Tips to Safely Invest in Cryptocurrency

How to Buy Bitcoin

1. Choose a currency exchange
2. Determine how you’ll pay for your bitcoin
3. Figure out how much you want to buy
4. Choose your wallet
5. Purchase your Bitcoin

1. Figure out how much Bitcoin to buy

The first step is to actually figure out how much you want to bet on Bitcoin. The quick answer is probably: buy as much as you’re willing to lose. When you trade Bitcoin there’s a chance you could make—or lose—a lot of money.

2. Decide where to buy Bitcoin

Once you’ve decided you want to buy Bitcoin and you realised how much you want to invest, here’s how to get your hands on it:

Crypto Trading Platform

You can use a crypto trading platform to buy and sell cryptocurrency easily and often cheaply. These providers often bring together multiple exchanges to get their clients the best Bitcoin prices. Crypto trading platforms normally don’t allow you to transfer your Bitcoin to someone else. You generally have to sell your Bitcoin to withdraw the money you invested. Wealthsimple Crypto is an example of a crypto trading platform in Canada that allows you to buy and sell Bitcoin. You can sign up for an account in minutes and avail of low and transparent pricing.

Read more on Cryptocurrency vs. stocks: What’s the better choice for you?

Online Exchanges

A cryptocurrency exchange is a digital marketplace where cryptocurrencies are bought and sold for other cryptocurrencies. This is where 99% of cryptocurrency trades take place. You can trade hundreds of cryptocurrencies, including “stablecoins”—coins pegged to fiat currencies, like the US dollar. There are a few things to watch out for when choosing to trade through exchanges, however: exchanges technically control the crypto that’s held in exchanges—even if it’s in your wallet on the exchange—so, should the owners decide, they could drain the exchanges of user funds. Popular, regulated exchanges include Binance, Gemini, and Coinbase, could be safer than unregulated or unknown exchanges: Binance, for instance, last year created a “Secure Asset Fund for Users”, an emergency fund that could be accessed in an extreme situation.

Bitcoin ATMs

These are a small number of kiosks that allow users to purchase Bitcoin using debit or credit cards. Bitcoin ATMs aren’t particularly common yet. They sometimes charge very high fees, and can have less than ideal exchange rates.

Peer-to-Peer Trading

You can buy your Bitcoins directly from other people on marketplaces, trading them for anything you want. But watch out for scammers: On sites like Paxful and others, it’s possible to sell Bitcoin for Xbox Live gift cards, although sellers frequently receive worthless cards in exchange. Since some systems are not totally secure, use good judgement before handing over a dollar.

Over the Counter (OTC)

Over the counter (OTC) trading is a type of trading that occurs outside of exchanges, just like peer-to-peer trading. But OTC trading generally refers to brokers that help high-net-worth clients trade millions of dollars worth of cryptocurrencies. This means that their trades probably aren’t registered on the public ledger, making them more discreet. Some OTC companies include Bitstocks, ItBit, and Circle Trade.

In Person

Find someone in your area who’ll take cash for Bitcoins. In France, they’ve formalised this process: it’s possible to buy vouchers for cryptocurrencies in cornershops.

3. Choose a Bitcoin exchange or trading platform

Buying cryptocurrencies from exchanges or trading platforms is perhaps the simplest, safest, and most convenient way to buy. There are many exchanges and platforms out there, and they all come with distinct advantages and disadvantages. Educating yourself about the features of each will make your first Bitcoin experience much smoother.

It’s not just the price of Bitcoin you’ve got to take into account; fees come in all shapes and sizes: Exchanges will sometimes ask for a fee to deposit or withdraw cryptocurrencies, alongside some additional trading fees.

There are generally two sorts of trading fees: market maker fees—fees that are paid when you add liquidity to an exchange’s order book, and taker fees—fees paid when you take liquidity away from our order book. Trading fees generally decrease the more Bitcoin you trade, encouraging larger investments.

Some exchanges offer lower fees than others, but these often come at the cost of privacy, security, or insurance. As such, it’s important to gain a more rounded opinion of exchanges before you trade on them. Without sufficient expertise, you might end up with a bad deal.

