In 2017, Cryptocurrency market started to successfully and rapidly developing.
Disclaimer: This article serves as a general guide and provides some insight from our own experience of investing in cryptocurrencies and it does not determine financial advice. Keep in mind that you should always do your own research before trading or investing and seek your own professional financial advisor.
So now, you decided to take your future happiness into your hands, and now you’re either looking to invest, or have started investing into cryptocurrencies already. With the overall growth over $100 billion in just 2 weeks, the space in cryptocurrency world is heating up.
But where should you start? While there are over 1300 cryptocurrencies, many types of technologies and also dozens of exchanges on the coinmarketap.com, it is sometimes difficult to understand. The crypto world can be quite stunning for newcomers, but it takes plenty of time and research to know how to start, and how to avoid costly mistakes.
We will try to explain basic and major things that every investor should know, including crypto wallets and how to use them, how to trade and general advice that we have personally learned from investing in this field.
LET’S GET STARTED
Here are the topics we will discuss in this article:
Wallets are like bank accounts for your tokens. We will go through all main types of wallets and their usage.
How to send money to get started on popular exchanges.
How to start trading, and things you should learn about the crypto markets.
- Managing your portfolio
The best Apps to help you get wider understanding of your gains & losses, and how to watch tokens and prices.
- Security & safety
How to maximize security for your holdings and how to avoid phishing scams, etc.
- Common mistakes
Mistakes you should better avoid.
- General tips & advice
Personal advice gained from our own experiences, from trading, etc.
Useful resources that can help you to learn more about the technology in the world of cryptocurrencies, how to keep up with crypto news, and more.
Wallets are like your own crypto bank accounts and various wallets store various tokens.
To trade with any crypto currency, you first need a wallet to store them in there, i.e.: Bitcoin needs to be stored in a Bitcoin wallet. Wallets are exactly what they sound like; they’re like a crypto bank account.
How to get your own wallet
Simplest way to get your wallet is to sign up to an exchange that allows you to buy, trade, or sell cryptocurrencies. Even if you do not own any token, they allow you to generate a wallet for every token that they trade. For example, Coinbase gives you a wallet for Bitcoin, Ethereum, Litecoin, and Bitcoin Cash.
Unlike physical wallets, Crypto wallets do not actually carry anything.
What is important to understand is that wallets are simply a secure “window” into the blockchain so you can view your records and transactions. Imagine it like Gmail. Your wallet is now your Gmail login and password, but you are not really storing the emails manually; you are just simply accessing it. Tokens and transactions that you own are saved on a blockchain that is distributed across a huge network. No matter if you lose your wallet, your tokens are always there. Simply you just will not be able to access or do anything with the tokens without your wallet.
Sending and receiving tokens between wallets
Every wallet is unique, so it has its own unique address. Therefore if you trade on 3 different exchanges, you will have a different wallet and address for each exchange and for each token. Imagine them as a different website addresses.
Hash is a term for a wallet addresses that are nowadays a very long fibres of letters.
If you want to send tokens between wallets, first thing you should do is to copy the receiving address, and then enter the address into the Recipient field when sending.
Wallets are currency specific
This means, they are only allowed to be sent and received in their own token. This is very important to understand and that is because in the crypto world, if you do not want to lose your funds forever, you just cannot send different coins to different wallets (there are also some exceptions).
The exception: tokens based on ERC-20
To have a little wider perspective, there are certain tokens that can be stored in the same ERC-20 compatible wallet. They are generated from the Ethereum blockchain and based on the ERC-20 protocol. For example, imagine you have two ERC-20 tokens, “Apple Coin” and “Orange Coin”. Both tokens can be sent to an ERC-20 wallet, such as MyEtherWallet.com
***Make sure you always check the link you are visiting at least twice, if it is correct. Why? Because there are many sites out there with a purpose to confuse you with their similar spelling in attempt to trick users into logging in. And because they think it’s the real site, they may “phishing” or stealing your login info! It is important to always enter it directly or visit from a bookmark and not through!***
Always make sure if the web address you are on is secure as well as secure connection.
Various types of wallets
Although online wallets are regarded to be most convenient for trading, they are often considered as the least safe. If you have your tokens on an exchange, you can trade with them immediately.
There are a few main types of wallets you should know:
- Desktop wallets
This type of wallet is usually created by the token developers. So if you want to find an official supported wallet for Bitcoin, you can download one from https://bitcoin.org/en/choose-your-wallet
- Mobile wallets
App-based wallets that you can download and install on your phone. One disadvantage is that they are more common for Android based phones. Examples include the Blockchain mobile walletfor Android.
