Over the past few years I’ve been asked countless times about how to get started with bitcoin and crypto.
There’s a tremendous amount of horse-shit out there on the big wide web; including naivety and fraud.
Having worked in the crypto industry for several years, and a bitcoin buyer since 2013, here’s all the info I would share with friends and family to help get them started...
The Beginners Guide to Cryptocurrency for 2018 - 2019
Gavriel Shaw, www.gavrielshaw.com
First things first..
Disclaimer: Nothing herein is intended as financial advice. It is for educational purposes only. Any actions taken are your own full responsibility. Money can be made or lost. If you want ‘financial advice’ speak to a qualified financial advisor. The contents are the author’s personal thoughts only, not an official communication from any client or company with whom the author is connected on a professional basis. This guide is not intended as financial or investment advice. Caveat Emptor (buyer beware).
First published Dec 2017. Updates Jan 2018, Apr 2018, Nov 2018.
Investment Opportunity of a Lifetime?
First, Explore the Market
Deciding What To Buy
How do you actually buy cryptocurrency? (exchanges)
How to keep your crypto safe (wallets)
Cryptocurrency Transfers and Dealing with Banks
Margin trading, day trading and swing trading
Bitcoin is the gateway drug of cryptocurrency.
It gives you a good hit, but isn’t the final option.
First let’s lay the foundations:
What is blockchain, cryptocurrency, and the token economy?
Here’s my attempt to describe ‘blockchain’ in 3 bite-size chunks:
- Encrypted blocks of data…
- Chained together to form a distributed ledger of transactions (a record of accounts)…
- Requiring no central database (such as at a bank) to confirm those transactions.
Don’t be. We don’t need to be electricians, engineers, or computer scientists to grasp the concept of light bulbs, cars, bridges, Internet or email.
Cryptocurrency is currency (a shareable exchange of value) built using digital encryption. Just like e-mail is a digital form of mail.
7 Broad-Brush Facts
- Bitcoin was born in 2008 with the publication of the Bitcoin WhitePaper by Satoshi Nakomoto, intended as ‘peer to peer electronic cash’ to replace central banking.
- Ripple (ripple.com) founded in 2012 as ‘OpenCoin’, intended as a cryptographic payment solution, and is now being used by hundreds of banks around the world. Possibly soon to be thousands. Global reserve currency of the future?
- Ethereum introduced blockchain-based ‘Smart Contracts’ in 2015, allowing ownership assignment to be recorded and transferred automatically based on the rules managed between computers.
- ~1500+ Ethereum-based tokens have been created by startups for crowdfunding (usually called ‘Initial Coin Offering’), and to manage various types of smart contract transaction — from invoice finance auctioning (e.g. https://populous.world) to distributed graphics processing (e.g. https://golem.network).
- As of 31st October 2018, Bitcoin is now 10 years old, and has several versions based on code alterations and ‘chain splits’: Litecoin, Bitcoin Gold, Bitcoin Diamond, Bitcoin Cash, etc. Will the real bitcoin please stand up.
- Other blockchain platforms exist now too, such as EOS, NEO, and so on.
- The pace of the crypto industry is accelerating towards mainstream adoption, with Forbes publishing a ‘Crypto Markets’ site forbescrypto.com as of late 2018, and Morgan Stanley recognizing cryptocurrency as a ‘New Institutional Investment Class’ as of October 2018.
2. The Investment Opportunity of a Lifetime?
Some say crypto is a gamble, others call it speculation, others feel it’s like investing in the early days of the Internet; buying Apple, Google and Microsoft at the beginning.
Here’s a video created by fans of Dogecoin, which achieved hundreds of millions of dollar total market cap despite being created in-part as a joke, as admitted by its Founder.
As the digital economy grows, the value of many cryptocurrencies will [likely] sky rocket...
Yet many projects will also fail, just like bankruptcies ‘in the real world’, with their cryptocurrency value ending up worthless.
Some projects from the 2017 wave of ICO’s were outright scams, having nothing to do with actual encryption or blockchain technology at all.
