The Total Beginner’s Guide to Cryptocurrency Trading (Bitcoin, Ether and More)

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As traders, our job is to take advantage of opportunities in the markets. Sometimes, these opportunities come in the form of entirely new markets.

I've been interested in cryptocurrencies for a few years now, but I've been very reluctant to trade them, much less write about trading them. I felt that there was just too much risk.

Especially for the average trader.

…and quite frankly, I didn't understand them well enough myself.

The first time that I saw them as viable for trading was when I went to this conference. I saw Chris Dunn talk about trading Bitcoin, but I was still skeptical that it would stay around for the long-term.

…until recently.

I credit my friend for talking to me about it on Twitter and opening my eyes to the potential in trading this emerging market. I'm not sure if he wants to be named, but you know who you are. I sincerely appreciate the education and helping me see the light!

This is a perfect example of the benefit of staying in touch with other traders on platforms like Twitter.

Anyway, as I have done more research and have actually started trading them, I have found that there are tremendous opportunties. With some coins, it's potentially like being able to get pre-IPO shares of Microsoft.

But there are also big risks.

Remember, the dot-com bust?

There will probably be losses of that magnitude too. That's just how these new technologies work.

So in this post, I want to share with you my knowledge of the cryptocurrency markets and give you a total beginner's guide to trading them. Be sure to bookmark this page because I'll continually update the information, as things change.

For you crypto veterans, this will be very simplified, but my goal is to make this information as easy to understand as possible so new traders can make an informed decision about the opportunities. Once people get the general concepts, then they can geek out about the details.

This is the future of FX trading. So in addition to USD/CHF, CAD/JPY and EUR/GBP, we also need to be aware of XLM/USD, ETH/BTC and XRP/LTC…

[toc]

What is a Cryptocurrency?

Let's start at the beginning.

You may have heard many things about what a cryptocurrency is, but you may still be searching for an understandable definition. I hear ya, I was in the same boat for a long time.

Instead of getting too technical, here's the easiest way to think about cryptocurrencies:

A cryptocurrency is basically money on software platforms.

It's important to keep in mind that the teams/companies that are behind these cryptocurrencies are not only creating a new form of currency, but a new software platform. To demonstrate how this works, let's take a look at other software platforms that you are probably already familiar with.

Examining how these platforms work will help you understand cryptocurrencies. 

Here are a few software platforms that many people use:

  • Windows: A software platform for personal computers
  • Dropbox: A software platform for storing and sharing documents
  • Fedwire: A software platform that sends money between financial institutions

On each of these platforms, a type of money is used, in exchange for using the platform:

  • Windows: You pay US Dollars (or your local fiat currency) to buy a license for Windows to use on your computer. If you buy a computer that already has Windows on it, the license fee is included in the purchase price.
  • Dropbox: You pay US Dollars (or your local fiat currency) to buy a subscription to use the software for a month or a year, depending on which plan you buy.
  • Fedwire: You pay a transaction fee to use the system and you send fiat currency itself.

Each of these systems also have a database connected to it:

  • Windows: Database is stored on your local computer
  • Dropbox: Database is stored on the Dropbox servers
  • Fedwire: Database is stored on the Fedwire servers

Cryptocurrencies essentially replace the US Dollars (or your local fiat currency) that you use to purchase these software services. The “database” that cryptocurrencies give you access to is based on blockchain technology. 

More on blockchain technology in the next section of this guide.

But wait, what are the software services that you are getting? Isn't a cryptocurrency like Bitcoin just a currency, like US Dollars?

Not quite.

The goal of cryptocurrencies is usually to improve on some type of existing software system or network. When you send money via PayPal, Fedwire or Western Union, you are basically sending fiat money electronically, similar to Bitcoin.

However, that's where the similarity ends.

Platforms like PayPal have severe limitations on what you can and cannot do. For example, you cannot send/receive money from certain countries (like Nigeria).

Cryptocurrencies like Bitcoin want to make financial transactions more open and accessible to everyone around the world.

Other cryptocurrencies solve other problems, which we will explore later in this guide.

Is Cryptocurrency Real Money?

Yes.

Since this is a new concept to most people, it will take some time to become widely accepted. This is where Bitcoin has been instrumental in paving the way for this new technology.

Websites like Newegg take Bitcoin, along with the other traditional payment methods. Here's what the checkout screen looked like after I added a drone to my cart.

Newegg transaction

Risks of Cryptocurrency Trading/Investing

Now that you understand the basics, what are the risks of trading these cryptocurrencies? There are quite a few, but here are the top three.

1. Some Technologies Will Fail

Remember that cryptocurrencies are basically software, created by people or companies. So just like Webvan or Pets.com in the dot-com bust, some of these technologies will fail.

…and they will fail spectacularly.

Right now, there is a lot of buzz around certain cryptocurrencies increasing several thousand percent, in a few months. This has a lot to do with ignorance and hype.

Just like when people found out that this new thing called the “internet” would change the world of business.

Did it change the world?

Of course.

But was there a lot of dumb money that overhyped the first wave of internet companies?

Totally.

So just remember, trading cryptocurrencies is kind of like trading a software stock. Some of the software will change the world.

Others will explode in a giant ball of fire.

There are also a lot of scam coins out there, so be careful. Like penny stocks that are just a company on paper, almost anyone can create a new cryptocurrency.

Learn how to separate the scams from the deeply underpriced currencies. Then use proper risk management and play the odds.

2. It Requires Technical Savvy

Computer

Let's face it, cryptocurrencies were created by super nerds. Like with Linux, there is still quite a bit of technical know-how that is required.

You don't need to know how to code, but if you are “not good with computers” you may want to stay away from cryptocurrency trading, at least until they start building more user friendly interfaces.

Don't get me wrong, I'm not calling anyone dumb. I'm just saying that if you don't possess a certain skillset, then you shouldn't get involved in that area. This could cause you to lose a lot of money, very quickly.