- Online Wallets
Online wallets are offered on every exchange and they are allowing you to send and receive tokens. For instance, Coinbaseor MyEtherWallet.com. To reduce risks of hacking your account, phishing attempts, and also the collapse of exchanges, it is highly recommended to store tokens offline. There are also security protocols which most of the exchanges have but there also have been disasters like the infamous Mt Gox hack. It happend in 2014 where $460 million worth of Bitcoin was stolen.
- Paper Wallets
Paper wallets are basically a print out of your wallet’s public and private keys, along with a QR code you can scan. Your private key is basically a long password with a sequence of letters and numbers which ONLY you should know. This password serves to unlock your wallet and access your tokens. Coindesk has a guide on how to create a paper wallet.
- Hardware wallets
These wallets are the most secure way how you can store your tokens. Hardware wallets are completely offline (often referred to as cold storage). However they do not support every token out there. That is the reason you will need to find out if the tokens you want to store are supported by the hardware wallet. Popular options are the Ledger Nano Sand the Trezor Hardware Wallet
Crypto exchanges never sleep. Unlike traditional stock markets, they are global and trade 24/7.
There are a few key things to understand if you want to start trading with cryptocurrency:
- Not all of the exchanges allow you to buy Bitcoin with your Fiat currency; your domestic currency, such as the US dollar
- Bitcoin is nowadays the most common trading pair, it means that if you want to invest in other tokens or projects, you will most likely only be able to trade/buy it against Bitcoin. So firstly you will need to store Bitcoin to make most trades. Ethereum also started to be more widely accepted as a trading pair, thus there are tokens you can trade against Ethereum too.
- Most exchanges are not controlled therefore you should invest at your own risk.
- Crypto exchanges have no opening and closing hours, unlike the traditional stock exchanges, they are always open, 24/7, 365 days, globally.
Here are some of the most popular exchanges:
Coinbase is one of the largest Bitcoin exchanges in the world and was established in the United States. Nowadays Coinbase only allows you to buy these four cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. With a $250 weekly limit, you can buy them directly with your credit card. Of course, this limit can be eventually increased but only if you complete some identity verification requirements. Naturally, they charge a 4% processing fee.
Bittrex exchange is also based in US and is one of the more popular ones for crypto and that is thanks to trading with more than 1300 alternative cryptocurrencies out there. These alternative cryptocurrencies are also commonly known as alt coins. If you want to deposit Fiat currency directly into Bittrex, you will first need to buy Bitcoin or Ethereum, and before you start trading you must transfer them into Bittrex.
This exchange is based in Hong Kong. It was only launched in early 2017, however they quickly pivoted their platform to open up to the western part of the world. This move earned them an opportunity to become one of the largest exchanges by its volume. Because of their superior user interface, we recommend you Binance. This exchange is ease to use, has lower fees because of the usege of their Binance token to facilitate trades, and the selection of tokens/alt coins they trade.
Bitfinex based also in Hong Kong is one of the largest exchanges. It is characterized mostly by its storage of the most Bitcoin volume for an exchange that targets North American traders. It suggests a range of alt coins as well, yet not as long of a list as Bittrex or Binance.
This US based exchange is another popular exchange that trades a few dozen cryptocurrencies.
Now, when you understand how crypto wallets work and you have learned about the exchanges on which you can trade on, we can move to another topic. We are going to learn how the trading mechanics work in the crypto world including general tips and common mistakes which you should avoid.
Understanding how to trade in BTC values – Trading pairs
Most trading connections are similar across all exchanges. There are however a few main terms to understand, which are quite similar as traditional stock exchanges. The only key difference is that most tokens are traded against Bitcoin or Ethereum.
Bitcoin and most tokens are divisible. Bitcoin itself can be divisible up to 10 million units, therefore, you do not have to buy or sell a whole Bitcoin.
It will take time to get used to it, but it’s a good way to manage your trades providing not just your native Fiat currency, but also the value against Bitcoin or Ethereum. For example, as of today, $1 USD is worth 0.00006246 BTC (or Bitcoin). That means all exchanges that trade a token with Bitcoin as a trading pair, will take buy and sell orders against a Bitcoin value.
Satoshi is the name of unit for 10 millionth value of 1 BTC which means that one Bitcoin can be divisible up to ten million units.
There are three ways how to make a trade:
- Limit Trade
This way of trading allows you to set a price of token that you want to buy or sell at, and also specify how many of them you want. This is a effective way to automatically fill a buy or sell order at a future time when the price of the token may hits your price target.
