The following guide is Thing 2’s experience with cryptography and cryptocurrencies. I leave no guarantees with this but just to serve you my experience with my adventure in the realm of Bitcoin which started in the black market. Let’s face it, stuff was used to buy drugs and question things on the dark market at one point in time, it is what it is.
What is it?
Well you’ll hear all kinds of descriptions out there but lets just keep it nice and simple. Cryptocurrencies is a form of digital money that is well encrypted. It’s meant to be an alternative method of paying for goods and services ahem drugs ahem. Now, since it’s encrypted, it also needs to be verified when it’s sent or transacted which leads to the blockchain. Think of it as a master log of what happened for each transaction with a coin. Now, the technology behind this has grown a lot to where people build applications and different uses for blockchain but let’s face it, that’s a lot of reading and research, I have no time for that, let’s just trade it!
With all trading, I can’t guarantee anything, it’s risk. You must be ok with the risk to trade cryptocurrencies like Bitcoin. There’s a real hype behind it but if you’re willing to dig into it, everything below will give you some idea of how to get into cryptocurrencies.
How Do I Get It?
Well there’s two methods to getting coins, one is simply, you purchase it. The other method is you become a miner (you build a server which connects to the blockchain to do transactions). Yay, I’m essentially a bank server or you can think of it as being Visa, Mastercard, or American Express. Now I won’t lie to you, the investment to mine can be quite large. My first rig was about $2,500 and it runs 24/7 just processing cryptocoin transactions. The idea is, each transaction requires horsepower to run, as a miner, you do the transaction for the network and in return, they give you a transaction fee. It can be small but over time, you make enough to get a full coin and there you go. There are lots of tutorials online on how you do it but think of it as a computer with a ton of high end graphics cards. Your kids will want it for gaming but you want it to generate coins ahem money ahem (minus upfront capital to buy the machine and watching your electricity bill go up, it’s really not too bad).
Ok, forget the mining, only so many people have time for that. If you’re thinking that, you’re probably thinking, just take my money and give me bitcoin. Not so easy… A few things you’re going to have to realize, the entire network operates on cryptocurrencies, not fiat currencies. You only get a couple places where you can transfer money into coins. Introducing you to: Coinbase, Gemini, and CEX.IO. Coinbase is the largest of them all, you probably heard of them because of the app store. Connect your bank account and away you go! Next is GDAX, it’s Coinbase’s trading platform. Gemini and CEX.IO are other options, don’t really use them but they’re there if you wanted to know. These exchanges are the starting places into cryptocurrencies. So much money flows into here, you can think of it as the gates to heaven… or hell, whatever you like, it’s up to you how you want to look at it.
Alright, what’s the catch?
Before I get into how you sign up and start investing in Bitcoin and such, you’re probably thinking, I keep hearing things about it. Bubble, bubble, bubble. Well, you’re not wrong and maybe not right either. Bitcoin is on a huge hype right now, but I would also argue the S&P, NASDAQ, and Dow Jones is in a bubble. Lots of things are in a bubble but you have to be willing to accept the risks. I just let you know my experience.
First thing first, if you trade on Coinbase, I will virtually slap you. SLAP If you currently do, please stop, I need you to read the fee schedule. Well, you probably should have done that before you signed up but why Thing 2? Why did you even mention Coinbase then? Here’s the thing, the company was smart. Let’s create this beautiful app and let normal people buy Bitcoin and we’ll slap a big ass fee on them (Excuse my language). What are we talking about here? For most transactions on Coinbase, you are going to pay around 5.5% per transaction. Wait whhhhaaattt??? YEAH!!! That’s right, it’s there on their site, 5.5%!!! That’s nuts!!! Ok, so let’s say you don’t think of yourself as a normal person. Did I mention Coinbase owns GDAX? Yes, they have another platform for traders and traders are smart. Do you think traders are going to pay 5.5% per transaction and trade hundreds of transactions? Absolutely not, on there you trade 0.3%. That’s a huge fraction of what everyone else is paying, straight up robbery! So the catch is, read up everything you need to know before you trade.
