As cryptocurrencies are once again entering into the mainstream, the world is slowly warming up to the idea of owning Bitcoin in their investment portfolio. And while the process may seem easy to follow, there are several methods to purchase Bitcoin that are safer than others.
In this article, we will show you the 5 safest ways to acquire Bitcoin to ensure that your investment remains in your full control. So get your notebook ready, ‘cause you’re about to keep some notes. Let’s get started.
Method #1: Cryptocurrency exchanges
Not all cryptocurrency exchanges are equal. For the most part, the ability to buy Bitcoin may seem similar in all platforms, but only a few allow you to do so in a secure manner.
- First off, you will need to find a platform that is reputable. Check for exchanges with large user-bases, positive reviews, high responsiveness, etc.
- Once you discover a platform that matches the above criteria, create an account, and start a transaction. You will notice, in most cases, that you will need to complete some sort of basic verification process to become eligible for a transaction. This is totally normal. All regulated and licensed exchange platforms are required to ask for the personal information of their users. Avoid exchanges that allow you to transact “anonymously”.
- The third thing you should look at is where the funds are sent. The safest method to transact with cryptocurrency exchanges is by sending your newly bought coins directly to a private wallet address. Try to avoid exchanges that deliver your coins in an exchange-based wallet address, as the coins will not be in your full control.
If the platform you choose to use abides by the three points above, you can rest assured that it is safe to use and, therefore, a great option.
Method #2: Escrow platforms
Another safe option to invest in cryptocurrencies involves the use of peer to peer (p2p) platforms with escrow mechanisms. The most popular platform of this type is Localbitcoins. Here is how the process looks like:
- You create an account on the platform and find a user that is willing to sell you Bitcoin. There are numerous payment methods available and each one will usually have slightly different fees depending on the demand of users.
- As soon as you open a new trade, you will need to make a payment while the seller sends his BTC to an escrow account (third party). The BTC will remain locked in the escrow until your payment is received.
- Once the seller receives your payment, the BTC is “unlocked” and sent to your wallet. From that point onwards, it would be smart to send the funds to a private wallet instead of leaving them on the platform.
Using escrow services is usually very safe, as long as you choose to use specific transaction methods. For maximum safety avoid meeting people in real-life situations, as these types of transactions can carry a significant amount of risk.
Method #3: Bitcoin ATMs
In many locations worldwide, people are still using paper money as their primary transaction source. This can become a problem for those willing to buy Bitcoin. This is where ATMs come into play. Bitcoin ATMs are very safe when it comes to cash transactions. While, in the past, the devices carried very high fees and low limits, users today have a lot more flexibility.
Most Bitcoin ATMs request users to verify their identity and enter their own private wallet address in order to receive the coins. Both of these characteristics add to the safety of the transaction, as you will be able to backtrack your transactions in case a potential issue arises.
While this method is not the most optimal solution due to its high fees and limited availability, it can act as a great complementary method to help you acquire BTC safely.
Method #4: Banking apps / Paypal
In recent times, several banking services have started using “paper” Bitcoin as an investment option within their apps. The most popular example, in this case, is Revolut. The digital bank allows users to safely acquire Bitcoin and keep it within their app. That’s right. In this case, users can not actually own real Bitcoin – they own a digital representation of the coin instead. It is impossible to send or use your Bitcoin for anything else other than storing value, which in crypto terms is more commonly known as HODLing.
Just a few days ago, Paypal also announced its support for Bitcoin and other cryptocurrencies. Starting from early 2021, users will be able to buy crypto directly from their Paypal account. However, much like the banking apps, you will not actually own the Bitcoin. Instead, you will only own a digital representation of the cryptocurrency.
What does this mean for the future of crypto? Is it the same as actually buying Bitcoin? Well, for many institutions, this effort is all about controlling the flow of money. If you wish to be exposed to the asset as a long term investment, both options work. However, when you can only access your funds within a specific payment system, you never really own the keys to your coins, which is inherently against the function and purpose of cryptocurrencies.
Method #5: Using trading platforms
Trading platforms and exchanges have many similarities in their functions. However, trading platforms are known to offer more opportunities to utilize your cryptocurrency in the open market. While buying crypto on a trading platform is not as safe as sending it directly to your private wallet (due to exchange-based wallets), many trading platforms offer full insurance to your funds up to a certain (often large) amount of money.
Therefore, if you wish to do more with your crypto rather than just holding onto it, you might want to explore the possibilities and make small-sized purchases with the purpose of trading the funds. Try to avoid large purchases unless you plan to send the majority of your coins to cold storage afterwards.