# Ultimate Beginner's Guide to Cryptocurrency This is a no-nonsense guide to understanding, exploring and buying cryptocurrency. Focuses on only what you need to know at each step of the way. ![](https://i.imgur.com/f8wZUb8.jpg =725x) :::info **Find this guide helpful?** I hope to write more beginner, intermediate and expert guides on Cryptocurrency. I accept Bitcoin donations at `1397Yc3SW6TKmk2cKcxLgkKWoBzka7jPoZ`. Thanks for reading! ::: ## Introduction to Bitcoin and Cryptocurrency If you are a total beginner to this, start here! ### Seriously, what even is Bitcoin or Cryptocurrency? Cryptocurrencies are distributed digital currencies, much like a form of digital cash. They allow for seamless, direct, and extremely fast transactions between parties. You have full control over your payments and balance, and can spend and earn with ease and transparency. Here's a quick video to get you started: {%youtube Gc2en3nHxA4 %} Cryptocurrencies, often referred to as "coins", are stored in digital "wallets" that you use to manage your payments. Your wallet is protected by a complex password (private key) that only you know about. You can spend or send money by submitting a transaction from your wallet to someone else’s using a "public address". Think of your wallet like a personal bank account that you complete control over. These currencies are unique because they don’t require a central authority to manage your money. As such, while a bank might have a database that’s an obvious target for hacking for someone to steal your money, cryptocurrencies aren’t susceptible to these attacks when stored properly. Additionally, cryptocurrencies can process transactions in a matter of seconds or minutes, and not hours or days as it may take to send money today. Watch this on how Bitcoin works: {%youtube t5JGQXCTe3c %} Read this [guide to Bitcoin](https://coincentral.com/what-is-bitcoin/) for a more detailed overview. Next, check these articles and videos to build a deeper understanding: * [Bitcoin Explainer](https://www.coindesk.com/bitcoin-explained-five-year-old/) * [Blockchain Explained](http://www.zdnet.com/article/blockchain-explained-in-plain-english/) * Video: [Blockchain 101](https://www.youtube.com/watch?v=oSP-taqLWPQ) * Video: [Blockchain and Bitcoin Explained](https://www.youtube.com/watch?v=M_zCjjy59cg) * Presentation: [Bitcoin for Beginners](https://www.youtube.com/watch?v=UlKZ83REIkA) * Presentation: [Introduction to the Internet of Money](https://www.youtube.com/watch?v=rc744Z9IjhY) Make sure to watch and read these first to gain at least a basic understanding before continuing on and doing any investing. ### But why would anyone use Cryptocurrency over regular currency? There are five significant advantages to this type of truly digital currency: 1. **Universal** - Cryptocurrency is not bound by any exchange rates, interest rates, transactions charges or other charges of any country; therefore it can be used at an international level without experiencing any problems. 2. **Faster Transfers** - Transfers between people can happen within minutes or hours regardless of the amount of money. Furthermore, no central third-party is required to approve the transfer as the whole network is decentralized. 3. **Lower Transfer Fees** - As the payment is done online without any intervention of a third party, there are relatively low fees charged to confirm the transactions. The small fees generally go towards compensating transfer confirmations. 4. **Eliminates Traditional Fraud** - Individuals cryptocurrencies are digital and cannot be counterfeited or reversed arbitrarily by the sender, as with credit card charge-backs. Committing traditional fraud is nearly impossible with these currencies. 5. **Highly accessible** - There are approximately 2.2 billion individuals with access to the Internet or mobile phones who don’t currently have access to traditional exchanges or financial accounts. There is no other currency system in which your accounts aren't inherently owned and controlled by a central authority. With cryptocurrency, you are truly in control of your money. ### How would "investing" in cryptocurrency even really work? When this guide or anyone refers to "investing" in cryptocurrency, we are referring to the process of **exchanging US dollars (or other national currency) into a digital currency** which then later rises in value per coin. This is very similar in principle to exchanging US dollars to Euros when traveling to Europe. In simple terms: 1. You find an exchange system which supports trading in one currency for another 2. You pick a currency you want to trade in to the exchange (i.e US dollars) 3. You pick a digital currency that you want to receive in return (i.e Bitcoin) 4. The currency "pair" (USD / Bitcoin) have a certain "exchange rate" (i.e 1 Bitcoin == $15k USD) 5. The exchange accepts your currency and then in return issues you the digital currency 6. You take the digital currency that you were given and store that in a digital "wallet" Now you've bought the digital currency from an exchange and you are holding that currency in a wallet. #### Profiting off Exchange Rate Fluctuations But what does any of this have to do with investing? The answer to profiting is in the ever-changing exchange rates between fiat (US) and digital currency. Unlike traditional currency (i.e 1 US dollar == 0.84 Euro), the **digital currency exchange rates are highly volatile** and constantly changing. This means the value of 1 Bitcoin to the dollar is frequently changing on a daily and hourly basis. This is how that exchange rate has evolved over a year's time from Jan 2017 - Jan 2018: <img src="https://i.imgur.com/VanwKGL.png" width="750" /> In other words, 1 year at the beginning of the chart Bitcoin was worth **$800US per coin**. At the end of the chart (in January 2018), Bitcoin is **now worth about $15k per coin**. That means the exchange rate caused Bitcoin's value to **rise 1775% in 12 months** (or an average of 147% per month). In between there were frequent wild fluctuations of price up and down between 10-40% on a weekly/monthly basis. Profiting off of this looks like the following: 1. You exchange $500.00 USD for a digital currency (i.e Bitcoin) on an exchange 2. You receive `0.625` fraction of a Bitcoin in return (since 1 Bitcoin == $800.00) 2. You hold that currency in a Bitcoin "wallet" for a year 3. You sell that currency and exchange back to US dollars and receive $9375.00 This type of scenario is a simple version of what is referred to as "investing in cryptocurrency". ### Is Bitcoin or Cryptocurrency actually worth investing in now then? This is a really tough and complicated question. If you talk to many traditional financial experts, the answer is either "no", "definitely not", "maybe not", or "it's way too early to tell". Truth is, almost no one from the financial sphere really understands Bitcoin. And no one knows for sure if Bitcoin is actually a good investment or a massive speculative bubble waiting to burst. Bitcoins are worth a ton of money right now (at present, **more than $15k per coin**), largely on "speculation" since the currency has no intrinsic worth. But then again, neither does the US dollar bill or any fiat currency. The concept of "worth" in the financial world is complicated and Bitcoin is completely different than anything we've ever seen before. That said, this is an exciting time for the cryptocurrency world. Many, many investors have become millionaires or built fairly reliable passive incomes off of Bitcoin. Here's some more facts to consider: * If you invested just **100 dollars into Bitcoin in 2010** and held, **you would now have over 10 million dollars.** * In 2017 alone, Bitcoin has spiked up for a shocking 1800% return on investment. This means if you have invested just **$100 dollars in Dec 2016**, you would now have **over $1800** after a year. * In November 2017 alone, Bitcoin **rose 50% from the previous 30 days**. You'll frequently see gains of between 30-50% on months that Bitcoin is rising steadily. Ultimately, only you can decide if investing in cryptocurrency is a good idea for you. However, the main exchange now is fairly secure, and Bitcoin has proven itself to have a rising value (with huge gains) from it's 2009 release to today. Keep in mind that the prices fluctuate wildly, and Bitcoin has also seen enormous corrections and crashes where value plummeted. You can [read a visual history here](http://blog.startupdigest.com/2017/03/09/history-major-bitcoin-crashes/) for more details. Check out the [currency charts for yourself here](https://www.coinbase.com/charts) to investigate further and see how the value has changed over time. This [article on Bitcoin](https://medium.com/@brianhoffman/bitcoin-money-or-a-waste-of-time-321767f2a4c7) lays out a case for evaluating Cryptocurrency as money and summarizes the situation well: > Bitcoin is very much a work in progress towards declaring itself a perfect money in modern economist’s definition. I still believe it has a lot of potential to become more than simply a tool to break the law with, but it will take a lot of hard work both in technology and theory to demonstrate to the world that Bitcoin is here to stay and able to take on traditional fiat money. Until that time comes it’s smart to educate yourselves on all sides of the argument, be open-minded and don’t rush to judgement. After all, everything is an experiment in the world of money regardless of where you live. Most important to keep in mind is that you should **never ever invest more in crypto