Cryptocurrencies such as Bitcoin and Ethereum are totally digital currencies that could be used as online versions of payments for goods and services. Transactions through cryptocurrencies are very secure and can’t be easily closed down by governments. What makes cryptocurrencies so secure and transparent is because the details of the transactions are made public. Although everyone can see that someone sent let’s say $10 worth of Bitcoin in Canada to someone else-the identities of the seller and recipient still remain anonymous.
The majority of the public opts to purchase Bitcoin as a means of sending money around the world cheaply, unanimously and securely. Due to the rise of E-transfer options and the whole economy slowly turning into a virtual base, cryptocurrency transactions come with very low fees compared to other payment methods such as wire or bank transfers.
Some people use cryptocurrency for buying narcotics online anonymously while others trade tokens in the volatile market with the hopes of winning big cash. There is always a risk involved when making or losing money by buying Bitcoin. An interesting part of cryptocurrencies is that they are not backed by fiat currency and their values are almost entirely based on investor speculation. As such, Bitcoin is an exciting, new space to get involved in.
The character of Bitcoin and other cryptocurrencies is the decentralized element. To buy Bitcoin is to record all transactions across the world and to be stored in the blockchain, which is a public ledger that is found on all of the computers within the network. All ledgers are synchronized with no master ledger.
The verification and updating process for all Bitcoin transactions are referred to as mining. This process is independent, with miners being selected randomly across the world to verify transactions over a given period of time. Once this verification is complete, the information of the transaction is incorporated into a block, which then links to the blockchain. Miners will receive Bitcoin as a reward for the verification process.
The Steps to buy Bitcoin in Canada
Figure out how much Bitcoin you are going to buy
How much Bitcoin you should buy should be entirely based on how much you are willing to lose. Treat buying bitcoin in canada similar to gambling – there is a chance you could make-or lose- a lot of money. There are plenty of people in Canada who lost a fortune to Bitcoin, while others have become overnight millionaires.
Buying bitcoin used to cost just a few pennies back when it just came out but in late 2017 the price skyrocketed to around $20,000. Since then it has crashed, dropping the prices to as low as $3,000 in 2018 and then rising again to around $18,000 in the 4th quarter of 2020. While, some investors that buy bitcoin have became overnight millionaires and others have ended up losing a fortune.
As such, before you place any of your hard earned cash into Bitcoin, it will be wise to make sure you have enough money in the bank as a solid emergency fund and for a retirement plan. After taking into account these factors should you then figure out how much money you are willing to risk losing to Bitcoin-if any.
Decide where you are going to buy Bitcoin
Online exchanges or cryptocurrency exchanges are one of the most popular places to buy Bitcoin for Canadians due to their ease of use and simplicity. Not only for Canadians, but cryptocurrency exchanges are one of the most popular places globally to buy bitcoin.
It might be surprising to learn that these platforms traded over 2 Trillion in Bitcoin in 2018 despite the year-long bear market. This is where investors buy and sell 99% of all digital currency. You are able to use Canadian crypto exchanges as a platform to buy and sell hundreds of cryptocurrencies, including “stablecoins” – coins pegged to fiat currencies, like the US Dollar. However, when buying and selling, there are a few things to watch out for when choosing to trade through exchanges. One of them would be that although exchange platforms technically control the type of crypto that’s held in exchanges, they could potentially drain the exchanges of user funds, even if it’s in your wallet on the exchange.
There are popular more regulated digital currency exchanges such as, Kaken, Cex.io, Bitcoinmama,bitbuy or Binance. These kinds of platforms could be safer than unregulated or unknown exchanges. Binance for example, created a “Secure Asset Fund for Users”, an emergency fund that could be accessed in an extreme situation.
In Canada, there are a few ways that online exchanges use to provide funding to your account, the list below are some of the ways you can buy bitcoin in canada.
One way to buy bitcoin is utilising an Interac e-Transfer to fund your account. Many online trading platforms such as Bitbuy support this option. It is probably the most universally accepted method for an online Canadian trading platform, as over 250 financial institutions in Canada allow customers to use this as a payment method to fund your account.
One of the advantages of this online transfer is that it is extremely fast and has one of the lowest fees.
Another way to buy or sell bitcoin is through a bank wire. This option requires the investor to visit a bank branch which can be inconvenient for most Canadians though especially during the winter. Again, most cryptocurrency exchange platforms will accept bank wire as a way to buy Bitcoin, such as Kraken, Bitbuy and Binance. However, you will need to take into account that some of the minimum fees will vary. Coinsquare for example, requires a $10,000 minimum while Bitbuy charges about $5,000.
One attractive factor of this option of buying bitcoin is that most cryptocurrency exchanges charge relatively low fees at about 50 basis points which makes it attractive to those who wish to buy and sell large amounts of bitcoin. It is also important to note that because of the traditional banking system, funding times can be much longer (1-3 days) to process.
Another way of buying Bitcoin in Canada is using Flexepin if you are buying Bitcoin fast. How it works is that Flexepin sells vouchers with individually unique pin codes that can be entered on many online services in order to fund your account or buying bitcoin.