Though there are hundreds of exchanges, first-time buyers are wise to stick to large, reputable exchanges and trading platforms. When trading a volatile, new currency like Bitcoin, you’ll need all the information you can get. To work out what’s the best deal for you, here’s a handy guide to three major cryptocurrency exchanges.

Wealthsimple Trade

Wealthsimple Crypto is a crypto trading platform made available through the Wealthsimple Trade app in the Apple App Store and the Google Play Store. The app allows you to buy and sell Bitcoin and Ethereum instantly. There is no account minimum and no fees to deposit or withdraw money. Coins are held by Gemini Trust Company LLC™, a regulated crypto custodian with $200M in cold storage insurance coverage. Wealthsimple Crypto is the first way to buy and sell cryptocurrency in Canada that’s regulated by the government.

Wealthsimple Crypto is not an exchange itself. Instead, they bring together multiple exchanges to get their clients the best Bitcoin prices. A limitation is that you can’t send the Bitcoin you buy on Wealthsimple Crypto to somebody else or hold it in a wallet of your own.

Wealthsimple Crypto charges low fees for buying Bitcoin. The only cost is an operational fee added to the bid and ask prices when buy orders and sell orders execute. This fee is presented in the Wealthsimple Trade app. It covers custodial expenses charged by the company’s third-party custodian, Gemini, and Wealthsimple business costs. Wealthsimple does not earn any other revenue from trading crypto-assets.

Wealthsimple is an online investment manager that was founded in 2014. They create smart financial technology products that are simple to use. Over a million people use Wealthsimple products and their clients have trusted them to manage over seven billion dollars.

Buy and sell Bitcoin and Ethereum instantly with Wealthsimple. Sign up to trade here.

Binance

Binance is one of the largest cryptocurrency exchanges. It serves most of the world’s countries, though it has subsidiaries for specific countries. It’s based in Malta, a nation known for being friendly towards cryptocurrencies. Binance lists over 500 coins, including Bitcoin, and trades almost a billion dollars per day. Binance’s CEO, Changpeng Zhao, regularly tweets with investors and shares his opinions.

Binance charges some of the lowest trading fees in the industry; just 0.1 percent for market makers and takers. This can be reduced to 0.075 percent if you hold Binance’s own token, BNB. But like most exchanges, the more you trade, the bigger your discount. Binance offers a “VIP” tiered system, in which the platform offers further discounts if you’ve traded a certain amount of Bitcoin over a 30-day period.

For VIP 1, the first tier of Binance’s discount system, your maker fee drops to 0.09 percent, and your taker fee stays at 0.1 percent, if you trade at least 100 Bitcoins in a 30-day period, and hold at least 50 BNB. Though this doesn’t seem like much, these percentage points can add up for users who trade millions of dollars worth of Bitcoin.

Binance also asks users to pay a flat fee for withdrawals, paid in the form of the currency you’re taking off the exchange. For Bitcoin, the withdrawal fee is 0.0005 BTC, currently worth around $4.

Binance also provides a wallet to store your Bitcoin. Like all cryptocurrency exchanges, it’s recommended that you take your Bitcoin off of exchanges as soon as possible: if Binance were to suddenly shut down, it’d be difficult to get your money back.

Coinbase

San Francisco-based Coinbase is one of Binance’s main competitors, and both battle for pole position in the cryptocurrency exchange industry. It has over 30 million users, and has traded a cumulative total of over $150 billion. Coinbase is backed by industry giants like Andreessen Horowitz and the New York Stock Exchange.

What’s different about Coinbase, though, is that its services are split into two. First, you have Coinbase, which technically isn’t an exchange. Rather, Coinbase sells you coins directly, just like a broker, instead of providing a platform that matches trades with other users. This makes Coinbase incredibly easy to use; buying Bitcoin directly from Coinbase is as simple as buying something off of Amazon.

Though buying directly from Coinbase is convenient, the drawback is that this method is relatively expensive: Coinbase charges the greater of either a variable fee of around 0.5 percent, or a flat fee. The variable fees depend on where you are. For Canadians, the variable fees for buying through credit or debit cards are 3.99 percent. The flat fees are as follows: for purchases less than or equal to $10, Coinbase charges a fee of $0.99; for purchases between $10-25, $1.49; for $25-$50, $1.99; and for $50-200, $2.99.

