After publishing my first article, “Thanksgiving (Crypto) Question of the Year: Is it too late to get into Cryptos?” quite a few people called / texted me to ask “How do I buy Cryptos?” so I decided to put together a quick guide to walk you through the process. It is very similar to purchasing stocks on an exchange account (i.e. E-Trade, Scottrade, Fidelity etc.).
DISCLAIMER: This post is not investment advice. Please consult your financial advisor and do proper due diligence when making investment decisions regarding cryptocurrencies.
Coinbase / GDAX & Gemini are three prominent exchanges to purchase Bitcoin, Ethereum, & Litecoin. Coinbase is great, and another good alternative is Gemini. Coinbase owns GDAX, so if you have an account with Coinbase, you should have an account with GDAX automatically.
Before jumping in, here are a few gems of knowledge of buying for FTCB — First Time Crypto Buyers that people have recommended in the past:
- Only invest as much as YOU ARE WILLING TO LOSE.
- Have a plan in mind for purchasing cryptos in terms of portfolio allocation i.e. [50% Bitcoin, 40% Ethereum, 10% Litecoin — just as an example, not real numbers, 100% Bitcoin is also fine]
- Given the volatility, it is IMPOSSIBLE TO TIME THE MARKET, so do not try to time it. Instead, use Daily Cost Averaging (DCA) meaning spread your investment over a couple of days. For example (again fictitious numbers) if you have $1,000 to invest and you want to just buy Bitcoin:
i. $250 of BTC on 11/1
ii. $250 of BTC on 11/2
iii. $250 of BTC on 11/3
iv. $250 of BTC on 11/4
3. This is a volatile market — do NOT Sell Low. Most people will see a dip, get scared and sell. If this is you, you have
a) Not listened to Rule #1
b) Cryptos might not be for you
There are corrections that happen from time to time, which happens with almost every single investment asset class including the S&P 500; but overall the top Cryptos have performed very well.
4. Take security seriously, use Google Authenticator and set up 2FA (2-Factor-Authentication) when you can, and not via SMS messages (more on this below).
5. Learn about the space. You do not need to be a master cryptographer to understand Bitcoin and Cryptos, there are basic articles, podcasts, YouTube videos, etc. that you can use to learn about the subject. It is a really exciting topic, do not be lazy. Some of my favorite resources below:
a) Tim Ferris (Podcast): The Quiet Master of Cryptocurrency — Nick Szabo
b) Mohit Mamoria (Article): The ultimate 3500-word guide in plain English to understand Blockchain
c) Banking on Bitcoin (Netflix Documentary): Banking on Bitcoin
d) Crypto (Blog): Master the Crypto
e) Joel Monegro (Blog) — Union Square Ventures
f) Fred Wilson (Blog) — Union Square Ventures
6. You can buy/sell on Weekends & Holidays!
7. [Advanced] Investing in Alt Coins i.e. Bitcoin Cash, Ripple, Dash, IOTA, NEO, Monero NEM, Ethereum Classic, Lisk, Qtum, EOS, Zcash, OmiseGO, Cardano, Stellar Lumens etc. — this is more for advanced crypto traders (more on this topic below). If you are buying Cryptos for the first time, would not recommend starting out with these. Additionally, be sure to follow any financial regulations when it comes to buying / selling Alt-coins.
Here is how you can sign up for a Coinbase / GDAX Account or Gemini:
Coinbase: Click here to sign up for an account (feel free to use my referral link :)
a. Click “Sign up”
If you are an individual, click on “Individual”, fill in: First Name, Last Name, Email Address, State. Verify you are not a robot, and Agree to the Terms & Conditions.
b. Verify your email address, by clicking on the link that is sent to your email.
c. Verify your cellphone number (for safety reasons) using the code that is sent to your phone.
d. Once your account has been created, you will want to ‘Verify your Identity’ so that you can start making purchases.
i. Click on Settings
ii. You will see a line that says, “ You can enable a USD Wallet on your account by verifying your identity.”, click ‘Verify your identity’
iii. Follow the process and fill in the required information from Coinbase,
“Financial regulations require us to verify your identity. Once complete, you can buy, sell or transfer digital currency. This will not impact your credit score. Learn more.”
iv. Once you have verified your identity, you will want to link your bank account so you can start transferring funds to start purchasing Bitcoins, Ethereum, & Litecoin.
v. One highly recommended tip is to set up Google Authentication for signing into your account. You can do this by going through the “Security” under “Settings” in your account. Here is an article that explains how to set up Google Authenticator.
vi. After this is set up, you can start wiring money to your account, use your debit card OR credit card (with higher fees) to make purchases.