than you can risk losing entirely**, this is rule #1 of cryptocurrency investing. :::warning All this above said, a large subsection of traditional financial investors consider cryptocurrency in a **very negative light**. Words like "fad", "waste of money", "throwing money away", "totally worthless", et al. At the end of the day, read about this, become informed, and decide for yourself if you think this is the worth the risk. ::: ### Do I need a large upfront monetary investment in order to get into cryptocurrency? No, you don't need any set amount of money to get started. In fact, at least at first, you are better off investing a small amount to get your bearings. You can then incrementally invest more over time based on your personal level of comfort. Cryptocurrency investment operates on **percentage returns or losses** based on the fluctuations of the exchange rates for different coins. In other words, you can throw in $50 or $5000 and will still recieve the same "rate of return" by percentage. For example, if you threw in $50 in the scenario explained above, you'd be able to sell for ~$890 at the end of a year. If you threw in $5000, you'd sell off for ~89k. :::info Keep in mind that you do not need to buy "whole coins". In other words, if a Bitcoin costs $15,000, you can safely purchase a small fraction of a Bitcoin. No solid dollar amount (e.g $5) is too small! You will still receive the same percentage gains and losses and a person who bought a whole Bitcoin. Read more [to clear up any confusion about this here](https://www.coindesk.com/no-dont-buy-whole-bitcoin/) ::: ### But hang on, isn't Bitcoin and cryptocurrency just a temporary bubble, soon to burst? If you've heard about cryptocurrencies, chances are you've heard about this space "being a bubble". You can [read more about bubble theory here](https://www.investopedia.com/terms/b/bubble.asp). Famous bubbles from history include [Tulipmania](https://www.investopedia.com/features/crashes/crashes2.asp) and the [Dot Com Internet Bubble](https://www.investopedia.com/terms/d/dotcom-bubble.asp). There are many strong opinions about this online ranging from positions arguing this is not a bubble, to others arguing this is the most obvious bubble the world has ever seen. Check out these resources below to learn more and then decide for yourself: * [Quora post on the crypto bubble](https://www.quora.com/Are-we-in-a-cryptocurrency-bubble) * [Is Bitcoin the Most Obvious Bubble Ever?](https://www.theatlantic.com/business/archive/2017/12/bitcoin-bubble/547952/) * [The Bubble to End All Bubbles](https://www.cnbc.com/2017/12/11/ubs-cryptocurrencies-like-bitcoin-are-the-bubble-to-end-all-bubbles.html) * [Bitcoin is a Bubble](https://www.forbes.com/sites/investor/2017/09/18/cryptocurrency-is-a-bubble-whats-next/#602e38822cb8) * [Not Your Ordinary Bubble](https://seekingalpha.com/article/4130820-bitcoin-ordinary-bubble) Few important things to note while getting started in this space: * Overall, **cryptocurrencies are in their infancy** and have a long way to go before they can replace credit cards and traditional currencies as a tool for global commerce. It will needs years and years of exposure to the global system, before the masses start accepting it. * The current design of many cryptocurrency systems significantly limits the speed and number of transactions processed, making it unlikely that bitcoins will be able to replace conventional credit card transactions without significant technical improvements. * There is no real safety net or perfect way to protect your bitcoins from human error (passwords), technical glitches (hard drive failures, malware), or fiduciary fraud. If you accidentally lose your credentials or send coins to the wrong account, there's no one to call for help. * While relatively benign legal guidelines are currently in place, law enforcement agencies could decide that bitcoins are a "giant money laundering scheme" and enact more stringent regulations that would significantly diminish the currency’s value. Ultimately, the decision to buy cryptocurrency **must be left up to the individual**. If you are overly concerned of the possibility that you might lose all your money put into cryptocurrency; and that risk is not acceptable to you, then this might be a good place to stop reading this guide. Otherwise, continue below with caution. ### How volatile or risky is this market at this point? When getting started into investing in cryptocurrency, people are often surprised by the extreme volatility. Here are things you'll witness fairly quickly after buying into cryptocurrency and exploring around for 6 months: * Waking up one morning and seeing several of the currencies **price increase 200% or even 500%** from the day before * Waking up one morning and seeing **the entire cryptocurrency market down 30% or even 50%** * Waking up to see Bitcoin has surged to an unbelievably high price, only to see the price plummet the next day. All of these are not exaggerations, they are relatively commonplace in the cryptocurrency marketplace. If you invest in cryptocurrency, you'll need to expect and anticipate regular market surges and market plummets. To learn more, check out the section on [understanding the market cycles](#understanding-the-market-cycles). The takeaway here is that price fluctuations (even significant ones) can happen wildly on a weekly and even on a daily basis. If this is not something you feel prepared for, you may want to reconsider buying cryptocurrencies. However, if you can understand and accept this, then you may be ready to get started. ### Which currencies do I actually want to invest in? To start out your crypto journey, you should invest in the safest "Tier 1" currencies to get your bearings in this new space. **Tier 1 currencies** are listed below: * [Bitcoin](https://coincentral.com/what-is-bitcoin/) (BTC) - Released as an open-source software in 2009, Bitcoin is often credited as the **world’s first cryptocurrency** and is best defined as a digital currency that exists electronically. The original cryptocurrency. * [Ether](https://coincentral.com/what-is-ethereum/) (ETH) - With the second largest market cap in the cryptocurrency world, Ethereum has drawn a lot of attention from investors and crypto enthusiasts alike. This relatively new cryptocurrency not only presents a significant change to the status quo, it also allows for the quick development and deployment of new applications on the platform. Ethereum essentially **enables dozens of new and extremely innovative cryptocurrencies** to exist. * [Litecoin](https://coincentral.com/what-is-litecoin/) (LTC) - Litecoin (LTC) is a decentralized peer-to-peer cryptocurrency that branches directly off of Bitcoin and went live on October 13th, 2011. The advantage Litecoin has over Bitcoin is that the **payment transaction costs are extremely low**, and it is **capable of facilitating payments around 4x as fast**. To start out, you only need to focus on these until you get into Tier 2 and Tier 3 currencies later in your investment cycle. Each tier of currencies represents an increasing volatility/risk meaning that the currencies can often radically change in value every day. ### How much money should I invest? :::warning **Disclaimer:** I am not a financial adviser, I am a random schmoe on the internet. This article is for informational purposes only, and should not be considered financial advice. Decisions based on the information in this article are the sole responsibility of the reader. ::: This is of course up for debate. Many cryptocurrency enthusiasts and investors recommend you should hold between **1-10%** of your full investment portfolio in crypto in total. This is a risk spectrum, with holding 1-2% there being on the "safer" side while 10% there is for those significantly more risk tolerant. Start by determining how much you've already invested in stocks, bonds, mutual funds, etc at the moment. How much money do you have in these traditional "markets" of some kind? For example, if you have 50k invested overall in your portfolio, you can consider eventually moving over 1-10k of that into cryptocurrencies in total. You'll want to invest that total amount over time, rather than all at once. :::danger Most importantly, **never ever invest more in crypto than you can risk losing**, this is rule #1 of crypto investing. ::: Start small, and continue to invest over time as you become more comfortable. ### Cryptocurrency Glossary Here's a glossary of terms to keep in mind as you research more about Cryptocurrency: * **Exchange** - The most common place where people buy and trade cryptocurrency is on the exchanges. Exchanges are places where you may buy and sell your crypto, using fiat (i.e US dollars) or trading one cryptocurrency for another. * **Wallet** - A cryptocurrency wallet is a secure digital wallet used to store, send, and receive digital currency like Bitcoin. This is where the cryptocurrency lives, similar to a "bank account". * **Public Address** - A special string of alphanumeric characters (i.e `1397Yc3SW6TKmk2cKcxLgkKWoBzka7jPoZ`) identifying a wallet used to send and receive transactions of digital currency. Think of this like a bank routing number where people can wire you currency. * **Block** - A specially packaged list of recent transactions that have not yet been permanently recorded into the "distributed ledger" (the full transaction database). Every block contains a reference to the block that preceded it in the ledger. * **Blockchain** - A complete digital record of transactions (distributed ledger) that have happened that cannot be easily forged or altered. Simply put, a distributed database of currency transactions. The name refers to the "chain" of data chunked into discrete "blocks", each containing transaction history. * **Mining** - Miners are people worldwide running "mining" software that confirms new blocks of recent transactions into the permanent blockchain. In order to incentivize people to run the mining software, they are given a prize for their work – either in new coins, transaction fees, or both. Anyone can see the [new unconfirmed transactions in realtime](https://blockchain.info/unconfirmed-transactions). * **Fork** - Forks create an alternate version of a blockchain, leaving two distinct blockchains to run simultaneously on different parts of the network. For example, [Bitcoin Cash](https://www.bitcoincash.org/) is a fork of Bitcoin released in Aug 2017. You can review [additional terms in this blockchain glossary](https://blockgeeks.com/guides/blockchain-glossary-from-a-z/). ## Level 1: Invest only in Tier 1 This is the beginning of your journey into cryptocurrencies. Start like this: 1. Register for [Coinbase](https://coinbase.com) 2. Submit identity verifications 3. Setup funding accounts (bank for lowest fees) 4. Download the Coinbase mobile app 5. Buy Tier 1 currencies [Coinbase](https://coincentral.com/coinbase-review/) is the safest and most secure online cryptocurrency site. Always start with Coinbase. You can be reasonably confident that your bank and personal information is secure there. [![](https://i.imgur.com/teJ8EkF.png =500x)](https://coinbase.com) :::warning While Coinbase is reasonably secure, there are no real guarantees in this life, so read [this guide on account security](https://blog.coinbase.com/how-to-increase-your-coinbase-account-security-4b7164926631) and [this guide for more security tips](https://blog.coinbase.com/how-to-safely-store-digital-currency-with-coinbase-2dd405588753). Be cautious and careful. ::: ### How much to start investing with When ready for step 5, you'll want to spread your money between the three Tier 1 currencies like this: **50% Ether (ETH), 40% Bitcoin (BTC), 10% Litecoin (LTC)** Start with a reasonably small amount of coin to get your bearings. For example, if you transferred $2000 to kick-off investing, put $1000 into ETH, $900 into BTC, $100 into LTC. As you continue to invest further, try to maintain this ratio between the three. **Bonus: Buy close to a 24 hour low for a currency**. If you want to maximize your investment, go to the chart for each currency and **check the 24-hour interval**. Note that lowest value listed and be patient and wait until the current exchange is as close to that 24-hour low as possible (i.e within 20% of the 24-hour low value). Download the Coinbase mobile app and setup alerts on there to trigger when the currency falls to a particular value. When the value has fallen closer to that value, this is the optimal time to buy. ### Dollar Cost Averaging The safest overall strategy for investment is to invest into cryptocurrencies spread out over time, investing an amount every week (or every month). :::info [Dollar Cost Averaging](https://medium.com/@_Hypron/dollar-cost-averaging-465dc8d593be), or DCA for short, is "an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of share price." This is a technique used by both traditional investors (stocks, etc) and by cryptocurrency investors to reduce risk. By purchasing a financial instrument regularly, you average the price you bought at — if the value of the instrument goes up, so does your gain. If the value goes down, your average price invested goes down as well, so you are down less money than if you had invested everything at one price. This is especially important when investing in something as volatile and risky as Bitcoin. ::: You can read more [about this strategy](https://www.reinisfischer.com/dollar-cost-averaging-part-cryptocurrency-portfolio) or [watch this helpful video](https://www.youtube.com/watch?v=fDfB7V7qiMA) to understand the benefits of this approach further. In order to DCA invest, all you have to do is **make an investing schedule and stick to that**. For example, if you plan to invest $3000 into Tier 1 currencies, instead splitting that into 10 investments of $300 made each month (or $150 every 2 weeks). ### Is my money safe in Coinbase? Coinbase is very safe and secure and can be a reasonable place to store your money over time. If you have more than $5k in Coinbase, you should make sure to at least [use a Coinbase vault](https://support.coinbase.com/customer/portal/articles/1612208-the-coinbase-vault-) for safe keeping. For most people, most of the time, you should be perfectly safe in Coinbase Vault even for large sums. However, there are some limitations and caveats to keep in mind. The coins on Coinbase are being managed in a wallet entirely by Coinbase, and this means that **you do not have the private keys for the wallet** and therefore the coins are not technically within your possession. If you want to be extra cautious and be in full control, you should be using a private wallet to store your currency. The best options for a [secure private wallet](https://blockgeeks.com/guides/cryptocurrency-wallet-guide/) are: 1. **Hardware wallets** like [Ledger Nano](https://www.ledgerwallet.com/products/ledger-nano-s) or [Trezor](https://trezor.io) - Secure hardware wallet that are offline and can store all your coins safely. (_Safest option, recommended_) 2. **Mobile Software wallets** like [Coinomi](https://coinomi.com/) - Mobile app on your phone that acts as a wallet for all your coins. Still connected to the internet and on-device so less secure. 3. **Desktop Software wallets** like [Jaxx](https://jaxx.io/) - Desktop app on your computer that acts as a wallet for all your coins. Still connected to the internet and on-computer so less secure. 3. **Other various wallet types** [as outlined here](https://blockgeeks.com/guides/cryptocurrency-wallet-guide/) including desktop and paper wallets. Here are the key considerations for deciding where to store your coins for safe keeping: * If you are security conscious person who wants absolute control over your currency stored with a maximally secure offline storage method, and are willing to weight security over convenience, then you absolutely need to use a [hardware wallet](https://www.ledgerwallet.com/products/ledger-nano-s). * If you want a middle ground, and an easy place to store all your coin where it's a bit harder to hack, use [Coinomi](https://coinomi.com/) mobile app to use your phone as a software wallet. * If you have **more than $15k+ of currency in Coinbase**, you should use either a software wallet or hardware wallet. If you are at all security conscious, we do not recommend holding this much in Coinbase, even in a vault. In reality, for most people most of the time, Coinbase is safe even for large amounts, but better safe than sorry. Once you've selected your wallet (or decided to keep your currency stored in Coinbase), then you can start investing further! :::warning Security and caution must be emphasized when holding any serious sums of coin. Be sure to read [this guide for additional security tips](http://bitcoinsecurity101.com/getting-started/). For context of why this matters, years ago the largest Bitcoin exchange was hacked ([Mt. Gox](https://en.wikipedia.org/wiki/Mt._Gox)) and $450 million dollars was stolen. ::: ### Tracking your Profits! You'll want to use **an app to track your profits, gains, and losses** across all cryptocurrencies. This is important to better understand how the currencies are evolving over time (on a daily, weekly, monthly basis) and track how much you've made or lost. * If you are using an iPhone, you should pay for [Crypt Pro](https://itunes.apple.com/us/app/crypto-pro-bitcoin-ticker/id980888073?mt=8) which is the best app for tracking your cryptfolio. If you are too cheap, just use [Delta](https://itunes.apple.com/us/app/delta-crypto-ico-portfolio/id1288676542?mt=8) or [check this list for alternatives](https://steemit.com/cryptocurrency/@sirwinchester/the-best-cryptocurrency-apps-for-iphone-trading-charts-portfolios-wallets-converters-and-more) instead. * If you are using an Android phone, use [Delta](https://play.google.com/store/apps/details?id=io.getdelta.android&hl=en). See [this guide for a few other options](https://www.androidauthority.com/best-cryptocurrency-apps-for-android-581192/). Check [this list for more options](https://steemit.com/bitcoin/@pedrombraz/the-best-way-to-track-your-crypto-portfolio) for how to easily track profits on your investments. Once you've setup a portfolio tracking app, go to your [Coinbase transaction history](https://www.coinbase.com/transfers) and begin entering the "trades" into the app of your choice. Now the app will give you real-time profits and losses over time. ### Investing Further and Using Alerts Setup the Coinbase mobile app on your phone and get used to reading the exchange values. Look at the 24 hour lows and the 1 week lows for each currency. Setup alerts for a value of your choice near the low-ish side of the coin within 24 hour window. For example, Litecoin might currently be at $100 with a $91 dollar low within 24 hours and an $82 dollar low within a week. Set up several alerts on the mobile app for $93, $87, $84 for Litecoin. When these alerts are triggered, these are good times to increase your investment by making further buys in a particular currency. Be patient and take your time. Continue to make