Cryptocurrency: a guide to getting started, buying, and trading
Whether you know absolutely nothing about cryptocurrencies or have been looking them up for a while and decided to start investing, this guide is for you. We are confident you will find everything you need to get started in the best way possible.
Before we get started, however, please make sure you read the following disclaimer:
Why you need to read this guide before investing in cryptocurrency
The price of Bitcoin has once again been rising consistently for the past several months, and countless people are trying to buy some while they can. We strongly and firmly believe in the future of blockchain and cryptocurrency, but we also believe any investor should be aware of the product he/she is investing in. And this is why we created this website: to inform investors like you about investment opportunities in this field and to show them how to get started.
This article is no different: after reading it, you will not only be familiar with the technology behind blockchain, but also with how to invest in and trade cryptocurrency, how to store it safely, and, most importantly, how to stay informed. Throughout this article, we will point you to the very same resources we like to use daily for our investment decisions, as well as to useful additional readings. Some of these resources include pretty convenient deals!
Despite the huge market cap and numerous resources, we are aware that getting started with cryptocurrency might not look easy from the outside. This couldn’t be further from the truth, and the world of cryptocurrencies is now more accessible than ever. The barrier, in our opinion, comes from the many available resources (exchanges, wallets, etc.).
Hopefully, by the end of this guide, you will be as excited as we are about the future of this amazing technology! Most importantly, we hope you will come to realize how early we are in this game given cryptocurrency’s potential, and how you can take advantage of it to maximize your returns.
We are sure that you have heard Bitcoin being mentioned on the news more than once, especially when the price is quickly rising. We saw this happening multiple times in the past ten years or so, and we expect the same will keep happening in the future.
The cycle starts with people who are not familiar with Bitcoin learn about the underlying technology and are excited to take part in the game. This includes people who heard about Bitcoin years before but did not have enough faith in the technology (yet). Then, if the price ever goes down, the very same investors try to get even more because of the cheaper price. This includes long-term investors who are in for the technology, as well as speculators who are simply attracted by the price fluctuations. Players as big as Tesla, who invested a mind-boggling $1.5B in Bitcoin, are now strongly supporting the technology.
But Bitcoin is not everything. It is only the tip of the iceberg when compared to the thousands of projects based on blockchain (you might have heard of Ethereum or Litecoin) that are out there. In this article, we will show you how you can get started and invest in any cryptocurrency.
By gaining a more thorough understanding of the technology, you will also be able to avoid some common pitfalls and misleading expectations. At the end of the day, cryptocurrency trading is still trading and should be treated with the uttermost respect. It is therefore extremely important that you know what you are doing, as this will prevent you from learning lessons the hard way.
By following a few commonsense rules, you will save yourself the pain of going through possible nasty surprises (do it for the sake of your sanity, not only to avoid monetary loss).
Alright, enough talking. Ready? Buckle up!
Blockchain: what makes everything possible
To really appreciate cryptocurrencies, we need to take a step back and look at the bigger picture. As soon as we do that, we are presented with a view of the technology that makes it all possible: the blockchain. While every cryptocurrency might have a different motivation behind its existence, not one of them would exist without a blockchain.
A blockchain can be defined as a constantly growing digital chain of blocks securely linked together. That was a mouthful, let us break it down.
Imagine you must store some information (phone numbers, messages, bank accounts, criminal records, flight books, property information, whatever you can think of) and decide to do so in a record (block). Every time a new piece of information is available, you add it to the list (chain) of records you already have.
Since you want to make sure nothing gets altered, you decide to store other things along with the new piece of information: this might include a timestamp, a unique identifier, and some code that depends on all the information that has been added in the past.
You just linked all these records coming at different times and made sure that the information cannot be changed without you noticing right away. This is, in simple terms, what a blockchain does. Except that everything is permanently stored in the case of blockchain.
There can be much more: you may decide to encrypt all the blocks, to continuously run sanity checks, to decentralize the network to keep multiple copies of the records, etc. And that is exactly what goes on with blockchain (and cryptocurrency).
