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How to Buy Bitcoin in the US
Luis Clark
The availability of cryptocurrency in the United States is at an all-time high, which is no surprise as the US accounts for almost one-fourth of the world’s crypto trading. Purchasing Bitcoin may appear difficult at first, but trading in this leading cryptocurrency involves simply an account with a service or an exchange, as well as adequate and safe storage methods.
Customers for Bitcoin require a cryptocurrency exchange account, authentication documentation such as cryptographic keys, a secure internet connection, a method of payment, and a personal wallet separate from the exchange account. Bank accounts, debit cards, and credit cards are all acceptable ways of Bitcoin payment, and Bitcoin may be obtained at dedicated Bitcoin ATMs.
It is important to understand digital assets, how they work, and the benefits they provide compared to traditional currency. This allows for making better decisions regarding buying Bitcoin. It also includes knowledge of where and how to sell Bitcoin.
In this post we’ll take a look at how to buy bitcoin in us.
What is Bitcoin?
Bitcoin (BTC) is a form of digital currency created as an alternative virtual payment method that exists outside the jurisdiction of any governing body or individual, eliminating the need for the involvement of any third parties. This form of decentralization affords security and autonomy to users not available with a conventional bank account.
Bitcoin transactions require miners, who validate the transaction and allow individuals to buy Bitcoin through multiple cryptocurrency exchanges. Some Bitcoin is, therefore, charged by these miners as a fee and this acts as an incentive for them.
Satoshi Nakamoto was an anonymous developer who first brought Bitcoin onto the public platform in 2009. Since then, Bitcoin has grown to become one of the most popular digital assets in the world. The growing popularity of Bitcoin has led to the development of multiple other crypto assets such as Ethereum, Binance, and Cardano.
How Does Bitcoin Work?
The whole Bitcoin network exists entirely in the public domain, making it possible for anyone with access to an internet connection to participate in and trade Bitcoin.
Bitcoin utilizes the peer-to-peer network. Here the individuals or enterprises involved in using Bitcoin do not have to look to third parties to carry out and validate their transactions. Users connected to the internet can link with this network and access its public record with the history of previous Bitcoin transactions.
As all participants have a record of the transactions, they are verified through a consensus system. The majority of the computers on the network must agree on the validity of a transaction being carried out. One of the consensus systems used is the Proof-of-Work mechanism.
Blockchain
Blockchain technology refers to the public ledger of recorded transactions. It can also be called distributed ledger technology. Through this system, transactions are verified, recorded, and organized in a fixed and transparent way. Transparency is essential for a system that operates on a no-trust policy.
A blockchain consists of digital blocks that are linked together. Blocks are chunks of Bitcoin transaction data that are recorded in chronological order. The process of mining and validation of crypto exchanges are separate from the blockchain and can be carried out even if new blocks are not added to the chain.
Conversely, an increase in the number of transactions is not proportional to the number of blocks added to the chain. This payment system is designed to allow the addition of new blocks to the blockchain every 10 minutes.
With the blockchain’s public platform, users can check and access the transaction data as recorded. This reduces the possibility of double payment with online payments.
Bitcoin Mining
Mining is the process through which new Bitcoins are added to the blockchain. It is vital for the confirmation of recent transactions, and it is also necessary for the recording of transaction data on the blockchain and its development. Miners have to validate and monitor transactions before they can be completed.
The mining process is carried out with the help of powerful computer hardware solving complex mathematical equations. The computer that will get to solve the equation first will have access to the subsequent block of Bitcoin.
Mining is complicated and costly, and success is not always guaranteed. Miners are, hence, rewarded for their efforts. Mining rewards consist of the transaction fee and the block subsidy. The transaction fees provide an incentive to miners to continue validating transactions despite the difficulty of the process.
Fiat Currency
Fiat currency represents the traditional form of money that the government issues. This payment system derives its value from the supply and demand of the currency and the faith of the general public in the issuing authority, and not through getting backed by any commodity.
Advantages of Fiat Money
One of the most significant benefits of conventional currency is the stability of its value. Cryptocurrencies are far more volatile and subject to more sudden changes in their value compared to standard cash.
It is also regulated through government entities providing security via regulations and strict guidelines. This mode of monetary exchange is also more cost-effective to perform and has greater acceptance in the larger market.
Disadvantages of Fiat Money
Payments through conventional cash can suffer delays, and a simple bank transfer can take days compared to a much faster exchange of cryptocurrency. The value of the money can also depreciate over time due to inflation.
Political unrest and government instability can severely damage the currency’s value as the government decides how much it is worth. The government can also easily track how much money is spent, where and by whom, compromising the user’s privacy.
There are also limits on the amount of money that can be withdrawn from a bank account simultaneously and the fee for an international bank transfer can also be very high.
