Bitcoin is often called ‘digital gold’ which makes it one of the most promising investments in recent times. If you are interested in buying this sparkling piece of digital gold, you need to follow either of the 5 ways we mention below. So, tighten you seat belts and get ready to explore the world of Bitcoin and cryptocurrencies.
Traditional exchanges/Spot exchanges
People searching for software for trading Bitcoin most often land up on the websites of traditional cryptocurrency exchanges. Exchanges like OKeX, Binance, Huobi, Coinbase etc. qualify as traditional cryptocurrency exchanges where orderbooks are centralized. They act as stock exchanges, providing a centralized trading platform and an order book where you can find numerous buyers and sellers and the prices at which they are ready to buy/sell. Often, the liquidity of these exchanges is very high. Some exchanges also allow you to deposit and withdraw in a local fiat currency. Some even provide fiat/crypto pairs alongside crypto/crypto pairs to the users. They are the easiest methods to get started with Bitcoin trading.
Also known as DEX, these exchanges are completely decentralized. However, liquidity on these exchanges is often a big problem. Several prominent exchanges like Binance have tried to start DEX (for example Binance DEX) but the response has not been as good as traditional exchange which make trading exceedingly simple. If you a firm believer in the idea of decentralization, this could be the right choice for you.
Peer-to-peer exchanges like LocalBitcoins help you list your intention to buy or sell a Bitcoin at a particular price. There is no orderbook or order matching system here. You simply strike a deal with the buyer or seller of the coin which is either fulfilled online or offline. If you are fulfilling the deal online, the exchange may keep the Bitcoin you are selling as escrow until the buyer has transferred you money. This is not common to all exchanges. If you are fulfilling the deal offline, you agree to meet a buyer/seller, transfer the money and Bitcoin to each other and go your separate ways.
Over the counter exchanges are not for everyone. Even though these exchanges can provide you smaller quantities of Bitcoin, they are generally better suited to larger buyers and sellers or those who trade in big volumes very frequently. The prices at OTC trading exchanges can be different from those at spot exchanges like Binance. These trading desks became very popular in China where the government frequently cracks down on cryptocurrency exchanges.
This the last method of trading in Bitcoin. If you know someone who could be interested in buying or selling digital currencies, you simply trade with them using your digital wallet. You are free to decide how much you would pay for one Bitcoin- in terms of another cryptocurrency or fiat money. This type of transactions is completely different from P2P exchanges which allow strangers to exchange cryptocurrencies. Here, you trade with people you already know or those who you strike a deal with without going to a third-party platform.
Which is the best place to buy Bitcoin?
If you are a beginner investor with relatively small sums of money to invest, then you should choose spot exchanges only. These conventional crypto platforms work like stock exchanges and provide you better security than other platforms. Moreover, there is more transparency for traders on these platforms as they can easily check order books, order book depth and overall liquidity of the market. Most spot exchanges will also store your Bitcoins for you in their hot wallets.
Some experts suggest that holding Bitcoins in exchange accounts is a bad idea since exchanges are prone to hacks. To combat this problem, create a Bitcoin wallet and transfer all your coins there on a regular basis. However, make sure that you keep your private keys safe.
Don’t wait anymore. Bitcoin is the next big thing in the world of finance and could totally revolutionize our financial industry. It is not just a great way to pay for different goods and services but the best investment vehicle available on the planet today.