This concept of a growing list of blocks securely linked together was first proposed in 1982. The first real blockchain how we know it, however, was designed and implemented in 2008 by Satoshi Nakamoto, and that’s when Bitcoin was invented. The original idea is presented in the official Bitcoin whitepaper, which also goes into the technical details related to the implementation.
Since then, blockchain technology has been adopted for many applications ranging from food supply to healthcare, and from government applications to banking systems. Several industries and tech giants found value in this new piece of technology which can be adapted to serve virtually any field. One of the most successful applications so far has been, you probably guessed it, cryptocurrency.
The beautiful world of cryptocurrencies
So, what does cryptocurrency have to do with all of this? Simply put, whenever someone makes a blockchain, they need to create an incentive to make the whole system work as well as to reward its users and miners (we will come back to miners later). This is where cryptocurrency comes into play: it is a digital asset that, through encrypted transactions, enables the blockchain.
There exist numerous types of cryptocurrencies, each one with its pros and cons. According to CoinMarketCap, at the time of writing there exist more than 8,500 cryptocurrencies!
Most of them are decentralized, meaning that no one can ever be in full control of the network and therefore directly control the digital asset. Some, on the other hand, are centralized; centralized cryptocurrencies can be more suitable, for example, for banks or governments, who might want to have greater control over the network.
While – as mentioned above – the purpose of many cryptocurrencies is to back a blockchain system, some are created with the only goal of being a better cryptocurrency for the market (through better anonymity, faster transactions, higher energy efficiency, and so on).
Another thing most cryptocurrencies have in common is the absence of a third-party entity (or man-in-the-middle) that handles your funds. To realize how impactful this can be, think about some of the most successful services out there now. Airbnb allows you to immediately get in touch with the property owner without a mediator. Uber allows you to contact a driver directly. When you send money in the form of cryptocurrency, you are letting the network do the job, not a bank. Everything is transparent and every transaction is automatically kept track of.
The number of choices is infinite, and we will show you some guidelines to choose cryptocurrencies wisely.
The bottom line is that the applications are limitless and the list of cryptocurrency advantages is long (lower transaction fees, impossibility to reverse a transaction, absence of a man-in-the-middle, instant payments, and much much more).
Can cryptocurrencies be spent?
Absolutely. Unfortunately, most people still believe that Bitcoin (or any other cryptocurrency, for that matter) is useless and cannot be spent. That could not be further from the truth, for two reasons.
First, even if it could not be spent, that would not make Bitcoin worthless: insane profits have been made trading gold in the past, even though I have never seen anyone paying a cashier with gold.
Second, the truth is that many businesses are accepting cryptocurrency as a form of payment, and the list keeps growing over time: Overstock, Expedia, Microsoft, Wikipedia, AT&T, eGifter, NewEgg, Shopify, Subway, Twitch, Playboy, KFC, Namecheap, Express VPN, the list is long. Now even Tesla is planning on accepting Bitcoin. There are hundreds of other services accepting cryptocurrency (you can take a look here, for example).
Before you ask: what about Amazon? While they do not accept cryptocurrency payments directly (but hey, they don’t accept PayPal either!), you can buy anything they sell by using Purse. And, let’s be honest, being able to buy stuff sold on Amazon means being able to buy pretty much anything!
What about going back to cash?
Bitcoin and other cryptocurrencies can be converted to cash (fiat money to be precise, which indicates currencies such as USD and EUR) at any time either at a Bitcoin ATM or through Bitcoin exchanges (more on this later).
Is it necessary to buy a whole Bitcoin?
Of course not! You can buy any percentage of a Bitcoin you want, just like you can spend fractions of a Dollar.
The “basic unit” of a Bitcoin is a Satoshi, which is 0.00000001 BTC, and you can buy any multiple of that you want.
Is it too late to buy cryptocurrency?
