How to make your first crypto purchase!

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It’s all over the news. Bitcoin is hot, and even though the saying goes buy the rumor sell the news, you’re still very much interested in crypto currencies. If that’s the case, then this post is for you. My name is Rico Richardson, and let me explain to you how buying crypto works!

First, let’s explain what crypto currency is. It’s a digital asset that typically uses decentralized control instead of centralized currency like banking systems. You can buy it, and you can mine it and in which the buying option is far more easy than the mining option. When implemented with decentralized control, each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.

A physical bitcoin, not yet available. Source: Pexels.com

There are basically three types of coins that you can pick from. The first one is bitcoin itself. It’s where it all started with and it’s the coin that is the most known. Besides bitcoins, there are also altcoins that you can buy. All the available coins can be found on sites like coingecko and coinmarketcap. When we take coinmarketcap as an example, you see that bitcoin is currently the number 1 crypto, followed by Ethereum. It tells you the price of the coin, the 24h change in price, the 7 days change in price, it’s market cap, the 24h trading volume, the circulating supply and it gives you a stat in which you can see its price development over the last 7 days. The third type of coins, are stable coins. These do not fluctuate as much because they are based of the US dollar. There are a few to choose from, like Tether and USDC.

There are many coins to choose from, and the higher the marketcap, the higher its position on the list. The definition of the market cap is. The total market value of a cryptocurrency’s circulating supply. It is analogous to the free-float capitalization in the stock market. You can calculate the market cap by multiplying the current price by it’s circulating supply. Unlike regular stock markets, the price of crypto currency is extremely volatile. Bitcoin sometimes jumps 4000 dollar in price over the course from a day, going back and forth multiple times. One thing about crypto currency is for sure, it’s not for the weak hearted.

The crypto market is very volatile! Source: Pexels.com

You can buy the crypto currencies on exchanges. There are many exchanges out there. The most popular ones are Binance, Coinbase, and Kraken. Some exchanges offer more different coins than others. You can sign up for those exchanges, and transfer money to them through SEPA wire transactions, or other methods of deposits. You can add funds to your account, you can convert funds to crypto and vice versa and you can withdraw funds from your account.

Besides exchanges there are also brokers like anycoin, or companies that offer services like a bitcoin and ethereum robot which will trade based off AI. It will open and close positions based on an algorithm and they work with a leverage. Which is also known as margin trading.

Binance: The biggest crypto exchange in the world.

My own experience with margin trading using a robot is that it has cost me quite some money. I lost 5000 dollars in one week and it completely ticked me off. The robot kept taking the wrong positions. When the market went long, the robot went short and when the market went short the robot had opened a long position. The difference between those is that you gamble against the market, or in favor of the market. When you go long, you expect the stock to go up. When you go short, you expect it to crash. You can find movies on this as well like the big short.

Now margin trading means that you trade with a leverage. This can be anywhere from three times to one hundred times. By doing so, you loan money from others to increase your position. That money will be repaid once you close your position. To give you an example, let’s say you have 10 dollars and you use a three time leverage. That means you are taking a position with 30 dollars. When the price goes up by 10%, you’re actually gaining 30%. However, when the price goes down by 10%, you’ll be down 30% as well. You’ll also need additional funds to cover the margin so that you won’t get liquidated. Because if you do not have sufficiënt funds to cope with the volatility of the market, you risk being liquidated which means that your entire position will be gone. So keep that in mind because it can cost you a lot of money in a very short period of time.

A typical trading view when margin trading. Source: Pexels.com

Besides trading, you can also hold your funds for the long term. Most people that get into trading have two different types of assets. Those that they trade with on a daily base called day trading, or on a weekly or monthly base called swing trading, and those that they hold. Holding your crypto coins for the long term is also called your hodl bag. Personally I have both as well, sometimes I sell and buy new crypto and a different part is stored for the long term.

So now that you know where you can buy crypto, on exchanges like Binance, Kraken and Coinbase, it is now time to decide if you will keep your money on the exchanges, or bring them over to your crypto wallet. Keeping them on the exchanges allows you to quickly transfer or trade your funds but when the exchanges are offline, you cannot access your money. This has happened quite a few times where Binance and Kraken weren’t available while the market was dumping because everybody was trying to take profit or prevent losses. There are many wallets to choose from with the most popular being Exodus. It’s a software wallet which is a bitcoin application that sits on your computer’s hard drive and allows you complete control and great security. Besides software wallets, there are also hardware wallets like the Trezor Model T. The easiest way to explain that is that you put your crypto coins on a USB stick. It cannot be accessed by the internet and it’s extremely safe. However, if it gets stolen or you lose it, you’ll need to make sure that you still have your seed password so that you can import your assets into a new hardware wallet. Because most wallets use a 12 phrase seed password as a security and backup function. If you lose that, all your money will be gone and it cannot be brought back.

Keeping your password and crypto assets secure is a must. Source: Pexels.com

So in conclusion.

You can buy your crypto coins from brokers or on exchanges. You can choose bitcoin, altcoins, or stable coins. You can purchase the coins, and hold them or you can trade them. When trading, you can go long expecting the market to rise, or short expecting the market to fall. You can trade with or without a leverage which means that you’ll only use your own funds or loan money for a leverage trade. The coins can be stored on an exchange or on seperate wallets like Exodus or Trezor. Each have their own advantages and disadvantages. The market is extremely volatile so please keep that in mind when buying your crypto. You can day trade, swing trade, or hodl as we call it, all depending on your own strategy. And that’s it for today, thank you all for reading, and happy trading!