What is a Bitcoin Wallet?
A crypto wallet is a virtual program executed on computers or a specialized device that allows the user to keep their stash of crypto secure and send and receive tokens. A crypto wallet itself cannot hold Bitcoin. Instead, the wallet secures the cryptographic keys. The keys provide proof of the owner of a specific quantity of Bitcoin on the network.
Types of Keys
Bitcoin utilizes the public-key cryptography system to secure transactions and maintain the cohesiveness of its blockchain design. This makes sure that only individuals with particular keys can access specific coins.
Two types of keys are essential to possess and carry out cryptocurrency trades with the Bitcoin you own. Both of the keys consist of strings of alphanumerical characters that are generated randomly. They are used for the encryption and decryption of transactions using the Bitcoin you own.
The network uses one-way mathematical functions to create public keys from private keys. The algorithm is near impossible to implement in the reverse direction, which means public keys cannot be used to develop private ones.
Public keys are also called wallet addresses and are shared to receive Bitcoin. However, private keys must remain hidden in the same vein as a debit card PIN. The private keys are stored in hardware wallets. The primary purpose of a hardware wallet is to ensure security and easy access to private keys.
To send Bitcoin, private keys are needed to authorize the transaction, and the recipient’s public key must be added so that only the right person has access.
Bitcoin Exchange
With the setup of a Bitcoin exchange account, you can buy and sell Bitcoin. Crypto exchanges offer users the ability to purchase Bitcoin through traditional currencies or trade one form of digital currency for another.
How to Trade on Crypto Exchanges
To use a crypto exchange, you must first add funds to your exchange wallet linked to the exchange account. You are then able to observe various trading fees which are not determined by the exchange. The trading fees vary depending on the market conditions and reflect real-time pricing. However, many cryptocurrency exchanges can be different due to the decentralized nature of digital assets.
You can then place a buy order for Bitcoin purchases, which is included in the order book with the record of other buy and sell Bitcoin orders. Online brokers will usually charge a fee for their services. Unlike the comparatively lower fee charged by traditional brokers, cryptocurrency exchanges can be more expensive.
How to Purchase Bitcoin in the US
Buying Bitcoin is one of the first entry points for new investors into the cryptocurrency world. The procedure to buy Bitcoin can be very unfamiliar to someone used to traditional financial transactions. Four basic elements are involved in buying Bitcoin.
Where to Buy Bitcoin
There is a multitude of options at your disposal for buying Bitcoin as well as cryptocurrency of other types. These include various crypto exchanges, traditional brokers, and money transfer apps.
Cryptocurrency exchange
You can buy Bitcoin through a cryptocurrency exchange. Many exchanges offer different cryptocurrencies for sale or purchase, while other platforms offer Bitcoin purchases with some alternatives. The fees vary among the various platforms, each with unique consumer protection measures in place.
The major cryptocurrency exchanges where you can purchase Bitcoin include Gemini, Kraken, and Coinbase.
Traditional stockbrokers
There are a few traditional brokers who provide the facility to customers to buy Bitcoin. The first investment broker in the mainstream to provide Bitcoin was Robinhood. The platform charges no fees to trade Bitcoin, similar to its stock-trading setup.
Alternative online brokers that give customers access to buy cryptocurrency include Webull, Firstrade, and TradeStation.
Bitcoin ATMs
Bitcoin ATMs are kiosks that allow anybody with cash or a debit card to purchase Bitcoin and other cryptocurrencies. Many Bitcoin ATMs are bidirectional, allowing both the purchase and sale of Bitcoin for cash. Most Bitcoin ATM operators require customers to have an existing account to use the machine.
Credit card and Debit card
Large platforms may be able to charge much higher prices for some funding options, and credit card and debit card transaction fees can be exorbitant on a crypto exchange. Buying cryptocurrency through a card is classified as a cash advance.
Credit card and debit card-acquired Bitcoin can have much higher interest rates than those charged on regular transactions. Taking on credit card debt to purchase highly volatile Bitcoin is also seen as a major risk.
Exchange-traded funds and Trusts
These trusts will not invest in Bitcoin directly, and ETFs (exchange-traded funds) will invest in the futures contracts of Bitcoin. Proshare created the first Bitcoin-linked ETF in 2021. Other cryptocurrency investments, such as mutual funds, have investment minimums and can only be traded once a day compared to the all-day trading of ETFs.
Bitcoin trust funds are offered by Grayscale Investments in the form of Grayscale Bitcoin Trust (GBT) and Ethereum Classic Trust (ECT). These publicly traded platforms enable customers to utilize them with the help of brokers. GBT shares have a higher cost than Bitcoin, and people are willing to pay more to avoid dealing with wallets and storage.