One of the questions we get asked more often. Back in 2014, when Bitcoin was selling at about $400, people were afraid to buy because the price was “already so high”. The same happened in 2017 when people missed a huge bull run that culminated with a $20,000 peak. Bitcoin started rising again in 2020, and people were claiming it was too late to buy when the price reached $20,000, then $30,000, then $40,000, then $50,000… You probably see where this is going.
Yes, it would have been great if you (and us) bought a couple hundred Bitcoins back in 2011 when it was worth around $0.30, but that does not imply it is not worth it now.
Especially taking into consideration the economic recession caused by the COVID-19 pandemic, this might be a great time to buy. Consider that, at the time of writing, the cryptocurrency market is worth about 1.7 trillion dollars.
New cryptocurrencies are continuously being introduced on the market, each one with its peculiarities: from coins that guarantee greater anonymity and higher security, to coins aiming for faster transactions and ease of mining (once again, we will come to mining cryptocurrencies later).
The bottom line is that cryptocurrency projects are constantly evolving and there is still a long way to go before many of the projects will be mature, as well as a tremendous potential for growth to be exploited for several applications.
If you look at historical charts (among all, Bitcoin’s), you will see that all the rallies were followed by “crashes”. These natural price adjustments were always followed by a stronger bull run driving the prices higher than before the crash.
Alright, if you made it to this point, congratulations! Most people have no idea what cryptocurrencies are, let alone how the blockchain works. Now is where it starts getting very interesting, as we are about to show you how to buy and trade cryptocurrencies.
Before moving on, let us remind you that you should only invest as much as you are willing to lose. We know it is commonsense, but countless people lose money they can afford to lose, every day. Just be patient and take the market seriously, you will be rewarded in the long run. Gains in the cryptocurrency world can be huge, but the opposite can hold as well if you don’t make informed decisions.
To make this guide as useful and as complete as possible, we are going to focus on three main areas: how to get started with cryptocurrency by buying your currency of choice, how to trade it on cryptocurrency exchanges, and, most importantly how to make informed decisions. We will briefly touch on other aspects such as how to store your cryptocurrency safely, how to mine cryptocurrency, and a brief overview of the jargon.
How to buy your very first cryptocurrency
You know the blockchain is. You know what cryptocurrency is. Ready to take it one step further and finally be the owner of some cryptocurrency?
As we mentioned above, buying and getting started with cryptocurrency is not as difficult as you may think, and can be done in a couple of minutes from the comfort of your house!
It goes without saying that in order to buy some cryptocurrency you need to choose how you prefer to pay.
There are several ways to do this, but the most common ones are through a credit card or with your bank account directly. PayPal is also becoming more and more popular among the accepted forms of payment.
If you choose to buy through a service like BitcoinLocals.com, you can even buy from people living near you.
Other alternatives such as peer-to-peer (P2P) also exist. However, we prefer buying through official exchange platforms. Let’s see how to do it!
Buying your very first cryptocurrency on Coinbase
The goal of this guide is to show you how to get started painlessly, and Coinbase makes the process very easy. Plus, it is the most used website among buyers.
Also, good news:
Coinbase offers a wide choice of cryptocurrencies, and you can certainly choose the one you like the most for your first purchase. If you are not familiar with cryptocurrencies already, we suggest you stick to the “big ones”: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and so on.
Buying from Coinbase is very easy: you just need to create an account (and possibly verify your identity) and click on the Buy/Sell button in the upper right corner. The rest of the procedure is straightforward, and you just need to follow their instructions. If you prefer to follow a step-by-step guide on how to buy, you can have a look at our guide on how to buy cryptocurrency on Coinbase.
Coinbase accepts all kinds of credit cards, and you can also link your profile to a bank account if you prefer. By linking your account, not only will you have lower fees, but you will be to transfer your cryptocurrency back to your bank account with a direct deposit if you ever wanted to do so.
Now, one question you may have – and one we are not entitled to answer – is how much you should buy. All we can say is that you probably don’t want to start too small, or you won’t be able to diversify your portfolio at all.
