5 Simple Steps Learn How To Trade Cryptocurrency
5 Simple Steps, Learn How To Trade Cryptocurrency
In this guide, let’s talk about how to trade cryptocurrency.
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Anyone who is remotely interested in learning about crypto has taken part in some form of trading. As it gets more and more mainstream attention, newer players want to enter the market and get their slice of the crypto pie. So, to help those people enter this exciting market, we have created this “Cryptocurrency Trading Guide.”
In this guide, we are going to take you through all the steps in order for you to become a crypto-trader. We will be going through the following sections:
* Fiat to Crypto Trading.
* Storing Cryptocurrencies.
* Crypto to Crypto Trading.
Enjoy a free lesson from the Blockgeeks Library!
How To Trade Cryptocurrency: Fiat to Crypto Trading
So, you have some money that you want to invest. How are you going to go about it? The portals which connect our world to the crypto-worlds are called “exchanges.” There are a lot of exchanges out there, however, before you choose to invest in one, there are certain things you need to look out for. Let’s call this the “Exchange Checklist.”
* Validity: Before you even do anything, first make sure that the exchange is available in your area. Eg. Coinbase, one of the largest exchanges, is not available in India and Indonesia. So before you do anything please check this.
* Reputation: Next thing that you need to check is the reputation of the exchange. Are people happy with their services? Has it been hacked recently? How secure is it? Have people complained about it? Twitter and Reddit are good sources for checking this.
* Exchange Rates: Up next we have the exchange rates. Different exchanges have their own exchange rates which may vary. Do your homework here and research 3 or 4 exchanges and their rates.
* Safety: Please always choose exchanges which need some sort of ID verification from you. Even though they may take time, they are easily 100 times more safe and secure than anonymous exchanges. At the end of the day, it is your hard earned money. You must take that extra step to keep it secure.
You can do your own research and choose your exchange, however, in this guide we are going to go with the most popular crypto exchange out there Coinbase. So, let’s start trading!
Signing Up and Account Creation
Signing up is a very simple process. The moment you land on Coinbase.com just click on “Sign Up”. You will now see this screen:
Since you are creating your own personal account, create an “Individual” account as opposed to a “Business” one.
It is a simple matter of putting in your:
* First Name.
* Last Name.
* Email.
* Password.
After you just have to agree to their Terms and Conditions and prove that you are not a robot (if you are a robot and you are reading this then “Hail Skynet!”).
Ok, now you have an account set up.
Security and Account Addition
Next up is security and Account addition. In this section you will need to do the following:
* Phone Verification: Phone verification is necessary to give your account a 2-step verification process. Firstly, you’ll have to enter your phone number. You will receive a text message with a verification code. Simply put in that code and you are done.
* Adding a Payment Method: Payments in Coinbase can be done via bank account, debit card, and wire transfer. In order to understand the advantages and disadvantages of all these three methods you can simply refer to this table: “Buy” and “Sell” refers to buying and selling Bitcoin, Bitcoin Cash, Litecoin, and Ethereum.“Deposit” and “Withdraw” refers to depositing and withdrawing credit in your Coinbase account. The Coinbase help guide will show you exactly what you need to do in order to manage your payment methods.Click here to read the help guide. Note: Coinbase doesn’t support credit cards anymore.
* Identity Verification: Finally, you will need to verify your identity. Since Coinbase is a regulated company, they will need to be compliant with KYC/AML regulations. Before you can use your debit card to purchase anything, you will need to verify your identity. It is a pretty straightforward process, you can click here to follow the instructions.
How to Start Trading
Alright! Let’s get started.
You have now signed up and then set up your account. How exactly are you going to go about trading now?
In Coinbase you can buy the following coins:
You can watch the video here and follow whatever he does to purchase your first bitcoin.
Trading Cryptocurrency via Atomic Swaps
Atomic swap is a peer-to-peer exchange of cryptocurrencies from one party to another, without going through a third-party service like a crypto exchange. During this entire process, the users have full control and ownership of their private keys.
On September 20, 2017, Decred and Litecoin did the first known successful implementation of the atomic swap.
Here are some things to note about atomic swaps:
* They can either be directly executed between separate blockchains with different native coins
* Or, they can also be executed via off-chain channels that are offshoots of the main blockchain.
How Do They Work?