For example, I don't know how to sew, so I don't make my own clothes. If I did try to make my own clothes, everyone who meets me would think I'm a weirdo for wearing fucked up pants.

You get the picture.

So if you aren't so tech savvy, but still want to get involved, find someone you trust to trade for you.

3. There's a Lot of Broker and Technology Risk

Since this is emerging technology, there are still a lot of unknowns with trading at scale and how brokers and the software will react to certain surprise events. If you think that Forex brokers are risky, then you should consider cryptocurrency brokers at least twice as risky.

Not just because they could be shady, but there a still so many unknowns with the technology.

However, I would still trust the bigger cryptocurrency exchanges over a lot of offshore binary options brokers 🙂

So the lesson is: Don't keep too much of your coinage at the exchanges.

Move them off to your own wallet as soon as possible.

I'll get to wallets later in this guide.

What is a Blockchain?

Server room

Simply put, a blockchain is a database.

However, there is one huge difference between how you probably currently think of a database and how a blockchain database works.

In most cases, a traditional database sits on one computer or in one location.

Even if a company has redundant servers around the world, the data might only be backed up between 3 to 5 locations. On top of that, these companies collectively spend billions of dollars a year on cyber security, to protect this data.

With a blockchain database, the data can be backed up on potentially thousands of computers all over the world, for a much, much lower cost. The information in these databases is heavily encrypted and sometimes files are broken up into pieces, so even if one piece is exposed, it will not expose the entire file.

If the information on one server does become compromised by hackers, the other copies of the databases have to “agree” that the compromised data was a legitimate change to the data. If the other copies do not agree, then the change is rejected and it is changed back to match the others.

Obviously, this is an oversimplified explanation of the technology, but I hope that you are starting to see the benefits.

Instead of just one point of failure, like on a single server, you now have multiple copies of the same database all over the world that is almost impossible to crack and will “fix” itself in the case of a hack. This can also save a ton of money on cyber security software and services.

Example

Let's say that a hacker gets into your bank's computer tomorrow and transfers all of your money to his account, then deletes any trace of the transaction. With today's technology, you would probably be screwed.

But with a blockchain currency like Bitcoin, if one server was hacked and a fake transaction was inserted into the database, then it wouldn't match the transaction record on the hundreds other copies of the database. This transaction would be seen as a fake and rejected.

Your money would be safe. 

This is one of the many reasons why blockchain technology is so exciting.

The Characteristics of a Currency to be Aware of

Although cryptocurrencies are all based on blockchain technology, they are not all created equal. Here are some differences that you need to understand to make informed trading decisions:

  • Transaction processing speed
  • Total supply currently available
  • Will there ultimately be a limit on the total number of currency available?
  • Will there be an unlimited supply of currency?
  • Is there a real-world need for this software/currency?
  • Real world adoption of the technology
  • Any big investors in the project?
  • Does the use of the software make sense?
  • Do the founders have a reputable background?

These are just a few of the characteristics that you should look at. But once you start digging into these details, you will begin to see which projects could work for their intended purpose and which ones are probably scams.

This understanding will also allow you to assess the long-term viability of these different currencies and which ones will be more desirable in the future.

Example

Tether

Tether is a cryptocurrency that wants to be the proxy for fiat currencies. So there is a Tether USD version, EUR version, etc. But each one is pegged to the value of the currency, so you can never make any money trading it.

It is purely to provide stable and liquid transactions. So one USD Tether will always be worth about $1.

If you didn't know this and bought a bunch of it, thinking that it's cheap compared to Bitcoin, you will tie up your money in an asset that will never appreciate. Sure, you won't lose money either, but you would have lost out on other opportunties.

So understand the nuances of each crypto, it's very important.

What are the Different Cryptocurrency Use Cases?

Almost every currency software has a different intended purpose and individual implementation, with inherent strengths and weaknesses.

It's like Windows vs Mac.

…or iOS vs Android.

Here are a few examples of the different types of cryptocurrencies and what they are designed to do. This is not an exhaustive list, just a sample.

Note: I don't necessarily support these currencies, I'm just using them as examples of the different use case niches within cryptocurrencies. 

Worldwide Financial Transactions

Application Platforms

Private Financial Transactions

Specialty Currencies

Take a look at these different use cases and figure out which ones make the most sense to you. Then understand how each software implementation works and think about what will probably do well in the future.

To see our extensive list of cryptocurrency sectors, read this post.

How do You Buy Cryptocurrencies?

First have to go to an exchange or service that will allow you to purchase cryptocurrencies. Some of the bigger exchanges are:

Many of them will allow you to use a credit card or link a bank account. As much as possible, do not store your cryptocurrency at the exchanges because they can be hacked. See the cold storage section in this post for details on how to store you coins safely.

It's easy to get Bitcoin, Ether and Litecoin. But if you want the smaller altcoins, you will have to do an exchange.

How to Buy Altcoins

First buy Bitcoin or Ethereum because those are the coins that are most easily transacted against the smaller altcoins. When in doubt, buy Bitcoin. If you want $10 of Bitcoin for free, use this link (while supples last).

Then find out where the altcoin that you want is traded. Go to Coinmarketcap and click on the coin you want to buy.

Next, click on the Markets tab for that coin. For example, here's where you can get NEM. The Source column will show you the exchanges where this coin is being traded.

Notice how most of them are traded against Bitcoin or Ether. 

NEM cryptocurrency markets

Open an account at the most reputable exchange on the list. Once you are in your account, find the “deposit” wallet address for the altcoin you want to buy.

Here's an example from Poloniex. Copy this wallet address.

Deposit address

Next, login to the account where you bought your Bitcoin or Ether. If you bought it from Coinbase, then you can go to: Accounts > Send and paste the deposit address into that field.

Coin send

Enter the amount you want to send, then click the send button.

It may take some time for the transaction to go through, so be patient.