The general advice in the cryptocurrency community is to start with no less than $200-$300 to be able to see some results, but of course, it is up to you whether to invest $20 or $20,000. Again, consider the worst-case scenario and never risk more than you are willing to lose.
If you bought some cryptocurrency and this was your first time, congratulations!
How to keep your cryptocurrency safe
This is probably the perfect time to introduce some basic rules regarding how to store your cryptocurrency safely and avoid nasty surprises. You should treat your cryptocurrency wallets just like you treat your bank account, and take appropriate care of your credentials.
Blockchain is incredibly safe, but this does not prevent hackers and scammers from trying to gain direct access to your cryptocurrency accounts and wallets. Taking a few basic steps to protect your funds is extremely simple, and there is no reason why you should not take some basic precautions.
Two-factor authentication is mandatory
The very first thing you should do on Coinbase (and any other exchange) is to set up a two-factor authentication method (often referred to as 2FA). This way, Coinbase will ask you to provide an additional code every time you log in, besides your password.
To do so, you need to go to the Coinbase settings and click on the Security tab. There, you should see a 2-step verification section from which you can choose your favorite method of authentication. In case you are provided with a recovery key during the process, be very careful not to lose it, as it is needed to regain access to your account should you ever lose your authentication device.
Dedicated email address
It might be worth getting a new email account for handling your cryptocurrencies, especially if you use your other email accounts a lot. Of course, you should choose appropriate passwords for your email accounts and possibly activate a two-factor authentication method on them as well. The same goes for any email account that might expose your banking details and/or personal sensitive information. ProtonMail is a great secure email provider, but a Gmail account also works.
Virtual Private Network
We don’t want to sound too paranoid, and this step won’t be necessary in most cases (although it won’t hurt). If you use public networks and WiFi often, however, you should consider getting a Virtual Private Network (VPN) subscription. What a VPN does is encrypts your traffic so that no one can see what you are doing or the credentials you are sending over a network.
There are countless services out there, we particularly like ProtonVPN. Whatever VPN you choose to use, do not rely on free services (if you are not paying for the product, you are the product).
Always double check your wallet addresses
Even though we haven’t got to how you can transfer cryptocurrencies from one wallet to another yet, just know that whenever you make a transaction you have to indicate the unique address of the wallet you want to send money to. Malwares have become extremely sophisticated, and there have been cases where they would alter the text copied on your clipboard. This way, whenever you paste your address, you would paste some hacker’s address instead. So always double-check the addresses you are copying and pasting.
The basics of cryptocurrency wallets
Cryptocurrency is stored in wallets, plain and simple. However (and by this point you should not be surprised), there are many different types of wallets: the main distinction we want to take into consideration here is that of hot wallets vs cold wallets.
Your cryptocurrency funds are physically (digitally, you could argue) stored in the blockchain, and secret keys (just like passwords) are needed to access them. It should be clear then, that whoever has access to these keys can control your funds.
If you followed the steps above to buy a cryptocurrency on Coinbase, you will have noticed that you were not handed any key. This is because in this case you are dealing with a hot wallet, and it is Coinbase that holds your keys.
A hot wallet, in general, is any wallet that is somehow connected to the internet (software wallets, mobile wallets, online wallets, etc.). These wallets are generally used when trading since this is the only way to have your funds readily available for trading when needed.
For extra safety, you might want to consider cold wallets, which are completely disconnected from the internet. This includes hardware wallets (devices similar to USB sticks) and paper wallets (literally a print of your keys).
Cold wallets are the safest way to store your cryptocurrency (provided you don’t lose your physical wallet), and you should consider one if you intend to keep your cryptocurrency for longer terms without ever trading it. This way, you won’t have to worry about anyone ever accessing your online accounts.
The disadvantage with cold wallets is that you need to transfer your funds back online whenever you intend to trade. This can still be feasible if you only trade once in a while, but gets less and less convenient with increasing trading activity.