To give a very simplistic explanation. Two parties who are going to engage in atomic swaps decide on a shared secret. The two parties will share their cryptos if and only if their secrets match. So, this way, if somebody else barges into this exchange, they won’t be able to get their hands on any of the coins because they will not know this secret. By doing this,
In order to execute this, something known as Hashed Timelock Contracts or HTLC is used. If you are familiar with the lightning network then you should know how hashed timelock contracts work. If you are not aware then read up our guide on lightning networks.
Protecting your Cryptocurrency
In order to protect your cryptocurrency, you must have a wallet. The wallet saves your private key and public address which helps you store, send, and receive cryptocurrencies. Even though this should be very clear to you, let’s a do a quick run through of what private key and public address means:
Private Key: The private key gives you the right to access and send your money.
Public Address: This is the address where everyone will send you money.
One key thing to remember before we continue, the public address is the one that you will give to others in order to send your money.
DO NOT and we repeat DO NOT give out your private key. The private key is for you and you alone. If you give out your private key to strangers, then they will gain access to your money.
Let’s hope we have made that sufficiently clear.
Public Address Give out to everyone Private Key If you give it out to everyone then you’re screwed Alright, let’s move on.
All crypto wallets fall into the following two categories:
* Hot Storage.
* Cold Storage.
Hot Storage Vs Cold Storage
Before we go deep into them, let’s use an analogy to help understand the difference between the two. The hot wallet is like the wallet you carry around in your pocket. It gives you easy access to your cash but, it is pretty vulnerable.
The cold storage, on the other hand, is like your savings account. Highly impractical for day-to-day use BUT it is extremely safe when you compare the two.
Hot Storage
A wallet that is connected to the internet is termed as “hot storage.” The following are examples of hot wallets:
* Exchange wallets.
* Desktop and mobile wallets.
* Multi-Signature wallets
Before we get deep into each of those wallets, let’s go through the pros and cons of hot wallets.
Pros of Hot Wallets
* Gives you quick, easy, and instant access to your funds.
* Gets easy support in different devices.
* Very user-friendly and ideal for beginners.
Cons of Hot Wallets
* Vulnerable to hacks and cybercrime.
* Unless the keys have been carefully backed up, if the device is damaged then the wallet will be damaged as well.
* The device in which your hot wallet is saved like your laptop, phone etc. is susceptible to physical robbery as well.
So, now that you have a general idea of what a hot wallet is, let’s go through some of the more popular types of hot wallets.
Hot Wallet: Exchange Wallets
This is the easiest wallet that you will ever create. In fact, if you have been following our instructions and have created your Coinbase account then guess what? You have created your exchange wallet already!
The advantages are obvious. It is already linked to your account and gives you quick and easy access for trading. HOWEVER, this also means that you are vulnerable to attacks. Remember, exchanges are a constant target for hackers. We would recommend that you don’t keep a major chunk of your cryptos in exchange wallets, keep only as much as you need for trading.
Hot Wallet: Desktop and Mobile Wallets
Desktop and mobile wallets have grown in popularity. Desktop wallets offer more security than exchange wallets. Setting them up is very simple as well. All that you need to do is to download the client in your laptop/desktop and you are done! MultiBit provides an excellent desktop wallet to store Bitcoins.
This video will show you how to create your own Multibit wallet.
However, there is a problem with desktop wallets. They are not the most flexible of options. After all, you can’t access your desktop wallets from any other desktop apart from the one that you have downloaded it in.
This is why, for more users who want flexibility, mobile wallets are a pretty convenient option. Setting up is as simple as downloading an app into your phone. MyCelium is a pretty popular mobile wallet for both Android and iOS.
This video will show you how to set up a Mycelium wallet in your phone.
The problem with both these wallets are that since they are stored in a device which is connected to the internet, they are vulnerable to viruses and hacks.
Hot Wallet: Multisignature Wallets
Have you ever seen one of those old school safes which require multiple keys to open? Or what about those treasure chests which needs 3 or 4 people to put in their keys and unlock at the same time?
That will give you an idea of how Multisignature wallets or multisig wallets work. Most of the ICOs use multi-sig wallets to collect and store their funds. So, why would one want to use multi-sig wallets?
* To protect from corruption: We have all heard stories of ICOs getting millions of dollars in their crowd sale. What is to stop all these developers from taking the money and run away? Human greed is powerful after all. In situations lik