When you see the balance in your destination exchange account, you are now ready to buy altcoins. Here's what it would look like when you have a Litecoin balance at Poloniex. This can be found in Balances > Deposits and Withdrawals in Poloniex.

Litecoin deposit

Now go to the Exchange area of the website. In Poloniex, it would look like this:

Exchange tab

Then click on the BTC tab. These are the currencies that you can exchange for Bitcoin. Click on the altcoin that you want to trade. Here's and example from Civic (CVC).

Civic on Poloniex

Next, scroll down and look for the buy/sell box. Enter the amount of altcoin that you want to buy. If you want to trade all of your Bitcoin, click on the link at the top with your total balance.

How to buy Civic cryptocurrency

Click the Buy button and you are all set. The trade might not happen right away, so check your Orders > My Open Orders page to see the status.

The exact process will be different at different exchanges, but the basic idea is the same for all exchange.

How do You Store Cryptocurrencies?

With fiat currency like US Dollars, you can store them at the bank or in your wallet. It's pretty straightforward.

But with digital currencies, there are a few wrinkles that you need to get your head around, but the idea is similar. Let's take a look at how cryptocurrency storage works.

You store your cryptocurrencies on the blockchain in a “wallet.” This is simply an address on the blockchain. It's like how the website address tradingheroes.com directs you to my website, on the internet.

Each wallet has a public address and a private address. The public address is the address that people send funds to. The private address is the “password” that you use to access and send your funds.

Never expose your private key until you are ready to spend your funds, otherwise you will probably lose all the money in your wallet.

Here's an example from a Bitcoin paper wallet:

Bitcoin paper wallet
Image: bitcoinpaperwallet.com

Now that you understand the basics of cryptocurrency wallets, let's look at the different wallet options out there. Here are the different ways that you can store your loot:

  • Online wallet: This is probably the easiest way to store your money. But it is also the least secure. So it's not a good long term storage solution, but it is fine for buying things and funding your trading accounts. Exchanges like Coinbase also have their own wallets built in.
  • Mobile wallet: You can download a mobile app like Mycelium to store your spending money. It is more secure than an online wallet, but if your phone ever breaks or it gets hacked, everything in your wallet will be gone.
  • Desktop wallet: Similar to a mobile app but just for desktop computers.
  • Hardware device wallet: These are hardware devices that are built especially for storing cryptocurrency keys. They are safer than the options above, but they are still susceptible to the things that can damage all electronic devices.
  • Paper wallet: You can also store your private key on paper, like in the picture above. This is the most hacker proof, but it is also the least convenient. If you are going to go this route, be sure to store them in a safe place (like a safety deposit box) and don't actually use paper. Use something like this to make sure that your money isn't lost to something as simple as a spilled beer.

 

Cryptocurrency Tracking Apps

Before I wrap it up, you will probably need an app to track cryptocurrency prices on your phone. So here are a couple of apps that might work for you.

  • Blockfolio: A simple app that allows you to add a watchlist and add trades so you can track your portfolio, ala stock trading apps. The most useful thing about this app is that it displays all currencies on your watchlist in the currency of your choice. Some apps insist on displaying the value in Bitcoin, which is annoying.
  • Coincap: This app allows you to display currencies by market capitalization, volume and other ranking factors. They also have cool charts. Very useful for seeing what is being actively traded. Also displays prices in your currency of choice.

These apps are not for storing or trading currency. They are just to check the markets.

What Can Affect the Price of a Cryptocurrency?

There are many things that can affect the price of a cryptocurrency…sometimes very quickly.

Here is what you need to be aware of when you trade cryptocurrencies.

Of course, there is no guarantee that these things will move the market. But based on what we have seen so far,

Exchange Listing

This is a big one.

When Coinbase added Litecoin to their already limited list of cryptocurrencies that can be bought, they made it easily accessible to the average person.

Their interface is the best I've seen so far. It makes it so easy for the non-technical person to buy Litecoin.

Soon after the Coinbase launch (marked with the arrow, in the chart below), the price of Litecoin started to skyrocket and it has never looked back.

Coinbase Litecoin launch

Now, you might be thinking that this could simply be a coincidence.

…and it could.

But it is very, very likely that exposing Litecoin to Coinbase's user base helped boost the price.

So when a large exchange announces that they will start listing a cryptocurrency that you are trading, take notice.

Watch exchanges like Coinbase, Bitfinex, Poloniex or CEX.

It could give it the boost you have been looking for.

Software Upgrades

Over the past few years, there has been a lot of discussion in the Bitcoin community about upgrading the core software functions of Bitcoin. The primary discussion has been around the transaction speed of Bitcoin.

If you have ever funded your trading account with Bitcoin or tried to buy anything with Bitcoin, you will understand what I mean. For a digital currency, the transaction time is a little slow.

It can take about 30 minutes or more, to do a single transaction.

Upgrading this speed has been hotly debated and finally led to the creation of Bitcoin Cash. After the split of Bitcoin Cash, Bitcoin has taken off to new highs.

Bitcoin split - Bitcoin Cash

There will be countless other software changes across all cryptocurrencies, so make sure that you understand the implications of those changes. 

Public Hype

Just like fake tweets can affect the price of a stock, any type of hype can affect the value of a cryptocurrency.

Good or bad.

So before you dismiss something as just hype, remember that hype moves markets too. But if you do trade hype, be sure to close your trade out long before the hype has a chance to cool off.

Otherwise, it could be a very expensive lesson. 

Wallet Improvements

Since you are reading this post, you probably want to start actively trading cryptocurrencies. But there are many other people who are investors and want to buy and hold for the next few years.

This is where storage becomes an important part of the cryptocurrency valuation equation.

Unlike traditional fiat currency that can be stored in a bank, your trading account, or your mattress at home, cryptocurrencies need to have a compatible wallet (or cold storage solution) to be stored safely.

