Trading Digital Assets and Setting Up a Cryptocurrency Exchange
This is a how-to guide to trading cryptocurrency for beginners and veterans alike. Before you get underway into the cryptocurrency ecosystem, you’ll need to choose a cryptocurrency wallet as well as an exchange to trade on. Choosing an exchange is an endeavour all in itself, but once you find on that you’re comfortable with, you will need to fill out a registration form as well as have some identification verified through the exchange’s KYC (know your client) process. For most exchanges this is a simple process and which one you choose will give you different levels of access depend on which step of the verification that you are on.
Like and new venture, it’s best to know what you’ll need in order to have the right tools in hand. So to start trading cryptos you’ll need some necessities and you may want to look into some optional features depending on what you hope to gain out of the nascent market.
If you are looking to trade the increasingly popular cryptocurrency market, you will need to choose a crypto exchange (multiple if you want).Then every virtual coin enthusiast needs is a crypto wallet (multiple of these as well if you want). Wallets come in different varieties with different levels of accessibility and security.
Here is some basic information on terms you need to be aware of. Your cryptocurrency wallet is you digital ‘bank account’ where your coins are stored using an encrypted password. The crypto market is accessed through a cryptocurrency exchange mechanically similar to a standard stock exchange. This system is paralleled to how you would utilize the stock exchange with a bank account, the process is similar to the crypto markets.
Besides the above information, there are a few points to understand before jumping into the market. These are the most important to focus on:
● The regular stock exchange and a cryptocurrency exchange are separate. As mentioned above the best course for a beginner is to use a service such as Coinbase or its pro version GDAX. However, both of these exchanges, though operating with similar mechanics, are separate from the standard stock exchanges.
● A novice might choose to invest in cryptocurrency stocks. The standard stock market has GBTC which is a trust that has ownership in Bitcoin and sells shares to the public. Be cautious however, because GBTC trades at a premium, where you could get bitcoins cheaper through a crypto exchange rather than owning stock through the trust. Also, the cryptocurrency market trades 24-hours, whereas the standard stock market does not.
● In order to trade Bitcoin and altcoins you’ll need to find a wallet and an exchange such as Binance, Bittrex, Kraken, or GDAX.
● The price of coins on the cryptocurrency markets are extremely volatile. Even the more well known coins such as BTC (Bitcoin), ETH (Ethereum), Bitcoin Cash (BCH) can have large movements in the matter of seconds. As with any type of speculation, you should apply risk management, attempt to diversify your portfolio, and look to hedge potential losses. The above mentioned coins can and do create large movements, however expect higher chances to make fast gains in altcoins, the downside is of course the faster chance to incur losses.
Cryptocurrencies are multifaceted and have similarities and extra aspects versus fiat currency (currency issued by a government, such as the US dollar):
● You can invest in it
● You can trade it
● You can use it for transactions
● You can ‘mine’ them
The general process of registering and trading cryptocurrency is straight forward for the most part, but there are some notes to understand. First is to choose an exchange. After you choose an exchange then:
1. Sign up with an exchange in order to create a cryptocurrency wallet where you can securely store cryptocurrency.
2. Add you bank account, credit card, or debit card so that you can exchange cryptocurrency into and out to fiat currency.
3. Purchase Bitcoin, Ethereum, or Bitcoin Cash using your local fiat currency.
4. Sell Bitcoin, Ethereum, or Bitcoin Cash back into fiat currency.
5. Consider another exchange if the one you chose doesn’t support another coin you want to invest in.
Important notes for opening a cryptocurrency account:
● Secure exchanges will want a lot of your person information. They will want an ID, bank account, credit card, and proof of address and depending on the exchange they may ask for further details,.
● Bank accounts, versus credit and debit cards offer lower fees and card fees tend to be on the higher side.
● Wait 3-5 days after inputting your banking details until the bank accepts the pairing. This means that you will have to wait until you can begin trading, depending on the exchange.
