Trading cryptocurrency starts with the purchase of cryptocurrencies. This can be done in multiple ways, and each way has its pro’s and cons.
Where do I buy cryptocurrency?
In order to start trading cryptocurreny you will first have to purchase it. There are several ways to purchase cryptocurrencies. Each method has its pro’s and cons.
You can buy from so called ‘brokers’. These act like middlemen who buy cryptocurrencies for reselling purposes. Pro: you can purchase cryptocoins easily and quickly with iDeal. Con: it costs more and there’s a limited supply when compared to other methods. Examples: Litebit, Bitonic, BTC.
You can buy cryptocurrencies from exchanges who accept fiat money, like dollars and euro’s. Pro: this costs less than buying through a broker. Con: the conversion of fiat money might take some time, and you also have provide full identification before you’re allowed to open an account. Examples: Kraken, Bl3p. NOTE: it’s common for exchanges like these to use Bitcoin as a base currency, so you can’t buy altcoins directly with fiat money, you buy Bitcoin and then exchange these for the altcoin of your choice.
You can buy cryptocurrencies from exchanges that accept other cryptocurrencies. The main reason to do this is to trade between currencies, and at these types of exchanges you can usually find most altcoins. Pro: you can trade between many cryptocurrencies. Con: you can only trade between cyptocoins, so you’ll first need to exchange fiat money. Examples: Binance, Bittrex.
I bought cryptocurrency, and now?
The two most important matters are safety and storage. Your cryptocoins are digital and online, so the main threat to your assets are hackers. These are some of the ways in which you can protect yourself:
- Create a different and unique password for each login
- Use passwords that can’t be easily guessed
- Never use a password that you’ve used before online; create only new passwords
- Safe these passwords in a password manager (like KeepassX)
- If possible, don’t leave cryptocurrency on an exchange; you don’t have any control of this account other than the transactions. If the exchange goes offline, your money is gone.
- Do you have money on an exchange? Use two factor authentication (2FA)
- Are you technically inclined? Then it’s advisable to use a Linux operating system on your laptop or PC, since Linux is much less likely to be infected with viruses or malware.
I want to transfer cryptocurrency to my own wallet, how do I do this?
The most well known currencies can be stored in different wallets. We advise to download a wallet from the official website of the currency you want to store. A ‘lite’ wallet is often a good choice because other wallets usually download the entire blockchain during installation and this can take up some time.
After having the wallet installed and set up, it’s sensible to create a backup of your private key. Print this out, or store it on another safe location. This way you can prevent the possible hassle of recovery when your PC/laptop crashes. You can also opt for a so called paper wallet or hardware wallet.
When sending cryptocurrency, make sure you’re sending it to the correct address. You can only send cryptocurrency directly to someone on the same blockchain. For example: if you send Bitcoins to a Litecoin address, all of what you’ve sent will be gone. Also, don’t forget to add enough ‘fee’ to your transaction, otherwise the transaction might take up more time than you’d like. Usually, the standard fee that’s being applied at that moment, is the right amount.
How can I make money with cryptocurrency?
There are several ways to make money with cryptocurrencies. We’ll describe the most common ways.
A way of trade is considering the long term for Bitcoin or altcoins. Especially investing in altcoins that are new and have a lot of room to grow or that seem to have good fundamental features, can be very lucrative. Reading up on a cryptocurrency, investing in it, storing it safely on a wallet and waiting; this is what long term investment boils down to.
Another way to make money with cryptocurrencies is to invest in ICO’s, meaning before the currency hits the market. Investing in ICO’s can be extremely lucrative, but it also comes with a great amount or risk. The offered coin doesn’t actually exist yet, so it still has to prove its worth, and your investment might simply vanish of the project is cancelled. The risk with ICO’s are higher than the already high risk of investing in cryptocurrencies. To decrease this risk, it’s advisable to do research about the project, the team behind it, the technology, and other features
Another oft used technique is ‘day trading’. Day trading simply means you make profits of the daily fluctuations of cryptocurrencies. Especially experiences traders can make a lot of profits by foreseeing upward (long) and downward (short) trends. Day trading is often used by traders who make use of ‘leverage’ (margin trading).