Lately, I have been having the same conversation about how to invest in cryptocurrencies over and over again. I am happy to help anyone get involved in what could be one of their most significant chances to invest in something highly profitable this lifetime. That being said, I decided to write what I have learned about trading cryptos in a blog post to help the people who don’t have someone they can ask.
Here is a little overview of the whole process. I want to go over how to make the exchange of currency and then some strategy that I have found to work for me. It all starts with moving your hard-earned cash to an exchange that allows you to purchase a crypto. For most, this is the first hurdle and some are scared away immediately when faced with the technology they do not already understand. Once your cash is on the market and you can purchase crypto, you will need to make a decision. You will have to decide which crypto to invest in. There are many coins out there that are yet to be mentioned in the media and these coins have been very profitable lately. There are also other exchanges out there that offer more coins than others. In the end, you will need to understand how to move money to crypto, and crypto to different crypto. You will need to understand some of the technology behind the cryptos. Don’t worry, not a complete understanding but just enough to read through information on new coins in order to make educated decisions on when to buy and when to stay clear. Now that we have that out of the way, let’s get a little more into the details.
The easiest way to get money into the crypto world is to make an account on CoinBase. CoinBase is a cryptocurrencies exchange that allows you to deposit money in a few different ways. Those ways are bank transfer, wire transfer, debit/credit card or by a crypto transfer. Each of these has their own default weekly limit. They also take different amounts of time to actually show up in your CoinBase wallet once the transactions are complete. The biggest problem we all face is moving money into the CoinBase wallet quickly, so the best way to do that is plan ahead. Do not wait till you’re ready to buy a crypto before you transfer your money. Send your money in as soon as possible and then do your research. That way you can purchase your coin of choice without having to wait for the money to show up.
To setup your CoinBase account, go to https://www.coinbase.com. Once you are there, signup for a new account. When you login for the first time, you will need to verify your email by clicking a link sent to your email address you used during registration. At this point, you can login and move on to linking your accounts in order to deposit cash. Once you are logged in, from the “Dashboard” click the settings link in the navigation bar. You will see a new page load and it will have a tab view inside of it. Click the tab that is called “Linked Accounts”. From this screen, click on the blue button titled “Link a New Account”. Then, select which type of account you want to link and fill out the form provided to you. Once your account is linked, you may simply proceed with depositing your money. Remember each form of depositing money takes a different amount of time to complete. So, do not freak out when your money does not appear instantly. Sometimes, the times stated on the CoinBase website actually get delayed and you have to wait a little longer. Personally, my favorite way to transfer money is through bank transfer. It takes 3 to 5 business days but has minimal fees and a decent weekly limit.
Choosing Crypto Coins
Once your money hits the new CoinBase wallet you created, you can purchase a crypto. At the time of writing this, you have 4 options on CoinBase (1/5/2018) (Bitcoin, Bitcoin Cash, Ether, LightCoin). It is impossible for me to recommend which coin to buy because this market is very volatile but with research and educating yourself, I am sure you will make the best decision for yourself. You will learn very quickly that there are a lot of other coins out there and you cannot access these from CoinBase. There are also many other exchanges out there and most of them do not allow you to deposit cash to them. Which begs the question, if you want to purchase a coin other than the 4 on CoinBase, how do you achieve such a task? The answer is to purchase a coin on CoinBase and transfer the coin to another exchange, which will then allow you to exchange crypto coins for crypto coins freely. Actually, a lot of people who trade cryptocurrencies daily use CoinBase as a way to move cash in, but do most of our buying and selling on other exchanges that offer a lot more coins. These other coins are commonly called “Alt Coins”. My favorite exchange is Binance. Binance offers a large amount of Alt Coins and does not require you to send in a bunch of personal information to identify yourself. I prefer this because I am not comfortable sending my personal information to a foreign controlled company that is most definitely targeted by hackers on a daily basis.
Alt Coins are by definition alternative coins to Bitcoin. Mostly, when someone uses the term, they are referring to the less expensive and not as popular coins. There are indeed very popular and very expensive alt coins. For example, Ether is the coin from the Ethereum blockchain. At the time writing this, it just had a historic day breaking $1000 per coin for the first time. These prices we are seeing are mind-blowing. While there is plenty of opportunities for people to invest in the crypto market, it does make it hard to invest when the most popular coins are pushing hundreds of dollars and in some cases thousands. I believe every investor needs a strategy first and cash flow second. Otherwise, nothing good will come from treating the crypto market like a weekend trip to Vegas. After all, those trips typically end with an exciting story ending with horrific losses.
