Getting started in cryptocurrency

in #cryptocurrency7 years ago

So you want to be a crypto-trader, eh?

So you want to get started buying, selling and trading cryptos, but you're overwhelmed at where to start? Then this article is for you. I'm going to go over all of the major pitfalls and show you how to begin investing in cryptocurrency today!

What is cryptocurrency?

As of this writing, there are over 1300 different cryptocurrencies trading at different prices. The start of your journey should be to look at www.coinmarketcap.com. This is the best all-in-one stop for cryptocurrency information, including real-time market graphs, official announcements and much more. Go ahead and surf on over there and you'll see something like this:

CMC top.PNG

This is just the top 8 cryptos as of right now, you can scroll down and see many more, and even go off into the weeds and look at the ones outside the top 100. You can sort by various criteria, allowing you to view the markets in a different way. The default view has everything arranged according to market capitalization, which is a simple calculation of last price paid on the market multiplied by how many of that certain cryptocurrency that is in circulation. It's not the best way to measure the value of a cryptocurrency, but it is a good starting metric when comparing different ones. This is just barely scratching the surface of what Coinmarketcap.com (hereafter referred to as CMC) can show you. We'll dig a little deeper, but first we need to add some terms to our glossary of vocabulary.

What is a wallet?

A wallet is software that runs on your desktop computer or smartphone (or even on the web, more on that later) that actually stores the rights to transact your cryptocurrency. Your cryptocurrency is stored on the blockchain, but the private key is the ownership rights to the specific crypto and entitles you to the coins you own. If you lose your wallet, but still have the private key backed up, you can still access your funds. Because of this, the private key is very powerful and should be something you keep very secret. Perhaps keep a backup written down in a safe or with a trusted associate/family member. Almost all cryptos have a wallet, some more than one. As of right now, there's no one-stop crypto wallet that stores everything, so you'll have to get the one that store what you're interested in and keep them safe. There are web wallets that will store a few different cryptos, but you should own your own keys in case they get hacked or go out of business. Here's a few web wallets that I have used in the past:

https://www.cryptonator.com/ - Supports about 20 different currencies right now, and has a smartphone app.
https://mymonero.com/#/ - Only for Monero, but good at what it does
https://www.myetherwallet.com - Leading web wallet for Ethereum and ERC20 tokens

These all have minimum amounts to withdraw and they charge fees on top of the network fees, so it might be a good idea to find the official wallet program for whatever crypto you're wanting to get into and put that on your computer rather than trust these services who will nickel and dime you. If you have large holdings and want the convenience of being able to move them around quickly, then this might be a good solution.

Hardware wallets

You can also buy a hardware wallet, which protects your private keys in a small device with a passcode. The leading ones as of the time of writing this are the Ledger and the Trezor:

Ledger.PNG
The Ledger Hardware Wallet’s Supported Cryptocurrencies:

Bitcoin (BTC)
Bitcoin Cash (BCC)
Ethereum (ETH)
Ethereum Classic (ETC)
Litecoin (LTC)
Dash (DASH)
Dogecoin (DOGE)
Zcash (ZEC)
Ripple (XRP)
Stratis (STRAT)
Komodo (KMD)
PoSW
ARK
Ubiq
Expanse (EXP)
PIVX
Vertcoin
Viacoin
Stealthcoin (XST)
NEO (Works with NEON Wallet and supports GAS too)
Bitcoin Gold

There are more being added all the time, hardware wallet support is a big driver of more mainstream adoption.

As for the Trezor:

Trezor.PNG

Cryptocurrencies That Trezor Supports

  1. Bitcoin (BTC)
  2. Bitcoin Cash (BCH)
  3. Litecoin (LTC)
  4. Ethereum (ETH)
  5. Ethereum Classic (ETC)
  6. DASH (DASH)
  7. Zcash (ZEC)
  8. Namecoin (NMC)
  9. Dogecoin (DOGE)
  10. ERC-20 Tokens - This covers quite a few coins that are out there

If you're going to have more than $10k in cryptos, a hardware wallet is highly recommended. It will keep your crypto safe from hacking, and you can keep it with you to protect it's physical security. If someone malicious got ahold of it, they would still need to know your PIN to transact your coins.

