Beginning Investing in Cryptocurrency (Bitcoin, Ethereum, etc.)

21 Jun 2017

So most people nowadays have heard of Bitcoin, and maybe now Ethereum. It's a common belief that the ship has sailed with the big increases in value that you may hear about in the news, but that's not actually true.

What you may not know about is that there are hundreds of different Crypto-currencies, with Bitcoin and Ethereum just being two of them.

I won't cover mining in this article, but again, whilst mining Bitcoin and Ethereum may be a bit pointless now, there are many smaller newer currencies that you can mine which may do well in the future.

So why so many different coins? Each one has been created with different goals, technologies, ideas, etc and some are just plain copies and scams for people to cash in. When a new coin is created then it generally goes to a "initial coin offering" (ICO) where people will get hold of the initial coins and then different exchanges will start to list the coin to allow people to buy and sell. Before investing in any coin then I recommend researching the coin thoroughly - what is it trying to solve? Is the development team committed and professional? etc. The best places to start are the website of the coin itself, forums such as https://bitcointalk.org (where coins are usually announced first), googling for articles, looking at places like reddit, etc.

Buying Bitcoin

So how to buy Bitcoin? Well from the UK I would suggest https://coinfloor.co.uk/ or https://bittylicious.com/ - You need to sign up for them and supply some personal information to become verified and then you can buy small to large amounts of coin using a Bank Transfer (or Credit Card on Bittylicious). Coinfloor is also a wallet so you can buy coin and leave it there - great if all you want to do is buy Bitcoin. Bittylicious needs an address to send coins to, so you could send them directly to an Exchange.

Bittylicious allows buying smaller coins direct with GBP, which can be worth it but check the rate on the Exchange to see if it's cheaper to buy Bitcoins and then convert them on the Exchange.

Look out at the fee's on whatever site you use, because they will take a cut and transferring to an Exchange will also cost a small amount.

Exchanges

To buy and sell different coins then you need to sign up to an Exchange, these work very similar to how the Stock Market exchanges work and once signed up you can deposit money (different exchanges allow different currencies to deposit) and then you can see real time market information. This can be daunting, but it's not as complicated as it seems. Generally most exchanges use Bitcoin as the base currency, and you need to deposit Bitcoin into them to begin. Coins can be sold in vest small amounts so you can start with very small amounts to get a feel for how they work.

I recommend using https://poloniex.com/ or https://bittrex.com/ for an Exchange. https://www.kraken.com/ is also a very large one. Poloniex has good tooling and the major coins but the mobile site isn't very good, Bittrex usually has the smaller coins (higher risk).

On Poloniex you can easier see all the coins you own and put in Buy or Sell orders to exchange coins. If you put in orders at the current going rate then they go through instantly. You can also put in orders at higher or lower amounts if you think the rate will increase/decrease.

Which Coins?

So this is the £100 question... there is a lot of speculation and if you browse around you will see a lot of "buy this one now!", "it's going to the moon", etc and to be frank, a lot of this should be ignored. The difference between the Cryptocurrency market and the Stock Market is mainly the type of people on the Exchanged. The Cryptocurrency market is dominated by younger, less-experienced, people and therefore can go up and down very quickly. This isn't a bad thing though because you have a few options:

Long Term Investment

Research the top 10, 20 or 100 coins right now and choose a selection that you think are strong. Ideally include Bitcoin and Ethereum in your portfolio because they are the two strongest and therefore whilst not increase as much, should be more stable. The top 10 coins right now are:

  • Bitcoin
  • Ethereum
  • Ripple
  • Litecoin
  • Ethereum Classic
  • NEM
  • Dash
  • IOTA
  • BitShares
  • Monero

I'll put up posts with details of the coins, comparing them, but for now you will need to research them yourselves. Just be very careful of what you read and take in lot's of opinions to make your decision.

Once you have bought them then you should ideally transfer them to a Wallet to keep them safer. I'll post more on this at a later date, but you can leave the coin in the Exchange for the short term.

With Long term investment you will find the amount your portfolio is worth can go up and down a lot daily, but overall you are hoping for increases over months and years. Blockfolio is a good app for keeping track of your Portfolio.

Trading

Trading is where it can be fun, or stressful, depending on your mindset. I would personally recommend putting 80% of your money in long term investment and 20% or less in Trading which you can afford to lose.

Here you can benefit from the "hype train" of different currencies, by keeping on top of the charts in the Exchange and on news sources such as the Twitter accounts of the coins, Reddit, Forums, etc. then you can attempt to buy low and sell high on coins without caring much on the technology behind them. As an example, the coin Antshares went up 455% in the last week alone because of an upcoming announcement causing mass speculation and once people see the increase they jump on the train. This can be great if you buy low and sell high - just need to be careful to not be greedy. Personally I recommend putting in a sell order when it hits an increase you would be happy with that isn't too crazy, e.g. if you think Antshares could have gone more than 300% put a sell order in at 200% and be happy when you double your money. Sure you could have made more, but it's more of a risk.

One more example right now is NoLimitCoin, currently at 2625% increase in the last week. It dubs itself as "Cryptocurrency meets Fantasy Sports" but doesn't matter whether you believe in the strength of the coin if you jumped on the hype 6 days ago.

https://coinmarketcap.com/ is a good website for an overall view of coins, with links to the website, social accounts, etc.

Hopefully this helps some of you, have fun and remember, only invest what you can afford to lose. It's a new area of currency so not without risk.

Posted by makit
Last revised 21 Jun 2017 09:41 PM

makit / Martyn Kilbryde

Professional software developer, ponderer and eccentric.

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