Trading Cryptocurrencies: How To Get Started

I have been investing in cryptocurrencies for the past three years (I might have erroneously said four in the past since my exposure to crypto has been much longer), and I am frequently asked how I got started so I decided to write a post about it that I can send out to my friends. I learned about Bitcoin in college because I knew some people making “online” purchases. Shortly after, a friend exposed me to the investing side of digital currencies and that definitely sparked my interest.

It doesn't take much to get started. You also don't need to be extremely smart nor do you need a lot of money to begin. My first investment was only $20 in Counterparty and that increased by 10x in four months.

You've probably heard of Bitcoin (BTC) and about how many millionaires there are now. It was less than $0.01 in 2010 and now is around $3,500. That year someone bought one pizza with 10,000 bitcoins, which is well over $25,000,000 today. This all is pretty insane.

Bitcoin, founded by Craig Wright (known as Satoshi Nakamoto) in early 2009, is the first coin ever created and is definitely the most talked about digital currency. Bitcoin itself is a product that allows peer-to-peer technology to operate with no central authority or banks. There are hundreds of coins with different purposes, and some can even make you over 20% in a week. Bitcoin isn't the only one that can bring you massive gains.

I won't bore you with too much of a deep dive, but I'll give you the steps to start today and enough basics that will lead you to the correct Google searches.

It is absolutely imperative you invest your money with great care and diligence. 

1. SIGN UP TO AN EXCHANGE

When I was in college, I remember the stories of students buying drugs online with BTC. I also heard that you could hire hitmen. I thought that was stupid, so obviously I wasn't involved then. It wasn't long after until a friend exposed me to the investing side of digital currencies and then created an account for me on a cryptocurrency exchange. The platform is called Poloniex and at the time it didn't even require my identity details, which is now more regulated. It looked intimidating and I didn't mind putting in a small amount to see what it could do.

If you're already thinking about investing, I'd create an account (it's free) because sometimes it takes a while to set up since the exchanges are flooding with more people than ever. Look into Poloniex, Kraken, Bittrex, Gemini, and GDAX. If you already have a Coinbase, use their GDAX because you can freely transfer your coins and then withdraw for a much lower fee than if you were to do it through Coinbase.

I would advise you position your longer term investments on a different exchange than the riskier investments.

2. GET A WALLET

There are digital wallets, like Coinbase, and physical hardware wallets, like the Nano Ledger S. Hardware wallets are easy to lose which thus means you lost your money, though digital wallets could get hacked since third parties can be insecure. You could also do both, like putting the coins you want to keep long term in a hardware wallet and keep money in a digital wallet to have faster access to your coins.

3. DO YOUR RESEARCH

This is obvious but I always think it's important to point out how imperative research is. Read How To Research Cryptocurrencies for some tips and resources that I use 

Do not buy because of hype and do not invest before doing your research. Also - do your research ASAP if you want to make huge gains because digital currencies fluctuate fast.

I always start with YouTube tutorials and then read on top of that but if you are better at reading, then just start with that. I am better with seeing someone go through certain steps first so that I can be diligent.

Understand the coin you are investing in from the underlying tech, team, background of founders, execution progress and strategy, early adopters/investors, and the long term benefits it has. Here's an example for Ethereum:

• Vitalik Buterin, the creator, has a deep understanding of crypto and spends a lot of his time educating the world about it.
• There is a full, solid development team.
• Ethereum's sets itself apart by smart contracts, which is the future. Smart contracts allow you to exchange money, shares, property, or anything of value in a transparent, non-conflicting way while taking out the services of a middleman.
• Peter Thiel is backing it, the billionaire PayPal cofounder. Microsoft invested into ETH last year and a bunch of investors started getting in this year.
• The code base is easier to integrate for engineers so a lot of people are building off of it instead of bitcoin now.

4. ANALYZE TRENDS AND CHARTS

If you are trying to day trade, you will have to learn how to time it out. You need to have extreme discipline as well. It's very easy to be excited about a coin, thinking it will keep rising. If a coin has dipped, that is typically the time to buy in.

Tell yourself you will sell at X%, and stay true to that.

Remember my first $20 purchase I made that gave me 10x return? Well, I didn't cash out at that point and kept thinking it would rise -- a common beginner's mistake. I didn't do my research to even have a valid reason to keep holding and I also didn't realize how astronomical that return was. I didn't understand the discipline in investing at the time, but that was definitely a lesson learned, especially in my hedge fund class shortly after.

I do believe in holding for a few years if you are not big on day trading, even if you can make profits from swing trading. There are absolute exceptions, especially when you are willing to take a risk because you just fully believe in a coin's future. Sometimes it's better to keep your hands off for a long time because if you don't know what you are doing then you could lose a lot of money.

So, stay disciplined.

5. KEEP UP WITH CURRENT EVENTS

Many coins have a pattern, and can be easy to detect which way it will go. However, nothing is certain and I am not kidding when speaking about its high volatility. One bad article can cause a heavy dip, and it doesn't even have to be from a legitimate source. Someone posted on 4Chan that Vitalik died in a car crash, and people panic sold which caused the price to drop. This is why you don't believe everything you see or hear, so do your research.

6. JOIN BLOCKCHAIN EVENTS/COMMUNITIES

I learn something new at every event and in every chat box. I also meet some pretty awesome people. Talking and reading other peoples' perspectives allows me to become a better investor by seeing all the possible outcomes. I also stay in the know this way.

Blockchain communities have an incredible amount of supportive people. The more you share and help others in the community, the more successful you will be. This applies to most things in life as well.

7. GET YOUR FRIENDS INVOLVED

Winning is more fun when you're doing it with friends. I have gotten around twenty of my friends to invest and introduced them to the world of Blockchain. It's also nice because my friends are always updating me with current events, so I don't even need to do much of researching myself (but I do).

If you're thinking about taking part in this, understand the risks that could happen: getting hacked (consider getting a hardware wallet like the Nano Ledger S), losing your wallet (store it where you will never lose it), forgetting the password to your private key (write your private key on paper, send it to your mom, engrave it in your jewelry, etc.), etc. Digital currencies are extremely volatile and trading it can cause loss of principal.

Also, understand the impact Blockchain already has on the world today. The flow of digital currencies is much faster than sending through banks. During the Greek Crisis, Greeks were looking for alternative investments to preserve their wealth due to their failing bank system, so they resulted to Bitcoin. I also saw some of this happening while I was in Argentina a few years ago. The growth potential is higher than the risk if you look at the future potential.

Many coins have a place in the future. The world of Blockchain is just beginning!      

Feel free to message me with questions on any of my social media accounts @lindzjm :)