Hackernoon logoBitcoin: Buying, Selling, and HODLing Guide for 2021 by@bybit

Bitcoin: Buying, Selling, and HODLing Guide for 2021

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Bybit

Bybit is one of the fastest growing cryptocurrency derivatives exchanges, with more than a million registered users.

Bitcoin (BTC) was the first cryptocurrency to be created. It was labeled “a purely peer-to-peer version of electronic cash” in the original whitepaper, that was published in 2008. When it comes to buying crypto, investors often select Bitcoin above all the available alternatives thanks to its popularity.

However, those who are making their first steps in the world of cryptocurrencies may find it initially difficult to buy Bitcoin since the process of purchasing crypto may be an alien concept to them. Fear not, as this guide will provide a comprehensive explanation of different methods of how to buy Bitcoin.

Where To Buy Bitcoin

There are many valid methods of buying Bitcoin available to any potential purchaser. The most popular ones include exchanges, P2P platforms, and Bitcoin ATMs. Let’s view each of them in detail.

Exchanges

Exchanges seem to be the best choice for beginners. They are secure, cost-effective, and quick to set up. Many of them offer various options of payment as investors can choose to buy bitcoins either with fiat or with other cryptos. The possibility to buy crypto for fiat is especially handy for newbies as it facilitates the onboarding process.

Fiat-to-crypto exchanges offer a chance to buy crypto using various traditional payment methods such as bank and wire transfers, or a debit/credit card. The initial purchase of cryptocurrency can be made on such reputable platforms as:

  • Coinbase
  • Binance
  • Kraken
  • Gemini
  • Bybit

Each crypto exchange provides different anti-money laundering (AML) policies and requires different levels of Know Your Customer (KYC). What they have in common is a user-friendly interface and a simple onboarding process for newbies.

Let’s review the basic steps that one needs to take in order to buy bitcoin using the Bybit exchange as an example. On Bybit, users have an opportunity to buy bitcoin (as well as Ethereum and USDT) with major fiat currencies (40+) via its fiat gateway. Basically, the process is as follows:

  1. Log in to your verified account and open Fiat Gateway to make a purchase.
  2. Select the preferred currency from the drop-down menu and enter the sum you are going to spend or the BTC amount you are going to buy.
  3. Select a service provider and a payment method.
  4. Electronic fund transfers, Visa/Mastercard credit and debit cards, and cash deposits can be used as a payment method on Bybit.
  5. Finalize the transaction and wait until cryptocurrency arrives at your account. The process usually takes from 2 to 30 minutes.

As you see, the process is really simple and doesn’t require any technical skills. From this perspective, Bybit offers a service that would perfectly fit newbies as well as seasoned traders and investors.

P2P (Peer-to-Peer) Platforms

Generally, crypto newcomers start their journey with traditional centralized exchanges that act as a middleman. But it is also possible to buy bitcoin directly from other Bitcoin owners. This is possible on platforms such as:

  • Local Bitcoins
  • Binance P2P
  • Local Coin Swap
  • Remitano
  • Paxful

The key difference is that you buy cryptocurrency not from a centralized platform, but from another person. The platforms mentioned above serve to connect buyers and senders.

The first step on P2P platforms is the same as on regular exchanges as it involves creating and verifying your account. Then users need to browse different offers and find a trading partner who provides the best price and most convenient payment method available. If a suitable option is found, all you need to do is open a trade with the selected Bitcoin seller. 

Once the trade is initiated, the seller sends Bitcoin to the escrow account and a buyer sends the relevant sum of fiat money. After that Bitcoin is unlocked and sent to the buyer. If there is no appropriate offer on the platform, you always can publish a request yourself.

There is no middleman in such deals, and both parties have to deal only with a program that transfers assets from the seller’s deposit to the buyer’s wallet. Such a method has some advantages:

  1. A buyer doesn’t pay the platform for the deposit, exchange, and withdrawal of the assets. The buyer sends money directly to the seller’s account and receives crypto on their wallet.
  2. A seller only pays a trading fee.
  3. Many P2P exchanges have systems in place that track successfully implemented trades and help you select from reputable traders.

But there are also some risks associated with this method, especially if you conduct your own P2P selling. The seller may ask for additional information from the buyer, or for additional commission. If you are selling Bitcoin, fraudulent buyers may ask you to release the coins straightaway, before the payment is completed, or insist they have made the transaction when they haven’t. That is why it is always best if participating in this method, to only do so on legitimate platforms like the ones above. For the most part, they have security measures in place such as identity check, and as mentioned, escrow.

Bitcoin ATM

Another way to obtain Bitcoin is provided by special ATMs called Bitcoin ATMs. Such machines look like ordinary ATMs but they allow buying Bitcoin physically for fiat money. Some Bitcoin ATMs possess bi-directional functionality and give an opportunity both to buy and to sell Bitcoin for cash. This method is especially useful for those who find it difficult to adapt to technological innovations and prefer more traditional ways of payments. Another advantage of ATMs is the quick transaction speed. The risks of fraud are also eliminated because no third parties are involved in the deal.