Also, transferring back and forth from a cold wallet can get expensive due to the high fees. As a rule of thumb, if you have less than 500 USD and intend to trade with it, it’s probably not convenient to transfer your money. This, however, depends on a lot of factors.
If you intend to trade often, our suggestion is to keep in a hot wallet only the amount of cryptocurrency you will trade with. For example, if you are trading with only 30% of your account, then you should keep the other 70% in a cold wallet.
While it is very unlikely that anything will ever happen to your online accounts if you took the measure we listed above (especially 2FA), you are always better to be safe than sorry.
Finally, be aware that wallets are currency-specific, meaning that you will need a separate wallet for each cryptocurrency you intend to store. Ledgers support multiple currencies and you can get away with just one USB device for many cryptos, but the same won’t hold for a paper wallet.
By the way, if you want to have fun generating a Bitcoin paper wallet address, take a look at bitaddress.org!
To learn more about cryptocurrency wallets, check out our Recommended Cryptocurrency Wallets page, where we analyze the pros and cons of our favorite storage solutions.
Alright, hopefully, we didn’t scare you with all the notes about security. We just like to be extra safe when it comes to money, and cryptocurrency is no different!
How to send (and receive) cryptocurrency
Before we get to the trading part, let us briefly discuss wallet addresses and how you can transfer cryptocurrency from one wallet to another.
Every wallet has a unique address (or identifier) attached to itself. Remember how we said that anything written on the blockchain is permanently stored? By using a blockchain explorer, you can see all the transactions that took place on the blockchain, and also explore the transactions associated with each wallet address. Note, however, that this information is completely anonymous as you cannot tell who the owner of a specific wallet address is.
So, what if you want to share your address with other people without them knowing the history of all your previous transactions? You create another wallet address! This can come in handy, for example, if you want to share a cryptocurrency address publicly on the web.
If you go to your Crypto Addresses section on Coinbase, you will be able to create as many wallets as you want. Just select a specific asset and click on Create new address. This is also useful in case you want to receive funds in a cryptocurrency that you never held before (in which case you do not have a wallet associated with that cryptocurrency yet).
Now that you know everything about wallet addresses, let’s say you need to transfer your funds from Coinbase to a hardware wallet or to an exchange (more on that in a moment). How can you do that?
On Coinbase, just click on Send/Receive (upper right corner) and you will be presented with a pop-up window that lets you choose which currency you want to transfer, and which address you want to send it to. If you click on Receive, you will also be able to see the address associated with each of your crypto wallets: this is the code you need to give other people if they are sending you money (note how you can easily share your QR code, if you prefer).
Exchanges (or how to trade cryptocurrencies)
Here comes the fun part, exchanges! Up until now, you saw how you can buy a single cryptocurrency and how you can transfer it to any wallet. The real fun, though, begins when you start trading cryptocurrencies.
Note that this section does not apply to everyone. If your goal was to buy a cryptocurrency and completely forget about it for a few years, just store it in a safe wallet and skip this section. If you, on the other hand, want to take full advantage of cryptocurrency fluctuations, read on.
Trading cryptocurrencies is just like trading stocks, or trading Forex (foreign currencies). If you live in a country that uses U.S. Dollars (USD) and suspect that the Euro (EUR) will become stronger soon, you can get some Euros and then sell them back later for a profit.
Similarly, if you are holding Bitcoin (BTC) and think that Ethereum (ETH) is gaining momentum and its value will increase, you can convert your BTC to ETH temporarily to increase your BTC holdings.
We must warn you: when looking at your portfolio value, try to reason in terms of equivalent BTC, not USD. To see why, let’s imagine you bought 1 BTC for $10,000, start trading, and, unfortunately, you lose some of the BTC you had, ending up with 0.8 BTC. Let’s also say that during all your trading activity, the value of 1 BTC increased to $20,000. You sell your BTC for $20,000 each and get $16,000. Obviously, you made a $6000 profit, which is still a nice 60% return. However, you would have been better off just holding your initial 1 BTC and sell it for $40,000 total!