Question is… imagine having a chance to invest during the early days of the Internet.
Would you do it?
How would you judge each company opportunity?
How would you diversify to spread risk and maximise your upside potential?
Countless memes, price projections, and insider jokes abound about how high the value of cryptocurrencies could go.
With that backdrop of hype in mind, let’s make a start on researching the crypto market, in the hunt for real potential opportunity.
3. First, Explore the Market
To date, https://coinmarketcap.com provides the best view of the crypto marketplace, including:
- How much money each crypto is measured to be worth in total (market cap)
- How much of it is bought and sold per day (trading volume)
- How many of each token is available in total (circulating supply)
- How much each token has gone up or down in value over the past 24 hours (the little graphs show the past 7 day price fluctuations).
From https://coinmarketcap.com, click on any one of the cryptocurrency names to visit a page with further details. From there you’ll find a link to its website, and a more detailed price chart, such as the one for Litecoin.
4. Deciding What To Buy
Gavriel, what crypto should I buy? How much should I invest?
Beware: The moment you ask someone a ‘should’ question, you might be handing over your personal power by seeking an external higher authority to tell you what to do.
The philosophy of cryptocurrency is de-centralization; a movement away from central authorities telling us what we can or can’t, should or shouldn’t do.
Thus it seems ironic that beginners ask what they should do with crypto. Instead, try re-phrasing ‘should’ questions with more self-responsibility and clarity, such as:
“Investing in cryptocurrency seems smart but I’m not sure how to assess the risks. Any suggestions for how to get a better picture?”
“I want to invest and I’m considering $5,000 total. What’s your experience of how much people typically decide to put in?”
“So far my idea is to diversify among a handful of crypto’s. Can you suggest a few scenarios for how I might do that?”
These may also be difficult questions to answer, but they are far more empowering than questions like:
“How much should I invest in crypto?”
“Which crypto’s should I invest in?”
“How long should I keep them until I cash in?”
What’s more, the ‘should’ questions are also impossible to answer:
Firstly, because I’m not a financial advisor and not qualified to give anyone individual investment advice.
Secondly, because it depends on various factors such as your financial health, your appetite for risk, your approach to trading, how closely you want to monitor your portfolio, how soon you want to see profit, how much profit you want to aim for, and possibly a few other considerations to boot.
The essential point of the growing cryptocurrency industry is that each person takes sole responsibility for their choices, and outcomes.
Carve Your Crypto Destiny
Go at your own pace, but do start now. Research until you feel comfortable making your own choices. Dip your toes. Test the waters. Get a feel for the process. Begin to learn now. Glean insight from multiple sources.
Investing (or speculating in a brand new industry) is a learning curve for all of us.
Write down the list of key questions you think of, and tick them off one at a time as your self-education progresses.
Hopefully I’ve helped to answer quite a few in this Beginners Guide.
A good place to start is with a sector you already have interest or knowledge in, perhaps sport, health, banking, communications, or artificial intelligence (links take you to ICObench category pages where you’ll find a long list of new blockchain startups).
Sidenote: What’s an ICO? An Initial Coin Offering is a crowdfunding event in which a new blockchain startup raises capital by selling smart contract tokens to hopeful investors. Most ICO’s of 2017 failed or lost value. Some have done remarkably well and have a very bright future.
Chances are there will be a few blockchain startups related to areas of personal interest and knowledge. It might be a good idea to start with those. Read about the company, the team behind it, their product road-map, review their list of technology partners, investors and advisors.
Perhaps you’re knowledgeable about co-working office space.
Well, there’s a crypto for that.
It’s called PrimalBase.
Here’s a pic I took in their new office in London.
I own a PrimalBase token (PBT), which gives me free access to the co-working office space.
How cool is that?
…Or, you could take another approach and review the current Top 10, or Top 50, and read up on all of them.
Find projects that look good and make sense to you. See what other people are saying via Google and YouTube. Start building a picture.
But remember, projects can look fantastic one month, and then seem to crash and burn the next month, for various reasons: market timing, failed products, outright scams, etc.
