoin that are minted by the system every 10 minutes.  In total, there is about 18 million Bitcoin currently in circulation, and this will be capped at 21 million in the year 2140.

Although Bitcoin was designed to be used as a digital currency to compete with the status quo of the dollar, pound, yen, euro, and other fiat currencies, most people buy it as a speculative investment. In other words, people are buying Bitcoin in the hope that it will be worth significantly more in the future. While there is no guarantee that Bitcoin will ever regain its previous all-time highs, there is much to like about the technology, and the many problems that it solves.

What are the Pros and Cons of Buying Bitcoin?

Where to Buy Bitcoin Online?

Looking to join the cryptocurrency and blockchain technology revolution by buying Bitcoin for the very first time? There are now hundreds of exchanges operating in the online space that allow you to do this with real-world payment methods such as a debit/credit card, bank transfer, and even an e-wallet like PayPal. However, no two Bitcoin exchanges are the same, meaning that you need to make some considerations as to whether or not the platform is right for your individual needs.

Below we’ve outlined 7 crucial things that you need to consider prior to buying Bitcoin from an exchange.

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7 Things to Consider When Buying Bitcoin:

1. Choose Your Deposit Method

The first thing that you need to look out for when choosing a Bitcoin exchange is what payment methods it supports. If you’re buying Bitcoin for the very first time, then you’ll want an exchange that accepts everyday payment methods. Heaps of platforms now allow you to deposit funds with a debit/credit card (Visa, MasterCard, Amex, etc.), a bank account, and in some cases – an e-wallet like PayPal, Skrill or Neteller.

The fees associated with debit/credit deposits can be costly, so if you’re already holding an alternative cryptocurrency like Ethereum or Ripple, it might be worth choosing a crypto-to-crypto exchange. In doing so, you simply need to make an exchange between the two cryptocurrencies.

2. KYC

Although much of the Bitcoin industry is still largely unregulated, third-party exchanges that accept fiat currency deposits and withdrawals must identify its users. This is known as KYC, which stands for Know Your Customer.

In a nutshell, if you do intend on using a debit/credit card, bank account, or any other fiat currency payment method, then you’ll need to upload a copy of your government-issued ID, and in some cases, a proof of address. A passport or driver’s license is sufficient for the ID side, and a bank statement or utility bill to prove your address.

3. Buying Bitcoin vs Trading CFDs

If you’re a cryptocurrency ‘purist’, then you’ll likely want to buy Bitcoin in its truest form. By this, we mean actually buying and storing Bitcoin in a private wallet. In doing so, you’ll have 100% control and ownership over your Bitcoin, free from the reach of third-party actors.

However, owning and storing Bitcoin independently can not only be costly (if using a debit/credit card for example), but you always stand the risk of having your private wallet hacked. As such, if you’re merely looking to invest in Bitcoin with the hope it increases in value in the long-run, then it might be worth considering a CFD via a regulated CFD brokers listed here.

You can read more about how Bitcoin Trading works here.

4. Do You Need a Wallet?

If you don’t like the sound of investing in a Bitcoin CFD and thus – you want to own it 100% outright, then you will need to make some considerations about storage. While the cryptocurrency exchange that you go with will usually allow you to store the Bitcoin in their online wallet, we would strongly advise you to withdraw the coins to a private wallet.

The reason for this is that were the platform to get hacked, you stand the chance of losing your Bitcoin. Instead, go with an exchange that allows you to withdraw your Bitcoin to a private wallet, and store the coins yourself.

You can compare the best bitcoin wallets in this guide here.

5. Compare Fees

Before you even think about depositing funds at a third-party Bitcoin exchange, you need to spend some time assessing fees. First and foremost, you will likely need to pay a fee to use an everyday payment method when buying Bitcoin. Debit/credit cards can cost as much as 4-5% per transaction, although bank transfers are much cheaper (but slower).

You also need to assess what the platform charges in trading fees. This will be charged in addition to your deposit fees, and the amount is charged as a percentage of the transaction. For example, if a 1% trading fee is charged and you decide to buy $1,000 worth of Bitcoin, you’ll pay a trading fee of $10. Ultimately, you should choose an exchange with the lowest deposit and trading fees.

6. Regulation and Security

Next up on your Bitcoin exchange checklist should be that of regulation and security. Regarding the former, most third-party Bitcoin exchanges operate unregulated, so you need to tread with extreme caution if making a purchase from an unregulated source. As such, you should stick with platforms that hold at least one license from a well-known financial body.

In terms of security, you should ensure that the exchange offers a number of safeguards to keep your funds safe. For example, two-factor authentication (2FA) will ensure that you can only access your account when you confirm a unique code that is sent to your phone.

7. How Easy is it to Use the Platform?

Finally, you also need to assess whether or not the Bitcoin exchange is suited for beginners. Some platforms actually target their services to experienced traders, which is likely to leave you feeling somewhat intimidated. Instead, try to stick with exchanges that make it a seamless process to buy and sell Bitcoin regardless of experience.

Where Can I Store my Bitcoin?

