The mechanics of getting started with Exchanges
…or how to make your first crypto trades.
Getting started as a crypto investor means getting started with exchanges. The easiest way to explain an exchange is to liken it to the old school world of currency exchange. Let’s make it easier by going back to times before the introduction of the Euro. If you were holidaying in Europe and visiting a handful of countries you might have visited an exchange bureau several times, turning pounds into francs, then francs into pesos, pesos into lira, and so on. The exchange was simply the place you went to turn one currency into another. Hypothetically, you might have found that not all forex exchanges would be able to convert between all currencies. Maybe that was because of low demand, or if they had run out of a particular currency. In the crypto world, the exchange serves the same function. Hundreds of different exchanges exist to allow buyers to turn one currency into another. With so many current and emerging crypto currencies, it’s easy to see why not all exchanges handle all currencies. As a new investor, I would repeat that the best starting point is always to learn the basics and start your journey with one of the larger currencies. If you go back to coinmarketcap.com you will see that the top 5 currencies by market value are, in this order, Bitcoin, Ethereum, Ripple, Bitcoin Cash, and Litecoin. There’s a top 20 list that doesn’t change terribly much. Below that you have what are known as the alt-coins. This is where you can find the weird and wonderful, and the coins that may well show huge volatility. Many of these Altcoins are unlikely to survive over the long term, but there will certainly be winners amongst them. Doing your homework and understanding the business case, the team, and the valuation, are all key requirements before jumping into the world of Altcoins. With the top 5-10 coins, you can be more confident that they have been validated over a longer period of time, that relatively big money has flowed into them, and that they may just give you a great return over a longer period. What is a longer period in the world of crypto will vary depending on who you ask, but this author would suggest spreading your investment between those top 5 coins and planning on holding for 3-5 years might be one of the smartest investment decisions you ever made. Come back and thank-me if you follow this advice and it works out!
Here’s where I tell you how I took my first steps. I researched a few of the larger exchanges, looking at reviews, trying to get a feel for which were considered most reliable, where fees were reasonable, and where I could easily transfer in my FIAT [think GBPs in my case – but more on this later]. I decided to start with an exchange called CEX.IO. https://cex.io/. Looking at their home page, they say all the right things – the “Bitcoin Exchange you can trust”, low-commissions, global coverage, blah, blah, blah. It all sounds great, and there is no doubt they are one of the biggest. My advice can only be based on my own experience, and that experience was far from good. Creating an account was easy, and even the verification process wasn’t too much of a problem. Note that verification is a requirement for sending, or trading, above a certain limit. Nearly all exchanges work this way, with different tiers of verification, depending on the amounts you wish to send, trade or exchange. In my case, I needed to reach a high enough level of verification to be able to send around 10,000 Euros. This was the amount I had decided to make my initial investment with. The biggest problem I had with CEX.IO was their terrible level of customer service. I’ve had plenty of experience of moving money between banks, both within one country, and cross-border. With CEX.IO it took 3 weeks for them to credit my account after having sent funds from my bank. In that time, they either ignored my emails, or were incredibly slow to answer. For that reason, I will never use CEX.IO again. My funds were eventually credited, but the process was painful and stressful. While waiting for my funds to arrive, I had no way to trade, so I had to watch as the price of the currencies I wanted to buy traded up, down and back up again.
With my funds [still in EUR] sitting in my CEX.IO account, I was ready to trade. What I would say about CEX is that it’s easy for a beginner to use. Look at https://cex.io/buysell and you can see that it’s a simple, clear interface, that makes buying quite straightforward. Despite the claims about low fees, there are far cheaper places to buy Bitcoin. Another reason I won’t be using CEX again. My first trade was into Ethereum rather than Bitcoin. My logic at the time being that I felt Bitcoin had already traded up, and that perhaps Ethereum offered more growth potential. I can’t tell you if that was correct or not, as both have risen by about 30% – 40% in the last few months. At this point, I’m now in the game. My Euros have been safely turned into ETH [Ethereum] and I’m comfortable with the process. Rather than give you a long-drawn out explanation of my particular trades from Day One, I will summarise the journey since. In my case, as I improved my knowledge, and my conviction in crypto and blockchain, has increased, I have invested more, across a basket of currencies, and intend to keep investing over the long term. I have moved some funds from the stock market into crypto, and firmly believe that being partly invested in crypto will be a good decision. I can only wish I’d invested sooner, but having seen paper gains of 100% in at least one of my trades, in the space of a few weeks, I can only say that the future of crypto currency is still in it’s infancy. You most certainly haven’t missed the boat.
Since that first move into Ethereum, I have made more trades, increasing my position in Ethereum, buying Bitcoin, and making some smaller trades in IOTA, and Binance. What, why, how you might be asking? If you’ve got this far, and you own either Bitcoin, or Ethereum, it’s very likely that you will start to explore the world of Altcoins and ICO’s. My decisions on Altcoins investing were made after reading more about, and doing some very basic chart analysis. Just as with stock trading, chart analysis plays its part in crypto. There are numerous sites that will let you play with charts to see patterns over time, and to perform basic technical analysis. If that sounds too technical, follow some YouTube videos on crypto or seek out content on basic technical indicators for crypto. For every coin you see listed on coinmarketcap.com you will be able to find some key pieces of information. As well the current live price [crypto trades 24/7] you can find the exchange where it is trades, [there may be several exchanges trading the same coin], the link to the coin or token web site, and the trading history chart. You may also find a link to a forum where enthusiasts of the coin will be asking or answering questions. To close the loop on my own choice of investments, IOTA, is a coin that has been developed to add an exchange mechanism to the Internet of Things. See https://iota.org/. It is based on a concept called Tangle, widely considered to be technically superior to the Blockchain. I bought IOTA on an exchange called BitFinex – https://www.bitfinex.com. Here’s a quick lesson on how to get started with coins other than BTC or ETH. Usually, or almost always, buying another currency is based on using an exchange that offers liquidity [a market] between a pair of currencies. In short, it’s not as simple as saying, Marcus is buying IOTA so I will spend my 100 GBPs on IOTA too. In order to follow me into a position on IOTA you will need to transfer your fiat [GBPs etc] into another crypto-currency [ETH or BTC] then send your crypto into the exchange that supports the alt currency you wish to buy. In this case, you might buy some ETH [Ethereum] and then send your Ethereum from wherever you bought it. Once It arrives in your wallet [that’s your secure, only assigned to you, digital wallet on each exchange] you can then trade ETH into IOTA. Phew…take a breath. It does sound a little complicated, but it’s not really, and once you understand this process, you are well on the way to understanding how the entire crypto space works. My IOTA investment was only around 10% of my invested portfolio and I intend to hold longer term. i.e. perhaps 5 years, unless I see some explosive growth between now and then.