Paper wallets

If you're just starting out, you can make paper wallets for quite a few of the coins out there. A paper wallet is exactly what it sounds like, just your private key on a piece of paper that you then have to protect from prying eyes. If anyone gets that private key, then they have access to your funds. A paper wallet is one of the most secure methods of storing your cryptos longterm because they can't be hacked. The private key isn't on a computer, so there's nothing to be hacked. I will briefly go over how to make a paper wallet for Ethereum and ERC-20 tokens using www.myetherwallet.com. If you would like to make a paper wallet for another currency, just Google "Paper Wallet Monero" or whatever crypto you're looking to create a wallet for, and then make sure the program you're using is legitimate and not a scam trying to steal your funds.

To make an Ethereum wallet, go to https://www.myetherwallet.com

MEW.PNG

Then make a passphrase. It will be used in addition to your private key to encrypt the JSON file they give you in the next step:

keystore.PNG

You can download the JSON file. It is your wallet private key encrypted with your passphrase that you chose in the first step. If you only want a paper wallet, you don't need this, but you should keep it as a backup until you make certain the paper wallet is correct. Next they will give you your private key, with the option to print a paper wallet with all your information on it. This is one I made for an example, there are no funds on it:

Private key.PNG

Again, if you just want a paper wallet, you don't necessarily need this, although I would save it as a backup for now until you verify the paper wallet works. Here's what the paper wallet looks like in the print preview:

Paper wallet.PNG

This little piece of paper is just a wallet, you still have to load it with funds before it has any value. The Public key is your address. You can give out the public key to anyone, the only thing someone can do with that is send you crypto as well as see your balance and transaction history if it is a currency that has a public ledger.

What is an exchange?

So how are we going to load this with funds? First we have to find a way to get your fiat (government printed currency, such as $USD) into a cryptocurrency. I suggest Coinbase if you're a beginner. They're not the best way, but they have a good balance between ease of use and fees. If you use this link, you'll get $10 in Bitcoin for free after your first $100:

https://www.coinbase.com/join/5939b83c6586f2078c6916ad

Coinbase is just one of many exchanges. It's the most prominent even though they only offer BTC, LTC, and ETH right now. Most of their business comes from people getting their fiat into crypto, so it's one of the bigger on-ramps to the crypto highway. There are other ways to get cash into crypto, but this is the easiest. In a future article, I will go over other on-ramps and other ways to get into cryptocurrency.

Let's go back to CMC briefly. Let's say you have done some research and want to buy some Request Network(REQ). If we click on REQ at CMC, we go to that coin's page, with lots of information in one spot:

req.PNG

Here we see a price over time graph. It shows the price in USD, the price in BTC, and the market cap. We also have the 24-hour volume and the total supply as well as circulating supply. There's a bunch of very informative and useful links under the currency name/logo as well. If you're doing research to try to find something undervalued, this is a where you want to start. A lot of questions can be answered by looking through these links. If I click on "Website" it takes you to the coin's official website. Here you can (usually) download the whitepaper and view the team behind it, as well as see announcements. If you click "Announcement" it will take you to www.bitcointalk.com, a forum from the early days of cryptocurrencies. It's customary to make an "Announcement" thread there to tell the community that you have created a coin and what it's purpose is. Anyone can comment on it and say it's good or bad or suggest things to improve. Reading through the ANN thread can help you decide to invest in a currency or not based on what people are saying about it. It gives you a "pulse" of the community and what the wider world thinks about a coin that you may not get from the coin's official website. First post in the BTCtalk ANN thread for REQ:

bitcointalk.PNG

The other links on the coin's page at CMC are usually for a block explorer, which allows you to see how many coins are in how many wallets, and some chats/forums, where developers may be hanging out to answer your questions should you have any qualms. If there's not any developers of the coin there, usually the community hanging out there can answer your questions if they're not too nit picky.

One of the best uses of any certain coin's page on CMC is to see where the coin is trading and at what current prices and volumes. If you click the "Markets" tab above the chart you will see this information:

Markets.PNG

The "Source" column of this tab shows what exchanges sell this coin. There are many different exchanges, with new ones popping up every day. As you can see from the image above, the main exchange this is trading on is Binance. I'm going to how you how to use Binance in the nest section. Just remember this step when looking for where to buy a coin and who has the best current prices.

Binance

There are hundreds of different exchanges, all with varying degrees of user friendliness in their interfaces. Some are clunky and old and not very intuitive to figure out how to buy and sell. Binance is the most user-friendly exchange that offers the widest variety of coins, with more being listed all the time. If you want to trade or be able to pick up the newest coins when they first start trading, Binance is a great place to start. Also, by making an account there, you will have exchange wallet addresses for every coin they offer. It's not smart to keep all your coins on an exchange, in case they get hacked, but if you are actively trading, it's better than having a plethora of different wallets. A good rule of thumb is never keep more than 10% of your portfolio on exchanges. Feel free to modify that to fit your trading strategies, but exchanges are big targets for hackers because of the massive volume of money that moves through them daily.