● Depending on how far along the KYC process you are, there will be limits to your trading activity.
● There are transaction fees with trading, the fees usually decrease with trading volume. You may see a small spread on the buying and selling price as well as pay commission to the exchange. Depending on the exchange you may find better rates if you shop around.
● Set up the Two-Factor authentication. This allows you an extra level of security as you will be prompted with a code sent to your phone to access your account.
● Make sure your wallet is set up to trade. Keep in mind, every exchange can be different on how to deposit fiat currency and the speed at which it is processed.
● You can buy fractions of coins instead of a whole single unit. Bitcoins can be split down to a ‘Satoshi’ which is 0.00000001 of a coin. And consider spreading your investments initially between major coins in an attempt to hedge loss in value.
● Many exchanges have an app. This allows you to stay connected to the market as volatility can come unexpectedly and micro-movements in the decimal place can affect your investment drastically.
● Look for support to set alerts, this will allow you to be notified when it’s time to trade.
● Look at different investment strategies. There are a variety of trading strategies to explore, each one will offer a different risk management method.
● Remember that this is a volatile nascent market. Cryptocurrencies can experience extreme highs and lows in the matter of seconds. Cryptocurrencies don’t maintain a centralized ledger, meaning that losing a coin, having your account hacked, or forgetting your password can be hazardous, lending credence to the 2-factor authentication set-up.
Remember that trading cryptocurrency can be easy to get into, however, take the time to learn what each exchange and wallet has to offer to find the best fit for you.
There are many ways to invest in cryptocurrency. You can go the standard routed of buying and selling on the exchange. You can look into new blockchain projects that are launching initial coin offering (ICOs). To invest in the crypto market outside of buying, selling, and trading, new investors can look into these different options as well. The Bitcoin Investment Trust (GBTC) listed on the stock market. A cryptocurrency IRA or 401k retirement plan. An exchange to buy cryptocurrencies on and a wallet to store the coins in. You can even look into a multi-service platform like Coinbase/GDAX .
One of the facets of investing in cryptocurrencies is through cryptocurrency mining. While this process used to be fairly easy for an individual to get into, the major coins have diminishing returns and only large organizations are seeing real gains. However you can look into smaller and newer coins and in order to get into mining cryptocurrencies, you will need a fast computer and you’ll want to direct the computing power through your GPU(s) (Graphic Processing Unit). However, to see any real return, you’ll need to invest heavily into a computer system or series of computer systems.
If you’ve made it this far, then you probably are ready to get started. A novice trader should look for a reputable exchange such as Binance, GDAX, Bittrex, Coinbase or Kraken and acquire a cryptocurrency wallet.You should stick to the major coins, such as Bitcoin (BTC) and Ethereum (ETH) before branching out, however if you do look into other coins, such as getting into one through an ICO, due diligence is necessary because there are many con artist looking to exploit new investors.
As mentioned above, you’ll most likely want to invest by buying a major coin such as Bitcoin. However, after that you may look into trading fiat currency (US Dollar, Euro, etc.) on an exchange such as GDAX, and then move on to crypto pair trading. Trading cryptocurrencies against each other can be very profitable, however this adds another level of complexity over investing into a single cryptocurrency.
Avoid trading on margin unless you’re aware of the risk involved. Margin trading in a volatile market such as the cryptocurrency market can be very risky and lead to tremendous losses in a very short time.
● To get into the digital world of cryptocurrency:
● You will need a crypto wallet (multiple if you want).
● You will need to choose a crypto exchange (multiple of these as well if you want).
● You can go the standard routed of buying and selling on the exchange.
● You can look into new blockchain projects that are launching initial coin offering (ICOs).
● The Bitcoin Investment Trust (GBTC) listed on the stock market.
● A cryptocurrency IRA or 401k retirement plan.
● An exchange to buy cryptocurrencies on and a wallet to store the coins in.