Here’s an industry famous clip for a crypto pyramid scheme called BitConnect that collapsed soon after the event this video is based on…
And look what happened to pets.com in the early Internet days:
Convincing advice from YouTubers, or attractive web design, is not a reliable indication for a successful project.
Hence, due diligence and diversification is vital.
One YouTuber I do like is CryptoDaily. I think he’s honest. And he’s entertaining too.
Hi. Welcome to my channel. I aim to give you the pure honest news on a (mostly) daily basis. Enjoy your stay. Be aware…
What if you want to put aside, say, $5,000 to speculate on crypto projects? Perhaps you’ll find 10 projects that you really like, and put $500 into each of them. Some might completely fail. A few might become the next Google, Amazon or Microsoft.
There’s plenty of opportunity, so don’t rush things. Think long term.
Welcome to the wonderful new era of buying encrypted tokens of magic internet money — and hoping for the best.
5. How do you actually BUY cryptocurrency?
Once you’ve got a list of tokens you want to buy, you’ll need to use a cryptocurrency exchange.
Think of exchanges like a foreign exchange office. They help you convert one currency into another, such as Dollars into Bitcoin, or Euro into Ripple, and back the other way too; Bitcoin into Pounds, Ripple into Pesos.
Different exchanges list different coins. I suggest opening accounts at several popular exchanges and getting a feel for how they work. It’s not so complicated but does take some getting used to.
On CoinMarketCap, visit one of the cryptocurrency pages, then click on the ‘Markets’ tab, and you’ll see a long list of cryptocurrency exchanges where you can buy and sell that particular crypto.
The list above for bitcoin shows the highest volume exchanges are in East Asia, showing how popular crypto is in that region.
In the West, CoinBase is probably the easiest place to get started, where you can buy crypto via bank transfer or with your bank card. Here’s my referral link: https://www.coinbase.com/join/589f8e735020c5063633f1f1.
LocalBitcoins is another option, which connects buyers and sellers through an escrow service and direct bank transfer.
Two types of exchange
Listed above are ‘centralized exchanges’ (CEX), which means they take custody of your coins. The industry is now moving towards a new approach called decentralized exchanges (DEX).
In a nut shell, a DEX allows you to maintain full custody of your coins, while connecting buyers and sellers for peer-to-peer exchange.
I wrote about DEX’s in a recent article: How and Why The Next Wave of Cryptocurrency Growth Will Trigger The Largest Economic Boom in Human History.
DEX’s are the future, but right now, centralized exchanges are the easiest place to start.
6. How to keep your crypto safe
Millions of dollars worth of crypto have been lost over the past few years due to hacking, forgotten passwords, or lost wallets.
When you’re keeping crypto within your own custody, there is no chance of a ‘request password’ function.
If you’re serious about getting involved with crypto, take the additional time to understand how to secure your crypto accounts properly.
If you’re using a custodian exchange such as CoinBase, switch on all of the security options. Really.
2 Factor Authentication
Most exchanges now also use 2FA (receiving a code on your phone to access your account) which helps add a layer of security. Recommended. But not immediately necessary to get the ball rolling if you’re only kicking the tyres and buying a tiny amount of crypto.
If you do not activate 2 Factor Authentication on your account, and use a fairly simple password (or one that you use on other sites), you might get hacked and lose all your coins.
If you’ve not used 2FA before, it’s fairly simple with a modern smart phone. Install Google Authenticator from the app store and follow instructions inside your exchange account.
But don’t only rely on 2FA. Use all security measures that the exchange provides.
This is not an idle warning. Take it seriously. There are a lot of hackers attempting to steal cryptocurrency. No banking insurance will cover your losses.
Do not use personal information such as your mothers maiden name and your siblings date of birth. Hackers have access to databases of personal ID data.
For manually created random passwords, a well respected format for security is Word-word-word-number. For example:
Write the password down on a piece of paper and keep it very safe somewhere at home. Do NOT store it on your computer in a text file, or as a screenshot uploaded to DropBox, etc. Hackers can find it. Seriously.