buys at a level you are comfortable with until you've invested 65% of your 5-10% crypto investment target. For example, if you've decided to take 10% of your portfolio into crypto and that works out to $5000 dollars total, put at least 65% of that ($3250) into Tier 1 over time. ### Trading with GDAX for cheaper fees When you are feeling comfortable with Coinbase, Coinbase has a sister site which has your same Coinbase account but much lower fees called [GDAX](https://gdax.com). Go there, login there and you'll find that if you buy your coins on GDAX rather than Coinbase, the trading fees are way way cheaper (0.25% compared to 1.5% on Coinbase). You'll need to sign in with your Coinbase account, pick a currency and then make LIMIT or MARKET buys. This is more complicated than Coinbase. The basic steps are: 1. Go to [GDAX](https://www.gdax.com) 2. [Deposit funds](https://www.gdax.com/accounts) from bank or Coinbase to GDAX for your purchase 3. Select your "product" (currency) at the top (i.e BTC/USD or ETH/USD) 4. Select "MARKET" tab on the left hand side 5. Enter an amount to buy into the "Amount" field in USD 6. Press "Place Buy Order" 7. Transfer the purchased currency back to Coinbase wallet or vault [![](https://i.imgur.com/qX5hOqm.png =200x)](https://www.gdax.com) That's it! GDAX is run by Coinbase, so learn to use this as this will help you get ready for more advanced investing later. If you aren't able to pick it up quickly, just explore around anyways. You can always return to Coinbase for ease of use but the higher trading fees. ## Intermediate Level Investing Come to this section after you've bought Tier 1 multiple times as alerts come up at certain targets and are fairly comfortable with trading at Tier 1. You probably have about 65% of your allocated crypto investments made already by this point. ### What are the currency tiers? There are generally three basic levels of cryptocurrencies that you can hold: * Tier 1: Comparatively safer and less volatile * Tier 2: More volatility and fluctuations * Tier 3: Very risky bets and typically high price fluctuations No cryptocurrency is a "safe" bet but Tier 1 are likely to retain their value over the long-term. However, some Tier 3 currencies will have wild and volatile fluctuations perhaps surging up 500-1000% over a week or month or conversely losing 80% of their value. You'll eventually want to spread your investment across all three for a diversified portfolio. :::info The tiers outlined in this document are rough categorizations and evolve over time. These are not fixed distinctions, but instead intended to provide a framework for thinking about cryptocurrencies. ::: ### How should I split my crypto investment? You should diversity your crypto investments across all three tiers of currencies eventually. When starting out, you will want to put 100% of your investment into Tier 1 currencies. As you become more comfortable, you will then take Tier 1 earnings and move them into Tier 2 currencies. Eventually, you will want to hold a full portfolio that breaks down like this: * Tier 1 Currency: 60% * Tier 2 Currency: 30% * Tier 3 Currency: 10% In this way, the majority of your investments should always be in Tier 1, a medium portion in Tier 2, and the smallest amount in the much risker Tier 3. ### Using a Cryptowallet (Important!) Past this point, you are about to leave the safe confines of Coinbase. Keep in mind that Coinbase **can only ever store Tier 1 currencies** such as Bitcoin, Ethereum, and Litecoin. If you ever want Tier 2 or Tier 3 currencies, you **cannot store them on Coinbase** and will need a separate wallet. Your options for storing these alernate coins (altcoins) are: 1. Store the currencies directly on an exchange (not recommended for any amounts greater than $1000) 2. Store currency on a mobile software wallet like [Coinomi](https://coinomi.com/) - Mobile app on your phone that acts as a wallet for all your coins. 3. Store currency on a desktop software wallet like [Jaxx](https://jaxx.io/) - Desktop app on your computer that acts as a wallet for all your coins. 3. Store currency securely on a hardware wallet like [Ledger Nano](https://www.ledgerwallet.com/products/ledger-nano-s) or [Trezor](https://trezor.io) - Secure hardware wallet that is offline and can store all your coins. The easiest way to store the currencies (and by far the least secure), is to store these investments directly on a secondary exchange outside of Coinbase. This can be quite risky and is not recommended for amounts over $1000. If you have amounts between $1k-30k, you can easily and quickly setup a software mobile wallet such as [Coinomi](https://coinomi.com/). This way you can relatively safely store all your currencies on your phone. However, your phone is connected to the internet and in theory could be hacked, so be wary. :::success For the security conscious or if you have more than $30k in investments, then use a hardware wallet like [Ledger Nano](https://www.ledgerwallet.com/products/ledger-nano-s) or [Trezor](https://trezor.io). This way you will have absolute control over your currency stored with a maximally secure offline storage method. ::: ## Level 2: Expand into Tier 2 investments When you are ready to expand into Tier 2 investments, register for a [Bittrex account](https://bittrex.com) or other exchanges such as [Binance](https://www.binance.com) or [Kucoin](https://www.kucoin.com/). Bittrex (or others) are extended exchanges that supports a huge number of alternative currencies (**altcoins**) outside of the Tier 1. You can use this exchange to trade for almost any popular alternative currency you might want. Remember that only up to 40% of your total crypto investment should be outside of Coinbase and Tier 1. 1. Sign up for a [Bittrex](https://bittrex.com) or [Binance](https://www.binance.com) account 2. Submit any identity verifications (as needed) 3. Transfer Bitcoin from Coinbase over to Bittrex (or other exchange) 4. Wait for the transfer to complete (can take up to a few hours) 5. Buy Tier 2 currencies on this secondary exchange [![](https://i.imgur.com/AcCqzSy.png =500x)](https://bittrex.com) :::warning As of December 15th, Bittrex is temporarily [halting new user registration](https://support.bittrex.com/hc/en-us/articles/115003463331-New-Account-Sign-Ups) as they upgrade their systems. In the meantime, register for [Binance](https://www.binance.com) instead. ::: ### Transferring Bitcoin to Bittrex/Binance Bittrex and most other exchanges operate on exchanging Bitcoin (or Ethereum) for currency rather than USD. **Never setup your bank account or credit card on Bittrex.** Coinbase should be the only site with that information or access to your accounts. Instead, we'll transfer Bitcoin from our Coinbase Bitcoin wallet to our Bittrex wallet: 1. Go to [bittrex wallet](https://bittrex.com/Balance) 2. Hit (+) on Bitcoin in balances section 3. Add a new address 4. Copy the destination address to your clipboard (i.e "1tgj5qmmFteECdqdsf756luhQcsagk9w") 5. Double-check the destination address is definitely correct (this is really important!) 5. Go to [Coinbase BTC wallet](https://www.coinbase.com/accounts) 6. Hit "Send", paste in the address and enter an amount of BTC to transfer 7. Wait a while (could be 30 minutes, or up to a few hours) 8. Once transferred, now you have BTC to trade on bittrex Similar processes for transfer will exist for all alternate exchanges. For example, for [Binance](https://www.binance.com), you can go to the [Funds > Deposits and Withdrawals](https://www.binance.com/userCenter/depositWithdraw.html) and click "Deposit" on "Bitcoin" to copy the destination address. :::info Note that the primary "trading pair" for alternate currency exchanges is Bitcoin (BTC). This means that generally speaking you will trade Bitcoin for alternate currencies. However, many exchanges including Bittrex and Binance also **support Ethereum (ETH) trading pairs** instead. In certain congested situations, you may find that transferring Ethereum instead of Bitcoin is preferable due to faster transaction times or lower transfer fees. Feel free to use either BTC or ETH when purchasing Tier 2 currencies. ::: ### Buying Tier 2 currencies Once transfer completes, you'll see some BTC amount in your bittrex wallet. Now you can begin purchasing Tier 2 currencies to diversify your holdings. The Tier 2 currencies include the following (in order by market cap): * [Bitcoin Cash](https://www.coingecko.com/en/coins/bitcoin-cash) (BCH) * [NEM](https://coinmarketcap.com/currencies/nem/) (NEM) * [NEO](https://www.coingecko.com/en/coins/neo) (NEO) * [Stellar Lumens](https://www.coingecko.com/en/coins/lumens) (XLM) * [Dash](https://coinmarketcap.com/currencies/dash/) (DASH) * [Monero](https://www.coingecko.com/en/coins/monero) (XMR) Note that new currencies can rise and reach Tier 2, but this is a simple short list at present. Generally speaking, Tier 2 currencies will be in the **top 15 coins by marketcap** and will have a market cap of **more than 5 billion** with many having a market cap of over $10B. You can [check the market cap for any coin here](https://coinmarketcap.com/). Market cap is a common way to rank the relative size of a cryptocurrency. It's calculated by **multiplying the price per coin ($1k/coin) by the circulating supply (number of active coins)** to provide a sense of the overall value of a currency. :::warning There is no such thing as a "safe" investment in cryptocurrency. These Tier 2 currencies could be a worthwhile investment or could completely lose their value. Ultimately, the choice of investing is entirely up to your risk tolerance. Always **do your own research** on sites like [Cryptominded](https://cryptominded.com/coins/) and [Cryptonator](https://www.cryptonator.com/) before proceeding. ::: Buying works like this: 1. Go to [Bittrex markets](https://bittrex.com/Home/Markets) page 2. Pick a Tier 2 currency to purchase by exchanging the currency for Bitcoin 3. Click at the top in Bitcoin markets and search for currency (i.e XMR) 4. Click on the page for that currency such as [this one for Bitcoin -> Monero](https://bittrex.com/Market/Index?MarketName=BTC-XMR) 5. Choose an amount to invest in this currency (easiest is to split evenly your money between up to six Tier 2) 6. Go to this [BTC calculator](https://www.coingecko.com/en/coins/bitcoin) and enter that amount. For example, to invest $100 in Monero, type 100 into the calculator. 