Remember that cryptocurrency is simply software. So the wallet software needs to be able to work with the cryptocurrency software.

It's like trying to use the Windows version of Microsoft Office on a Mac.

That simply won't work.

Therefore, if a cryptocurrency doesn't have a good wallet yet, that will prevent less technical investors from buying the currency.

But as soon as one is available, then it makes the currency much more accessible to the masses.

…and thus, more valuable.

If you find that a cryptocurrency does not have a good wallet solution yet, that could be one signal that it is undervalued.

Looking for opportunities to buy, immediately after the launch of the first high-quality wallet, could give you a nice short-term profit.  

Platform Applications

Some cryptocurrency platforms, like Ethereum, host other applications. These applications, in turn, can have their own currencies or tokens.

If one of these DApps or Decentralized Apps does very well, this can have a positive effect on the underlying platform currency.

The value of the tokens should theoretically be independent of the value of the platform.

However, not everyone understands this and the success of one DApp can drive the price of Ether…at least in the short term.

So if you are trading a platform cryptocurrency, watch promising apps on the platform closely. 

Government Regulation

Finally, government regulation can have a huge effect on the value of a cryptocurrency.

One example is in Venezuela, where the police have been arresting Bitcoin miners on made-up charges. This has forced miners to go underground or start mining Ether instead.

But this could happen in any country. Any decision by the NFA or SEC could affect the value of certain cryptocurrencies. The SEC has already banned certain Initial Coin Offerings (ICOs), due to the potential pump and dump situation that could happen with those coins.

Be aware of current trends in government regulation and steer clear of currencies that could get red flagged by government agencies. 

Conclusion

So that is the Trading Heroes Beginner's Guide to Trading Cryptocurrencies. I hope that it answered any questions that you may have had about trading currencies like Bitcoin or Ether.

There will be more detailed posts on specific currencies and how to do some of the things mentioned above.

If you have any more questions or comments, leave them below.

Happy Trading!

 

 

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156 thoughts on “The Total Beginner’s Guide to Cryptocurrency Trading (Bitcoin, Ether and More)”

  1. Great article, Very detailed. This article helped me a lot in Forex trading specially for me cause I’m just starting out as a Forex trader. I am excited to see your next post my friend. By the way, is there a chance that you can do an article about Forex signals, I’ve searched online and been trying FX Leaders, it is promising because the features but I definitely would like to hear your thoughts about it.

  2. Great content, In my opinion, the next surge will see bitcoin climbing into $6k as long as it continues treating $5,100 as a strong level of support having been able to firmly establish its position in the lower $5k region however, Bitcoin continues to hover underneath $5k resistance. It wasn’t all that long ago we were talking about $9k support, then $8k and $7k, $6k, $5k and 4k followed not long after. Now $5k turned from a floor into a ceiling putting a devastating dent in the bull case with possibility of further room to fall.. What this simply spells boldly is, there is no time as perfect as now than to invest in bitcoin and trading to create and increase one’s portfolio. The challenge would be to find a system that not only guides you but also provide the right tools and skill set to help you realize a set financial target.

  4. hi Hugh! just wanted to say thank you.

    I’ve been doing a lot of my own research and it was your article that gave me a solid foundation to get started with crypto. it’s bookmarked for easy referencing (: I also signed up for coinbase using your referral and just got the $10 after making my deposits so thank you for that too!

    warmest regards.

  5. Hi Hugh,

    This was really awesome,am so grateful for the write-up,in fact you made my understanding of it so easy,but i still got to learn more,and will be glad if you u can assist? You know it’s risky without knowledge dealing in cryptos.

    Question; I took my time to read through the comment and reply messages on The platform.But then what is bitcoin mining and how is it done?
    And also would want to know,is the block chain wallet the same as bitcoin wallet?
    Thanks for answering my questions in advance.

    • Hi Dornyo,

      Thanks for stopping by and I’m glad that the post was useful.

      Mining…it will take me more than a comment to explain that one. I understand how it works, but I haven’t worked out how to explain it yet. More to come in a future blog post.

      The Blockchain wallet is a type of Bitcoin wallet. If you want to store Bitcoin, something like a Ledger Nano S is usually your most secure option.

      Hope that helps.

  6. Hey Hugh,
    great article! Really helpful overview for newcomers like myself.
    I have a question concerning Coinigy: There is a lot of fraud and basically no customer support on popular exchanges like Binance and Bitfinex. Can you avoid that by using Coinigy or is it merely a User Interface which makes use of the other exchanges and you are still in danger of the same threats?
    Thanks in advance! 🙂

  9. Hello

    Congrats!Great article.Can I please ask you if you can give permission to post this article on my facebook page.Of course all credits goes to you.Thanks

  11. Hi Hugh,

    What is the best site to see live up to date cryptocurrency graph charts to see if its a good time to buy a crypto and its chance of increasing ?

  12. Hi Hugh, another simple question from a beginner. I am currently using Coinify, Blockchain Wallet, and binance websites. However, on all of these websites, there doesn’t seem to be anywhere which gives you a ‘current’ value of your coin. It tells me how many coins I purchased and at what price but not the current value. Is this correct? I have traded in shares before and am used to having the current value of my holdings shown in relation to current price?
    Thanks again,
    James

    • Hi James,

      Yeah, a lot of these crypto guys are tech nerds, not finance guys. So the way that they setup their platforms are really weird. They also insist on quoting everything against BTC and not GBP or USD, which is super confusing. Binance has the current value for each coin position quoted in BTC, in the deposits area. If you want to see the current value of each coin, you can use something like TradingView, which does the conversion to USD on their server. Not too sure about GBP.

      • Thanks Hugh, that makes sense, albeit a bit confusing. I’m still struggling to find the value of my coins when I purchased them? Do you know where I can find it?

        I think the only way to track your coin values is to manually input your transactions in to Tradingview (or Coincap which I have started using) as soon as you purchase. However I didn’t do this originally so I have no idea what I paid for the coins. I purchased with ETH which price obviously fluctuates also…..

