Many investors find buying and selling Bitcoin complicated or difficult due to its recent rise and the fact it is backed technology (mathematical evidence) rather than any other asset.
This is not the case. As with other fiat currencies one can also receive Bitcoin to pay for goods or services rendered, as well as to give it away or to buy it on an exchange or custodial account.
You should be familiar with the tax laws and regulations of your country before you purchase Bitcoin or any other digital currency. We have seen that countries around the globe have taken varying stances regarding cryptocurrencies. Some have endorsed them while others have threatened or attempted to ban transactions in digital currencies. Your decision to purchase Bitcoin could be subject to taxes, stipulations or other applicable legislation. You should therefore take care before you make any decisions.
Where to Buy and Sell Bitcoin
There are several ways to buy or sell bitcoin. These may vary from one territory to another, but it is possible to obtain digital currency by exchanging fiat currency (for instance, the US Dollar) at online exchanges and ATMs for Bitcoins, or accepting it as peer currency.
Many investors prefer to purchase bitcoin through an exchange or custodial services that allows them to exchange fiat currency for Bitcoin. The exchange may charge a transaction fee for this conversion.
Many online exchanges accept many currencies and are available in various regions of the world. Online exchanges are usually regulated by governments. They must adhere to two important requirements: “Anti-money Laundering” (which prevents criminal products from appearing as legitimate cash) and “Know your Customer” (which requires that traders register their identities to prove their involvement).
Most exchanges require traders linking their personal bank accounts (where fiat currencies can be sent from and received) and to lodge documents verifying their identity before they are able to trade.
The requirements for verification before trading, transaction fees and trading limits vary between exchanges around the globe.
Bitcoin peer-to-peer transactions
You can accept Bitcoin via a peer-to-peer transaction if you don’t want to use an online exchange. A buyer provides a seller with fiat currency, or other goods. The seller then sends a set amount of bitcoin to that buyer.
Important to remember that Bitcoin transactions are only between the parties involved. Bitcoin is not dependent on any central bank or authority for operation. These transactions take approximately fifteen minutes to verify and are not refundable. If you want to request a return, you can rely on the goodwill and generosity of another party to accommodate your request.
There are many ways that peer-to-peer transactions may be conducted. The most common method is to have the recipient provide the Public Key from their Bitcoin wallet/keychain. A sender will then direct an allocation of bitcoin to this address. After the usual wait of fifteen minutes, the transaction will be “confirmed”. The transfer will appear in both the Blockchain and in the wallets.
There are other peer-to-peer platforms and parties. Because the process of sending Bitcoin requires trust, cryptocurrency meetups are where transacting parties meet face to face to complete the transaction either individually or in a group.
There are also services that facilitate the transaction and help to secure trust by putting funds in escrow until it is completed.
There are many factors that can affect the price of buying bitcoin via these channels. Sometimes sellers will request additional fees for privacy or convenience beyond what is listed on exchanges. Or, the transaction may be finalized prior to or during a meeting.
An ATM is a relatively new method of purchasing bitcoin. It may be available in your city.
Bitcoin ATMs typically charge a commission fee of three to eight percent over and above the traditional exchange price. Although it might seem expensive, Bitcoin ATMs are the fastest and most private way to settle a transaction.
Users can use a bitcoin ATM by inserting cash or a debit/credit cards into the system. Then, they scan a QR code from their mobile wallet to access the transaction. An ATM prints a receipt on paper with codes and instructions. This allows the user to transfer their newly bought bitcoin to their mobile wallet.
How does Bitcoin trading work?
Most bitcoin trading takes place via an exchange. This is where traders can place ‘orders to buy or sell bitcoin at a certain price.
Exchanges list bitcoin and other cryptocurrencies in two amounts. This reflects the lowest or highest price that a bitcoin sold for within a 24-hour period.
Transactors on an exchange signal their intention to ‘buy’ and’sell’ bitcoins. This allows traders to indicate how many bitcoins and what amount of fiat currency they are willing to purchase or sell.
There are two types of orders: market orders and limit orders.
Limit orders allow traders the freedom to set their own bitcoin price, regardless of whether it’s higher or lower than what is accepted as the market value. These orders can be fulfilled by the seller at their discretion.
Market orders allow traders to quickly buy bitcoins in the best matching order on the exchange. This allows users to effectively buy bitcoins at their current price.
Once a trader confirms one of these orders, the transaction will occur. After it is mined, which usually takes around fifteen minutes depending on how many unverified transactions are on the Blockchain, the allocated bitcoin is transferred to the recipient.
Bitcoin purchased on the exchange remains there until the traders decide to send the funds to a keychain or bitcoin wallet of their choice.
It is important that you note that exchange security varies and they are a tempting target for hackers who want to steal cryptocurrency. It is a smart policy to use strong passwords and to protect one’s account using two-factor authentication.