Sign up with this referral link to share some love for me (It's free):

https://www.binance.com/?ref=10277703

So you have an account on Binance, now what? Let's say we want to buy some of that REQ we were looking at earlier. But we just started on Binance and we don't have any crypto in any of our wallets. Unlike Coinbase, Binance doesn't allow you to buy with fiat money. You have to get your money into the system through a different "on-ramp", we'll use Coinbase for this example.

So hop over to Coinbase, and buy some Ethereum. I'm using Ethereum for this example because it has very low transaction fees compared to Bitcoin. Also there's a trading pair for ETH/REQ on the Binance exchange, so once my ETH arrives at Binance, I will be able to trade it directly to REQ without any conversions to nickel and dime me in the fees.

Here's where you want to be on Coinbase:

coinbase send.PNG

It's under the "Accounts" tab, and from here you can send your ETH, BTC, or LTC to an exchange, your personal wallet, or someone else if you wish. I don't have any Eth on my balance, so the "Send" is grayed out, but clicking it will bring up a dialog that will allow you to input an address and the amount you would like to send. How do you know where to send it?

Go back to Binance, and click "Funds", and then the submenu titled "Deposits/Withdrawals." From this list of all their cryptocurrencies, select "Deposit" beside ETH. It will then generate a personal wallet address for you to send your ETH to. Be very careful, if you send any other cryptocurrency to this address, it will most likely be lost forever, so make sure you pick the correct one.

binance receive.PNG

Here is my ETH deposit address:

Eth deposit.PNG

Put this as the address for your withdrawal from Coinbase, and then submit it. Make sure the address is exactly the same as the one shown on Binance. One wrong letter in that address, and again, your coins will be lost in cyberspace forever. Coinbase handles a lot of transactions, so they usually group all their withdrawals in chunks and do it every 15 minutes or so as one large withdrawal instead of lots of tiny ones. This saves on fees, but can be nerve-wracking your first time when you're waiting for your funds to show up. Always transfer a small amount first to make sure you have everything correct. Ethereum usually transfers pretty quickly, 15-20 minutes in my experience, but could be longer/shorter depending on how much the ETH network is being used. Bitcoin is usually in the hours, so ETH is my preferred medium of transfer from Coinbase.

So you have your fresh ETH sitting in a wallet on Binance, now how do we buy REQ? First, click on "Exchange". "Basic" is OK for now, we're just buying our first crypto. Here's what you should see:

binance.PNG

We want to go to the ETH marketplace, because that's the coin we have to trade with. Once we click "ETH" up in the top right, we have to scroll through the list of things offered for ETH and find REQ:

Req highlighted.PNG

Click that, and you will be taken to the REQ/ETH marketplace:

Req. Market.PNG

From here, you should see your current balance of ETH and REQ in the Buy and Sell. If you click a price in the "Sell" order book in red, you can buy some for the current going rate. I'm going to buy 100 REQ with my 0.04599 ETH. Once you put in the price you want to pay, and the amount you want, then click "Buy REQ" at the bottom of the form and it will place a buy order for you. If you placed your order at a lower price than what it is currently trading for, the order might not get filled immediately or ever. I usually buy from the sell book so I know I will have the coin I want instantly. Sometimes if it looks high, I'll set a low buy and hope the price drops to meet it. Here's after I have bought my 100 REQ:

bought.PNG

You can see my order in the "Trade History" now, and my balance of REQ has increased by 100, while my ETH balance dropped from what I spent. Now you have bought your first cryptocurrency on an exchange! You can leave it on Binance if it's a small amount of your portfolio and you trust them. If not, REQ is an ERC-20 token, which means it uses the Ethereum network and can be stored in www.myetherwallet.com or any wallet that is capable of storing ETH.

This brings us to the end of my first primer on how to get into cryptocurrency. I know there's probably a bunch more questions that I missed, feel free to comment on here and let me know anything I can help you with. I will continue to update this document to help beginners , as well as produce more content to go deeper into other subjects. The ones I have planned so far are: Using all the different exchanges, Day-trading successfully, How to Research a Cryptocurrency, Storing your funds ultra-securely, and Fiat on-ramps other than Coinbase. Please leave any feedback in the comments below and use my referral links to help me out for helping you out. They cost you nothing, and I get a few pennies for every person that signs up. If it becomes a large amount, I'll have giveaways on here for some portion of it, to give back to those who have helped me. Thanks for reading!

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