Quick-start guide to trading cryptocurrency
If you’ve watched the soaring price of alt-coins with envy, here’s your guide to getting in on the game.
Trading cryptocurrency is less complex than it looks. At least, getting setup is easy enough. Trading itself is a skill that takes years to cultivate, so proceed with caution and try to develop a trading system that you follow rationally. Don’t trade on your gut! Be careful!
Getting setupor
With our obligatory disclaimer out of the way, it’s time to buy some coins. The easiest way is to use one of the following two exchanges:
Gemini
Coinbase
Both of these outfits allow you to link your USD checking account and buy cryptocurrency instantly. However, the fees on Coinbase (1%) are approximately 4x higher than the fees on the lowest tier of Gemini customers (0.25%) so unless you’re already setup with Coinbase, go with Gemini. The interface is great, and best of all, it’s licensed to do business in NY Staate, unlike some other major exchanges.
Where to trade alt-coins
Gemini and Coinbase only allow you to buy Bitcoin and Ether. This is enough to get you into the game, but if you want to buy some of the smaller, more volatile alt-coins, then you’ll need to transfer some of your bitcoin or ether to exchanges like Bittrex or Poloniex.
Including the aforementioned Gemini and Coinbase (GDAX) here is a full range of exchanges you can use within N Y State:
Gemini
Coinbase
BTC-E
HitBTC
ItBit
BitStamp
Owing to the NY Bitlicense, you may also take advantage of the following exchanges if your business and residential addresses are not within New York. These exchanges are quite good, and larger than the ones available in NY State, however at least one (Bitfinex) has suffered a large loss due to hacking. Again, here are major exchanges available to non-New Yorkers:
Bitfinex
Poloniex
Kraken
What to trade
There’s a lot that can be said on this topic. For some, trading cryptocurrencies is most like commodities or forex day-trading: quick in, quick out. However, if you’re new to trading, or plan to trade infrequently (taking “long” positions) then you may want to take an approach closer to the “value investing” model made famous by Charlie Munger and Warren Buffet.
In any case, here are the coins (below) which you will find make the cut as both highly liquid (good for trading) and intrinsically valuable. A slightly deeper discussion of the rationale behind the list below can be found in this post, but for now, it suffices to say that the coins below are the “safest” to trade, in the sense that they are reliable networks and teams which are still undervalued by the wider investment world. Despite intra-day volatility, these networks will likely stand the test of time:
BTC
DASH
ETH
XMR
DCR
Begin by buying and holding the coins above. Despite the temptation, try not to buy when the price seems to have been increasing lately; don’t submit to your FOMO. Instead, buy when the price has been flat for a week or more. For a more nuanced discussion of this topic, check out this post about how our fund defines a “tradeable” cryptocurrency.
At some point, you may decide to move some long positions out of your exchange wallets for safer keeping. This post explains how to securely hold your coins and back up your private keys. Never hold all your funds in exchange wallets; sometimes (although rarely) they go down, or get hacked.
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