7. Copy the BTC amount from the calculator (i.e 0.008883) representing that target investment amount 8. On Bittrex, go to the "Trading" section and the "Buy" form on the left 9. Paste the amount of BTC from step 7 into the "Total" field 10. Scroll down to "Order Book" and click the number in any bid in the "BIDS" section 11. The bid price should have been transferred to the "Bid" field 12. Confirm that the bid price you clicked is filled in AND the "Total" BTC entry is correct 13. Hit "Buy Monero" ![](https://i.imgur.com/y8I9uTo.png) Now your bid for $100 of Monero is on the Market. In most cases, in between 1-30 minutes, the order will be completed. You can track both [open and closed orders here](https://bittrex.com/History). Repeat this process to purchase each of the desired Tier 2 currencies. Feel free to continue transferring and investing on Bittrex in Tier 2 over time. The desired target would be to have about 30% of your total crypto investment in Tier 2. If your total cryptoinvest was $5000, you'd want to put a maximum of $1500 into Tier 2 in total spread out across 2-6 of currencies. You can split evenly or read into them and invest more heavily in your favorites. ## Level 3: Expand further into Tier 3 investments The time has come and you are ready for Tier 3! This means you have a total desired cryptoinvest amount (i.e $5k), you have 60% of that invested in Tier 1, 30% of that invested in Tier 2. Hopefully you've seen some profits over time as well across your cryptfolio. Now you are ready to get into the high-risk, high potential reward world of Tier 3 crypto currencies. These currencies are low cost, and highly likely to be totally worthless. **Proceed with caution**, and expect that your investment into these will almost certainly lose money. The name of the game here is research and then the rest is LUCK, plain and simple. Investing in Tier 3 looks like this: 1. Go to websites showing crypto gains and losses over recent windows of times 2. Pick a few nascent coins to research and then bet your money on 3. Transfer Bitcoin from Coinbase to Bittrex as needed 4. Wait for transfer to complete to Bittrex 5. Buy Tier 3 currencies and then hope for the best ### 1. Research the coins by gains and losses Start by learning more about the market in general and getting a sense of the different coins available to buy. Keep in mind there are **over 1400 currencies** and the **vast majority of them will eventually be worth little to nothing**. Here are some of the things you can do to get started: * Go to news sites like [Cryptocurrency reddit](https://www.reddit.com/r/CryptoCurrency/) and [Cryptocoins News](https://www.cryptocoinsnews.com/), [Coindesk](https://www.coindesk.com/), [Coin Telegraph](https://cointelegraph.com/tags/cryptocurrencies). You can check [this multireddit](https://www.reddit.com/user/xgamerx/m/cryptonews/) for aggregated cryptocurrency news. * Check price tracking tools like [Coinzaa](https://coinzaa.com/tools/binex) and [onchainfx](https://onchainfx.com/) to explore the currencies available. Use these to find surging coins that may be accruing positive value quickly. * Check this [market opportunities page](https://chasing-coins.com/market/opportunities) which evaluates cryptocurrencies likely to rise in the near future. * Research coins on analysis sites like [Coincheckup](https://coincheckup.com/) and [Is This Coin a Scam?](https://isthiscoinascam.com/) in order to learn about recent price fluctuations and evaluations of the project technology and community. * Go to [Coinmarketcap](https://coinmarketcap.com/) or [Bittrex markets page](https://bittrex.com/Home/Markets) and start scoping out coins with high "% Change" recently. Click on that column name to sort by percentage gains. Take note of any currencies that catch your eye. * Go to sites such as [Cryptominded](https://cryptominded.com/coins/), [marketwatch](http://thestockmarketwatch.com/crypto/best-cryptocurrency.aspx), and [cryptonator](https://www.cryptonator.com/winners-losers/USD/) to review recent gains and losses. On these sites, take a look for coins mentioned in the news, brought up in discussions online or with large % gains in the last hour, 24 hours or this past week. Generally speaking Tier 3 coins will **have a market cap of less than 900M** on [Coinmarketcap](https://coinmarketcap.com). Make sure to **to carefully do your research** and critically evaluate any coin before putting in your money. You can learn more about this in the [researching currencies](#researching-currencies) section. :::danger Tier 3 coins selected should generally have a [market cap listed](https://coinmarketcap.com) of **between 20M-900M**. Avoid investing in coins with a market cap of less than 20M, as these are often too volatile to be worthwhile in the majority of cases. ::: ### 2. Pick a few coins to bet on Pick a spread of 4-8 Tier 3 currencies to invest in. Based on gains, news, reddit, and anything that catches your eye. Again, this is based on a combination of research, analysis and luck. You hope that one of the picks is surging after you buy, so have some fun with it. :::warning Avoid investing in any coin that has gone up more than 100% in the past 7 days. Go to sites like [Coin Checkup](https://coincheckup.com/) or [coinmarketcap](https://coinmarketcap.com/) and review the price charts with fluctuations (24h, 1d, 7d) for a given coin before investing. Focus on coins that are up less than 100% in 7 days. If the price has spiked up recently, you would be advised to add to a "watchlist" and **wait for the price to come down or stabilize before buying**. This can be hard to do, but in the long run this will save you a lot of money. ::: ### 3. Buy Tier 3 Currencies Take your favorite 4-8 currencies and begin exchanging BTC for them! Go through each and buy orders off of Bittrex just like you did for Tier 2. Repeat this process to purchase each of the desired Tier 3 currencies. Feel free to continue transferring and investing on Bittrex in Tier 3 over time. The desired target would be to have about **10% of your total crypto investment in Tier 3**. If your total cryptoinvest overall was $5000, you'd want to put $500 into Tier 3 in total and spread out across 4-8 of the currencies. You can split evenly or read into them and invest more heavily in your favorites. ## A Deeper Understanding ### Researching Currencies 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 for Tier 3: * **Transaction speed**. How long does processing transactions take for this coin? * **Total available supply**. How much of this coin is currently available? * **Supply limits.** Will there be a limited or unlimited supply of currency? * **Use Case.** Is there a real-world need for this software/currency? * **Adoption.** Real world adoption of the technology * **Investors.** Any big investors in the project? * **Team.** Do the founders have a reputable background? * **Development.** How active is the technical development of this currency? 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. Check [this great post on researching coins](https://medium.com/lunafi-blog/cryptocurrencies-how-to-separate-the-good-from-the-bad-7157fa651146) and sites like [isthiscoinascam?](https://isthiscoinascam.com) to further your own research. ### Currency Categories Almost every currency software has a different intended purpose and individual implementation, with inherent strengths and weaknesses. The following are the four major categories of cryptocurrencies: * **Global Financial Transactions** - Easy way to exchange money for general purpose payment. Examples include: Bitcoin, Litecoin, Ripple, Stellar Lumes. * **Application Platforms** - Platforms by which other currencies can be developed more easily. Examples include: Ethereum, Storj. * **Private Financial Transactions** - Currencies with an emphasis on privacy, anonymity and security. Examples include: Monero, Dash, ZCash. * **Specialty Currencies** - Meant to pay for things on a specific service or specific niche. Examples include: ReddCoin, GameCredits. 