Once you have taken the plunge and bought your first ever Bitcoin, you then need to start thinking about how you intend on keeping it safe. To do this, you’ll need to obtain a private wallet. On the one hand, you’ll want to choose a wallet with top-grade security features. This will ensure that your funds remain safe at all times.

On the other hand, you also need to think about convenience. In other words, if you’re looking to move your Bitcoin on a regular basis, you’ll want to choose a storage method that allows you to do this with ease.

With that being said, Bitcoin wallets now come in a range of shapes and sizes, each of which come with varying levels of security and convenience. Read through the four main wallet types that we have listed below to determine the right storage method for you.

1. Web Wallet

When you purchase Bitcoin from a third-party cryptocurrency exchange, the funds will initially be placed in your web wallet. This means that you can access the funds simply by logging into the exchange via a traditional web or mobile browser. Sounds convenient, right? However, it is crucial to note that web wallets offer the lowest levels of security on your funds.

Ultimately, if the exchange platform that you are storing the Bitcoin at experienced a hack, or worse – went out of business, you stand the very real risk of losing your funds. As such, you should only consider the web wallet option for small amounts.

2. Mobile Wallet

As the name suggests, a mobile wallet allows you to store your Bitcoin on your mobile phone. You will need to download and install a digital wallet app to your phone, and then transfer the funds over from the exchange in which you bought them.

Mobile wallets actually offer a good combination of both security and convenience. Regarding the former, not only would a bad actor need to gain access to your phone (bypassing the screen lock), but they would also need your Bitcoin wallet PIN. In terms of convenience, you can easily send, receive, and spend your Bitcoin at the click of a button via your mobile wallet.

3. Desktop Wallet

If you are happy to trade-in convenience in return for enhanced security, then it might be worth considering a desktop wallet. You will need to download the wallet software onto your desktop device, and then transfer the funds from your chosen exchange. Desktop wallets allow you to install a range of security controls, with 2FA the most preferable.

This is where a code is sent to your mobile phone every time access to the wallet is required. Without it, access won’t be possible (unless you provide your passphrase). On the flip side, desktop wallets are slightly less convenient when it comes to transferring funds out, as you will need to be sat at the device in which the wallet is installed.

4. Hardware Wallet

If your number one priority is security, then it really doesn’t get more secure than a hardware wallet. This is an ideal option if you are looking to buy Bitcoin and hold it in the long-run, rather than move the coins on a regular basis. In a nutshell, you will be storing the funds on a hardware wallet that is never connected to the internet. This removes the threats of a remote hack.

Moreover, if you do decide to transfer the funds, you would need to enter the PIN that you chose when you first set it up. As such, even if the device was stolen, access wouldn’t be possible. If it was stolen, lost, or damaged – you could recover the Bitcoin remotely by using your passphrase on an alternative device.

Where can you Spend Your Bitcoin?

Bitcoin is one of few cryptocurrencies that actually allows you to spend your balance in the real world. While support for Bitcoin is still minute in comparison to fiat currencies, more and more merchants are beginning to install the required technology to accept it. In terms of major retailers, this includes the likes of AT&T, Overstock.com, PayPal, and Shopify.

Interestingly, Japan is now home to more than 200,000 individual stores that allow you to pay for goods and services with Bitcoin in-person. In order to complete the purchase, you would be required to scan the merchant’s QR code via your Bitcoin mobile wallet, and then confirm the transaction. As soon as you do, the purchase is complete!

If you’re looking for a store that accepts Bitcoin nearby, it might be worth checking out the CoinMap platform. By entering your current location, the platform will give you a full list of Bitcoin-supporting merchants!

How to Sell Bitcoin?

If you’re looking to sell your Bitcoin, then you will again need to use a third-party exchange. However, the process will depend on whether you are storing Bitcoin in a private wallet, or if you went with the CFD option. If it’s the former, then you will first need to transfer your Bitcoin back into your chosen cryptocurrency exchange. Once the funds arrive, you will then need to exchange your Bitcoin for a fiat currency such as the US dollar – which will attract a trading fee. Once you do, you’ll then be able to withdraw the funds back to your bank account, after paying a withdrawal fee.

Alternatively, if your Bitcoin investment is held in the form of a CFD, then the selling process is much more convenient. As the investment is already available within your CFD account, you can sell your Bitcoin at the click of a button. Once you do, you are then free to withdraw the funds back to your bank account.

Conclusion

In conclusion, there can be no denying that Bitcoin is a revolutionary technology. For the first time ever, people can now send and receive funds without requiring a third-party middleman, and regardless of where the two transacting parties are based, transfers take just 10 minutes. However, we would argue that most people buy Bitcoin as an investment, with the hope that the cryptocurrency will be worth much more in the future.

If this sounds like you, then you should now have a firm grasp of what you need to do to buy Bitcoin. As we have discussed throughout our guide, there are now hundreds of exchange platforms that allow you to do this. With that said, you need to ensure that the exchange meets your needs prior to opening an account. Whether this is with respect to payment methods, KYC, user-friendliness, or fees – do your homework before taking the plunge!

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