Coinbase also offers a more traditional exchange, Coinbase Pro, designed for more advanced users. On Coinbase Pro, you can sell and buy cryptocurrencies from other users, just as you would on Binance, or any other regular cryptocurrency exchange.

Maker and taker fees are five times more expensive than on Binance for users who are trading less than $10,000 a month: both 0.5 percent. In fact, for maker and taker fees to rival that of Binance, an investor would have to spend at least $100,000 every thirty days to reach Binance’s maker fee of 0.1 percent, and $50 million to reach its taker fee.

On the plus side, unlike Binance, there are no withdrawal fees, and, like Binance, there are no deposit fees—as long as you’re depositing or withdrawing digital assets, not US dollars. It costs $25 to withdraw from crypto to USD, and $10 to deposit it.

Coinbase also serves as a wallet to store digital currencies like Bitcoin.

Gemini

Gemini is the exchange run by the Winklevoss twins, the duo who sued Mark Zuckerberg for stealing the idea for Facebook, and who bought around 1 percent of all Bitcoin supply before the Bitcoin bubble popped. Gemini is their cryptocurrency exchange.

Gemini’s main offering is that, unlike many other cryptocurrency exchanges, it’s fully backed by regulators. It has carefully secured the backing of regulators like the New York Department of Financial Services (NYDFS) to list the privacy coin Zcash on its platform, and its stablecoin, the Gemini Dollar.

Courting regulators, though, comes at a price, and Gemini’s fees are just as high as Coinbase. The transaction fees for trades less than or equal to $10, are $0.99; for purchases between $10-25, it’s $1.49; for $25-$50, $1.99; for $50-200, $2.99; and for greater than $200, it’s $1.49. In addition to transaction fees, there’s a “convenience fee,” which is 0.5 percent above the cost of the coin at the time of purchase.

Gemini is geared toward institutions and wealthy investors. It offers institutional custody services that are backed by New York Banking Law, and its custody infrastructure, which guards wallets in safes kept in offline facilities, is distributed across the world. Gemini offers insurance, too.

4. Select a Bitcoin Wallet

When possible, cryptocurrencies should be stored in wallets, essentially bank accounts for cryptocurrencies. Importantly, if you store your Bitcoin on cryptocurrency exchanges, the exchanges technically have control over the crypto. But if you withdraw to a wallet, you have complete control over your digital assets. This is very important: if you keep your funds in exchanges, there’s a chance that the exchange might go bust, or the owners run away with customer funds.

When picking out a Bitcoin Wallet, make sure that you consider backup and security features. There are generally two forms of wallets: hot and cold wallets.

A hot wallet is one connected to the internet: if a hacker managed to gain control of it via some malicious code, then they’d be able to get to your Bitcoins. But it’s more convenient: these wallets are connected to the internet, via mobile, desktop, or web apps, meaning you can use them straight away. They’re also free. Popular hot wallets include Electroneum or Trust Wallet.

By contrast, a cold wallet is one that’s not connected to the internet. Cold wallets store Bitcoins on something physical, like a USB stick, that you can buy from a shop. This makes them incredibly difficult to hack, and a great long-term storage solution.

Think of the hot wallet as the one you carry to the mall: it’s full of cash, but easier to steal. By contrast, a cold wallet is the equivalent of storing your cash in a safe: it’s very secure, but isn’t very convenient to use.

Buy and sell Bitcoin and Ethereum instantly with Wealthsimple. Sign up to trade here.

5. Decide how to pay for Bitcoin

There are endless currencies and payment methods you can use to buy crypto, from PayPal to Spotify subscription gift cards. Most common payment methods include wire or bank transfer, other cryptocurrencies, and credit or debit cards. Some methods, like other cryptocurrencies or payment cards, are faster than bank or wire transfers, which can take a few days. But remember: paying through a bank transfer from your personal bank account isn’t protected by the same insurance products as a credit card purchase, nor is, obviously, swapping 10 months of Xbox Live for some Bitcoins.

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6. Purchase Your Bitcoin