If you work, walk your dog, look at the news, or in any other way venture out into the world, you’ve surely heard at least one mention of cryptocurrency, most likely in reference to Bitcoin’s incredible run at the end of last year. Your neighbor or co-worker probably roped you into an unsolicited conversation about how much money they could have made if they would have accepted that random Bitcoin offer back in 2012. Only a few years ago, cryptocurrency was exclusively talked about in small, remote corners of the Internet. Now, Fox News, CNN, and your grandmother can’t stop bringing it up. You’ve heard stories about people becoming millionaire’s over-night and are interested in investing but don’t know where or how to begin. We’ll change that today with a guide to cryptocurrency investing in plain English.
Disclaimer: The cryptocurrency market is extremely volatile. The entire industry is undergoing unprecedented changes and therefore investments should be made with an understanding that potential upside is coupled with equally remarkable risk.
The easiest and safest way to begin investing in cryptocurrency is through the American based website, Coinbase. Founded in San Francisco, Coinbase currently offers buying, selling, and storing services for Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. With an extremely user-friendly platform, even the most technologically challenged can get started right away, needing only a bank account and valid ID to sign up. Buying, selling and tracking your investments are all as easy as a few clicks, and the entire site is extremely easy to navigate. It does take a few days for your coins to arrive in your wallet, but this should be viewed as an upside as it prevents newbies from panic selling or buying before they get used to the large peaks and valleys. Extensive safety protocols protect your coins without any extra work on your part. The sites main drawbacks include limited coin options and occasional server overload issues. Coinbase has promised increased capabilities in hopes of preventing future collapses during peak trading rushes. When they added Bitcoin Cash in December of 2017, trading volume on the coin exploded exponentially and they were forced to cancel all purchases and sales that occurred within the first hour. Although Coinbase ensures that these issues have been resolved, users should be aware that buying and selling during future peaks may result in similar problems.
With over 1,300 cryptocurrency coins circulating, a number that grows by the day, there exists plenty of opportunities to make money on less mainstream currencies. Unfortunately, no truly user-friendly platform exists for trading these smaller coins. Currently, the best options on the market are Bittrex, Kraken, Binance and Kucoin. The sites can be difficult to work at first, and other than Bittrex, you need to transfer cryptocurrency that you already own to the site before you can begin exchanging, selling, and buying (Coinbase and Bittrex allow you to deposit traditional money into your account). Despite the initial intimidation, after a little bit of research and practice, trading on these platforms becomes relatively easy. With a faster buy/sell process than Coinbase, day trading is available and can be extremely profitable as small coins routinely rise and fall over 100% on a given day. It’s not advisable to store coins on either site long term as they can be targeted by hackers. If you plan to hold onto a coin for more than a few hours, it’s necessary to purchase a “hardware wallet,” or in other words, a specialized flash drive that keeps your coins safe. The best wallet available is Nano Ledger S, priced around $100. While it may seem like a hefty fee, protecting your investments long term will be worth the cost.
Ultimately, unless you are technologically savvy, it’s wise to use major trading platforms until you are comfortable and experienced in the world of cryptocurrency. Despite its volatility, investing in various cryptocurrencies can yield very high returns. At the very least, research and consider testing the waters on some of these popular trading sites.