Money Transfer Apps
Money exchange entities such as Apple Pay, Google Pay, and the Cash App allow customers to purchase Bitcoin through the app itself. Those with a PayPal account can also take advantage of this feature.
Bitcoin can be bought, held, and sold through the app’s system with Paypal and Cash App, enabling users to send and receive payments in the form of Bitcoin.
How to Store Bitcoin
A digital wallet is used for storing Bitcoin, and there are two major types: hot wallets and cold wallets. A hot wallet can carry out transactions much faster, while cold wallets have more security steps, making transactions slower.
Hot wallets
Hot wallets are crypto wallets where Bitcoin is stored in the cloud through a secure exchange provider. The use of internet browsers or dedicated apps helps you access such crypto wallets. A trading exchange automatically gives users a free hot wallet to store virtual currency.
A hot wallet, however, is susceptible to hackers. Therefore, many users prefer to store Bitcoin in third-party online wallets that are more secure.
Cold wallets
Cold wallets are small encrypted devices that download and store Bitcoin’s private and public keys. These portable devices allow users to always carry their cryptocurrency with them. Cold wallets are cheaper and more secure than hot wallets due to the two-factor authentication of the linked crypto account.
Buying Bitcoin
Once the Bitcoin wallet has been connected with your choice of exchange method, the final step is to determine how much Bitcoin you want to purchase. Bitcoin costs nearly thousands of dollars, but it can be bought in fractional shares with a low initial investment.
After the medium of purchase has been determined and the storage option selected, the investment can be made by placing an order through the bank account setup to buy Bitcoin. You can choose a payment option among credit card, debit card deposits, or bank transfers.
Once you have made the purchase, the money is added to your wallet of choice, where the funds can be exchanged with Bitcoin, depending on the exchange rate. Exchange rates, as well as exchange fees, vary between different modes of purchase.
Upon completing the transaction, the purchased Bitcoin will be transferred into your wallet for you to decide how to use it.
How to Sell Bitcoin
The process of selling Bitcoin is straightforward to carry out. You can quickly deposit the Bitcoin stored in your wallet into the exchange. After it has been added to the exchange, Bitcoin can be sold according to the current market value. Following the completion of the sale, you can transfer funds to your linked account.
In the United States, taxes are applied to any profits that are collected through the sale of Bitcoin, as with capital gains. This is in line with how the government views the stock market.
Investing in Bitcoin in the US
The rise of crypto assets such as Bitcoin represents a new form of a monetary exchange system that has eliminated certain risks, rules, and costs from the worldwide financial market. Many benefits have to be considered at when looking to invest in Bitcoin.
Transparent Transactions
The transaction record is available on the public ledger, and once a transaction has been recorded, it can not be altered. This ensures lesser chances of manipulation and fraud through falsifying financial records or carrying out incorrect valuation of assets.
Decentralized
Bitcoin is the most popular decentralized cryptocurrency in the world. The Bitcoin network is comprised of multiple distinct computers known as nodes. Decentralization is important because it removes a single point of failure for an attack, making it practically impossible for any organization, individual, or government to bring the network down.
Final Thoughts
The purchase of Bitcoin may seem daunting at first, but it is made accessible for potential users through various cryptocurrency exchange platforms. Understanding the different storage options and procedural steps will incentivize individuals to invest in Bitcoin. There is a multitude of benefits that make the process of crypto purchase lucrative to customers.
FAQ
Most frequent questions and answers
Yes, the purchase of Bitcoin is completely legal in the United States. It has been classified by regulators as a commodity, property, or security. This means that you can buy Bitcoin, trade it, and mine it. However, it cannot be registered as an investment and transactions are liable to taxes with capital gains.
Bitcoin can be bought in the US from an online exchange or a Bitcoin ATM. Exchange platforms such as Coinbase allow users to make purchases through credit cards, debit cards, bank transfers, or bank wire. The cost is higher when purchasing Bitcoin with credit or debit cards as compared to bank transfers.
Coinbase wallets are supported in the United States. The platform makes the process of buying crypto very accessible and users can create a crypto account on Coinbase to deal in cryptocurrency safely and efficiently.
Most banks in the United States allow customers to carry out transactions in Bitcoin. The most notable of these institutions include Bank of America, Goldman Sachs, Ally Bank, and Revolut.
Skrumble.com provides all its content for informational purposes only, and this should not be taken as financial advice to buy, trade, or sell any investment instruments or products, including but not limited to cryptocurrencies, or use any specific exchange. Please do not use this website as investment advice, financial advice, or legal advice, and each individual’s needs may vary from that of the author. Investing in financial instruments, including cryptocurrencies, carries a high risk and is not suitable for all investors. It is possible to lose the entire initial investment, so do not invest what you cannot afford to lose. We strongly advise conducting your own research before making any investment decisions. This post includes affiliate links with our partners who may compensate us.
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