        Thanks again!

  13. I swear to god that this is THE best article ever read on techonolgy or maybe anything actually…
    THANK YOU HUGH!

    question:
    let’s say I have 6 different alts.
    how do I choose a good and safe wallet for each one?
    are there some rules for it or whatever..?

    • Thanks Lior, I’m happy it helped!

      Good question. Generally speaking, if you can store your cryptocurrency on a hardware wallet like a Ledger Nano S or Trezor, that is the safest. Check their lists for the coins they support. Some people like paper wallets and that is an option too. Those are the safest options.

      However, some cryptocurrencies aren’t integrated into the hardware wallets yet, so you will have to find another way. Generally, your first option should be the official wallet of the coin. Next, you can research desktop wallets that hold several different coins.

      I would stay away from online wallets or keeping your money at the exchanges, if at all possible.

  14. Hugh. Brilliantly explaining for a newbie. Had major back surgery and hopefully learning to earn a small living trading cryptocurrency.
    Singed up to Coinigy to manage my small portfolio, but hitting a brick wall, can you assist? Ive added Cryptopia exchange and the coins held show as balances, but follow the same process with Binance and nothing……. HELPPPPP

    • Hi Samantha,

      Thanks. Binance can take awhile to get coins transferred over. It took 2 days for me to get LTC there. I use Binance as little as possible. Their support is useless too, but if you don’t have it in a couple of days, then contact them.

  15. Hi Hugh,

    Great simple article! I am just beginning to learning the ropes. Please can you explain the difference between Bitcoin and Ethereum? What is an Application Platform? And can I use Ethereum to buy Alt Coins?

    Thanks,
    James

    • Hi James,

      Thanks!

      Bitcoin vs Ethereum…

      Bitcoin is meant to be a store of monetary value, like physical gold. Ethereum is a network, like the internet. You can create applications on Ethereum, just like websites on the internet. You use Ether to pay for those services. That is why it’s called an application platform. Play around with the Cryptokitties website and you will start to understand how it works.

      Yes, you can buy altcoins with Ethereum. It just depends on the exchange you are using.

    • A coin that already has its maximum supply available for use cannot be mined. For example once Bitcoin hits 21 million coins, it will no longer be mineable because that is the maximum number of coins that can ever be produced. There are different reasons for doing it one way or the other and is up to the founders/team.

      If a cryptocurrency “pre-mines” or makes its maximum supply available from day one, you have to ask yourself if there is a legitimate reason for it or if it’s just a case of the founders trying to make a ton of money quickly. If a project has chosen to pre-mine their coins, most legitimate projects will put a large portion into escrow so it is released slowly over time and won’t tank the price suddenly.

      Also be aware of how much of the total supply the founders/team holds. If they dump their currency, the price will drop quickly.

  17. Hi Hugh,

    Thanks for the valuable info.

    I am from Malaysia. Seems that Coinbase does not support buying coins in Malaysia whereas Poloniex is unable to handle my request to open an account.

    How then can i buy buy the altcoins?

    Thanks.

  18. Wow! thank you Hugh…i found your article very interesting…i have already started trading with these guild lines.

  20. Hi Hugh! I don’t manage a Twitter account. Is there any other way to connect with you? Thanks a lot! Great writing!

  21. Instead of getting to technical, here’s the easiest way to think about cryptocurrencies:

    Typo to should be TOO

  22. Appreciate the clarity in your article !!!! Which one would you recommend between Desktop wallet and Hardware device wallet ? I am planning on buying undervalued cryptos for as long term investment , whichever i decide to use ,would be solely be used for coins storage.

  24. That’s really good information for beginners. On Public hype section, what did you mean by “be sure to close your trade out long before the hype has a chance to cool off”?

  25. Hugh, How do you transfer bitcoin exchange digital wallet to another cryptocurrency?

    Thank you for your attention. Roger W

    • Hi Roger,

      You would simply execute a trade on the exchange. It depends on which exchange you are using, but it usually goes something like this…

      There is usually an “Exchange” tab on the dashboard. On that page, there will be a list of cryptocurrencies that you can trade for Bitcoin. Click on the one that you want to buy with Bitcoin. Then there will be a box that allows you to choose how much of the altcoin to buy. Select how much you want to buy and click the execute button (or whatever the submit button is called).

      When you look at your holdings, you will now see that you own the altcoin.

      Cheers,
      Hugh

      • Yes ,but one quick question. Will the value of Bitcoin affect the value of the exchanged altcoin.? For example,when i need to buy ripple or Verge to hold long term, i will have to get bitcoin and then use it to purchase the altcoin. Now assuming my altcoin apreciates in value but bitcoin depreciates,would it affect the altcoin i am currently holding? Overall will my investment appreciate or depreciate in Fiat value. Pls help i’m kind relativly new to crptos. Thanks

        • The price of Bitcoin can affect the prices of altcoins. It’s like the prices of the stocks on the Dow Jones Industrial Average or the NASDAQ. Since they are the industry leaders, they can affect the stock prices of all smaller companies.

          This is not always the case of course. But you should keep an eye on Bitcoin, Ethereum and Litecoin for clues as to where the rest of the market is going.

  26. Hi
    Thanks for this write-up. It provides a spring board for begginers.
    Please is still viable to invest in Bitcoin at the current price?

    • Hi,

      You’re welcome, glad it helped. I can’t answer that question, it’s a decision that you will have to make for yourself. Do your research on Bitcoin and figure out if it still has potential to keep going. I’ve never liked Bitcoin as an investment, but given the current price, obviously others see it differently 😉

  27. Hi mate i am a crypto novice, what exchanges allow apply most cryptos at their earliest stage for you to buy? I notice the exchanges i use often dont let you buy them until they are well above what they started at and you miss the opportunity to make the big gains at low prices.