There are about 30 types of such machines and an algorithm of actions may vary but the basic principle remains the same. Here’s a general step-by-step guide on how to buy BTC via ATMs:

  1. Select the language and press the “Start” button.
  2. Select BTC from the list of the offered coins.
  3. Enter the BTC amount you are going to buy.
  4. Some machines will request phone number verification.
  5. In this case, enter your mobile number and then enter the code that you receive via SMS.
  6. Enter your Bitcoin address in case the ATM you use does not provide one. This part is tricky as wallet addresses are usually very complex.
  7. Be careful to double and even triple-check the address you put in in order not to make a mistake and ensure you receive the funds in the end.
  8. Insert cash into the machine and purchase BTC which will be transferred to your wallet immediately.

If you want to find the closest Bitcoin ATM near you, make use of the service Coin ATM Radar. It can help you allocate Bitcoin ATM machines in your home city.

How To Store Your Bitcoin

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Once bitcoins reside in your wallet, you should make a decision on what you are going to do with them. Traders may make use of it immediately as they return to exchanges and switch their bitcoins to different altcoins. However, if you prefer to store it long-term to make profits later when its price increases, you should consider withdrawing it to your own wallet.

A cryptocurrency wallet is a program intended for storing public and private keys that enable access to your funds, allow sending and receiving cryptocurrencies, tracking their balances, and interacting with various blockchains. Bitcoin is the most popular cryptocurrency which is supported by almost all popular wallets – that’s why finding a suitable option should not be a problem.

There are two types of crypto wallets: hot and cold ones. Both types have their own advantages and disadvantages and can be used for different purposes.

Cold Wallets

A cold wallet is a physical electronic device that is not connected to the internet and allows to store assets offline. One can receive bitcoins to the cold wallet at any time, but when it comes to spending them, the device must be connected to the PC or a laptop. Hardware wallets and paper wallets fall under this category.

Hardware wallets are typically USB drive devices designed for storing private keys in the offline environment. Such wallets are invulnerable to online hacking and unaffected by computer viruses. The only way to hack them is to steal this device physically. But even in this case, the perpetrator will not receive access to the coins as they can be protected with a PIN code. The average price of such a device varies between 60 and 200 USD.

Popular hardware wallets include:

  1. Ledger Nano S
  2. TREZOR T

They have proved their worth from a technical safety point of view and gained a good reputation among crypto users.

Another secure option for storing crypto long-term is to send it to a paper wallet. There are numerous online services that are designed for generating such wallets. All you need to do is to print the result they provide on paper. However, since this is not a durable material, don’t forget to take additional precautions. Make several copies, laminate some of them, put the others in a metal box, or give them to your friends for safekeeping.

Hot Wallets

A crucial feature of hot wallets that makes them different from their cold alternatives is that they need to be connected to the internet. In other words, these are online wallets. Any exchange provides its users with a free hot wallet where the traded BTC will be automatically stored.

The risk associated with storing crypto on such wallets derives from the fact that in most cases they are custodial. This means that their owners don’t hold the private keys to the cryptocurrency in their wallets. The fully non-custodial wallets are much safer, so in most cases, assets that are not traded are transferred to a wallet from a provider other than an exchange. Other types of hot wallets include web, desktop, and browser wallets. Among some of the most popular providers are Jaxx, Electrum, Exodus, and Mycellium.

Regardless of the type of hot wallet you select, it will anyway be connected to the internet which makes your funds vulnerable to hacks. In order to protect your cryptocurrency and reduce the risk, follow the following best practices:

  1. Never boast on public platforms of large Bitcoin amounts in your wallet if you don’t want to attract the undesired attention of thieves.
  2. Don’t neglect the measures that can reduce the probability of unauthorized access to your account.
  3. Strong passwords, two-factor authentication, and safe internet browsing seem to be trivial but they still work.
  4. Be aware of phishing sites as well and always check if the address that you access is correct.

Hot wallet providers, for their part, constantly develop and enhance security measures to protect their users.

Hot vs Cold Wallets

If you are a newbie to the crypto world, you may wonder which type of wallet will suit you best, a cold or a hot one. To find the correct answer, you have to decide first on what you are going to do with the bitcoins you have purchased.

Hot wallets are more preferable if one practices frequent Bitcoin trading. They provide easier access to the funds and they are more convenient to operate with. As well as being free. But it is not a good idea to keep large Bitcoin amounts for a long time there as their main disadvantage is lack of security.

Cold wallets are safer and are perfect for the long-term storage of significant Bitcoin amounts. At the same time, they can be challenging for newcomers to understand and they are not free. 

The Bottom Line

Purchasing your first portion of bitcoins and finding a secure place to store them may be tricky unless you know where to start. The options described in this article should provide you with the basic guidelines which you can implement in the beginning. As your experience grows, you may experiment with other options so as to eventually find those that fit your strategy best.

Disclaimer

This article is intended for and only to be used for reference purposes only. No such information provided through Bybit constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific person. These forecasts are based on industry trends, circumstances involving clients, and other factors, and they involve risks, variables, and uncertainties. There is no guarantee presented or implied as to the accuracy of specific forecasts, projections, or predictive statements contained herein. Users of this article agree that Bybit does not take responsibility for any of your investment decisions. Please seek professional advice before trading.

Bybit Hacker Noon profile picture
by Bybit @bybit. Bybit is one of the fastest growing cryptocurrency derivatives exchanges, with more than a million registered users.Sign Up to Trade on Bybit

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