How to Buy Bitcoin in Canada: A Complete Guide (2020)
Even though you might have heard of Bitcoin, you might not know how to buy them. Read this guide for explanations.
Globally, many people are buying Bitcoin to turn a quick profit or look for returns in the longer term. Others are using Bitcoin for a more flexible and convenient medium for money transfers. Since the movement from A to B is virtual and quite quick, cryptocurrency transactions are attractive. The technology is constantly evolving to meet increasing needs for effective cross-border transactions. Besides Bitcoin, tokens are also traded or invested on various markets, because the speculative volatility of cryptocurrencies brings the potential for exponential returns. If you are interested in using this exciting space, here are some ways to buy Bitcoin in Canada.Find a Bitcoin ATM or Bitcoin Counter near you
What is Bitcoin?
According to Bitcoin’s white paper, Bitcoin is a “purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.” After the 2008 crisis, Bitcoin was created to provide an alternative to the traditional banking system.
Reasons to Purchase Bitcoin
Currently, money is controlled and owned by a central authority. The government can oversee all transactions taking place in its monetary system – which allows those in power, such as banks and regulators, to get access to the records on ledgers. This is why Bitcoin is important.
Bitcoin isn’t owned by one man or one central authority. Its purpose is to allow each individual to be their own bank, unlike traditional monetary systems. This sort of decentralization allows for peer-to-peer transactions and greater transparency. Having ownership and control of your money through Bitcoin also allows it to be unaffected by inflation.
The value of the dollar has been weakened by qualitative easing and other methods. What you can buy in a grocery store today for $100 would have cost a fraction of that twenty years ago. That difference is called inflation.
What does it mean for Bitcoin?
Time has the opposite effect on the value of Bitcoin. The total amount of Bitcoin that can ever exist is 21 million. Based on the mining rewards available, the final Bitcoin will not be mined until at least 2140. Once the final Bitcoin has been mined – like mining virtual gold – the price of Bitcoin will hopefully continue to rise.
Historical Appreciation & Store of Value
If Bitcoin performs the way it is intended, and with a finite number of Bitcoin that will ever exist, the laws of supply and demand predict that the price of a Bitcoin should rise significantly, unlike the historical trend of fiat currency under a centralized authority. With historical appreciation, this asset class can be considered a store of value. In March 2010, a single Bitcoin was valued at $0.003 USD. In December 2017, Bitcoin was valued at an all-time-high of $19,783 USD. As of October 2020, one Bitcoin is valued at nearly $13,000 USD. While the price has fluctuated, past performance does not necessarily predict future performance, yet its value has continued to show higher peaks and higher troughs.
How can you purchase Bitcoin?
One way that you can purchase Bitcoin is through a Bitcoin ATM. There are many resources online that can help you locate Bitcoin ATMs around your neighborhood. If you live in Ottawa and prefer in-person purchases, there are currently Bitcoin ATMs that can be found in shops like convenience stores.
Buy and Sell Bitcoin via Peer-to-Peer Transactions
Another way to buy and sell Bitcoin is directly from other people on peer-to-peer marketplaces such as LocalBitcoins, LocalCryptos, and Paxful. You can also buy gift cards and other items, but you will have to beware of scammers who may sell you empty gift cards. The systems are gradually becoming more secure while still being quick and easy to use. When selling Bitcoin, the spot price percentages have varying ranges, so compare marketplaces and use whichever market is both safe and more beneficial to you.
Buy Bitcoin from Cryptocurrency Exchanges
Buying Bitcoin from exchanges is possibly the easiest and most convenient way for those new to the cryptocurrency space. Some popular exchanges include Binance, Bitfinex, and Coinbase.
Most exchanges carry their own fees for using their platform. These fees are taken when you deposit or withdraw cryptocurrencies. There are also hidden fees when using a cryptocurrency exchange. Some of these include but are not limited to, transfer fees, deposit fees, and currency conversion fees (from both international exchanges and sometimes your credit card provider). It is recommended to use large exchanges that are rated very favourably compared to others, as you may end up paying lower fees but at the cost of your privacy and security.
In 2014, users of Japanese-based exchange Mt. Gox experienced what happens when you leave your Bitcoin on an exchange. Mt. Gox got hacked and more than 600,000 Bitcoin were stolen over a two-year period. The customer base of Mt. Gox lost their money because of this.
QuadrigaCx, which was at one period Canada’s largest cryptocurrency exchange, also came under fire when its CEO died, taking with him the sole password to a cold wallet on a laptop that he owned. Over $250 million of customers’ money was lost due to this – once again pushing the notion that individuals should be careful when using cryptocurrency exchanges to hold their Bitcoin.