This simple example also shows the power of trading:
- If you are a long-term holder, you may buy 1 BTC at $10,000 and sell it later for $20,000. The price of BTC has doubled, so you made a +100% profit.
- If you are a trader, you may buy the same BTC at $10,000 and trade it until you have something like 1.5 BTC that you can still sell for $20,000 each. You can now make $30,000.
Moving your funds to an exchange
The first thing you need to do if you wish to trade cryptocurrency is transferring your funds to an exchange.
Our go-to exchange is Binance, and we highly recommend you use it. Why? It has an awesome selection of cryptocurrency pairs, a huge trading volume, and has been around for years.
And yep, good news again:
Opening an account on Binance is very straightforward (you are not even required to verify your identity for “small” account balances) and will only take a few minutes. If you want a step-by-step explanation, make sure you read our article on How to Trade Cryptocurrency.
Every safety measure we discussed above obviously holds for Binance as well, since your funds are online. So make sure you enable two-factor authentication before proceeding, and also keep your accounts secured.
Once you have a Binance account, just click on Wallet and then Spot Wallet. Here, you will be presented with a huge list of all the cryptocurrencies they support. Find the cryptocurrency you wish to transfer to Binance and click on Deposit. You will be given your wallet address. Now move over to Coinbase and follow the steps we saw above to send money to this address. Make sure you are transferring the same cryptocurrency, otherwise you may lose your funds. Also, always double-check the address is correct!
Don’t worry if your funds take a while to appear, transactions may take a while depending on the cryptocurrency you are transferring. BTC can take around 20 minutes, but sometimes a few hours are needed due to a large number of transactions. ETH and LTC transactions are usually faster, and Stellar Lumens (XLM) is blazing fast.
Grab a cup of coffee and wait until your funds become available on Binance!
Now what? Just click on Trade (here you will be able to choose between a simple and an advanced trading interface) and you will be able to buy or sell any coin you want right away. Let’s say, for the sake of simplicity, you have BTC and want to buy some ETH with it.
First of all, select the ETH/BTC trading pair, which will present you with a historical chart of prices.
You will also see the option to place a Buy or a Sell order, with three options each:
- Limit order: place an order by setting the price and the amount of token that you want to buy (or sell). This order will get filled as soon as someone will be willing to sell (or buy) at the price you set;
- Market order: your order is filled right away at the most convenient price available (note that this price may or may not match the market values);
- Stop-Limit order: just like the limit order, but only gets placed when the stop condition is triggered (something along the lines of “set a Limit order when and if the Stop price is reached”).
Covering all the trading functionalities available is out of the scope of this article, but stay tuned for our detailed cryptocurrency trading guide.
How to choose cryptocurrencies
This really depends on the way you want to trade, and we suggest you take your time to both understand the markets and understand what trading style suits you best before risking money on highly speculative coins. Our Recommended Cryptocurrency Trading Books section is a great place to get started.
If you are more of a “value” investor, ideally you want to look for low market cap coins which are still undervalued and you believe will become more successful in the future. If you are “riding” the markets, then you possibly do not even care about the token you are trading, but only care about its past moves.
Do your own research
Do your own research before choosing a coin to invest in, and always avoid buying impulsively. If you buy impulsively, you will lose money. Trust us. It may not happen the first time or the second one, but sooner or later you will regret doing so.
Also, don’t buy a cryptocurrency just because you read it or heard it somewhere. Don’t randomly pick a coin because its value is increasing. Again, it may work the first or the second time, but sooner or later you will regret it.
So how do you do your own research? CoinMarketCap is an awesome place to start, and we use it almost on a daily basis. Here, you can quickly look at the cryptocurrency price, market cap, and volume of pretty much any project you can think of. Not only that, but for each coin or token, they have a page that lists the historical charts, official website, source code, whitepaper, social activity, and much much more as you can see in the following screenshot.
