When it comes to Bitcoin, I’ve always been an outsider looking in. Living in China, government crackdowns have made the cryptocurrency largely inaccessible, so I’ve been content to sit on the sidelines and observe.
Eventually, however, my curiosity got the best of me, and I decided to take the plunge. I am a Bitcoin believer, and I want to walk the talk. After some thorough research, I bought US$100 worth. So, in the interest of spreading the word, here’s some first-hand advice for first-time bitcoin buyers.
Where to buy bitcoins – choose the right exchange
The first question I had was – "where to buy bitcoins from?" With dozens upon dozens of exchanges in the world, I chose US-based Coinbase. Originally, I wanted to try out one of the many exchanges in Asia that I’ve written about in the past, but ultimately went with Coinbase because it’s in the same country as my primary bank account. I highly recommend you filter your search by finding exchanges in your home country or ones that explicitly state they accept transfers from your bank, otherwise you will risk unnecessary bureaucracy headaches and transfer fees. I also wouldn’t suggest buying from individuals on your first attempt. Here’s a brief (and by no means exhaustive) list of exchanges in Asian countries:
- China
- Taiwan
- Singapore
- Hong Kong
- Japan
- Korea
- Indonesia
- Thailand
- Philippines
- Malaysia
- India
So what should you be looking for? The number one priority should be security. This is real currency we’re talking about (despite what some governments might think), but rules and regulations are not yet up to the same standard as real banks and other financial institutions. If an exchange goes down, all of its customers’ assets can go down with it (see: Mt. Gox).
Do some background research on each of the available exchanges in your country. Have they been around awhile? Do they have good reviews? Are there any news articles about them getting hacked? Are the founders some fresh IT grads or experienced financial professionals?
Make sure the exchange uses two-factor authentication – a security measure used when logging into your account from a new device that requires two methods to prove your identity. Sometimes this is an email address and a phone number, while some exchanges require an actual scan of photo ID.
Cold storage is another plus. Not all exchanges have this, but I prefer those that do. Cold storage is sort of like the opposite of cloud storage – disconnected from the internet and kept completely out of the reach of hackers, and other forms of catastrophe.
Next, look for the features you want in an exchange. Remittances will require cooperation with local banks in the destination country. If you don’t have a bank account, look for exchanges with nearby bitcoin ATMs or a voucher system. Margin trading, instant withdrawals, automatic trading, and the option to buy altcoins (Litecoin, Dogecoin, etc) are all worth considering depending on your needs.
Transaction fees are also important to keep in mind and vary from exchange to exchange, but competition has driven most of them down to keep their prices low.
Apart from it being in my home country, I chose Coinbase because it uses two-factor authentication and cold storage, has a clean reputation, and offers instant buying up to US$100.
Choose the right wallet
Finding a wallet, an app from which you can send and receive bitcoin, is the next step. A search on any major app store returns tons of options, but using one made by the exchange which you buy from will make your life easier. Coinbase has both a mobile wallet app and a browser wallet on its website that sync with each other.
It’s convenient that I don’t have to transfer the bitcoins to a separate wallet, and I don’t have to worry about losing my bitcoins if I lose my phone or my computer dies. That’s a double-edged sword, though, because if Coinbase gets hacked or goes dark for some other reason, my bitcoins will go with it.
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