With Bitcoin now surpassing $14,000 after trading for just $500 a year ago, and now over $230 billion in total market value, it is hard to ignore the opportunity to get involved with cryptocurrencies.
This is a quick- how to get started guide in cryptocurrency trading.
Even if you are unaware of the technology, or not very tech-savvy, you can still make great profits if you learn from the right sources and study the markets. Our site is dedicated to educating you with no B.S. and no bias, so you can protect your money and beat the crowd. There is no better time than now.
Let’s dig in!
To get started, you will need 3 things:
- A Bank account (although we will mention an alternative for this)
- A Digital Wallet
- A Cryptocurrency Exchange Account
Open A Digital Wallet
The first step in starting with cryptocurrency trading would be to open a digital wallet.
The wallet is basically a digital storage of your assets that can reside offline or online. We advise that you have a backup wallet available in case you lose your hard drive.
There are many wallets out there to choose from, depending on your security needs and whether you wish to be an active trader or a more passive buy-and-hold investor.
Today we will use the example of Coinbase, which is the most popular wallet and is a company now worth $1 billion. Coinbase allows you to purchase Ethereum, Bitcoin, and Litecoin, as well as will have Bitcoin Cash on their platform by 2018.
- Sign up for a Coinbase account
- Connect your bank account, and;
- Buy or sell your first digital currency
Coinbase will deduce fees of about 2-4% of the total cost. You can access it both on your computer and by downloading their mobile application.
If you do not wish to use your bank account, you can try LocalBitcoins.com that allows face-to-face purchases.
Although we like Coinbase, there are dozens of wallets and exchanges out there. How do a wallet and exchange interact? Once you have set up your wallet and purchased your crypto, most exchanges will have a “deposit section”.
Copy the deposit “address” provided for whichever cryptocurrency you would like to transfer into the exchange.
Then, go to your wallet “Withdrawal” section, enter the address you have copied, and the transaction should go through within an hour or two max.
Choosing the Right Crypto Wallet or Exchange For You
We will now go over how we chose a wallet and exchange, as well as reveal some of our favorites, and give you an overview of how to execute trades on the exchanges.
The major factors you should consider when picking a wallet or exchange are:
Is the platform well known and has a larger user base? Usually, the more successful and high sought after wallets or exchanges can provide greater assurances and security.
Additionally, exchanges with high volume usually have better execution (speed and price of trade execution). Check the web for a history of hacks or incidents of insolvency.
If it is a web wallet or exchange, you should always check for:
- HTTPS secured domains
- Two-factor authentication (2FA)
- Backup creation and restoration features for wallets
Private Key and Address
If the platform does not show you private keys, technically you do not have control over the crypto. Furthermore, you should be able to move your crypto in and out of the platform at any time.
Also, another consideration is, do the wallet addresses change regularly? If so, this is a sign of a more private Hierarchical Deterministic (HD) wallet.
There are things such as multi-asset wallets (See Electrum, Exodus), a feature to consider.
Regarding exchanges, although you want to begin with investing in just a few cryptocurrencies at a time, you will want an exchange that supports all the cryptocurrencies you may want to trade in the future.
User Experience & Customer Service
Is the user interface friendly and customer service responsive? This can be a major consideration; for example, consider the moment you are invested in a crowded ICO or there is a market selloff, and there is major network congestion, or withdrawals are suddenly halted.
Will you be able to navigate the wallet’s help and support functions in time? We personally like Kraken customer support.
Transparency and Anonymity
Is there a user verification process (Know Your Customer/KYC)? This is important if anonymity is a factor governing your final decision.
Another consideration is margin capability and which crypto assets are available for purchase margin. Margin capability means you borrow from others (or from the exchange) to leverage up your positions. You in the meantime pay some interest to the lenders. The amount is 2% by default on the Polionex exchange.
For example, at Polionex you can buy up to 2.5x your BTC – which means your gains and losses are magnified. Once you have experience trading, this can be an invaluable feature. Just make sure you are ready for a storm.
Our suggestion is to operate with a few wallets and exchanges, rather than just choosing one, in order to protect your fortune from unfortunate one-off incidents.
You can also use our guides to further learn how to start in cryptocurrency trading.