Storing your Bitcoin
Storing your Bitcoin is just as important as owning it. Like traditional physical wallets, Bitcoin is also stored in a wallet – a digital one. This digital wallet can either be a physical or hardware wallet, a mobile wallet, or a web wallet. In order for your Bitcoin to be secure, you must also own and keep safe your private keys. Each wallet has its own unique private keys that are basically your unique combination for the lock that gives you access to your Bitcoin and prevents theft by cyber criminals.
The main concern regarding these private keys is that if an individual loses their private keys or has them stolen, their Bitcoin holdings are no longer accessible and therefore no longer theirs. In order to deter these sorts of concerns, it is important to choose the wallet that works best for your situation. Here are a few options you currently have.
Hardware wallets are a popular option for many Bitcoin holders. The benefit of these hardware wallets is that they are pocket sized. Hardware wallets are completely anonymous, which means your personal identification cannot be stolen. It is also protected from viruses and other malware that can usually infiltrate computers. If you misplace your hardware wallet, your 12, 18 or 24-word recovery seed that was provided to you when you first set up your original wallet can be entered into your replacement wallet and you will have ownership once again. Some popular options for hardware wallets include Ledger Nano S, Trezor T, and Keep Key.
In the age of technology, nothing is more attached to us than our mobile devices. With these devices, we also have a quick way of accessing our Bitcoin. Some familiar options include Coinomi and Zengo. Mobile wallets are fundamentally safe, but the downside is that your private key will be stored on your mobile device. Meaning, if your device goes missing, so does your private key. Thankfully, if you still have your seed phrase safely written down somewhere, your wallet can be recovered. Tread carefully with mobile wallets; being man-made, the technology can still malfunction, especially on cellphones.
Web wallets like Coinbase or Blockchain are accessible from your phone and your desktop. With web wallets, you do not have the private keys. Therefore, you do not own your Bitcoin outright until you own your private keys, which requires an offline wallet.
Bitcoin purchasing strategies
Dollar-cost averaging is a strategic way to invest in Bitcoin if you would like to reduce your investment risk, which is the main benefit. This investment style refers to investing a fixed amount in Bitcoin at regular intervals. The amount you should invest regularly is solely up to your budget and accounting needs. If you prefer to invest $50 every week or $10 bi-weekly, the choice is yours. By dollar-cost averaging, you avoid investing a single lump-sum in Bitcoin, thus risking heavy volatility due to the specific price you paid for it. By investing periodically, you can ignore the price increases and decreases of Bitcoin’s journey, and over time this will lower your volatility rate. Setting price alerts will also keep you up to date with current prices and may offer you time-sensitive investment opportunities.
Trading Bitcoin on exchanges such as Bitfinex and Binance can be profitable if you are highly skilled in timing the markets. For the average person, this is a trading strategy to steer away from, as trying to time the volatile cryptocurrency market may cause quicker losses than gains.
If you are considering dollar-cost averaging, trading, or any combination of Bitcoin purchasing strategies, it is important to keep in mind that there is no such thing as a guaranteed return and that your investment style should be based on your personal experience and risk tolerance.
Is it legal to buy Bitcoin in Canada?
Yes, it is currently legal to buy Bitcoin in Canada. Business dealings in virtual currencies are now considered as MSB’s (Money Service Businesses) under Canadian law. Canada is quickly taking notice of the legitimacy of Bitcoin.
If you intend on utilizing Bitcoin as an investment, please consider speaking to a registered accountant about what options you may have and the tax implications that come with them.
How do I use a Bitcoin ATM in Canada?
Using a Bitcoin ATM is an easy option if you have access to one near you. Each Bitcoin ATM may be slightly different than another in terms of the necessary steps, but most require you to scan your IDs or utilize a unique QR code. They may also request a phone number for security purposes.
Some Bitcoin ATM providers may have ‘how-to’ videos on their websites to make your experience with their services easier.
If you are looking for a Bitcoin ATM in order to do both buying and selling of Bitcoin, these may be harder to find as most only have a buying option.
For example, if you are BUYING Bitcoin, the process may go as follows:
- Click BUY.
- Choose BITCOIN.
- Click SCAN QR CODE.
- Scan the QR code on your wallet.
- Insert cash bills
- Press FINISH.
- Take printed receipt.
- Choose WITHDRAW.
- Choose BITCOIN.
- Choose the amount you would like to withdraw.
- Send Bitcoin to QR code from your mobile wallet.
- Collect your cash when the ATM is ready.
What is the smallest amount of Bitcoin I can buy?
The smallest amount of Bitcoin that you can buy is 1 Satoshi, which is 0.00000001 Bitcoin. But since this number is so small, it is impossible to buy 1 Satoshi on any exchange. One popular exchange, Coinbase, sets the minimum Bitcoin order at $2 USD. Binance, on the other hand, sets it at $15.
If you are considering using a Bitcoin ATM, remember that each will carry their own different minimum purchase amount and exchange fee. Do your research before you consider which Bitcoin ATM to use.