- Market Trade
This market trade is the quickest way to buy in the market if you want to purchase or sell a token straightaway. Some exchanges like Binance will allow you to buy at the market rate. On Bittrex, this is called an “Ask”, which means the asking price on the market.
- Stop Limit
A stop limit essentially allows you to automatically launch an order at a set price, or better. For instance, if you set a “stop limit” at $5, then you’ll automatically start buying up to a set limit when the price is $5 or less. Contrariwise when you set a stop limit sell order.
Tip: If you want to quickly check that you entered the right Bitcoin value in terms of dollar amount, you can paste in the amount on http://preev.com/ and convert it to dollars or other currency.
Managing your portfolio
Now that we went through trading, we can proceed on to how to manage your own portfolio. In the crypto ecosystem nowadays, you might find yourself spread out quite thin across different exchanges and dozens of wallets. It can be quite difficult to remember which tokens you’ve invested into, how much you bought, at what price you bought them, across a huge number of addresses and locations.
One of the steps would be to setup an excel spreadsheet, but it can be a little bit chaotic to keep in sync with live data. Fortunately, there are a few apps out there that can help you with your trades. They can show you your gains/losses.
Apps that help you handle your portfolio
Blockfolio was one of the first apps that were released. It was created specifically for managing your crypto investments. It’s one of the more popular options, and it’s available for both iOS and Android.
There’s a bit of setup as you start with this App. You will need to enter all of your transactions manually. Once it is setup, you can switch between viewing the values in BTC or in your default fiat currency as it will show you your portfolio balances and gains/losses. Basically it does a good job because it shows you an overview of your portfolio and prices of coins that you store. However it’s a little bit complicated to see how much you’ve made per coin. Firstly you will need to tap into the coin and then the holdings tab to see your profits and that is a bit of a UX annoyance.
An interesting ability of this app is that you can set price alerts, and it also pulls in the latest news from crypto related news sites such as cointelegraph.com, etc.
Pros of Blockfolio:
- It tracks over 2000 altcoins and that makes it one of the most voluminous portfolio apps available
- Price alerts
- A basic news section
- Multiple fiat currencies are supported
- It is available on iOS and Android
Cons of Blockfolio:
- Entering transactions can get quite sluggish because it only allows you to manually enter transactions
- Non-interactive graphs
- There have been some server issues with the app loading quite slowly because of the attention that the crypto market received,
- Occasional inaccurate prices of tokens from actual exchange rates
- Simple design of app and little confusing UX
CryptoCompare.com is an information, discussion portal dealing with pure crypto and all the issues around it. You can go there, watch the development of crypto prices, watch reviews for feedback on different crypto wallets, currency exchange, and crypto buses. Excavators can calculate the cost of mining equipment yield using mining calculator.
CryptoCompare also offers the ability to manage a crypto portfolio with different settings and features.
CryptoCompare portfolio offers:
- Private and Public Portfolio, you can share publicly and anyone can track your portfolio,
- Set and discard coin purchase price at one or two prices (Fiat + crypt)
- Track the history of sold coins
- Graphical and statistical information about the current portfolio status.
If you are looking for a quality web porftólio, CryptoCompare is one of the most used and the best.
Security & Safety
You definitely heard about all the stories about how people lost private keys, or how their Bitcoins were stolen, or about hacked exchanges, etc. When there’s so much money at stake, it’s important to take every security as it is possible, even if it may add some additional fees or disruptions. It is more comfortable for you and your mind when you know that your investment and hard earned money is kept safe.
Here are few things every investor should do to keep their investments secure:
Enable two-factor authentication (2FA)
Anyone who is investing should do this immediately. The first thing is to enable it after you register on an exchange or any location where you store your tokens. This option is available for all exchanges, to enable it! 2FA makes sure that even if your login and password are confirmed, hackers cannot get into your account. Thanks to a time-limited 6 digit code that only you can access on your phone are now your account secured.
If you want to setup two-factor authentication:
- Firstly download Google Authenticatoror Authy
- Then navigate to where you can enable 2FA for your account
- QR code should be now visible, so you just simply scan it with the app
- Got it!
From now on, every time you would like to login to your account, it will also ask you for a 6 digit, time-limited code as an extra security.
A common incorrect opinion if you want to enable 2FA you must use Google Authenticator and that is not true. We recommend Authy because it can be synchronized with multiple implements, in case you change or lose your phone/device.