- CoinMarketCap: be your cryptocurrency go-to for just about everything. Here, you can see the market capitalization, the current price, the circulating supply, total supply, and historical charts with prices relative to USD, BTC (Bitcoin), and ETH (Ethereum).
- Official website: This is ground zero for all your research, and where you’ll be able to get information such as their whitepaper. Your safest bet is going to CoinMarketCap, selecting your coin of choice, and selecting their website on the left side of the screen. See an example below.
Make sure you check the official website of the projects you want to invest in. We usually like to check whether the website looks professional or not, what the value of the coin is (what problems does it solve? why is it better than the others?), the team behind the project, if the supply is limited, the project roadmap, etc.
If we are confident about our research, we proceed with the trade.
Whatever cryptocurrency you choose to trade, place a stop-loss. There is no reason not to. Remember the stop-limit order discussed above? Be sure you carefully plan your trade risk and put an exit strategy in place. This way, you can go to sleep knowing that, should the price plummet overnight, you will be covered.
Stay up to date
With cryptocurrencies being such a new asset, there is something new coming out every day. And, no matter how much you may already know about cryptocurrencies and blockchain, there is always more to learn. It is therefore important that you stay up to date with new projects coming out and the latest market developments.
This is especially true if you are actively trading, and probably less relevant if you are planning to keep your funds stored for years to come.
The best resources to keep an eye on, in our opinion, are (in alphabetical order):
- Reddit (especially r/CryptoCurrency)
- Trading View is especially good for reading other people’s trading ideas and see if they are in line with your predictions. Also, you may find some ideas related to a project you didn’t even know of.
Twitter can also be a good choice.
If you were to remember just one thing from this article, it should be this: make sure you educate yourself. You should learn at least the basics before starting to trade cryptocurrency.
The good thing about cryptocurrency is that you don’t need to start out with $10k in order to see some profits, as you normally would for other stocks, and anyone can get started with as little as a few hundred dollars. This does not mean it’s a game.
There are many books and online resources covering different trading aspects, forex markets, technical analysis, psychology, and more. The more you learn and the wider your knowledge of the subject is, the better.
Our suggestion is to start by reading some of these cryptocurrency trading books: we know it is a long list, but a few will be enough to get the basics you need! Some of our top picks from that list are:
- The Art and Science of Technical Analysis: this book introduces the basics of technical analysis and does a great job of providing logical explanations behind what happens in the markets. Plus, it teaches you to always evaluate your trading results objectively.
- Trading in the Zone: great book for dealing with the psychological aspects of trading which, believe it or not, is what stops the majority of traders from succeeding.
- Market Wizards: with a series of interviews with some of the best traders in the world, this book will show you what it takes to succeed in the trading world and what are the common traits of these people.
For someone just starting out, Charting and Technical Analysis is also a good choice: it is simple to follow along and introduces the concepts of technical analysis starting from the very basics, slowly adding complexity throughout the book.
If you are more of an online course type of person, the School of Pipsology is a well-organized online course. Also, as pointed out by r/Daudr, MIT has this great introductory class on blockchain applied to finance. Taking the whole course might take a while though, and you most likely won’t need all of the information provided in order to get started.
At first, all these new concepts might seem a little overwhelming. Don’t worry, after a while you will get used to the different types of candles, volume patterns, moving averages, and so on.
Some basic terminology
One thing everyone struggles with at the beginning is the terminology involved. Don’t worry, the following list contains most of the terms you’ll ever come across.
- Altcoin: alternative coin, any cryptocurrency which is not Bitcoin.
- ATH: All-Time High. The highest price a cryptocurrency has ever achieved.
- Bearish trend: downward trend.
- Bullish trend: upward trend.
- Fiat money: currency that is not backed by a commodity (such as gold). USD, EUR, GBP, JPY are all examples of fiat money.
- FOMO: Fear Of Missing Out.
