Getting started with trading Crypto, and finding your next coin to trade
This post is meant to give some tips on trading crypto but does not mean you should take any mentions of currencies as advice to buy or sell. I am writing this guide to help people navigate the many currencies, exchanges, and resources to find a coin to trade.
Getting the big picture (or your first stop)
Before you go sign up for an exchange to trade on, first it’s always a good idea to get an idea of what’s happening in the market. To do this, I use a couple of resources but they all stem from one place: Coin Market Cap.
What’s better than opinions and articles about a particular coin? Data.
Coin Market Cap (CMC) provides near real time data on all coins available, if a coin isn’t listed on here, you’re probably looking at something not available to trade or something that’s been long dead.
When you first load up CMC, you’ll see a list of the top 100 coins right now. From here, you can navigate to check out a lot of different things but in this post, we’re going to look at how to find a coin to trade.
A note about rankings
The rankings on Coin Market Cap (CMC) are based on the coin’s market cap (whoa). This is one of the way to show how a coin is doing, of course other metrics like 24 hour volume or 7 day change in price might be important to some people but for now, we’re going to use the market cap as an indicator for how popular, valued, or hyped a coin is right now. Rankings change all the time, the top 10 maybe top 20 might not change every hour or day but the rest do move around a lot.
Researching a coin
For this post, I’m going to use an example coin but I don’t mean to advise you on trading the coin at all. This is just for educational purposes.
I’ve picked Ripple (abbreviated as XRP) as a subject for this post. I’m going to use the name Ripple and XRP interchangeably in this post but there is a difference. Ripple is the full name for the coin as well as the name for the company behind Ripple.
As you look at this page, you’ll see a lot of details and a chart showing the price of the coin over time. Some important things to notice here are the Circulating Supply, meaning how many coins there are available right now out of the Total Supply of this coin. Some coins will display a Total Supply as well as Max Supply which is what the absolute maximum will be when this coin is 100% available. As you probably saw on the homepage of CMC, the Market Cap is listed in USD and below it in Bitcoin (BTC). Then there’s Volume (24h), which is how much this coin has been traded in the last 24 hours on all exchanges that Coin Market Cap tracks.
The market cap of a coin is calculated simply by multiplying the circulating supply with the price of the coin.
Market Cap = Circulating Supply * Price
This means that a coin like Ripple currently has the 3rd highest market cap and is priced at $2, realistically, this coin is not getting to a $1000 or $15,000 any time soon if ever. Why? Because to get to even $10 a coin, the market cap would need to be over $387 billion, that’s almost half of the entire coin market right now and about 3 times as much as what Ethereum’s market cap is right now. Ripple is one of the coins whose circulating supply is not equal to the total supply meaning more coins will be made available by the company behind Ripple. The release of more Ripple coins is essentially to follow the concept of inflation in fiat currencies where a central bank or treasury prints more bills.
So after getting a bird’s eye view of the data for this coin, we have to look at a few more things to get a good idea of the coin.
One of the best indicators for a coin is the website, for Ripple, you can visit here: https://ripple.com/
The website is one of the most important things to look at, it’s the place where you will find the utility of a coin, if the website is not a compelling enough sell, will the coin actually have any legs? For Ripple’s site, it has some information about the company behind Ripple, different things that make Ripple a valid candidate for global payments, like speed, access, and cost. Now, Ripple has a great homepage and XRP even has its own page (see here), but most coins won’t even have a lot of information available. This is the part that you should spend more time on and get to know the coin before you invest your money in it.
The other links below the website link are worthwhile but another important one is the Source Code link, in Ripple’s case it takes you to the github page showing all the repos owned by the Ripple organization. A good indicator to look for is recent activity and to see if the coin has people working on it at least in the past month or so. Here, if a coin hasn’t had any activity for the past year or so, it’s as good as dead. Some coins won’t have a source code and that usually is a bad sign, the only exception is Bitcoin (although the code can be found here).
Another thing you will want to look at along with website and source code is if there are any links to Twitter, Reddit, or any other social platform and how active the coin and its development team are around the web. This important to look at because you’re getting to know the people behind the coin you’re putting your money into. If you can’t find people responsible for the coin, the coin might be vaporware.
As an exercise, I urge you to look at some other coins on Coin Market Cap and learn about them so you have an idea of what their websites look like, what they’re presenting that’s the same or different from Ripple.
To buy or sell your coins, there’s a couple of basics we need to get figured out first. You’ll need a Coinbase account because it’s pretty much the only way in the US to buy Bitcoin, Ethereum, Bitcoin Cash, or Litecoin using US dollars. The first problem you’ll notice with that previous sentence is that, there’s not many choices to buy. Of course, that gives you four currencies to buy but you’ll want to trade other currencies and that’s where things get a little messy.
To trade other currencies, there are a ton of options available and each of the exchanges below offers anywhere between 10 to 100+ different currencies to trade:
I decided to only list these but if you do a search for “crypto exchanges”, you’ll find tons of them. One I don’t recommend is Kraken, I’ve always had a bad experience using Kraken and they’ve been getting some bad press lately.
My top recommendations is Binance, it’s relatively easy to use and they have a lot of coins to choose from. Binance will be a good place buy most of the top alternative coins include Ripple, Stellar, NEO, and almost 100 others!
Once you create an account on one of these, you’ll be able to deposit one of the four currencies from Coinbase. Personally, I use Litecoin since the transfer fees are the lowest out of all of them.
Transfer and Transaction fees
I think the biggest cost to you that will come early on is fees for purchasing from USD to a currency and transferring to another exchange.
A typical purchase using USD on Coinbase is calculated as 1% of the amount you’re purchasing, regardless of which coin. After you purchase using your Coinbase, you’ll want to transfer to another exchange, and at this point, you’ll be paying to transfer out and if you’re using Bitcoin, you’re going to be 0.001 Bitcoin, which as of January 2018 is anywhere between $14 to $16, minimum. With Litecoin, you’ll be paying at the same rate which is 0.001 Litecoin, and that translates to about $2.50 to $3. So just with that, I recommend using Litecoin to transfer to Binance.
Trading on an exchange
After you’ve done some research into a coin, bought a coin to transfer on Coinbase, and then transferred it over to an exchange, you’re ready to trade.
There’s not much to trading, you put in an order and within minutes, it should be filled. I say minutes because you should never do a market order unless you’re okay paying the highest price for a coin at any given time. It’s always best to do a limit order and set your price so you know beforehand what you’ll be paying and what you’ll be getting.
I’m adding this section not because it’s “necessary” to trade but because it’s safer and gives me and maybe it will also give you some peace of mind. Simply put, wallets are an address where you can store your balance and it’ll keep track of transactions made against the address of your wallet (deposits and withdrawals and what addresses they were tied with). If you’d like to learn more about wallets, this is a good post: How Does A Cryptocurrency Wallet Work and How to Create One.
After you’ve created a wallet for a particular coin, transfer from your exchange to the wallet for safe keeping. Another thing I’ve noticed, transferring money around from a wallet is way cheaper than withdrawing from the exchange, so withdraw in lump sums to your wallet to avoid multiple transaction fees.
Trading coins means you’ll be dealing with real money and it’s your own money but I urge you to do as much research as possible before committing to buying one.
Looking at data on Coin Market Cap will give you insights but looking at the charts will give you some fear, uncertainty, and doubt but please you should be investing instead of day trading if you expect to grow your investments in the long run.