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. ### Currency Consensus Algorithms The heart of any cryptocurrency lives within the "distributed public ledger" technology, an immutable record of data, that is agreed upon by a large number of different computers or "nodes". One of the biggest challenges to achieving this in practice is **having every node agree on the accurate state of truth**. To agree on this, every cryptocurrency requires an **algorithm for achieving consensus between nodes**. The ideal consensus algorithm for any currency would be a strategy that is **as secure, efficient and robust as possible**. The major consensus algorithms currently used by currencies are outlined below: * **[Proof of Work](https://cointelegraph.com/explained/proof-of-work-explained)** - The most common approach, used by Bitcoin and many others. Proof of work uses a special type of computation/calculation that every node must perform. These computations ("work") are then used by the network to resolve conflicts and achieve consensus. This approach generally requires powerful computer hardware and costs energy. * **[Proof of Stake](https://www.ethnews.com/proof-of-work-vs-proof-of-stake-explained)** - This is the most famous alternative approach to Proof of Work. The idea is that each "node" establishes trust through a demonstration of how many coins of that type held. The more currency held, the more "weight" their version of truth has on the overall network. This approach requires users to leave a wallet of coins constantly open and connected to the internet. * **[Proof of Capacity](https://themerkle.com/what-is-proof-of-capacity/)** - This newer and largely unimplemented approach requires users to share their available hard drive space with the network. The nodes must each allocate large amounts of hard drive space to start generating new coins. In most cases, this hard drive space is used to store large amounts of data. Note that the specific approach used is important for a currency because this directly impacts the security, speed, and reliability of the currency at scale. You can reach more about these [different algorithms here](https://medium.com/@robertgreenfieldiv/explaining-proof-of-stake-f1eae6feb26f) and [also on this post](https://steemit.com/cryptocurrency/@crypto.hype/proof-of-what-a-crash-course-on-common-consensus-mechanisms). ### What Affects the Price of a Currency? There are many things that can affect the price of a cryptocurrency including: * **Exchanges.** Which exchanges have the currency available? How easy is this currency to trade? The more exchanges that support a currency, generally speaking the higher the price can go. * **Updates.** How active is the development, are there any upgrades being released? A currency solving an issue via an update may cause value to increase. If a new security protocol is scheduled to be released, it might mean a positive sentiment for the market. * **Media Exposure.** How hyped is the currency? Is there a mention on mainstream news, on Reddit, on crypto forums? Cryptocurrencies gain their value when they receive a positive media exposure, simply because more people are interested in buying the coins. * **Wallet Support.** How easy is it to store in a wallet? If a cryptocurrency doesn't have a good wallet, that will hurt price. But as soon as one is available, then it makes the currency much more accessible to the masses. * **Ecosystem.** Some cryptocurrency platforms, like Ethereum, host other applications. These applications, in turn, can have their own currencies or tokens. If any of these do well, this can have a positive effect on the underlying platform currency. * **Government Regulation.** Be aware of current trends in government regulation and steer clear of currencies that could get red flagged by government agencies. ### When and how to rebalance or take profits? One common question is when to rebalance your portfolio or take profits back to your bank account. Generally speaking, a conservative "trickle up" approach is recommended. This works like the following: * Every week or so, check the **Tier 3 small-cap currencies** in your portfolio tracker. If any of them are **over 100% in gains**, sell between 10-100% of that currency back to Bitcoin. Re-invest those profits into either another Tier 3 currency OR move that money into a Tier 2 currency for a longer hold. * Every month or so, check the **Tier 2 mid-cap currencies** in your portfolio tracker. If any of them are **over 150% in gains**, sell between 10-50% of that currency back to Bitcoin. Re-invest those profits into either another Tier 2 currency OR move that money into a Tier 1 currency for a longer hold. * Every 6 months to a year, check the **Tier 1 mid-cap currencies** in your portfolio tracker. If any of them are **over 150% in gains**, sell between 10-30% of that currency back to Bitcoin. Withdraw this money from Bitcoin back to your fiat bank account. In this way, you keep your holdings long-term in the market but also periodically rebalance and reinvest your money as well as take a portion of your profits off the table. You should **track the principal investment made into the cryptocurrency markets** (the amount you've put in of your own fiat). Your long-term goal should be to **incrementally withdraw that principal investment** as your profits increase, significantly reducing your overall risk! :::warning Avoid attempts to engage in high-frequency day trading. Do not buy and sell every day in an attempt to make a profit. Avoid these impulses and instead hold your positions for longer intervals regardless of what happens on a day to day basis. In the long term, this will result in more favorable outcomes. ::: ### Understanding the Market Cycles Like all markets, the cryptocurrency market [goes through repeated recurring cycles](https://www.investopedia.com/articles/technical/04/050504.asp). In order to be an effective investor you'll want to understand the cryptocycle phases as follows: 1. **Bitcoin leads a bull rally.** During this period, things are going well, prices are rising and Bitcoin's price is increasing most of all. Life is good. 2. **Bitcoin reaches new all time high.** At a certain point, Bitcoin hits an all-time high price and everyone is ecstatic! New mainstream investors are pouring money into crypto, more figures being interviewed on television, and self-proclaimed bitcoin/crypto experts comes out to share their perspectives. 3. **Bitcoin’s price somewhat "stabilizes"**. Life is good, everyone is excited about cryptocurrencies. Seems like this could last forever. 4. **A handful of solid altcoins rally behind Bitcoin.** Everyone wants to get into this. Cryptocurrency reaches a new total market cap all-time high. Altcoins prices start to rise almost across the board. 5. **Top altcoins "somewhat" stabilizes, also reaching new all time high.**. All the serious altcoins rise quickly and hit new all-time high prices. Now hype is at a maximum. Cryptocurrency can do no wrong. 6. **Majority of cryptocurrencies follow.** People buy the cheapest coins in hopes that they go up as well (in which they do, even the dead and scam coins). 7. **Majority of crypto including Bitcoin and top altcoins price stabilize.** People start to settle down, hype activities slow. This usually represents the "calm before the storm". 8. **Massive correction starts!** Bitcoins and altcoins starts trending down. People begin to panic and sell their cryptocurrency. Continues to fluctuates for weeks to months, until finding its new floor price. 9. **Cryptocurrency depression**. Drought after the crash. People start regretting not taking profits. Many people have been scared off of cryptocurrency. People sell at lows and wish they would have sold during the highs. There seems to be no signs of hope, cryptocurrency seems to have burst. Keep these phases closely in mind as you begin to get invested into cryptocurrency. Avoid panic selling. Be sure to take profits as described in the previous section. ## Where Do I Go From Here? At this point, you likely have a healthy portfolio of cryptocurrency spread across Tier 1, 2 and 3 currencies. You are comfortable using GDAX and other exchanges for your transactions. You are using a software or hardware wallet to store your currencies. Hopefully life is good! But where do you go from here? Few suggestions: * Buy a [Shift debit card](https://www.shiftpayments.com/card) and start actually spending small amounts of cryptocurrency as a real currency! * Check out [other exchanges for fun](https://coincentral.com/how-to-buy-bitcoin/) to try trading with new sites such as Binance and KuCoin. * Get more involved in cryptonews sites like [Cryptocurrency reddit](https://www.reddit.com/r/CryptoCurrency/) and [Cryptocoins News](https://www.cryptocoinsnews.com/), [Coindesk](https://www.coindesk.com/), [Coin Telegraph](https://cointelegraph.com/tags/cryptocurrencies). * Check out [crypto podcasts](http://badcryptopodcast.com/) or other media such as [DataDash on Youtube](https://www.youtube.com/channel/UCCatR7nWbYrkVXdxXb4cGXw). * Get involved in local cryptocurrency meetups in your city. * Start looking into earlier and earlier stage coins to invest in. Chat with developers. * Look into building your own crypto apps. Or once you hit a certain investment target, just [**HODL** and chill](https://coinsutra.com/hodl-popular-cryptocurrency-terms/). Sit on the investments and let them work for you over time. ### Sophisticated Trading Strategies There are of course much more sophisticated trading strategies not covered in this guide yet. Stay tuned for more advanced guides on trading. In general, there are two major areas to explore when learning more advanced trading strategies: * **Technical Pattern Analysis**. Relying on your own ability or the ability of others to spot common "patterns" in the price movements of a currency over time. Leveraging this technical analysis correctly can help you predict trends while trading. * **Algorithmic Trading.