- FUD: Fear, Uncertainty, and Doubt. Often causes dips in prices.
- HODL: actually means “hold”, although it was misspelled years ago on a forum and people kept using it.
- ICO: Initial Coin Offering. When new projects are introduced to the market, a crowd sale usually takes place that offers the opportunity to purchase digital coins.
- Market cap: circulating supply of a cryptocurrency multiplied by its current price.
- Max supply: maximum amount of coins that will ever exist for a given cryptocurrency. For Bitcoin, it is 21,000,000.
- Satoshi: the smallest fraction of a Bitcoin, 0.00000001 ฿.
- Shill: when people promote a project as if it was the next big thing, ignoring any negative aspect and focusing only on the positive ones.
A word about mining
Mining is a topic that would deserve a whole article just for itself, if not a book. For completeness, however, we think you should be at least aware of what mining is.
Blockchain transactions take place because of miners, people who allocate computational power to the network and allow these transactions to take place. Miners are usually competing to solve some sort of mathematical problem: whoever solves it first (among all the miners in the world), gets the transaction reward.
This is also how coins are generated, as mining rewards are the incentive for people to set up powerful dedicated computers (called mining rigs).
Anyone can mine, although it is often not convenient for small players given the costs involved (both hardware costs and electrical energy costs).
Avoid FOMO at all costs
One of the worst things you can base your decisions on is the Fear Of Missing Out (FOMO). Never buy a cryptocurrency just because its value is increasing and you feel like you missed the boat. It is a recipe for disaster.
If the value has already gone up so much, chances are that you would be buying close to the top. You want to do the exact opposite: buy low and sell high. Be patient, you will not get rich overnight. Luck may strike here and there, but will not be your friend in the long run.
Use cold storage whenever possible
By now, it should be clear why cold wallets should always be preferred, given the choice. If you are not actively trading part of your funds, do not leave them on an exchange. Actually, do not leave them online at all.
No matter how reputable an exchange is, websites as big as Twitter and Facebook have been hacked multiple times. We highly recommend buying a Ledger Nano S or Ledger Nano X. They are cheap, small, and convenient to use. Another alternative are paper wallets (but please do not use literal paper, check these out instead).
Keep it simple
Especially in the beginning, do not over-complicate things. Stick to simple strategies, learn more about the markets, and work on your emotions.
Keep track of your currencies
The more you learn about cryptocurrencies, the more you might end up having funds in multiple exchanges. To keep track of all your cryptocurrencies, you can use mobile apps like Blockfolio, BitUniverse, or Delta. These apps allow you to sync your exchange accounts all in one place, and can often keep track of all your trades.
Small tip: if you sync your accounts using an API key (you can find how to do that on Binance here), make sure you disable any trading and withdrawing privilege. This will prevent any app from ever trading or withdrawing from your accounts.
Just like you would with a stock portfolio, it is important to diversify your cryptocurrency investments. This way, you will reduce the risk in case things went south.
Never invest more than you are willing to lose
Last but not least, and we can’t say this enough times, risk only as much money as you are willing to lose. Also, manage your risk correctly. You don’t want to blow up your gains with a single trade after months or hard work.
You might want to take a look at our list of favorite cryptocurrency trading books.
Congratulations on making it to the end! Not everyone is willing to invest some time learning before investing money, and this is a great first step towards success.
If you keep in mind everything we mentioned, you’ll be ready to trade cryptocurrencies in no time.
We hope this guide was helpful to you, and hopefully, we convinced you that trading cryptocurrency is easier than it may seem. Please remember to take the appropriate steps to protect your capital, and never risk more than you can afford to lose.
Feel free to let us know if you think we left something out of this guide, or to contact us for any feedback.
The very first thing we suggest you do is to take a look at our recommended books section. Also, try to familiarize yourself with your exchange: spend some time on Coinbase and Binance and look for all the features they have to offer!
If you like watching videos or listening to podcasts, you may also take a look at our Resources section.