3. How to buy bitcoins 2


how to buy bitcoins


Introduction

This article will explain how to buy bitcoins through different methods. It is important that you first understand what it means to own bitcoins, and how to store your bitcoins safely under your control before you buy your first bitcoins. If you haven’t done so already, go back and read article 2. How to store bitcoins, and 1. What is Bitcoin? before you read this one. The options available to buy bitcoins depends on what country you live, if you live in a larger city or not, and if you want to buy bitcoins using cash, bank transfer, or other payment methods.

Buy bitcoins on currency exchanges

There are now a large number of exchanges for real-time trading between fiat currencies and bitcoin which serves a global customer base. A real-time currency exchange is a platform run by a company which allows individuals and businesses to hold accounts with fiat money and bitcoins from which they can trade with each other in a real-time market. To use these exchanges to buy bitcoins all you have to do is to register a free account on their webpage, with at least an email address, username and password. Some exchanges also require you to register your name and country of residence as a minimum. Depending on your trading volume you need to give additional personal identity information in order for the exchange to comply with Know Your Customer (KYC) and Anti-money laundering/Counter Terrorism Financing regulation (AML/CTF) that is required under the law where the exchange is registered, or in anticipation of coming regulation. To open up the ability to buy larger amounts of bitcoin you need to submit copies of documents to prove your identity (e.g. a passport or national ID card) and your current residence (e.g. a Utility bill). Sometimes the freedom of the exchange to do business is also hampered by government regulations specific for virtual currencies, such as the BitLicence in New York, which has caused several companies in the cryptocurrency space to leave New York and stop serving New York customers.

You can often deposit money to your exchange account through several different ways, but the most common way is probably a direct transfer from a bank account registered in your name. Buying bitcoins on the large global exchanges is the easiest way to buy bitcoins to current market price (plus a 0.0 – 0.5 % transaction fee), but with the requirement to provide personal identity information if you want to trade any larger amounts.

You should always use two-factor authentication on your accounts and never use the exchange as a storage place for your bitcoins, since you are not in control of the private keys to the bitcoins credited to your account.

Here below is a list of some of the largest fiat to bitcoin exchanges in August 2015, what fiat currencies they trade for bitcoin, there trading fees, and their 24h bitcoin trading volume (data from BitcoinAverage, bitcoin charts and Coinhills). The exchanges included in the comparison below is OKCoin, Bitfinex, BTCChina, LakeBTC, Bitstamp, Coinbase, itBit, BTC-e, and Kraken. Be advised that the trading volume between CNY and bitcoins on the exchanges BTCChina, OKcoin.cn and LakeBTC can not be directly compared with the others because they do not charge trading fees between CNY and bitcoin, meaning it costs nothing to inflate the trading volume. The other exchanges listed below where the trading fee ranges from 0%, that is only on one side of the trade and for some of them only if you trade large volumes. These exchanges have a maker-taker model for trading fees, where orders adding liquidity are charged less than orders taking liquidity from the order book. The itBit exchange even has a 0.1 % rebate for makers. To find the fee schedule for each exchange just google “exchange name” + “fees”.

 

24h trading volume in bitcoins

 

I have not included the chinese exchanges Huobi, BTC100, CHBTC, and BitBays since I know to little about these companies and can’t judge the legitimacy of the large trading volume reported for those sites on Coinhills. It also seems like some of them are calling market depth “volume” which is confusing.

Here is a wiki for comparison of real-time trading exchanges and here below is a more complete guide to available bitcoin exchanges in different countries:

Buy bitcoins person-to-person

Localbitcoins

Localbitcoins.com is the largest platform for person-to-person bitcoin exchange in the world. You can think of it like eBay but only for buying and selling bitcoins. Localbitcoins has users in 246 countries and over 3500 bitcoins are exchanged for local currencies through this plattform each day (calculated by adding up the volume for each currency from bitcoin charts). It is easy to register an account on the site and create an advertisement for buying or selling bitcoins or click on other users buy or sell ads to initiate a trade. An ad can be for either any online payment method the seller of bitcoins want to accept, or it can be an ad for a local cash trade where you meet each other in person to settle the transaction. When you initiate a trade, the amount of bitcoins for the trade is withdrawn from the sellers localbitcoins wallet and held in escrow by localbitcoins. When the seller confirms receiving the payment from the buyer, the bitcoins held in escrow is released to the buyers localbitcoins wallet. How much other users on the site trust you for doing a trade depends on how old your account is, your trade history, your feedback from users you have done trades with, and how much identity information you have registered in your profile.

Mycelium Local Trader

The Mycelium bitcoin wallet for Android phones has a built in feature called Local Trader. It is a decentralized in-person exchange service, where people who want to buy or sell bitcoins in-person can arrange trades with other people using the app who want to sell or buy bitcoins. The app handles the trade between buyers and sellers, and calculate reputation ratings based on the trades. Here you find instructions for using this Local Trader feature.

Buy bitcoins in a Bitcoin ATM

A bitcoin ATM (Automatic Teller Machine), often called BTM (bitcoin ATM) is a machine for exchanging cash to bitcoins (one-way) and some BTMs also exchange bitcoin to cash (two-way). There are only a little over 450 BTMs installed throughout the world so far by about twenty different manufacturers. The five largest BTM manufacturers in terms of number of installed machines is Lamassu, Genesis Coin, BitAccess, Skyhook, and General Bytes. If you are lucky to have a BTM in your city it is probably the easiest ways to get some bitcoins. The average fee for using a BTM is about 6%. The excellent webbpage Coin ATM Radar keeps track of the BTM development in the world with great maps, statistics/charts and information about all BTM manufacturers.

Buy bitcoins in local meetups

In many larger cities in the world you can find local communities of bitcoin and cryptocurrency enthusiasts. Going to one of their regular meetups is a great way to meet new friends that can sell you or help you to buy your first bitcoins and answer your questions. Some large cities also have regular events called “Satoshi Square”, where people gather to trade Bitcoin with each other. Do a search for “Bitcoin” and “Satoshi Square” together with the name of your city on Meetup.com, Facebook and Google to find your local Bitcoin communities.

Buy bitcoins from bitcoin banks

Bitcoin banks are not registered as banks under state regulation, so they are not officially allowed to be called banks, but they are called banks here because they want to act as custodians of your bitcoins. That means that they have full control over the bitcoins (private keys) you keep with them and you can not get your bitcoins out if the service goes offline. If you use one of these bitcoin banks to exchange fiat to bitcoin you can chose to withdraw the bitcoins to a wallet under your control.

Xapo

Xapo offers insured cold storage and the option to exchange fiat for bitcoins using different options for a 1% fee. You can also order a debit card which makes it possible to spend the bitcoins in your Xapo account wherever VISA/MasterCard is accepted.

Circle

With Circle you can buy and sell bitcoins instantly using a credit card or a US bank account.

The methods described in this article is far from all options available for buying bitcoins but it should be enough to get your started. You can find more options here.


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