https://nasacademy.com/blog/article/how-to-start-crypto-trading

Crypto

How to Start Crypto Trading (and Why You Should)

What you need to get started

Team Nas Academy

06 Feb · 5 mins read

Cryptocurrency has come a long way since first being introduced to the world in 2008. Bitcoin has risen in value and a single token is now worth around $43,000 (as of writing this). A plethora of different altcoins (any cryptocurrency besides Bitcoin) are now available to traders. And trading of cryptocurrency has moved from fringe to mainstream. But how can you get in the action?

Luckily, it’s not as hard to start trading crypto as one might think when first searching for options. In this article, we will run through the basics of how to get started with cryptocurrency. However, before we do, it should be noted that trading can be risky, and cryptocurrency is often more volatile than traditional stocks. Trading cryptocurrency should only constitute a small part of a larger portfolio.

Choosing How to Invest

Buyers generally have two options when looking to invest in cryptocurrency: brokers and cryptocurrency exchanges. The latter might be a bit more complicated for new users, while the former generally charges more for transactions. 

Cryptocurrency exchanges are essentially platforms where buyers and sellers meet to exchange cryptocurrency. However, the user interface on some of these platforms can be a bit overwhelming for first time users, especially if you are new to trading in general. Some platforms do offer a pared-down experience, but these come with a fee.

While being more complicated to use, exchanges do generally offer customers more options when it comes to buying cryptocurrencies. This includes the ability to buy more types of altcoins, view charts, statistics, and take part in different types of trading. Some popular exchanges include Coinbase, Gemini, and Kraken. If you choose this option, make sure to research the platform you want to use first, as some only let you fund your account using cryptocurrency.  

The other and more user-friendly option is trading through a broker. These are usually platforms that focus mainly on stock trading. Some recognizable names include Robinhood, Webull, and Tradestation. These types of platforms offer more ease-of-use, but they have their own drawbacks. For example, some do not allow you to withdraw your cryptocurrency and instead force you to sell your currency, essentially trading in your coins for legal tender. This is important because, as we will look at in a bit, you may want to store your crypto on an external “wallet”.

Setting Up Your Account

Now that you have chosen a platform, here comes the easy part. Setting up your account will generally be similar to opening an account with a traditional broker. You may have to provide the platform with your social security number, a photo of your driver’s licence, your date of birth, and sometimes a selfie. 

This is a necessary process in order to trade, as the platform has to confirm your identity and make sure you’re not there to try anything funny. 

Funding Your Account

Next, you’ll need to add funds to your account. Depending on what platform you choose, this can either be done through the use of crypto or traditional currency such as the U.S. dollar. Crypto can be transferred to your account via your digital wallet if you opt for this route, (but since you are here, you’ll likely be using traditional currency for your first transactions).

Most platforms will allow you to add funds using your bank account or debit card. Some also allow you to use a credit card to fund your account. However, we advise against this as cryptocurrencies can be volatile and credit card companies view transactions for them as a cash advance. This essentially means the interest on the purchase will be higher and it may come with additional fees.  

Choosing a Crypto to Invest In

Now it’s time to choose what kind of cryptocurrency you want to invest in. There are thousands of options here, but it might be worth asking yourself what your aim is before investing. Are you interested in monetary returns? Do you want to use crypto in day-to-day transactions? Etc. And most importantly, like any other stock, do your own research beforehand. As mentioned, cryptocurrencies can be volatile and should not make up the majority of your portfolio. 

Below are some common cryptocurrencies and their ticker symbols:

  • Bitcoin (BTC) 
  • Ethereum (ETH)
  • Tether (USDT)
  • Binance Coin (BNB)
  • USD Coin (USDC)
  • Cardano (ADA)
  • Solano (SOL)
  • XRP (XRP)

While many of these cryptocurrencies are pricey for the average investor, many platforms do allow you to buy a small piece of an entire coin. 

Storing Your Cryptocurrency

There are a couple of options you have when it comes to storing your cryptocurrency, and these generally have to do with how comfortable you are with security. If you use a traditional broker platform; however, you may be stuck with storing your crypto on their platform.  

Storing crypto on a platform

This might be the right decision for most people, especially if you plan to continue trading your cryptocurrency. You also do not have to keep track of your keys — the pin required if you plan on storing cryptocurrency on a wallet. However, if you have large amounts of crypto, you may want to opt for another option as there is always the possibility that a platform could be hacked. 

Hot Wallets

Hot wallets are basically storage devices that are still connected to the internet in some capacity. This makes them easier to use, but also opens the door to security breaches. These can be run on phones, computers, etc. 

Cold Wallets

Cold wallets are external devices that store cryptocurrency without the need for an internet connection. You can think of cold wallets kind of like an external hard drive. In order to access them, one would need to be in material possession and have the device’s pin. These are the safest option, but be sure to remember your pin to these devices. You do not want to end up in a headline after losing your pin, and consequently access to your crypto fortune.  

Some Things To Keep In Mind

Now that you’ve learned how to get started with cryptocurrency, there are some things to keep in mind. 

Research, Research, Research

Just like with trading stocks, always research the cryptocurrency you plan on purchasing. These assets can be volatile and their price can fluctuate wildly. Because of this, many investors are attracted to buying crypto. However, there are thousands of different altcoins on the market, and most of them operate differently from one another and claim to be beneficial in different ways. 

Also consider diversifying your investment into cryptocurrencies. Since they can be so volatile, diversifying helps shield you of any major losses should a currency crash. There are also other questions you must ask yourself before investing in an altcoin. What is the history of this cryptocurrency? Is it already developed or asking for funding? Who developed it and why? In short, the more research you do, the more knowledge you have at your disposal and the more likely you are to succeed. 

Invest only what you can afford

As mentioned before, it’s important that cryptocurrency is a small part of a larger portfolio. This is especially true for first-time investors as the risk and volatility associated with cryptocurrencies is steep. If you have a large purchase coming up in the next couple of years, make sure that money is safe. If you have money put away for a desperately needed new car, make sure you’re not investing in something that is more likely to lose value. You should only invest money in cryptocurrencies that you consider to be extra funds. 

Volatility does not have to be bad

If you are looking to invest in cryptocurrency, then you are probably okay with a little bit of volatility. And while you should be careful and only invest what you can afford, volatility in and of itself, does not necessarily have to be a bad thing. It can allow you to buy low and sell high. However, if you are a first time investor and you have invested in a cryptocurrency and its value starts to plummet, just stay calm and remember that crypto is inherently volatile. 

This is where your research and knowledge comes into play. If you are confident in your research then you have less to worry about, and you will be more likely to be okay with weathering the storm, so to speak. 

With that said, cryptocurrency is still a remarkable field to watch moving forward, whether it’s investing in the currency itself or the blockchain technology underpinning it, cryptocurrency is in all likelihood here to stay. 

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