    • Hi Nic,

      Good question…

      The best thing to do is to join whichever media channel is the chosen channel for that currency. For some, it’s Slack, for others it’s Twitter. Several teams are switching to Discord.

      Whatever the case, follow that channel and they will usually let you know where you can buy the coin first. Sometimes it’s through an internal sale or it can also be through a little known exchange.

      You can also ask the developers questions and get the inside scoop before some of that information is widely known.

      Cheers,
      Hugh

    • Hi Frank,

      Things change so quickly so it is important to stay on top of the news. You can setup Google alerts or following one of the big cryptocurrency news sites.

  31. Hi Hugh: Such great information you are providing. Refreshing. My question is: Are there any US-based FX brokers that are offering trading of Bitcoin yet? (USDBTC ?)

    Thanks in advance for your reply and thanks for your passion to provide reliable information.

  32. Hey there great read, you seem to have a good idea on the crypto world, what are some coins that you think might shoot for the moon in the up and coming years 🙂

  33. Hi,

    Thank you for the great info!

    I am worried about what happens if the exchange site goes bankrupt or out of business on which you are trading Crypto? Do you still owe your coins if you have moved them to the wallet? what if you have moved to the exchange wallet? How fast can you move your coins to wallet?

    Keeping your crypto on wallet, does it make your trading slower and painful?

    Last, I am hearing Bitcoin future trading? how it will impact price of Bitcoin and how they can continue doing if Bitcoin has a fixed number of coins. Do you have any information on when Ethereum will start playing on future?

    Sorry for lot of questions, but want to get as much information as I can on first go!

    Cheers

    • Hi Don,

      If the exchange goes out of business, you lose the coins that are stored on the exchange. If you move your coins to a wallet that is not on the exchange, they are not affected by the exchange closing. The speed of moving your coins depends on which coin it is. Bitcoin can take as long as an hour. Others are usually faster.

      When you are trading, you need to keep some of your coins on the exchange, so you have easy access to them. However, you should not keep all your crypto at the exchanges. It’s just like Forex or stock trading…don’t keep all your risk capital with the brokers. But keep enough at the exchange to execute trades.

      Futures trading should increase the price. But nobody knows how much of an increase it will have. I don’t know anything about Ethereum futures trading, but I assume that it isn’t far behind.

      Thanks for stopping by.

      Cheers,
      Hugh

  34. I bought some of the TerraSlate “paper” you linked to, and did a trial print. The ink never dries. Is there a certain type of printer needed.

    sl

  36. Hello, If I put my bitcoin in a paper wallet how do I turn it into cash. I think I have to scan it and send that someplace but not sure where. Do I have to send it to the broker I bought it from, or any broker? Will banks cash me out?

    I sure do appreciate you answering all these questions. I want to be in on this unbelievable rise of bitcoin, but don’t want to make a misstep and lose all my money.

    Thanks a lot

    Mark

    • Hi Mark,

      Totally, best to be safe. OK, so to turn a paper wallet into cash, you have to sweep it to a desktop or mobile wallet. Something like Mycelium or Armory are good options.

      What happens is in the app, you scan the private key barcode from your paper wallet. This transfers the funds from the paper wallet to the digital wallet. From there, you can send it to any Bitcoin wallet you choose. You could send it back to Coinbase, or whatever provider you use, and they can send it back to your bank account in your local fiat currency. To comply with AML laws, you will be have to be a verified user on a platform like Coinbase to cash out your Bitcoins.

      Remember to cash out the entire paper wallet because once you expose your private key anywhere, you should assume that your wallet is compromised. For this reason, do a small test wallet first and only add a small amount of money. Once you are comfortable with the process of moving the coins back and forth, you can start moving higher dollar amounts.

      For any paper wallet however, it is good practice to send a small amount of money first, just to be sure the wallet is working. Then send the rest after you have verified that the first send is in the wallet. Also, don’t keep too much money in each paper wallet.

      Banks probably won’t have this capability for awhile.

      Hope that helps….

      Cheers,
      Hugh

      • Hello Hugh!
        Hats off to you for such a simple but concise account on Cryptocurrency for a starter like me. Thanks a lot.
        I’ve few ambiguities that I wanna ask about.

        “You can send it back to Coinbase or whatever provider you use” what are other providers? Are they exchanges too? Or personnel? Or something like western union etc?

        Does coinbase entertain bank accounts in Pakistan or india, and does it send cash in those banks in the respective local currencies like Rupee?

        “once you expose your private key anywhere, you should assume that your wallet is compromised” That means no matter how much cryptos I’ve in my wallet I’ll have to cash them out? What if I don’t wanna cash all at once? Can I make multiple/paper wallets ? ?

        What if someone prefers paper wallet but they don’t have their own Laser Printer? Isnt it, then risky to have your wallet printed from an internet cafe ?
        Any solution plz?

        I’m sorry for the long list of questions but since I’ve got many of my confusions cleared after reading your article, I believe you can clear the rest of them ?

        Thanks in advance. I really appreciate your attention and time.

        God Bless ?

        • Hi,

          Thanks.

          1. Exchanges where you can turn that cryptocurrency into fiat deposits into your bank account.
          2. I don’t know about Pakistan, you will have to check their website.
          3. Yes, you should make multiple paper wallets or use a hardware wallet like the Ledger Nano S, which hides the private keys.
          4. It’s very, very, very risky to print from an internet cafe. You need to find your own laser printer, period.

          Hope that helps 🙂

  38. Hi Hugh,

    I have a Gemini account that is tied to a back account I opened exclusively for that purpose. Do I need a wallet to keep my bitcoin in?

    • Hi Mark,

      Yes, as a best practice, you should keep it in a wallet that you control. The safest things are a hardware wallet or paper wallet. Never keep your Bitcoin in an online account or at an exchange, unless you are actively trading it. If you are actively trading, then keep the minimum amount online as possible.

