You see it everywhere. You hear success stories and you hear misadventures. Crypto trading. Since so many are talking about it, a lot of people are interested in starting to invest in cryptocurrencies, but it is harder than you think.
Before actually starting, you need to know some basics. There are two ways to store your cryptocurrencies. Both have their pros and cons.
Online wallet: This definitely is the easiest way to store your crypto. Using an online wallet, you create a wallet on a website and transfer your fiat currency to the wallet you created on the website. When you have the money in your wallet, you can buy cryptocurrencies with it. The biggest problem with online wallets however is that they are not very safe. The technology behind cryptocurrecies, the blockchain, is immune against hackers, but the online exchanges are not. That’s why most people only use an online wallet for relatively small amounts. There are some tricky details you should know too before you can actually start, those will be discussed later in this article.
Hardware wallet: A hardware wallet is undoubtedly a safer way to store your crypto. Hardware wallets are tangible, and can be bought, mostly online. The cryptocurrencies you own are held in an encrypted Hard Drive. The advantage of it is the fact that your crypto is immune to hackers like this. The only way you can lose your crypto is when the Hard Drive crashes; the crypto that was on a crashed hardware wallet is lost forever.
There are various factors you should consider revising before opting which online or hardware wallet you should use.
To start, there are countless online exchanges you can use. For a list of top 10 exchanges per volume, check https://cryptocoincharts.info/markets/info. On there, you can see that not all exchanges trade all pairs. If you want to invest in a specific coin, go to www.coinmarketcap.com, search for that coin, and you will find which exchanges trade that coin. However, just choosing the exchange that has the most markets won’t work. There are some more things your should learn about at exchange.
Fees: All exchanges have different fees. You can check the fee of an exchange best by just googling ‘the name of the exchange + fees’.
Safety: Obviously, an exchange with a very small trading volume isn’t trustworthy. Therefore, only consider exchanges in the region of top 30. Does that mean the exchange is safe? No. The biggest crypto exchange hack so far was the Bitfinex-hack in 2016. At that time, Bitfinex was the biggest exchange, just as it is now. So, chosing a renowned exchange reduces the chances of being hacked, but it doesn’t exclude it.
As you can see on https://coinmarketcap.com/currencies/volume/24-hour/, there are various pairs. Sometimes you have to buy a certain coin with another cryptocurrency (mostly bitcoin or ethereum), sometimes with a fiat currency, and sometimes with ‘USDT’. What is ‘USDT’? It’s the abbreviation of Tether, a cryptocurrency that is artificially held the same price as US Dollar. You can see Thether’s chart on https://coinmarketcap.com/currencies/tether/ . Some exchanges use Tether instead of US Dollar for judicial and practical reasons. In general, if an exchange uses tether, you can not actually buy the crypto on that exchange. You have to buy litecoins (this coin has lowest fees) on an exchange where you can buy it with your fiat currency, and then transfer those litecoins to the exchange.
Below is a list of exchanges and their characteristics:
Coinbase: You can buy Bitcoin, Bitcoin cash, Litecoin and Ethereum with fiat.
GDAX: This is Coinbase’s trading platform. You can trade Bitcoin, Bitcoin cash, Litecoin and Ethereum with no/very small fees.
Bitfinex: You can buy almost all coins with US Dollar, and all coins with bitcoin.
Kraken: You can buy a lot of coins with fiat.
Bittrex: You can buy basically all coins with bitcoin, and a lot with tether.
Binance: You can buy basically all coins with bitcoin, most with tether or ‘binance coin’.
OKEx: You can buy basically all coins with tether or bitcoin.
HitBTC: You can buy all coins with tether or bitcoin.
Note: Sometimes you see EOS/USD or EOS/BTC for example. If you look at the charts, they look completely different. However, there is no difference since the exchange automatically calculates the different amounts you should get. Some exchanges don’t have USD or even USDT markets, but for the trade, it doesn’t matter whether you use Dollars or Bitcoins to buy a specific altcoin.
The other way to store your valuable coins is using a hardware wallet (also called ‘cold’ wallet). As we speak, the only place to buy a hardware wallet is online, paradoxically. The most used hardware wallet is the Ledger nano S.
How to use the Ledger nano S:
Just put it in your computer, it usually has an usb connection. The ledger nano S has two buttons on top, and you control it using those two buttons.
At first, you’ll be asked to create a pin code. How this is done basically speaks for itself: you can go up and down with the buttons and confirm it by pressing both buttons simultaneously. Always remember the code, because you need to fill in the code every time you log in on your Ledger nano S.
The most important thing about the Ledger nano S however is the so-called recovery sheet. This is just a piece of paper with the digits 1-20 on it. After you’ve confirmed your code, you will see 20 words appear on the screen. Write every word down on the recovery sheet. This is the only way to recover your funds after you’ve forgotten your code or lost the device, so never show anyone. Besides, it is extremely important you only have the 20 words on the piece of paper and not on your phone. After confirming you wrote the words down, the device will test some words, and after that you are all set.
After that, go to your browser on your computer and go to www.ledgerwallet.com/apps .
On there, click on ‘Ledger wallet Bitcoin & Altcoins’ and you can download a chrome extension. Like this, you control the device from the chrome extension. To trade more coins, click on ‘Ledger Manager’ and select the wallets you want to download. You only need to be online to send coins; you don’t need to be online to receive coins.
The ledger nano S is priced at estimately $100.
For a video of an expert installing his ledger nano S wallet, click the link below.
Since the hardware wallet costs around $100, it’s not worth it to buy one when you don’t have invested that much money in cryptocurrencies, obviously. However, someone who doesn’t want to risk anything should use a hardware wallet. Since some exchanges temporarily don’t accept new wallets, you might find trouble finding the right exchange. However, the probability of your funds being stolen in a hack is just as small in any renowned exchange, as said before.
The Growing Investor