Use longer and secure passwords
It might be a bit annoying to search it every time you want to log in when you want to trade or just check your balances. Although this process is much smoother if you take advantage of secure, a password manager that helps you form and remember every login or password for all of your trading exchanges.
Tip: It’s also useful to save your 2FA backup code in the password manager. This is also effective for your wallet addresses, because you can easily just copy and paste them when transferring tokens!
Do not use the same passwords and logins
In our opinion, this is an obvious fact. If one of your accounts gets estranged, it’s not hard to imagine the hacker can easily find the other accounts you own on exchanges. And before you know it, your hard earned investments will be completely gone.
Common mistakes you should avoid
- Sending tokens to the wrong wallet address
This is really important to remember! Once you send your coins to an incorrect address, it is impossible to return them back. Always ensure you are double checking the send/receive address.
- Sending the wrong amount of Bitcoin
As we know that Bitcoin is divisible up to ten-millionth of a unit, it’s sometimes hard to keep track of how much money you’re actually sending. To double check the value of the BTC you are sending/receiving using a website like http://preev.com/.
General tips & advices
“It’s a safer and more profitable strategy to put time in the market, instead of trying to time the market.”
- Always invest only what you can afford to lose
Cryptocurrencies are a brand new asset class on the market. It’s an ultrahigh risk of investing, and you should invest with the thought that the money you invest could be worthless one day. So do not invest more money than what you can afford to lose.
- Excitement of buying a coin on the rise
Quite often, when a coin is rising in price or exchange is very prosperous; it is seducing to want to buy in. We strongly recommend To avoid rushing into buying a trade, because it is likely to happen that by the time you buy in, the price will start to correct or in another words will lose its value.
- Do not try to time the market
When it comes to trading cryptocurrencies, not only is the market much more unstable than traditional markets (where 20%-50% fluctuations in a day is a matter of course), but it is also unpredictable. You cannot always sell it at best price and buy it almost for nothing. It is a safer and prosperous strategy to put time in the market, instead of trying totime the market.
The more you trade cryptocurrencies, the more you’ll notice people say “Just hodl.”. It was originally a typo on a Bitcoin forum, but eventually it became a general trading strategy, meaning to hold long term. Simply it refers to holding onto your investments throughout the highs and the lows, and avoiding day trading. Just like markets grow over time, as well as your investments, do not get gluttonous and try not to make multiples of your investments too quickly.
- Buy the dips
Over time, you will notice schemes in the crypto market, and there are usually periods of exchanges are very prosperous in the prices, followed by a correction. These corrections or so called dips, are the perfect time to add to your position and put more money into your portfolio.
- Diversify your portfolio
There are a few categories of projects that have natural cooperative interaction, applications with blockchain technology, and others that with long-term potentials. It is also important to diversify your portfolio to ensure you occupy a wider net to bet on different categories and by this ensuring that you will not miss out on any opportunities. There are various categories: Currencies (BTC, VTC, etc), Platforms (ETH, NEO, QTUM), Supply-chain (WTC, VEN, WaBi, MOD, etc), Privacy focused (XMR, ZCash, XVG, HUSH, etc), Blockchain Agnostic (ARK, LINK).
- Always do your own research
Nowadays the crypto-market is not controlled and therefore there are a lot of scam projects out there. It is dangerous for your investments so you should always, do your own research before investing your hard earned money. There are lots of factors that you should think about when determining if a token or project is a good investment.
There are a few of these factors:
- Team — Is the team experienced? Do they have a reputable background? Are they real and have verified identities?
- Technology — Are they building real technology that serves to solve a problem? What is different about their method? Are they in active development?
- Token — If some projects may have a good ideas, it does not mean it will be a good investment. It’s important to understand whether the purchased token will have possessions that will make it increase in value over time. You are investing in hopes that the price will go up one day.
- Timeline — Does the project have a scheme? Do they have real, clearly defined goals? Do they already have a working product? What kind of goals have they set and when will they be launched? Is important to understand the timeline in order to know if it is the right time to invest. If there are no predictable milestones until a year later, it would be better to invest elsewhere in the short term.
Blockchain technology and cryptocurrencies, as of today, are still in development, and there is always something to learn about in this field. It is quite fascinating to witness this eruption of wealth, innovation, and technology. It can remind us the early days of the internet similar to development of this market, and there is no better time than NOW to invest in projects you believe that will change your life.
So fasten your seatbelts, learn more about all different projects, and watch as the industry reaches its peak in upcoming years. Good luck!