I am in no way a financial advisor nor an expert on the world of crypto, but I do have a strategy that works for me. In the spirit of loving thy neighbor, I will share my strategy with you. Personally, I look at this as a risk vs reward situation. As probably most people do. What I mean by that is this, Bitcoin saw a high of 19k in the past month. Its current value is $14,953.99. Although most of us are bullish on Bitcoin or in other words, believe it will continue to rise in price. Most of us can’t afford to buy much of anything that cost more than a car. Now, you can absolutely purchase a fraction of a Bitcoin. You will make money if it continues to rise in price. But if you do put all your money in Bitcoin the chances of it doubling or tripling overnight are slim to none. Also, it is hard to diversify your investments when you have all of your money tied up in one very expensive coin that is within a few thousand dollars range of its all-time high. It becomes a question of goals and commitment. If you are anticipating to purchase a coin and sit on it, then maybe Bitcoin is the best choice for you. But if you want to attempt to make some of those explosive gains you have heard about, tying up your $1000 total investment into Bitcoin is most likely not going to make you very wealthy. Some would even question if this risk is worth the reward on that small amount of an investment. I would be one of those people. Personally, I want to invest in something that could potentially show me serious gains in a short amount of time. This market is unpredictable and I want to make short-term investments, so I do not have to wait to see if the coin makes it to the 4th quarter. I know what I want from my investment, so I know that the coins for me are the ones that have the potential of doubling overnight. That means the less expensive the coin, the more shares I can buy. The less expensive the coin, the higher chance that it could double overnight. Going from 5 cents to 10 cents is not as unreasonable as 19k to 48k from the time I go to sleep to the time I wake up. Based on that thought, I look for coins that are worth less than a dollar. That is not to say I do not purchase coins that are worth more than a dollar. But I do primarily look for coins that have a lot of potentials and are still worth pennies or in some cases less. I have watched coins go from 7 cents to 14 cents in a day. Then to 28 cents the next day. Imagine you buy 10k coins at 7 cents which is $700. Then, as I just stated the coin moves to 28 cents by the next day, that would leave you with $2100 profit. Compared to buying a whole Bitcoin right now for almost 15k and hoping that it moves back to its all-time high so that you can make 4k with a 15k investment. That does not even sound reasonable when compared to the real-life scenario of a $700 investment and a 24-hour turnaround. These smaller investments offer higher returns at a quicker rate, but the best part is all for a fraction of the risk.
When choosing a coin to invest in, I base my decision on things that everyone has the ability to look up. Google is your best friend in this matter. I am not going to spend a lot of time explaining the technology or theory behind Cryptocurrencies, but I promise there is tons of information on the internet for you to read. What I will say are the things I look at. When a new cryptocurrency comes into play, they have an Initial Coin Offering (ICO). This is an announcement that the coin will be released for sale on a specific date and in the meantime, will be pre-sold to the public. They typically offer a deal or some type of bonus if you buy the coin during the ICO period, but I find that it typically ends up costing you more money at this point. It is practically impossible to determine what a coin will be worth during the ICO phase. But you can gather a ton of information about the coin, and do your best to interpret how the community will embrace the coin once it is officially released. I look at each coin at face value. What does it do? What does it claim it will do and what problems will it solve? Who is working on the project? What technology was used to build it? What partners do they have? What does the community say about the coin? Has the media been talking about the coin? Any and all information you can find on a coin is worth evaluating before you make a decision. Once I look at all the information I can find on the internet, I’ll then compare that coin to other coins with any similarities. By looking at similar coins, you can gather a ton of information that was not spelled out for you. For example, if I know that a coin has a lot of characteristics of a coin that has been failing miserably, I can safely decide to avoid that coin till I see a good reason to do otherwise. Or on the other hand, if I see similarities in a coin to a coin that has been quite successful, that might give me the final reason I need to purchase some of that coin. I would then typically wait for it to be officially released and see how it does on the market. Once it has the attention, I think it needs to gain momentum and the partners to help it achieve its actual goal; I will purchase it as close to a penny as possible. With full confidence that I can’t lose my money and brush it off without a care in the world since I bought it so cheap. Sit back, and wait…
In the end, this is some risky business. But again, all investing is. If you are willing to put the time in to educate yourself, research your investments till you are comfortable to make an educated decision and are willing to lose your money without putting yourself in financial hardship, then trading cryptocurrencies might be right for you.