Anyone who’s purchased crypto before has performed a very simple cryptocurrency trade. But that’s barely scratching the surface of the market and the amount of options out there. In this guide, we’ll talk about how to make your first crypto trade and touch on some of the more advanced aspects of the process.
Choosing an Exchange
The first trade almost everyone makes is fiat-to-crypto trade. We bet you’ve read tons of articles on how to make money on Bitcoin and now are ready to embark on a crypto quest. So, below are things you must know to ensure your quest is a success.
First things first, you need to find a cryptocurrency exchange that you can trust your funds to. Among the most reputable and time-tested are Poloniex, Bittrex, and Coinbase. If you find it difficult to pick an exchange on your own, rely on Changevisor that will help you make a wise decision. In essence, exchanges serve as on-ramps for users into the cryptocurrency space. Depending on location and jurisdiction, exchanges sell cryptocurrency for a variety of fiat currencies. Make sure to do your research into the most reputable exchanges available in your area. Some things you should keep in mind are the exchanges’ reputation, their fee structures, and security. The exchange you select must be transparent about the any fees it will take from your transactions. You also want to make sure your exchange will keep your funds secure and intact. It would be a wise decision to pick the digital currency exchanges that offer two-factor authentication. In other words, make sure it’s not just your password that protects you from losing your hard-earned coins.
Furthermore, note that all trustworthy and reliable exchanges are required to verify your identity and perform various know your customer and anti-money launder checks. So, be aware that you may have to send your exchange documents proving your identity.
Once you’re on the platform, and they’ve accepted your funding, you can make your trade for whatever digital cryptocurrency your exchange offers.
Behind the scenes, the exchange will create a wallet for you where your funds are stored. It’s up to you if you want to keep trusting the exchange with those funds or move them elsewhere. We won’t go into depth on all the different wallet types here. But what you should know right off the tops is the difference between the hot wallet and cold storage. Go check out the following section for more info.
Hot Wallet Versus Cold Storage
A hot wallet is like the wallet you carry around with you every day. It isn’t particularly safe, but it’s quite convenient and gives you easy access to your money.
Cold storage, or offline wallet, is more like a deposit account. Though the money isn’t with you all the time, you can store it securely. That being said, if you’re planning on trading on a day-to-day basis, you may find it impractical to store all your money in the offline wallet.
The example of a hot wallet is your digital currency exchange. It’s a software wallet you can access after inputting the right password. Since it’s an online wallet, this makes it vulnerable to fraudulent activity and cyber attacks. But at the same time, this type of crypto storage allows you to reach your funds faster and easier.
Cold storage wallet represents a piece of hardware that’s separate from your computer. While your wallet is offline, you have nothing to worry about, since your coins are totally safe from cyber criminals. So, you need to decide whether you’ll be using your digital money frequently or locking it away. Then you’ll be able to pick the hot or cold crypto storage solutions that will work best for you.
Whatever wallet you choose will provide you with a public key and a private key. The first is the address you’ll be using to get your money. When you withdraw from the exchange and they ask for an address, you’ll need to provide your public key. You’re free to share and use it however you like, which is definitely not the case with a private key. Do not reveal or share your private key under any circumstances. If it’s leaked or discovered, a third party user may access your funds and dispose of them without your permission. So, take care to store it in a safe place and never share it with anyone.
Crypto to Crypto Trades
Once you decide on the storage method for your digital currency, you’re set up to engage with crypto to crypto trades, which are very similar to their fiat to crypto counterparts. That being said, the crypto-to-crypto trade works with the blockchain ecosystem. This means that you would take whatever coin bought with your fiat money, say Zcash, Ethereum, or Bitcoin, and trade it directly for another coin you need more at this time. Once again you should rely on a tried and tested exchange that offers these services.
With the two types of trading we’ve described above and some practice, you’re all set up to purchase and trade for any digital currency you like. Hope you’ll become a successful crypto trader!