vii. To wire money to you account, Click on Accounts, Scroll to the bottom of the screen (on the left hand side), and under “USD Wallet”, click on “Deposit”.
vii. To make purchases with your debit /credit card — simply click on “Buy/Sell”, choose what you would like to buy i.e. Bitcoin, Ethereum, & Litecoin; and fill in what you want to purchase. Note: there will be fees to purchase coins.
viii. When purchasing Bitcoin, Ethereum, or Litecoin — your purchases are instant, but it might take a few days for the currencies to get into your account. Do not freak out, once your transaction is confirmed, Coinbase does deliver.
viiii. Each coin has its own wallet. If you buy Bitcoin it goes into your “Coinbase Bitcoin Wallet”, if you buy Ethereum it goes into your “Ethereum Wallet”, etc. If you have a lot of cryptos consider getting a hardware wallet i.e. Ledger or Trezor (you can also use the Bitcoin Vault feature on Coinbase — for keeping your bitcoins even more secure).
i. If you are a slightly more advanced trader, and want to use an actual trading platform — you can sign up for GDAX. Coinbase owns GDAX, so you will not have to sign up all over again, you should automatically have a GDAX account if you sign up for Coinbase, or go through a very similar signup process.
ii. GDAX is a platform where you can also set up advanced trades including, market, stop-loss, or limit orders.
iii. The benefit of GDAX is that there are lower fees for purchases of BTC, LTC, ETH, and the cryptos get added immediately into your wallet.
iv. You can also transfer funds (USD, BTC, ETH, LTC) easily between GDAX & Coinbase.
v. You can transfer money from your bank account to GDAX, which can take up to 5 business days (free) or send a wire (usually 1 business day) with a fee.
i. Register for an account, fill out your full name, email.
ii. Enable Google 2FA (Google Authenticator)
iii. Link your Bank Account
iv. Verify your identity
v. The steps should be similar to the ones in setting up a Coinbase account
Investing in Alt-Coins (Advanced)
A quick note on investing in Alt Coins i.e. Stellar Lumens, Straits, NEO, ZCash, Monero, Ripple,Dash, IOTA, EOS, OmiseGO, Cardano, Bitcoin Cash etc. In order to invest in these you will need to use different exchanges. These other coins are usually bought using Bitcoin & Ethereum instead of USD. Make sure you have a good understanding on how these alt-coins trade before making investments.
In order to trade alt-coins, you will need to set up alternative accounts other than Coinbase / GDAX / Gemini.
Also, you will need to make sure that you know how to send / receive Cryptos across exchanges; it is a very easy process BUT you need to make sure you do it correctly. If you send your Crypto to the wrong address — you will not be able to get a refund / recover it (unless the receiver actually returns it to you out of kindness).
- Bittrex, Poloneix, Kraken are three exchanges that enable you to trade alt-coins.
- The sign-up process is similar to all other exchanges.
- In order to buy Alt-Coins you usually transfer Bitcoin or Etheruem to one of these exchanges and use that to purchase an Alt-coin.
Example: Purchasing NEO
Coinbase (Bitcoin) [send]→ Bittrex (Bitcoin) [purchase]→ Bittrex (NEO)
i. On your Coinbase account, click on “Accounts”
ii. Under “Your Accounts” you should see “Bitcoin Wallet” with “Send” & “Receive” buttons. Since we are sending Bitcoin to our Bittrex Account, click on “Send”.
iii. You will see a form that asks you to fill out the Bitcoin Address you want to send your Bitcoin address to. Here is where you will need your Public Bitcoin Address from Bittrex. On Bittrex, click on “Wallets” and you should see a “+” next to Bitcoin. You should see an “address” but if you do not, you can click on “Generate New Address.” Once the “Address” is populated copy that full “address” and paste it into the Coinbase “Receiving Address.” This is the hardest part, double check to make sure the address is correct.
iv. Put in the amount of Bitcoin you would like to send to Bittrex, hit “Send.”
v. Send Bitcoin to your Bittrex Address.
vi. On Bittrex, Find the BTC/NEO market and click on the link
vii. Under “Trading” it should show your current “Bitcoin Balance”, (1) Choose how many “Units” you want to purchase of NEO, (2) Choose your “Bid” price i.e. Last, Bid, Ask; (3) Type of order i.e. limit / conditional, (4) purchase.
viii. Depending on the volume of the alt-coin and your “Bid” price, your order might fill completely or partially fill. It is not necessary that your full order will execute unless there is a match for you order.
ix. Similar process to sell your NEO as well into BTC.
- This should be enough for starters, for more advanced questions, don’t hesitate to reach out via the comments section!