Steps to buy Bitcoin
1. Choose a cryptocurrency trading platform that offers support for Bitcoin.
2. Fund your account through one of the many available methods.
3. Search for Bitcoin on the platform and purchase using your available funds.
1. Choose a Crypto Trading Platform
Generally, one of the first steps of choosing a crypto trading platform is to ensure that the cryptocurrency you want to purchase is supported.
Luckily, as one of the most well-known and most-traded cryptocurrencies, just about every crypto trading platform will offer support for Bitcoin.
With so many options to choose from, here are a few popular platforms for Canadians.
One of the most well-known and trusted names is Wealthsimple Crypto.
Wealthsimple has designed a user-friendly application that makes it easy for first-time investors to buy, sell and trade Bitcoin.
However, it is important to understand that the platform does not allow for direct ownership of the underlying assets.
Users cannot withdraw Bitcoin directly from the platform since the cryptocurrency must first be converted to cash before being taken out of Wealthsimple.
One of the reasons investors choose to purchase cryptocurrencies is the direct ownership of the underlying assets.
By offering tools like private keys and additional tiers of security, other platforms allow their users to move cryptocurrency out of the platforms and into digital wallets or other secure storage choices.
While Wealthsimple Crypto does not provide this, the platform simplifies the process and allows users with little experience in the cryptocurrency sector to get started without having to set up complicated wallets, keys, or other security precautions.
As a result, this is a great option for those who are new to investing in bitcoin.
Bitcoin may also be purchased by Canadians (except for residents of Ontario) through Binance, one of the world’s largest and best-known cryptocurrency exchanges, Binance supports over 200 different cryptocurrencies, including Bitcoin.
Low trading costs and the ability to fund accounts using several currencies, including CAD, USD, EUR, are among the numerous advantages of Binance.
Binance offers users peace of mind by using a secure method for storing assets called “cold storage”.
This means that the digital wallets are stored offline and not connected to the internet in order to prevent cyber attackers from hacking the system.
Another popular option is Coinberry.
The Toronto-based trading platform is extremely easy to navigate and very friendly for new users.
Account setup, including identification verification, is a quick process.
Users are often able to deposit money and begin trading within minutes of signup.
Trading is commission-free but the platform could take between 0% to 2.5% in spread on each transaction.
Coinberry is a trusted company that has used its reputation to build solid relationships across Canada.
Coinberry was chosen by the Canadian town of Innisfil as their partner for a pilot project in which municipal property taxes could be paid using cryptocurrency.
Partnerships such as these prove that Coinberry is a safe and reputable platform that takes security seriously.
In December 2021, Bitbuy received OSC approval to become Canada’s first and only crypto trading platform that’s regulated as a marketplace.
Also founded in Toronto, Bitbuy has a platform that caters to both beginner and advanced traders.
Novice users are greeted with a friendly user interface and easy-to-understand options in the “Express Mode” product.
Experienced traders can opt for the “Pro Trade” product, which opens up features such as live order books and market depth charts.
Fees on trades vary from 0.1% to 0.2%, however, Bitbuy also charges for deposits and withdraws into and out of their platform, with fees ranging from 0.5% to 1.5% percent.
In terms of security, Bitbuy also uses cold storage as a way to ensure that customer assets remain safe and out of reach of any cyber security threats.
2. Deposit Money Into Your Account
Once you have selected a platform, the next step is to deposit money into your account.
Different platforms have different options, including e-transfer, debit card, bank transfer, or credit card.
With these options, each platform may charge different deposit fees.
These fees add up quickly, especially if you are making multiple smaller deposits each month.
Another element to consider is processing times.
Platforms such as Wealthsimple Crypto offer “instant deposit”, allowing users to make purchases within seconds of adding money to their account.
Given the large price fluctuations on cryptocurrencies such as bitcoin, having the ability to instantly purchase can make all the difference.
3. Buy Your Desired Quantity of Bitcoin
With money in your account, you are now ready to make your first purchase.
Searching “Bitcoin” or “BTC” in any of the trading platforms will bring up a trading window.
Here, you can see the current price of Bitcoin along with lots of other information.
As the price per Bitcoin has become tens of thousands of dollars, it is not necessary to purchase a whole Bitcoin to start off.
Just like fractional trading is available on some platforms to purchase stocks, investors looking to purchase Bitcoin can invest as little or as much as they want.
Whatever amount you decide to invest will give you a “piece” of a Bitcoin.
In fact, each bitcoin can be divided down to one hundred millionths.
Do I Need to Store My Bitcoin in a Wallet?
As discussed, there are several features that make purchasing Bitcoins safe and secure.
In general, crypto trading platforms offer a service known as a “custodial wallet”.
This means that while coins are safely stored in a wallet, the ownership of private keys is given to a third party.
Storing in a custodial wallet offers the benefit of ensuring that private keys are never lost.
Those who choose to keep ownership to themselves (non-custodial wallets) risk losing their keys (forgetting passwords, losing physical storage devices) and forever losing access to the Bitcoin stored in their wallet.
