The Ins and Outs of CryptoCurrency Trading
Many of you have now heard about Bitcoin and even Ethereum, but are unsure about how to transition some of your financial assets into their respective cryptocurrencies. Beyond that, you may not have a defined investment strategy to something so novel, and oftentimes chaotic.
Let’s start with my first word of advice, “DO NOT COME INTO THIS WITH A STOCK MARKET MINDSET.” Investing in cryptocurrency, even now, is still a very early, speculative, and fast evolving game. Mainstream adoption is easily 5–10 years into the future and I guarantee most of your corporate friends don’t really know much about it.
So here’s the steps to learn, invest, and repeat on promising cryptocurrencies across the Internet:
Read the Bitcoin Whitepaper and Learn the Basics of Blockchain and Smart Contracts.
It is essential that you have context around your investment. These cryptocurrencies (some of them anyway) are based on executable and market changing technologies — the currency itself is simply one part of that technologies ecosystem, much like the blood in your veins. Read the Bitcoin Whitepaper regardless of any investment you make because all of this began with the creation of decentralized consensus and the solution to double spending. Next, familiarize yourself with the basics of blockchain and Ethereum smart contracts.
Download (or Buy) a Secure Wallet
Securing your funds is crucial. A general rule of thumb is to keep 80% of your assets on at least a client, paper, or hard wallet. A client wallet is a software application that downloads onto your computer and holds your digital currency on your computer (but, technically, offline — at least when your Internet is disconnected). A paper wallet is a wallet in which you print out, or write down the private key in order to access your currency. Finally, a hard wallet is a literal hardware device that you can keep offline and off your computer to store and safeguard your crypto assets. Here are some great resources for each type of wallet (listed for Ethereum and Bitcoin based tokens only):
- Bitcoin — Bitcoin Paper Wallet, Bitcoin Client Wallets, Bitcoin Hardware Wallets,
- Ethereum — MIST (Client), MEW (Paper), MetaMask (Client),
Choose your Cryptocurrency Interest(s)
Choosing which currencies (tokens) that you’re investing in is a crucial decision. Don’t think that you are going to just start day trading and forgo the possibility of getting scammed. Research the teams and origins of the currencies you invest in. Here’s an extremely simplified, but concise, summary of the coins I focus on.
- IOTA — excellent environment that’s build on Tangle, a next generation Blockchain technology that doesn’t use “Blockchain” at all. In fact, it remedies many of the sustainability issues that Blockchain environments face — like increasing transaction fees (because it has free transactions) and transaction processing time.
- GNT — excellent (in theory) environment based on Ethereum — Distributed and decentralized computational power. The Golem Network is a decentralized sharing economy of computing power, where anyone can make money ‘renting’ out their computing power or developing & selling software.
- BTC — genesis of Blockchain technology with highest market cap. Driving tenants of its price are (currently) BIPs trying to remedy Bitcoin’s transaction malleability and Blockchain size problems (to prevent slow transactions and high transaction fees), ETF exchange denials by the SEC in the US, and Rootstock
- ETH — excellent environment, different from BTC because it’s a Blockchain that you can more easily build decentralized applications and decentralized autonomous organizations on top of
- XRP — institutionally backed by many big banks, but it’s a centralized — pump and dump currency. Most likely will reach mainstream adoption in the US first, at least on Wall Street
- BCN — Anonymous currency based on cryptonote w/ extremely high earning potential, very cheap, very minable
Pick Your Exchange Poison
If you’re day-trading you may want to stay with the more widely known exchanges like BTC-e, Poloniex, Bittrex, and Coinbase. Depending on the currencies that you want to invest in, the latter exchanges may not all be available for your investment purposes (given the currencies available on their exchange). If you want to focus on newly sold tokens (ones that recently had a “Initial Coin Offering,” or, more appropriately, “Token Sale,” then use Liqui.
Keep Up to Date and Find Your Investment Communities
CoinTelegraph, Steemit, and the Crypt0 YouTube channel are excellent, up-to-date sources of information. Become a student of the market and you will soon become one of the first thought leaders in the space — remember, we are still on the ground floor!
Robert Greenfield is a Certified Bitcoin Professional, Cisco Software Engineer, and Blockchain specialist with work experience @Goldman Sachs, American Express, and Teach For America. Follow him on Twitter @RobTG4