These vouchers can be bought at retails stores so you would not require any sort of id verification and are great for those who are looking to use cash to buy bitcoin and not wanting to get hit with large fees from using their credit cards.
Flexepin can be bought across Canada at thousands of locations and Bitbuy is one cryptocurrency exchange that accepts Flexepin vouchers. Flexepin will fund your account instantly and you will be able to buy bitcoin in less than an hour in most instances.
Although it is a normal occurrence to buy things online with credit cards, it is interesting to know that the companies consider purchasing bitcoin as a ‘cash advance’ because technically you are exchanging one currency for another. What this means is that you will be paying high fees from your credit card company on top of the already existent fees charged by the cryptocurrency exchange you plan to use.
Exchange fees are typically around 7% -10% in Canada and credit card payment is available on Canadian exchanges such as Coinberry and Coinsquare.
Using a Bitcoin ATM
In some places, there are kiosks available that allow users to exchange their cash to cryptocurrency. It allows users to purchase Bitcoin using debit card or credit cards. These kiosks however, are not particularly available everywhere. Some do charge a rather high customer service fee, and also provide less than ideal exchange rates for trading Bitcoin.
Bitcoin ATMs should not be confused with more traditional bank ATMs that are linked to banking networks that allow customers to withdraw and deposit Canadian Dollars and make other banking requests.
Bitcoin ATMs are linked to the internet and have no connection to bank networks. ATMs provide you the option to buy with a high degree of anonymity, which is one of the desired characteristics of Bitcoin, however it comes with a downside of having higher transaction fees with the limits on the size of transactions being lower than on Bitcoin exchanges.
The world’s first Bitcoin ATM was reportedly opened in a coffee shop in Vancouver back in 2013 and uses palm and ID scan technology in order to buy Bitcoin. Bitcoin was about $200 Canadian Dollars when the ATM was installed.
Using Bitcoin ATMs are more of an outdated option to buy Bitcoin though and will still typically cost much more in fees that range from about 6-8% above the market rate. If you are unsure where the nearest bitcoin ATMs in Canada are located, you can use the Coin ATM Radar to find the nearest one to your location. It would not be too much of a struggle to find one though as Canada has the most Bitcoin ATms per capita out of any country in the world!
A peer-to-peer network is an online marketplace that allows two users to make a transaction with no middle man helping to facilitate the transaction. As it is obvious to point out, using this option to get your bitcoin means you will lack any customer support that other options would provide.
There is the option to buy your bitcoin this way from other people on a platform called LocalBitcoins.com or Paxful. These sites allow you to trade anything for cryptocurrency. On Paxful for example, it is possible to sell Bitcoin for Xbox Live gift cards although sellers sometimes receive worthless cards in exchange. However as with all free marketplaces you should be aware of scammers.
These platforms are an option if you want to buy bitcoin in Canada as they are getting more secure and more importantly; they are quick, cheap and easy to use. LocalBitcoins offer an escrow service to protect its buyers when buying Bitcoin. It is important to take note than in some cases people have been taken advantage of by certain people so it is important to do proper research on each seller /buyer before going through with the transaction.
Over the Counter (OTC)
OTC trading is a private trade between two parties that occur outside of exchanges, and without supervision of an exchange. It is similar to peer-to-peer trading but OTC trading generally refers to brokers that assist high profile clients trade millions of dollars worth of cryptocurrencies.
This means that their trades are probably not registered on the public ledger, making it a more discreet way of trading. Reputable companies such as Bitstocks, ItBit and Circle Trade provide Over The Counter services.
You would want to use OTC if you are buying large amounts of Bitcoin ($25,000) at one time as it will protect you from a market phenomenon called Slippage. Slippage for Bitcoin transactions occurs when the amount of Bitcoin you are planning to buy actually exceeds the amount available at the current quoted price. What this means is that part of your order ‘slips’ to the next available (higher) sale price and you might end up paying more than your quoted market price.
So in essence, OTC trading helps the buyer to save money by protecting them from slippage when buying large amounts of Bitcoin.
VirgoCX, a regulated Canadian exchange, mentions that since OTC trades are done without having to make an order that is visible on the orderbook, the psychological market impact of a large buy/sell influencing the market price will be reduced. This effectively ensures that you will be able to secure desirable prices for your orders.
Using OTC to get digital currencies, buyers can typically be expected to pay 2-5% greater than the market price. The prices of an OTC transaction can fluctuate based on fees and market conditions. Both VirgoCX & Bitbuy offer an OTC desk with competitive rates so you could consider them to purchase you Bitcoin.
In-Person Retail Location
If for some reason you do not have access to an internet connection to get your Bitcoin online, and want to experience going to a retail location for all your shopping, you may want to check out a Bitcoin brokerage, or a foreign exchange center to get the cryptocurrencies you want. In Canada, MyBTC.ca offers cash or Interac Debit Card as one of the payment methods to buy and sell Bitcoin. Just go to your nearest Canada Post outlet to do so.
Netcoins offers retailers the opportunity to sell Bitcoin and other cryptocurrencies at various locations. If you are on the West Coast of Canada, you could opt to go for Bitcoiniacs who provide operational in-person Bitcoin stores.