      Cheers,
      Hugh

  39. Does these mean someone who is not computer literate and or owe a cpmputer cannot go into these trade?
    As a first timer, can your company advice and guide me into genuine and cheap crytocurrency l can invest on?

  41. Sure, i have read and understood, your concepts regarding Crypto Currencies, i was also a litle nervous about them whevere friends could talk about it and trade on them

  42. One of the problems I encountered why trading was how fast the market changes due to news in the crypto space, I use the following site to track news for specific coins e.g siacoin/ bitcoin https://coinspectator.com/ really good mixture of news from reddit to wsj right through to coindesk

  43. Hi,

    Awesome write up !!! Have answered all the queries for new entrant in this market. If possible please share all the details like exchanges and wallet available in India. How to convert Indian rupee to Bitcoin and other coin and reverse post trading. How to do trading on those exchanges.

  44. Hey, great article but I can’t help but notice you forgot to mention (in my mind) the most essential tool for crypto traders, Coinigy: https://www.coinigy.com

    It lets you connect all your exchange accounts directly to it via API key and you can trade directly from the chart. Chris Dunn personally uses it and so do I, can’t live without it. Just figured I’d mention, and I’ll be sharing this article with newbies, thanks for the excellent content.

  45. Hi, just found your site and subscribed it, really good knowledge and want to stick with it. My question is that I searched internet and there are many sites who are providing crypto currency faucets or some other ways, like gaming or gambling. I want to know are they scams or not? And if yes then how can I earn these currencies without trading even fractions.

    • Hi Kashif, thanks for the kind words. Many of them are probably scams, so I would stay away. There are affiliate programs coming out that pay you in bitcoin, so I would look into them. You would have to create a related resource and do some work to promote the affiliate program, but it could be worthwhile.

      Good luck!

  46. Hello,

    Thank you for this great guide, it really helped me understand many things about crypto as a beginner.

    I just found out that Coinbase doesn’t support my country, Do you know of any trusted websites that can be used mostly in any country?
    I plan to buy some Ripple and hold it for the long term.

    Thank you

  47. I am from India, Sir. By reading a newspaper article on Cryptocurrency, I opened the Internet and found your Information guide for beginners. It is excellent and very informative. Recently Bitbay is advertising that it is soon going to launch a trading platform for Cryptocurrency in India. I am contemplating to trade through it. I opened an account in Coinsecure also which is a Crypocurrency trading platform in India and which deals only in Bitcoin. But I have not done any trading so far, except opening the acccount. But Bitbay is going to offer trading in about 7 different Cryptocurrencies in India. What is your suggestion and which one is better Coinsecure or Bitbay.

    Once again thanks for very informative article on Cryptocurrency, Sir.

  48. great post! One question why not all coins be traded with fiat money? Is there a reason? If need to buy a altcoin and sell it, all those happen using BTC, why not USD?

    • Hi Henry,

      Thanks. I’m not completely sure, but I believe that it has to do with regulations. In order for an exchange to accept USD, they have to go through a whole mess of AML compliance that costs a lot of money. However, they probably don’t have to do the same with BTC. That may change.

  49. hi…

    first of all… million thanks for this great article.. it really helps me .. a lottttt……. i am eager to trade in bittrex now… but i still need to know how does a trader research on various altcoin and how do we read the graph there.?

  50. You can try Cloud mining instead of getting Mining Rig.

    Cloud mining means a host company owns Bitcoin mining hardware and runs it at a warehouse.
    You pay the company and rent out some of the hardware. Based on the amount of hash power you rent, you will earn a share of payments from the cloud mining company for any revenue generated by the hash power you purchased.

    • Yeah, I looked into cloud mining. The return sucks.

      The average I saw was about 7 months to break even and that was the very best case scenario. As you know, most coins get harder to mine, as time goes by, so that time will only increase. If you have seen a faster return in your personal account, let me know.

      But I think that it makes a lot more sense to invest that hosting fee in your favorite currency and watch it appreciate over those 7 months. Not a guarantee, of course, but a much better bet, in my opinion.

  51. I would like to thank you for the well written article, and would love to hear your answers to these questions:

    1- who provides me the wallet with its public/private passwords? on other words, who am i trusting? and why he is doing that? it might be stupid questions but i’m trying to make things clear.
    2- Which website or application do you recommend to use for trading cryptocurrencies ? and does it accept currencies and transactions from GCC region?
    3- who is monitoring and regulating the supply/demand in bitcoin and other cryptocurrencies? like sec for stocks and central banks for currencies?

    Thanks.

    • Hi Mohammad,

      Sure, good questions…

      1. The wallet is provided by the development team behind the cryptocurrency, or a third party developer. Yes, you need to be sure that a wallet comes from a trustworthy source. If you cannot get a wallet directly from the cryptocurrency developers, then look for open source wallets. These allow people to examine the code to make sure that they aren’t doing anything weird. Also do some research on the forums out there to see if a wallet is reliable.

      2. It really depends on the laws in your country, I’m not familiar with the laws in the GCC region. In the US, Kraken and Poloniex are good places to trade. You can also use Bitfinex. Most of these exchanges require you to deposit Bitcoin or Ether to start trading.

      So you would first have to find a place that sells Bitcoin. Coinbase is a good place to start. Then you can send that Bitcoin to the exchange of your choice. You might be able to buy Bitcoin (or other currencies directly on the exchange), but again, you would have to check how the rules work for your country. If you really have a tough time buying Bitcoin, then you can see if there are local meetups where you can buy Bitcoin directly from other people.

      3. There is nobody monitoring the supply and demand for cryptocurrencies. It is an open market and price fluctuates, depending on the demand. The supply is controlled by the mining process. Each coin has a limit to how much total supply there can be in the world. For example, there will only ever be a maximum of 21 million Bitcoins. However, the SEC has banned the sale of certain tokens via ICO because they are too much like pump and dump penny stocks. Again, the laws will be different in different countries.