Both custodial and non-custodial wallets come in many options.
Users can opt for a virtual wallet, a hardware wallet, a desktop wallet, or a mobile wallet.
These options all have tradeoffs between convenience and security, and it is important to research the pros and cons of each before investing large sums of money into the cryptocurrency world.
What is Bitcoin?
Created in 2009, Bitcoin is a digital currency that can be used for transactions through a decentralized peer-to-peer network.
Bitcoin and the blockchain technology behind it paved the way for many of the digital currencies, or cryptocurrencies, that we see in the market today.
With new cryptocurrencies being developed on a regular basis, Bitcoin has maintained its position at the top of the food chain.
With a market cap of over US$700 billion, Bitcoin is often one of the first coins investors learn about and invest in within the cryptocurrency space.
One reason Bitcoin is attractive to investors and has the largest market cap of any cryptocurrency is the limits on its supply.
While other coins such as Dogecoin are constantly adding to their circulating supply, Bitcoin is special in that only 21,000,000 coins can be in existence.
Just like gold derives its value from scarcity, Bitcoin investors can hold onto their coins knowing that the supply is limited.
New Bitcoins enter circulation by being “mined”.
The mining process involves using powerful computers to solving complicated math problems.
Solving these math problems is necessary to create and maintain a ledger of transactions.
Every time Bitcoin is used in a transaction, these complicated math problems must be solved to verify the transaction.
Those who are using their computers to do this verification receive a small amount of Bitcoin as a reward every time an equation is solved.
While the concept of using Bitcoin and other cryptocurrencies for transactions has been around for a decade, it is only recently that more mainstream adoption has been possible.
For example, the President of El Salvador recently announced that Bitcoin would be accepted as legal tender in the country.
While it is unknown just what the future holds for Bitcoin, announcements like these are promising signs to investors who believe in the future of the cryptocurrency.
Bitcoin Historical Performance
Like most cryptocurrencies, Bitcoin has had periods of extreme price volatility.
Retail investors have shown lots of interest in Bitcoin over the past few years, driving prices up to a peak of almost $65,000 USD in April 2021.
While Bitcoin has been around since 2009, investors are still wary of Bitcoin as an investment instrument.
A range of issues has caused the price of Bitcoin to fluctuate over the past several years: regulatory concerns, the emergence of other coins, and the negative media coverage in the case of security breaches are all examples of events that cause Bitcoin prices to dip.
In addition, another well-known catalyst for price movement is comments made by public figures such as Elon Musk.
For example, Musk famously tweeted that Tesla would be accepting Bitcoin as a form of payment before backtracking on that comment in the following days.
The comments drove prices rapidly up and back down over the course of a few short days.
Is Bitcoin a Good Investment?
As a speculative and highly volatile investment, Bitcoin is not for everyone.
For those who have a higher risk tolerance, investing in Bitcoin has the potential to generate high returns.
However, you must also be ready to stomach the wild price fluctuations that are associated with the sector.
Bitcoin is slightly more stable than some other cryptocurrencies with lower market caps, but the investment should still be considered higher risk.
Frequently Asked Questions
- Is trading Bitcoin legal in Canada?
While Bitcoin is not accepted as legal tender in Canada, there are no rules prohibiting the buying or selling of Bitcoin. Bitcoin and other cryptocurrencies are treated like any other security in Canada. Just like stocks and ETFs, the sector is quite regulated, so investors can rest assured that there are no legal troubles with owning bitcoin. Each crypto exchange platform is considered a Money Services Businesses (MSB) and is required to be registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and comply with their stringent rules in order to operate.
- Are Bitcoin ATMs available in Canada?
Bitcoin ATMs are available in most major Canadian cities. In fact, the world’s first Bitcoin ATM was installed in a Vancouver, B.C. coffee shop in 2013. Nearly a decade later, there are an estimated 1921 machines currently in the country. There are two types of Bitcoin ATMs: unidirectional (only allows for the purchase of Bitcoins) or bidirectional (allows for both the buying and selling of Bitcoins). Using cash or card, users can go to ATMs and make transactions from cash into Bitcoin. Rather than being connected to a bank account like traditional ATMs, money is moved into and out of digital wallets or crypto exchanges using QR codes or other secure methods. While ATMs have the benefit of convenience, fees are usually quite high, averaging around 8.9%.
- Can I buy Bitcoin through my bank in Canada?
There are currently no ways of purchasing Bitcoin or any other cryptocurrency through any of the traditional big six banks in Canada. While you can transfer money from your bank account into crypto exchange platforms to purchase Bitcoin, there is no way to directly purchase and hold Bitcoin within accounts at financial institutions.
- Is Bitcoin taxable in Canada?
Yes. In Canada, Bitcoin is treated like a commodity for purposes of the Income Tax Act. That means that any money made from trading Bitcoin will be subject to capital gains tax. For this reason, it is important to keep track of transactions for end-of-year tax reporting purposes. There are several nuances, including whether the CRA views activities as personal or business.