There are different ways to buy Bitcoin. Convenient services for a trader, may not be suitable for beginners. In our material, we will help you to choose a method that meets the needs of the buyer. Let’s consider what’s important and whether to trade off anonymity for safety. At the end, we’ll show the process of buying Bitcoin as an example.
Given that the principle of operation is like the currency exchange rates at banks. The account on the site is replenished by any supported currency, such as ruble, dollars, pounds or euros. Then the user buys Bitcoin at a price set by the exchanger.
Operations in centralized exchangers are performed instantly; as they do not directly rely on the current demand for crypto currencies. At the same time, high volatility, i.e. instability of the Bitcoin exchange rate, is compensated by an overvaluation of the real market value. In the end, the process of buying a Bitcoin will be simple, but not necessarily profitable.
These types of purchases are the most common. According to BestChange data for October 2020, there are 432 centralized exchangers (marketplaces).
Possible Prospect. A possible scenario of using centralized exchangers is to acquire long-term investments. Buying Bitcoin in this case can be considered as a tool to store your funds. In this case, the holder relies on security, anonymity and future profits. That’s why it’s important to be sure of its reliability and reputation when choosing a site.
How to Choose the Right Option. Reliability lies not only in the security of funds, but also in the safety of personal data of the users. The main danger in this process can be the verification process – some services require proof of identity through official document scans and photos.
According to ShapeShift CEO Eric Voorhees, verification systems make centralized platforms vulnerable to personal data theft and hacker attacks, especially if the exchanger keeps confidential information such as; passport data, financial statements and social security numbers.
After confirming your identity, the user is no longer anonymous. To protect yourself from hackers, you must selectively choose a service with a good reputation. To do this, it is highly recommended that you research online:
- Feedback from those who have already used the exchanger. You can find them on Reddit forums, Bitcointalk or BestChange
- The number of authentication methods and the possibility to form private keys
- Political situation and legislation of the state where the service is located
The work algorithm functions like the stock exchange. Prices are determined by the market, depending on the level of supply and demand.
After opening an account at the crypt exchange, the user works with one of the available currency pairs, such as “BTC/USD”. You can open an order for exchange at the current price or set the quote value at which the transaction will be started.
In some exchanges, you can exchange cryptocurrencies only for other cryptocurrencies. In this case, you can buy Bitcoin with a card. Also, in addition to the commission for withdrawal of funds, usually for each transaction on the exchange the trader pays a commission of 0.2 – 0.5%. This is due to the number of professional tools for market analysis and asset management, such as charts and pending orders.
According to CoinMarketCap as of October 2020, there are 334 cryptocurrency exchanges.
Possible Prospect. The function of a cryptocurrency exchange is designed to facilitate the work of traders. Buying Bitcoin is considered a short-term investment. According to CoinMarketCap, the daily trading volume of Bitcoin at Binance Stock Exchange alone is 2,000,000,000 USD on average.
Prices for cryptocurrencies are extremely volatile. Even Bitcoin during the day may fluctuate by 1-2%. Exchanges will help to analyze prices, choose the right time and react quickly to market changes.
How to Choose the Right Option. Before registering for a certain service, it will be useful to research a bit about it. Aggregators of exchanges and service of statistics, for example already mentioned in CoinMarketCap and BestChange, will help. You should note the following indicators:
- Liquidity — the more users on the platform, the easier it will be to find a suitable offer
- Trading volume — the more an operation is executed on the platform, the faster the transaction will be executed
- Time zone — so that most counterparties were active at the same time as you
- Number of markets — the more currency pairs are traded at the exchange, the more opportunities for the trader to work
Such services provide direct Bitcoin transfers between users. The exchanger only helps to bring together buyers and sellers, acting as an arbitrator in the transaction.
The user creates or finds an ad he needs. The system shall block the Bitcoins on the seller’s account until the transaction is completed. When the payment is confirmed, the P2P exchanger will send the Bitcoins to the buyer’s wallet.
Unlike cryptocurrency exchanges, the functionality of P2P exchangers is aimed at solving only two specific tasks — buying and selling. This makes the services convenient for users who have never had to deal with buying cryptocurrencies.
P2P exchangers are more likely to set low commissions because they have no exchange functionality and no third parties, as opposed to centralized exchangers.
Possible Prospect. P2P may be useful for a person who is entering the cryptocurrency world for the first time. For example, to make a money transfer. The fact is that international transfers, with the help of intermediary banks, take up to 3 business days. However, with Bitcoin, there is no difference in which point in the world the funds will be sent – a transaction usually takes 10 minutes. Furthermore, there are no limits on the amount of transactions.
Picking the Best Option. The common difference between services is the size of commissions. Since the transactions are free, you should compare the commissions:
- For creating an advertisement
- For the output on a third-party wallet
It is possible to minimize possible risks when buying Bitcoin by making transactions with reliable sellers. P2P exchangers offer different options so that users can evaluate the security of each other’s trades. For this purpose, the following tools are implemented on the service:
- Verification process — Users can confirm their identity by scanning documents, photography or exclusively by phone
- Statistics — Ideally know about the seller, i.e., the number of successful and canceled deals, losses in disputes, activity for the month, etc.
- Reviews — Is it possible to see the ratio of good to bad reviews from other users on the service?
How to Buy Bitcoin with P2P Exchanger, Bitzlato, as an example:
Finally, when we found out what may be the difference between different services and have chosen the best one, we will start the process of purchasing Bitcoin. Let’s do it on the P2P exchanger Bitzlato, as an example.
Step 1. Registration: Click “Register” and enter your email address and password.
Step 2: Searching for a Trader: Use the filter to select a purchased cryptocurrency. In our example it is Bitcoin. Find a trader with the right payment method and start a trade.
Step 3: Starting the Transaction. When the deal starts, Bitzlato will block the cryptographic currency in the seller’s account. The system guarantees transparency of the transaction and arbitrator’s assistance to all parties of the transaction in case of a dispute. At this point in the transaction, the buyer must transfer the fiat money according to the chosen payment method.
Step 4: Getting Cryptocurrency. The seller then checks and confirms receipt of money. The buyer then receives the previously blocked cryptovalue on the trader’s account for his wallet.
The deal is now closed. You can evaluate the trader and even leave him a tip, if you’d like.
In our material, we discussed the 3 ways to buy Bitcoin – using centralized exchangers, crypto ATM and P2P exchangers. We considered the algorithms of working with them and the main differences.
Each of them is suitable for certain tasks, such as trading in cryptocurrencies, private transfers or long-term investments. On page 3, we have described what to consider when choosing a suitable service.
Then we described a step-by-step instruction on how to buy a Bitcoin using the P2P exchanger Bitzlato as an example.