      Hope that answered your questions…

      Hugh

  53. As a real total beginner, I found this all very helpful. i am keen to trade crypto – but still have lots to learn !!

  54. Hi Hugh,

    I so appreciate your work. You did justice to cryptocurrency trading for beginners like me.

    Lets say if i purchase altcoin with bitcoin and later the price of bitcoin falls. does it mean my value of altcoin bought has dropped in value.

    • Hi Tinie,

      I’m glad you found it helpful…

      You should think of cryptocurrencies like stocks. Let’s say that you bought some Apple stock (like Bitcoin), then cashed it in to buy some Netflix stock (like an altcoin).

      If Apple stock drops later, it doesn’t necessarily mean that Netflix will drop because they are not directly related. However, the overall stock market (like the overall cryptocurrency market) can affect the price of Netflix, but any one stock won’t affect the price of Netflix directly.

      I would recommend watching individual cryptocurrencies on daily basis, to see price correlations. You can use an app like CoinCap or a charting service like TradingView.

  55. Hi Hugh

    Great article. Very helpful. I have following doubts/concerns

    1) Would any wallet (online, desktop or hardwallet) hold different types of currencies? Say I purchase couple of other altcoins along with bitcoins, will it require that many wallets to be created?

    2) How much memory would a hardwallet have? How many private keys can it store?

    • Hi Aditya,

      Thanks for stopping by! Good questions…

      1. No, you will probably have to have a few different wallets to store different altcoins. There isn’t a wallet yet that will store all types of coins. Wallets are a key part of the ecosystem of most cryptocurrencies, so they will usually be coin specific.

      An interesting thing to look at is how easy/hard it is to store a currency. If it is a command line wallet, then it will be hard for the average person to use. That might be a good opportunity to buy a currency with a great use case, at a depressed price.

      2. Since you are only storing a small line of text, you can theoretically store a ton of keys. But there may be wallets that impose their own limitations.

      Good luck!

  56. Today a bitcoin is worth about $3,500. How much money would I have to invest to open an account and start trading?

    Forex.com has a practice account. Do any of the exchanges listed have anything like that?

    • Hi Mark,

      You can start with as little as you want because you can buy fractions of a Bitcoin. There is a small transaction fee whenever you do a transaction, so take that into account.

      It is different from any other trading market out there, so only risk a very small amount of money to get the hang of doing basic trades. There are no demo accounts in cryptocurrencies. You can manually paper trade with TradingView charts.

  57. Can we write options or other derivatives on the crypto? I need to accept ETH for tokens, guarantee a return 10-12%, and provide investors the opportunity to redeem. I am looking for a way to limit my exposure/risk to fluctuation in ETH:fiat during the period I accept ETH and have to return ETH.

  58. Hi again,
    Another quick question, do websites exist that allow for the buying and selling of cryptocurrencies with GBP, and if they exist how do they compare to trading websites using specific sellers selling specific amount of cryptocurrencies? (namely for buying small amounts)

    • Hi Callum,

      Sure, you can use a site like Coinbase to buy Bitcoin in GBP. They currently accept SEPA or 3D enabled credit/debit cards. From there, you can send the Bitcoin to any exchange of your choice and trade it for the altcoin (any coin that isn’t Bitcoin) of your choice. Once you realize a profit or take a loss in that altcoin, and want to get out of the trade, you can do the same thing in reverse:

      Altcoin > Bitcoin > GBP

      …or you can do:

      Altcoin > TetherUSD

      …and keep it at the exchange to wait for the next trading opportunity. Transferring the money back to your bank will take awhile though, so the TetherUSD route will probably be better for active trading purposes. The value of TetherUSD always stays around $1, so it won’t fluctuate as much as Bitcoin or other cryptocurrencies.

      As far as person-to-person trading…I’m assuming that you are talking about sites like LocalBitcoin. It’s going to be just like trading a personal item on eBay. You have to trust the person you are dealing with. Since most people aren’t savvy about how cryptocurrencies work, there are tricks that they can used to scam people online. There is the possibility that you can get cheaper than market rates, if someone just wants to unload, but unless you can meet them in person and get a confirmed transaction before giving them cash or there is some sort of escrow process involved, I would steer clear. It’s so easy to buy and sell through reputable exchanges, that’s usually your best bet.

      Do your own research though, these are just my opinions.

  59. Hi, can wallets that let you transfer between different cryptocurrencies be used for trading, or when people talk about cryptocurrency trading do they really mean just the buying and selling of a certain cryptocurrency (into USD for example) or is there also a profit to be made from moving money between different cryptocurrencies?
    Thanks,

  60. hi Hugh

    What brokerage will allow me to trade cryptocurrency IPO as well as Dash,Ripple, Bitcoin, Ethereum, and Litecoin?

    • Hi Virgil,

      The exchanges mentioned in this article are a good place to start your research. The best exchange for you will depend on where you live and how actively you trade, so it is up to you to research your options. Good luck!

      • Thanks Hugh,

        you’re article was terrific and provided some great foundational information in trading cryptocurrency.. I realize I’ll have to do a lot of research before making any trades so I’ll start with a moderate size wallet to move funds in and out of.

        thank you for all the information.

  61. This is one of the most comprehensive description of Cryptocurrency trading I have ever read. Couldn’t have understood the block chain concept without your simple explanation .
    Nice work man.
    ??

  62. Hey, I really enjoyed the article. I am really eager to learn how to trade in crypto, but I don’t know where to start. I mean, do you know any good book or video series to learn from beginning to expert level? I’ll really appreciate that.

  63. Hey, nice article you have here. I have wrote the german pendant to this 😉 Like the way you write and explain, good job!

  66. Many thanks for a very useful beginner’s guide to crypto trading. Love how you put it with clear examples.

  68. My name is abbey princewill. I really enjoyed all you have written and I will be glad to connect with you

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