The Beginners Guide to Everything Crypto
Cryptocurrency is quickly increasing in popularity and gaining acceptance within mainstream society. This new and exciting product grants investors individual financial autonomy and allows them to participate in the first decentralized, peer to peer financial network which is controlled by its community members.
It is important to gain a comprehensive understanding of the ins and outs of trading and investing. If you want to get access to a free course that shows you exactly how to do it, check out the Boss Crypto Trading Course. The volatile nature of this new asset class means that while it is exciting and provides the chance for investors to make significant profits, entering this market with little understanding of its complexities, could mean disaster and significant financial loss for new investors.
Cryptocurrency wallets are secure, digital pouches used to store, send and receive currency. They also keep a record of your transactions, thereby acting as a personal ledger known as a blockchain.
Cryptocurrency itself is not stored in a wallet. Rather it stores a private key, a digital code which is kept private and known only to you. This private key shows ownership of a public key, which is a digital code publicly available and connected to a specific amount of currency.
While all wallets are developed to be secure, there are additional steps you can implement to further ensure the security of your cryptocurrency. It is suggested that you do not keep all currency in a single wallet and that you encrypt your wallet and use google authenticator to maximize protection.
Moreover, new investors are strongly encouraged to use the official wallet for their coins or a recommended third-party wallet. Additionally, there are universal wallets like Ledger Nano, which can hold a range of popular coins. Offline wallets like Trezor are also a great option if you wish to store a variety of coins for an extended period of time.
There is also the option of using a custodial wallet when you store your crypto on an exchange that is considered a custodial wallet. It is advised against storing any substantial amount of your cryptocurrency on an exchange. However, if you wish to store your coins on an exchange, it is essential that you do your research to ensure that the exchange is trustworthy. You may wish to consider the location of the exchange, its reputation within the cryptocurrency community and its performance history.
Backing up your cryptocurrency
The autonomous nature of cryptocurrency means that you are solely responsible for the safety and security of your financial investments.
There are a number of options available to back up your cryptocurrency investments. These include copying your wallet file onto a portable stage device such as a flash drive or external hard drive, print out your private key or generate a paper wallet which is a printed, hard copy record of your coins.
Exchanges are online platforms through which cryptocurrency can be bought, sold or exchanged either for another cryptocurrency like Bitcoin or fiat money like USD or Euro.
Fiat money to cryptocurrency
Fiat money to cryptocurrency investment is when the government declared currency, such as USD or Euro, is traded for cryptocurrency or vice versa. This form of trading is the only way new investors can enter the cryptocurrency market. Trading in this way is beginner friendly as you only need to consider the price of a single asset when trading. Once fiat money has been converted into cryptocurrency, a range of trading options are opened up to investors.
Coin to coin trading
Once the investor has moved his fiat into cryptocurrency, he can begin trading his new cryptocurrency (usually Bitcoin) for other, lesser-known altcoins. The most popular exchange for this right now is Binance. They offer a large number of coins that investors can trade in an attempt to make more Bitcoin if the asset in question appreciates in value at a faster rate than Bitcoin itself.
Types of Trading Exchange
Traditional cryptocurrency exchanges
Traditional cryptocurrency exchanges are online platforms that adhere to the current market price of cryptocurrencies. Therefore, coins are bought and sold according to this value. These websites generally incur a fee from each transaction made through their exchange. Some traditional exchanges allow investors to buy and sell only cryptocurrencies whereas others allow users to trade fiat currency for cryptocurrency.
Direct Trading Exchanges
Direct Trading Platforms allow investors to trade directly with other buyers and sellers. This peer to peer form of trading allows participants to set their own exchange rates, irrespective of the current market price of cryptocurrencies. This platform is not the best method for trading, however, in some regions, it is the only available solution. If this is your chosen trading platform, be sure to do your research and use a trusted platform and highly rated users.
Cryptocurrency Brokers are exchanges where customers buy and sell cryptocurrencies at a set price, determined by the broker. Generally, this is the market price of the coin plus a small premium. This method of trading cryptocurrency very beginner friendly as it is simple and easy to use. However, this is at the expense of paying slightly higher prices than on other exchanges.
Cryptocurrency funds are collections of cryptocurrency assets which are professionally managed. Investors can buy and hold cryptocurrency via these funds without having to purchase or store it directly.
Before joining an exchange, it is important to research your chosen platform to ensure it is reliable and will suit your trading needs.
It is suggested that you consider the reputation of the exchange and look into the reviews made by its users. Reddit or forums like Bitcointalk are great platforms to gauge the respectability of an exchange.
It is also wise to look into the fees and exchange rate associated with using your preferred exchange as they can differ substantially across exchanges. Similarly, it is important to check the payment options available on an exchange, to ensure it allows your preferred methods of payment.
The following exchanges are great platforms for any new investor wanting to start trading and investing. They are very beginner friendly and are widely used and reputable platforms.
Coinbase is a cryptocurrency exchange and broker platform which is used by millions of investors internationally. This exchange is based in San Francisco, United States and is very user-friendly. Coinbase utilizes a cryptocurrency broker system, whereby they set the price for trading bitcoins, Ethereum and Litecoin. Coinbase also has high security and reasonable fees, making it a great option for new investors.
Coinbase Pro is the sister site to Coinbase and is a great platform to use once you have a good understanding of Coinbase. Coinbase Pro acts like a traditional exchange. Consequently, there is no fee incurred if an investor wishes to transfer cryptocurrency between these two platforms. Coinbase Pro has all the positives of Coinbase while also enabling more technical investors to extend the scope of their trading ventures.
Bittrex is very popular cryptocurrency exchange based in the United States. This platform allows investors to make coin to coin exchanges of bitcoin for almost any other altcoin. The nature of this exchange means that you can not use fiat currency to trade for cryptocurrency. Therefore, you will also need to be registered to another exchange where you can trade fiat currency for cryptocurrency before transferring it to Bittrex to trade and invest in altcoins. It is important to remember when trading on Bittrex that the platform takes a commission fee of 0.25% and this must be factored in to make a profit on Bittrex.
Binance is a cryptocurrency exchange based in Tokyo, Japan. Binance has a large user base, and therefore substantial opportunities for investors to buy and sell cryptocurrency. It is the most popular exchange right now and has recently enabled fiat-cryptocurrency transactions. On top of this Binance supports a number of stablecoins which act as an alternative to fiat. Binance also offers low fees, deals in a variety of popular cryptocurrencies and allows for coin to coin exchanges of a range of altcoins.
BitMEX is an international cryptocurrency exchange based in Seychelles. BitMEX offers margin trading, meaning that users are able to buy coins on funds borrowed from a broker, in this case, the exchange. BitMEX leverages up to 100x, and therefore users can have their buying power multiplied 100 times over. Additionally, BitMEX only accepts deposits and withdrawals in Bitcoin.
One of the major strengths of BitMEX is its strong security, with no security breaches to date. However, BitMEX should not be used by beginners as it is not very friendly for new traders. Furthermore, BitMEX is not available in the United States as the current licensing regime available to cryptocurrency exchanges does not cater for bitcoin-only derivative exchanges, which offer leverage.
You should now be equipped with the information you need to start making the initial investment in the cryptocurrency market. In order to do this, you will first need to set up accounts on your chosen exchanges. If you want to take the next step and learn how to improve as a trader, try the Boss Crypto Academy for free.