** Relying on software to analyze the market based on code instructions and then having the "bot" (software) make trading decisions for you based on certain logic and triggers. This favors automating the trading process. #### Technical Pattern Analysis Trading cryptocurrencies is less difficult if you know the rules that the market flow follows. Learning these patterns can give you an edge as you look at price fluctuations for a coin. Pattern analysis involves: 1. Checking the price movements for a currency on an a detailed movement chart over a period of time using a site like [Tradingview](https://www.tradingview.com/chart/?symbol=BITSTAMP:BTCUSD). 2. Scanning the recent activity looking for one or more pattern formations to be forming. 3. Deciding that a pattern has been detected and then making a predictive decision based on that new information if appropriate (you think the price will be rising up or down) 4. Buying or selling some amount of a coin based on that prediction. 5. Revising your prediction and adjusting accordingly if your initial prediction was wrong. Each pattern is a different series of price movements that form a particular "shape" on the chart. There are a few major pattern formations to look out for: * [Candlestick Formation](https://steemit.com/trading/@stranger27/learning-to-trade-cryptocurrency-popular-single-reversal-candlestick-patterns) * [Head and Shoulders](#) * [Double top and double bottom](#) * [Triangle Pattern](#) * [Flag Pattern](#) Read more about how to interpret each of them [here](https://steemit.com/trading/@stranger27/learning-to-trade-cryptocurrency-graphic-analysis-popular-patterns) and [on this cheatsheet](https://steemit.com/cryptocurrency/@cryptoroger/cryptocurrency-trading-signals-chart-patterns). :::warning Pattern analysis is at the same time both seemingly simple yet also extraordinarily complicated and nuanced. Predictions based on these patterns can be wildly incorrect as the pattern is all based on individual interpretation and are **not at all uniformly reliable**. Many people find their predictions early on are almost always wrong, especially at first. You'll need up intuition over time by making mistakes. However, they can provide you insights into the market that can provide you a significant advantage when done right. As with everything, proceed with caution. ::: #### Algorithmic Trading with Trading Bots and Scripts For more advanced trading, the best approach is through software automation. This is known as **Algorithmic Trading**. Essentially software that is buying and selling for you based on a coded algorithm. You do not have to be a programmer or mathematician, but that will likely give you an edge. Anyone can do this. All of the above services offer bots that you can rent, for a fee of course. * [Cryptotrader](https://cryptotrader.org/) - Platform built to allow experienced bot developers to make profit by renting out their trading strategies to investors that lack programming experience. * [Haas](https://www.haasonline.com/pricing/) - Service that provides a wide range of bots capable of trading between 500 altcoins. You as an investor can develop your own script bot, to which the sky is the limit in its capabilities – or choose between a wide variety of backtested clones. * [Gecko](https://gekko.wizb.it/docs/introduction/about_gekko.html) - Free and open source Bitcoin TA trading and backtesting platform that connects to popular Bitcoin exchanges. [Video here](https://www.youtube.com/watch?v=3IWoRzqCSRE). * [Zenbot](https://github.com/carlos8f/zenbot) - Open-source Node.js trading bot * [Optimal Buy GDAX](https://github.com/brndnmtthws/optimal-buy-gdax) - Scheduled buying of BTC, ETH, and LTC from GDAX optimally ## Appendix and General FAQ ### Origins of Bitcoin? Satoshi Nakamoto is fictional name provided as the inventor of the first ever cryptocurrency, Bitcoin. Some believe that Satoshi Nakamoto is, in fact, a pseudonym for a group of people. The community believes that Nakamoto started working on the project in 2007. In 2008 the Bitcoin domain was registered on a site that allows the anonymous registration of domain names. Bitcoin.org was up and running a year after Satoshi started working on the concept. Nakamoto then quickly moved to publish a piece that explained in full what Bitcoin was, how it worked and how double spending would be prevented. The first mining took place in January 2009 after the project was registered on SourceForge.net – a website focused on open source software. A few days later the first ever transaction using cryptocurrency took place. Bitcoin was actually intended to be a peer-to-peer electronic cash system and not a currency. Many had tried and ultimately failed in their attempts to design digital money previously. He wanted to create a digital payment system that was decentralized in the same way files are shared over a peer-to-peer network. The public bitcoin transaction log shows that Nakamoto’s known addresses contain roughly one million bitcoins, or over $2 billion. To this day the identity or identities of Satoshi Nakamoto is or are not known, but there is no doubt that Satoshi Nakamoto has already left an incredible legacy on the financial industry. ### Um, wait a second. Why do different currency exchanges have different prices for the same coin? Check the [bitcoin price here on Coinbase](https://www.coinbase.com/charts). Now check the price on [this bitcoin price tracker](https://www.coindesk.com/price/). Chances are the prices are not actually the same between these two places. This reveals a larger truth which is that different trading platform **are not synchronized with each other**. Meaning their prices are independent of one another. Then coin prices vary because the price in each platform depends on the traders themselves. When you buy a currency, another person is selling that currency to you on the exchange. The buyer "bids" and then a seller accepts the bid. The buyer can pick any bid they want, and sellers are able to decide if they want to accept. Now imagine this happening at high volume with thousands of buyers and sellers. The point in which the bids are accepted becomes a range that determines the "market price" at any given point. On a particular exchange, as the bids that are accepted by sellers increases or decreases en masse, this is what controls the actual "price" listed on that exchange. This is also what determines if a particular currency is going up or down. Since exchanges each have their own different market prices, a person could in theory buy a bunch of coin on one market and **sell it on another market** to make a instant and massive profit. This is a very common trading strategy called **Arbitration**. This means buying on an exchange with the lowest price then transfering the coin into the exchange with the highest selling price. You can [read more about this here](https://www.coinspeaker.com/2017/06/10/real-life-example-arbitrage-bitcoin-ethereum/). ### Will I be charged a fee every time I move them from a wallet to an exchange, exchange to wallet, and wallet to wallet? Should I try to consolidate my transfers to as few as possible? Yes, each coin has different fees, but Bitcoin itself does have high fees at the moment. You can [learn more about Bitcoin fees here](https://arstechnica.com/tech-policy/2017/12/bitcoin-fees-are-skyrocketing/). ### If everyone just makes up random addresses for their wallets, how am I guaranteed not to duplicate someone else's address? Because there are so many addresses, more than the number of atoms in the known universe, that statistically nobody will ever randomly guess the address of someone else. ### Is the total value of Bitcoin (or any other coin) equal to the total amount of Fiat paid in to buy in? Or are there other factors at play? It's value is approximated by the value others recently paid to get a coin for on exchanges with a large volume of buyers and sellers. As there is high demand for buying, then the price goes up in the "bids" on each exchange. Price for a currency is affected [by the factors here](#what-affects-the-price-of-a-currency). ### What is a sell or buy wall and why should I care? A buy wall happens when the amount/size of buy orders for a certain coin are much higher than the number of sell orders. The wider/taller a buy wall is the better it is. It’s a good sign when traders see a buy a wall since it shows good belief about the current state of that coin. A sell wall shows some tough times for a cryptocurrency. In this case, the sell walls build traders pile in to sell. A big sell-off is underway and traders usually fill the highest buy order that is viewed on the market. In addition, whales (big players) effectively control the prices of crypto-currency when they’re able to do that, in part by creating "artificial sell walls". Check [this article for more details](https://smartoptions.io/read-buy-sell-walls-crypto/). ### Are there any crypto currencies that have been on the market, and then crashed and disappeared? I know investing in crypto is risky. But are there any that don't even exist any more? Yes, many of them will fall to very very low values and then become obsolete with very little trading occurring. These currencies are essentially "dead". ## More Cryptocurrency Investment Advice There are 10 very important pieces of investment advice below that will take you quite far and will make you much more of an intelligent crypto investor: > Don't have more than 5-10% of your entire investment portfolio in crypto, and only invest what you can afford to have locked in for the long term. Large corrections or downturns will inevitably happen, so you must be comfortable with losing 50-75% of your portfolio value in case of a crash and sitting