How To Start
Regardless of the fee robbery, I still recommend you open a Coinbase account. Why? It’s linked to GDAX, it’s literally the same login, just a different site. Sign up for it, get verified, and then hop onto GDAX and forget all about that app and just forget Coinbase.
Ahhh, look at that interface, it’s so GREEN! Maybe it’s to entice you with money or something. Alright, you see that top left drop down LTC/USD? That’s Litecoin, use this to switch between BTC/USD (Bitcoin), BCH/USD (Bitcoin Cash), ETH/USD (Ethereum), and LTC/USD (Litecoin). Buy whatever you want, these are all coins.
Add your bank account and deposit some money. This will put money into your virtual USD wallet. Think of it as a virtual wallet. You will want to do it this way when you trade, do not trade back and forth from your bank account. It’s slow and they will charge you transaction fees of 1.5%. SLAP Don’t do it! Now, this transfer will take… A WHOLE WEEK. Yes, it’s that slow, they have to mine the coin before they can give it to you. Well, in that time, what should you do? Wait and make sure your account is verified, it’s under there in accounts. You must be verified to do withdrawal of large amounts. They even have corporate accounts, just lets you pull larger sums of money.
Trading is simple, it’s just technical analysis. You get market, limit, and stop orders with advance order types. There’s no OCO order types though (ARGGGG) but you can just make due with other methods. I don’t recommend looking at charts on this platform, for that, I say use TradingView. They have all cryptocurrencies on there and if you don’t like that, head over to http://cryptowat.ch and give that a look. Yes, you will see everything on there including foreign exchanges, I’m not going to recommend any but let’s just say Thing 2 likes Poloniex… A LOT! Sometimes, these exchanges will go down as in if things are trending up or down, they can slow to a crawl and the website will hang. Let’s just say I don’t like an exchange that sounds like a sea monster or something that sounds like Trix the cereal. All exchanges are different, some offer market orders and some do not. Some exchanges have stop losses, others do not, it’s up to you.
How To Transfer
Alright, now we are in big boy and big girl shoes territory. Remember when I said this stuff is encrypted, you must remember this. Encryption means, it has to be exact to unlock anything. All transactions are encrypted so if you are one letter off, it’s going to be wrong! Remember this when you send or receive anything. So here we go! In any exchange, you can withdrawal coins, remember, you can only do things in coins to other exchanges. Where you put actual money in is where you pull it out hence Coinbase or GDAX. Some buy gold and silver bullion with bitcoin since there are places that except Bitcoin… I’m just going to leave that there but not going to say anything more about that. So, let’s transfer! Push that WITHDRAW button!
Options include your typical Bank Account, transferring to your Coinbase account, or LTC Account. Yeah, we will do this using Litecoin as an example. What you need is to go to your exchange you signed up for and get the deposit address.
This is mine, it’s public. Don’t copy and send here, I’ll just assume I got a random Christmas gift, use YOUR account number. So, rule number 1, always, always COPY AND PASTE! NEVER EVER type this out, it’s case sensitive!
Copy that address to your withdrawal window and double check, no triple check everything is exact! If you screw this up, it will send your money to the universe, no way to get it back! What I recommend is you send a tiny, tiny amount first to test. Say like 0.01 LTC. That way you don’t go broke if you screw this up. Click withdraw funds and prepare to wait anywhere from a few minutes to days! That’s right, days!!! Why is that? Well, remember when I said you could be a miner? You have to rely on these miners to process these transactions for you, it can a long time, go get a few beers and enjoy. Note – This alone is why arbitration is basically impossible on these exchanges, it takes too long to catch those price differences fast enough.
Cheers, you made it, now you own Bitcoin. Use your knowledge in technical analysis to trade the instruments, be careful of alternative coins (there’s a lot of scams and trash coins out there), and be prepared for the wild rollercoaster of crypto. Everything moves fast, news will affect it! Do your research diligently, it’s a weird crypto world out there.