Basics of Buying Bitcoin
Bitcoin hit $10,000 today on most exchanges across the world and the crypto community is speculating how the market will react now. Are we looking at a possible huge correction or will this rate of growth continue on an upward swing?
If you think about it, we were at about $6000 two weeks ago! And today we reached $10,000! That’s crazy, right?
With this huge development in the Bitcoin price, there are many news networks reporting to the mass media that Bitcoin is the next hot investment so many new investors are looking into how to buy Bitcoin. If you have never purchased before it can be overwhelming so I wanted to write a tutorial on buying from a major exchange like Coinbase.
Why Buy Bitcoin
There are many reasons to buy Bitcoin, but the main reason in my mind is because cryptocurrency is an investment vehicle that is rapidly increasing in value and the secondary reason is that many finance industry experts feel that cryptocurrency will replace fiat currencies around the world over the next few years. Many investors feel that they are getting in on the ground floor by buying in now.
“Bitcoin was created to serve a highly political intent, a free and uncensored network where all can participate with equal access.”
– Amir Taaki
Where to Buy Bitcoin
The largest exchange is Coinbase (coinbase.com) and allows you to buy Bitcoin, Ethereum, and Litecoin using a debit or credit card, bank transfer, or bank wire to purchase using US Dollars. Setting up an account with Coinbase is fairly easy so long as you have a drivers license and access to a reliable camera to take a picture of your ID.
My sister came out to my house this past weekend and we set her up an account and she made her first small purchase sitting next to me via debit card so this is all fresh in my mind. I would not recommend buying a huge amount of Bitcoin now until the price goes down again but she wanted me to walk her through it and she doesn’t live close so we did it.
When you first join Coinbase, you will only be able to purchase $100 per week with a debit or credit card or $2000 per week using your bank account. As you conduct transactions on the exchange over time, your reputation with the company will improve and you will be able to conduct transactions with higher amounts.
Setting Up Your Account
**Before even looking at Coinbase, set up a brand new email address that you will only use for cryptocurrency transactions and nothing else. Use a password that is not similar to any of your other online passwords. Some crypto investors will use a random password generator to give them a password in order to increase their security.**
Patience is a virtue when setting up an exchange account that allows you to purchase with debit or credit card. I would not recommend using your computer camera to take a picture of your ID for verification purposes because most of the time this picture is too blurry and will be rejected.
I would recommend downloading the Coinbase app on your cellphone and scan your ID using your smartphone camera. The verification process will take a few minutes after you submit your picture.
One note on keeping your account with Coinbase more secure is to not attach your phone number to your account as a security measure. It is possible for a hacker to get their hands on your cellphone number, call your cellphone provider, tell them that they are you and you lost your phone, then have your number ported to a new cellphone that they have in their possession. After that happens, you will lose your coins to the hacker and there is no getting them back. Ever.
Keeping your account secure should be your number one priority from the very beginning of your crypto journey. Establishing good habits early will help you to be more successful later on. (I wrote a post recently on how to protect your coins so please refer to that in order to keep your coins safe from hackers after you buy.)
How to Buy
Buying with a debit or credit card will cost you 3.99% in fees from Coinbase and your bank will likely charge you an international transaction fee based upon how much you buy, as well. The benefit of this method is that you get your coins instantly at whatever price the market is at at that time.
Bank transfers usually take about five days to go through but you lock in the price of the coin at the time that you buy. The benefit of this is that you will make money essentially if the price of the coin goes up during the time you are waiting for your purchase to go through. But there is always the possibility of losing money too if the price goes down. The fee for this type of transaction is 1.49% from Coinbase. Check with your own bank to find out the fees they would charge.
I personally did a wire transfer about ten days ago from my bank to the USD wallet on Coinbase and the entire process took less than 4 hours. But, the process can take up to 11 days from my prior experience. This is quicker than a conventional bank transfer in my mind and does not usually take 11 days, I have no idea why it took so long that time. My bank charged a $14 fee for the wire transfer and Coinbase charged me a $10 fee for the convenience. But, I was able to move a larger amount of money than these other methods would have allowed me to. So, if you are trying to move a larger amount of money into cryptocurrency purchases, consider purchasing using a wire transfer into your USD wallet on Coinbase.
Tips for Using Coinbase
· Dashboard: This will show you the current price of Bitcoin, Litecoin, and Ethereum while showing the rate of growth or decline for the period of time that you have selected. Your portfolio will be shown at the bottom left of this screen while listing the total value of the portfolio. The bottom right of the screen will show your recent transactions and what addresses the coins were sent to.
· Buy/Sell: This screen allows you to purchase Bitcoin, Litecoin, and Ethereum. Be sure to choose the right payment method from the dropdown menu. Your weekly limits will be shown as well as hints as to how to get your limits increased by Coinbase for future use. You can set periodic buys on this screen if you don’t care about the price and just want to schedule buys every time you get paid and such. This screen will show you the fees that you will pay so be mindful of this.
· Accounts: Shows all of your wallets, including your USD wallet and allows you to send, receive, and deposit into or from your wallets. This window shows your recent transactions. The most important part of this screen is that when you send or receive to these accounts, you must be mindful of the address that you are using. I would recommend copy/paste of the address to avoid mistyping. If you send your coins to the wrong address, you risk losing them forever so BE CAREFUL!
· Tools: This screen shows all of the generated addresses by Coinbase that are associated with your account because you have already used them for transactions in the past. Coinbase says that you are able to reuse them but I never do for security purposes. Maybe I am just paranoid? I don’t know. This is also where you will find your complete account history.
· Settings: Use this to change your password, email, physical address, and profile picture. You are able to set up your phone preferences and security preferences like adding authentication for transactions or logins. Linked Accounts is where you can add a bank account or debit/credit card for your purchases and you are able to manage wire transfers here too. API allows you to set up widgets and apps. Limits will show you exactly how much you are allowed to buy or sell for that week according to Coinbase.
· Your Username: This is located in the top right of the screen and if you click on it you are given the option to go to your profile, invite friends to Coinbase using a referral code, sign out, or email customer support.
Saving Money on Fees
If you choose to purchase Bitcoin, you can pay quite a bit of money in fees to purchase and then more fees to move it to wherever you choose to move it to after your purchase. I don’t feel that these fees are that much but many in the investment community complain about the fees.
So how can you save money on purchasing fees?
Coinbase has a sister exchange that they own called GDAX. If you have a Coinbase account, then you automatically have a GDAX account. This is not as user friendly as Coinbase is but you will pay a fraction in fees. There are a bunch of videos on YouTube on how to buy from GDAX if you need help because it can be slightly overwhelming to figure out if you have never done it before.
Transfer money from your USD wallet on Coinbase to GDAX and make a purchase. You can then move your coins back into Coinbase if you choose to do so.
Have you used Coinbase before? What was your experience like? I appreciate you taking the time to read through this beginner’s guide to buying Bitcoin using Coinbase! If you found value in this please clap a few times and share with your friends so this reaches people that need this information. Feel free to follow me on Twitter @IvyRiane or here on Medium.
Disclosure: This blog post is for educational and informational purposes only and is based upon my individual experience. Please do your own research and do not invest any money that you cannot afford to lose. Consult with attorneys and tax professionals for any legal or tax related questions that you may have. This should not be considered to be investing, legal, or tax advice.