back and letting it slowly recover. I would recommend that once you double your profit or more, pull out the principal so you are only playing with profits. > Don't chase a pump (absurdly quick rising price of a coin) Never buy on rapid upswing on the candlestick chart if you're not sure why it happened and can't figure it out. The reason is likely that it is a "Pnd". PnD is "Pump and dump" and it refers to a trading scam where people organize to coordinate the laddered purchase of an asset, then wait for others to come in at some delay and further increase the price before coordinating the unloading of their position once a specific price target is reached. This is illegal in the stock markets, but since cryptomarkets are unregulated such schemes are rampant. There are many PnD groups and today they are largely organized on Discord channels. They are now structured into tiers where the top tiers get a signal earlier than the bottom tiers and usually by the time the bottom tiers get the signal its too late, so unless you pay money to part of the top tier or have a connection with the admins its not even profitable. They are bad for the market as a whole and they prey on those who are looking for short term moons to latch onto. Don't look for things that you think will moon today, look for investments. > Holding will give you more returns over a year than day trading. You will find that most people who made six figures or more in crypto did it by holding over the long term, very few actually get rich by day trading. > Take your time and research what you are putting your money into. I cannot stress this enough, you are buying an asset with your hard earned money, and it should have some utility. Start by reading the whitepaper that is on the main site for the coin. You can avoid a lot of scams by simply critically evaluating the question: "Why does this coin exist?" Is it simply trying to apply a blockchain to something that doesn't need it or is there a transactional inefficiency/problem that the unique properties of the blockchain can solve? For example, the blockchain is immutable so the use case of tracking designer luxury goods across a supply chain and guaranteeing authenticity of a item makes sense. On the other hand trying to push the blockchain transactions into dentistry makes little sense. Designer good companies have a problem with conterfeit goods entering the supply chain and need some solution, dentists don't have a problem with charging people on their VISA for fixing cavities. Ask yourself what value the actual token would have in the ecosystem its part of. Does it pay out some kind of dividend like some coins, or is its value in that its used as part of transaction fees and is thus being burned? You can make a simple checklist for every crypto and just answer these questions to yourself for each coin you look at: * What is the problem or transactional inefficiency the coin is trying to solve? * What is the Dev Team like? What is their track record? How are they funded, organized? * Who is their competition and how big is the market they're targeting? What is the roadmap they created? * How will they attract their target market, how is their marketing? * How does the coin derive its value? Is there some sort of dividend structure, profit sharing plan, or is it a store of value within a digital economy? What is the float schedule like going forward (ie. how many coins will be released or burned)? > Learn to recognize FOMO when it arises within you If you ever feel this itch to get in on an rapid upswing because you don't want to miss out on some new development that is causing it, stop yourself from knee jerk reacting to this feeling. This is called FOMO: "Fear of missing out" and its what drives the market now. It happens to everyone and it leads to emotional investing and knee jerk buying/selling. > Recognize that lots of people actually are also losing money. Right now there is a confirmation bias happening where people who get quick gains go out and brag to all their friends all over social media, leading to this illusion that making money trading crypto is a surefire way to make money. That dopamine fix you get from seeing the position double will make you feel like a genius and its human nature to want to advertise it. What you forget is that those who lose money keep quiet about it and don't advertise their failure. > Accept that you will miss out on a lot of moon missions, and that's perfectly okay Right now the crypto market is like a giant dumb money party filled with coked up headless chickens running around throwing money at every shitcoin with a low nominal price hoping it goes to $10,000 like Bitcoin. Everyone is a genius in a bull market, and this creates a feedback loop of more money come in. You will miss out on these gains, but don't let that get to you. Sure by not buying into Tron at $0.07, you missed the big moon to $0.25. Buy you will also avoid FOMO-ing in and then getting stuck with the crash that will follow right after (its at $0.11 right now). By taking your time to make your decisions you end up focusing on the fundamentals rather than short term movements. > Think of not only individual position, but how they fit in your portfolio and your diversification Its good to diversify across different opportunities, but too much diversification is just saying you don't feel confident about your positions and are just casting a wide net hoping to hook something. Generally 6-12 positions is the ideal diversification spread in my opinion. It gives you a good spread across sectors, doesn't spread you too thin and any more than that is too much to keep track of. I like to think of the portfolio in terms of these segments: * Core holdings - BTC, Ethereum, LTC, etc. * Privacy coins - Monero, Zcash, PivX, etc * Finance/Bank settlement coins - Ripple, Stellar, etc. * Enterprise Blockchain solutions - VeChain, Walton, etc. * Promising/Innovative Tech coins - Raiblocks, IOTA, Cardano, etc. * Speculative/Moon shots - BountyX, FUN, etc. Your risk tolerance should dictate how much you allocate between your Core holdings (which are generally considered more "safe" since Bitcoin and Ethereum will be around for a long time) and the various segments. I personally am okay with a 30% core holdings, 70% across various other segments. However 60/40 splits between core and other segments is probably a good starting point for most beginners. You can make visualizations in excel with pie charts and keep tabs on your segment allocation. > Look for red flags and recognize that 90% of these coins have a net present value of zero. Look at every new coin you evaluate with a skeptical eye, because now there is way too much hype for vaporware and coins that have no use case and are just yet more ERC20 (Ethereum-based) get rich quick scams by the founders. For a lot of these coins there is a lot of shilling that tries to pray on your emotions. Recognize these red flags: * Massive portions of the float are assigned to the founders of the coin. Anonymous teams or members with a sketchy pasts are also a huge red flag. * Use case does not require or benefit from a blockchain * Empty Github repositories, or there being scant useless code * Vague whitepapers and websites filled with technobabble that sounds impressive to people who don't know tech. * No clear or well developed roadmap * A team that focuses almost entirely on shilling rather development. ## Further Resources ### Market News and Tools * http://www.coindesk.com - Overview of what's going on in the crypto world * http://cryptopanic.com - An aggregator of various crypto sites and news, filterable. I use the pro version to customize the feeds but the free version is good enough for most. * http://coinmarketcap.com - Not just for checking prices, they also are the most convenient way to start your research as they have the blockchain explorers, official website links and also a useful API that can be linked to Excel. * http://cryptomaps.org - Visualization of price across different segments, primarily hashing functions and ICO release dates * http://onchainfx.com - A better version of coin market cap, has all sort of columns and you can add flags. Only downside is it only has 61 cryptos, but its always adding news ones. * https://coingenius.co/coins - Interesting notes on pros and cons of different coins * http://icotracker.net - I like this site for looking at what ICO are coming up * http://icobench.com - Another ICO tracker which does nice summaries, shows teams, milestones, financials and gives a rating for each ICO * http://solume.io - Compares the number of Twitter mention increase decrease to price * http://eveningstar.io - This is basically like Morning Star except for cryptos * https://bitcoin.tax - for calculating taxes owed on your crypto gains * [BitcoinTalk Forums](https://web.archive.org/web/20180110174213/http://bitcointalk.org/) - Probably my favorite place to discuss crypto. ### Portfolio Tracking Mobile: - [Delta iOS](https://itunes.apple.com/us/app/delta-crypto-ico-portfolio/id1288676542?mt=8) and [Android](https://play.google.com/store/apps/details?id=io.getdelta.android&hl=en) Web: - [Cointracking.info](https://cointracking.info/) - [Coin.fyi](https://coin.fyi/) - [Coinloop](https://coinloop.io/) - [Cryptocompare](https://cryptocompare.com) ## Donations :::info **Found this guide helpful?** I hope to write more beginner, intermediate and expert guides on Cryptocurrency. I accept Bitcoin donations at wallet: `1397Yc3SW6TKmk2cKcxLgkKWoBzka7jPoZ`. Thanks for reading! :::