Better than a piece of paper (which could get soaked, burned, thrown away, misplaced) is the use of specialist password management software, like http://1password.com. In today’s modern age of multiple website accounts, using password software is vital.
If your cryptos are on an exchange, then you’re at risk of losing your coins due to government shutting down the exchange, hackers, exchange bankruptcy, or something like that
Your best option is to invest in a hardware wallet, which means your private encrypted key is never exposed to the Internet (less chance of getting hacked).
Coins are kept in your own custody, rather than entrusted to an exchange provider.
The http://ledgerwallet.com is an excellent choice.
Using a hardware wallet is quite a unique process, so consider it as an ‘advanced’ approach to managing cryptocurrency. However, if you’re intending to invest a significant amount of money into crypto, (whatever ‘significant’ means to you) it’s an absolute must.
7. Cryptocurrency Transfers and Dealing with Banks
Your bank may not like Crypto.
The growth of the crypto industry is direct competition against the banks.
Some banks have closed customer accounts (using the excuse of ‘money laundering risk’) of customers who transfer money to a crypto exchange.
Solution: Open a crypto friendly bank to use as an intermediary.
Once your account is open, here’s the process:
Some exchanges do not accept fiat currency deposits (meaning, USD, GBP, EUR, etc). Instead they only take deposits in crypto such as Bitcoin and Ether.
Bitstamp, Kraken and CoinBase for example do allow deposits in fiat.
Why bother with exchanges that don’t accept fiat deposits (such as Binance)? Because they have other coins listed, and the one you want might be there.
If that’s the case, your process now looks like this:
Each cryptocurrency has a unique approach to addresses. A bit like postal codes for different countries and regions.
Bitcoin addresses look like this: 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2 (not mine).
This is the public address which allows someone to send Bitcoin to your wallet. Think of it a bit like an email address. Just not quite as pretty or memorable.
You’ll find your public address inside your wallet for whichever crypto you are transferring.
To send bitcoin to an exchange, or to someone else, you’ll need the public address for the wallet you are transferring to.
This 3-minute video (not mine) demonstrates the point:
8. What About Trading?
Warning about Margin Trading
Some exchanges allow you to leverage your speculation by effectively borrowing money from the exchange in order to gain a larger profit when a coin goes up in value.
Similarly, if the coin goes down in value, you end up owing the exchange possibly a lot more than you put in.
My very strong view is that non-professional traders should not attempt margin trading.
One unfortunate trade and you can lose a lot of money. I’ve seen it happen to others. And it happened to me too! The profit opportunities from simply buying tokens are life-changing. Be that little bit more patient. Don’t bother with margin trading.
What about Automated Algo Bot Trading That Guarantees 5% Profit Per Day?!
Please… if it sounds too good to be true, it probably is. Programs like that will likely steal your coins.
What about Day Trading or Swing Trading?
Personally, I love to look at price charts. Studying technical indicators, price action patterns, support and resistance levels, etc are like my version of computer games — plus if you get it right, it can be profitable.
Day trading is literally watching the ups and downs of price movements during the day and trying to buy and sell to glean profits.
If you really want to trade, start with a long time-frame, which means you aim to catch the major turning points over weeks duration. Don’t try and day trade unless you build up a lot of experience with swing trading.
What I suggest is to ‘start slow’ — whatever that means to you.
How to convince your friends and family about crypto
Don’t expect people to follow your lead. Do your thing. Just wait for one or two to ‘get it’. Then… well, watch this:
Soon enough everyone will be involved.
We are entering a new era of global financial innovation which will impact every industry and every one of us.
Now is the time to start getting crypto smart.
Disclaimer: Nothing herein is intended as financial advice. It is for educational purposes only. Any actions taken are your own full responsibility for due diligence. Money can be made or lost. If you want ‘financial advice’ speak to a qualified financial advisor. The contents are the author’s personal thoughts only, not an official communication from any client or company with whom the author is connected on a professional basis.
Any questions or suggestions to improve this beginners guide, let me know in the comments below. Thank you.