Selecting a Bitcoin Exchange
Purchasing cryptocurrencies from exchanges is probably the safest, convenient and easy to use way to trade Bitcoin. However, there are a lot of exchanges out there, and they all come with their distinct advantages and disadvantages. You are required to educate yourself about the features of each cryptocurrencies exchange so that you are able to make your first Bitcoin experience as smooth as possible.
To get started, it is not just the price of Bitcoin that you have to take into account;fees come in all shapes and forms, for example, from considering the withdrawal fee or high fees from depositing cryptocurrencies. There are generally two types of fees when you want to trade bitcoin: market maker fees — which are paid when you add liquidity to an exchange’s order book, and take fees — fees paid when you take liquidity away from the order book.Canadian cryptocurrency fees generally decrease the more Bitcoin you trade, encouraging large investments.
An additional information to take note of is that although some exchanges offer lower fees than others, these often come at a cost of privacy, security, longer processing times or insurance. Because of this, it is important to gain as much information as you can get a more rounded opinion of exchanges before you trade with them. Without sufficient information, you may end up with a bad deal.
Although there are hundreds of exchanges, first time buyers would want to get started with large, reputable exchanges. When trading a volatile cryptocurrency such a Bitcoin you will need all the information you can get.
Opening a digital Bitcoin Wallet
When you want to buy bitcoin whether from Bitcoin ATMs or OTC, you will need a place to store your cryptocurrencies, this is where your digital wallet comes in. A digital wallet is where you hold your cryptocurrencies and interact with others via the blockchain technology.
Whenever possible, cryptocurrencies should be stored in wallets, especially bank accounts for cryptocurrencies. This is important as if you store your Bitcoin on cryptocurrency exchanges, the exchanges will technically have control over the crypto. But if you withdraw to a wallet, you will have complete control over your digital assets. That said, some popular exchanges actually provide you with a Canada bitcoin wallet to make it more convenient for storing and trading cryptocurrencies.
When picking up a Bitcoin Wallet, make sure that you consider backup and security features. Generally, there are two types of wallets: hot and cold wallets.
A hot cryptocurrency wallet is one connected to the internet, if a hacker manages to somehow gain control of it via some malicious code, then they are able to get your Bitcoins. However, the upside is that these wallets are connected to the internet via mobile, desktop, webapps, meaning you can easily access them anywhere. They are also free, notable hot wallets are Electroneum or Trust Wallet.
By contrast, a cold wallet, or cold storage is one that is not connected to the internet. Cold storage wallets store Bitcoins on something physical such as a USB stick that you can purchase from a retail shop. Advantage of this is that it makes your cryptocurrencies difficult to hack, and a great long-term storage solution.
In short, you can assume a hot wallet like the one you carry in public: full of cash and easy to steal, but readily available. By contrast, a cold wallet would be equivalent to storing all your Canadian dollars in a safe: it is secure but not very convenient to use.
There are many providers of digital wallets.So, it is important to get as much data and research as you can before you divide which one is the best for you.
Decide how to pay for Bitcoin
There are endless currencies and payment methods you can use to buy Canadian cryptocurrency. Most common ways are using debit cards or wire transfer. Some methods such as other cryptocurrencies or payment cards are faster than wire transfer or debit cards, which can take a few days. However, remember that paying through a bank account isn’t protected by the same insurance products such as purchases made through credit cards.
Buy your Bitcoin
Remember to exercise caution as always when you want to use these type of Canadian cryptocurrency and always to invest only in the amount of Bitcoin you are comfortable to lose your money on.
Accept that you are unlikely to become an overnight success, and set some time aside to learn about the various types of platforms and markets before making any large investment decisions.
Canada has certainly embraced Bitcoin and is reflected from the Cryptocurrency platforms with the ability to purchase goods and services across the goods and services sector.
Fees however seem to be on the more competitive side, particularly looking for identification security. Canada however, could be considered one of the more advanced markets in the world moving away from Fiat Currency for day to day living.
Frequently asked questions
Q: Is Bitcoin legal tender in Canada?
Digital currency is NOT legal tender. Only the Canadian Dollar is considered official currency in Canada. Legal tender is defined as: bank notes issued by the Bank of Canada under the Bank of Canada Act
Q: What are the cheapest ways to buy Bitcoin?
Coinbase is easily one of the quickest and cheapest ways to buy Bitcoin. CEX.Io has better trading options and Coinmama is better for privacy. Coinbase however offers some of the lowest fees in the market for direct purchases with credit and debit cards.
Q: Best Canadian Cryptocurrency Exchanges to buy Bitcoin of 2020
Coinbase :Best Overall
Robinhood: Best for Low Cost
Square Cash: Best for versatility
Binance:Best for Low Rates in Other currencies
Q: Is Bitcoin taxable in Canada?
Generally, possessing or holding a cryptocurrency is not taxable. But there could be tax consequences when you convert cryptocurrency to government-issued currency, such as Canadian dollars or use cryptocurrency to buy goods or services.
Q: Do Canadian Banks accept Bitcoin?
Royal Bank of Canada, TD Bank and Scotiabank block credit card crypto purchases, but allow Interac and debit card buys.