Beginner’s Guide to Crypto: 5 Steps for Success in Buying Cryptocurrencies

You are excited and eager to make your first move. You have done all your research. Ecstatic with anticipation, you start to believe that this next investment will send you straight for an early retirement. The sandy beaches of St. Martin await your arrival, but hold on…how do I even start?

With looming interest in the cryptocurrency sphere, there is still one major hurdle most individuals must overcome — how to enter the market. Now, this might seem like an easy step, but depending on your country of origin this becomes a complicated aspect of entering the market. Each country has a different approach on how they are regulating the purchase, trading, and use of cryptocurrencies. Here is a step by step approach on how one should tackle the barrier to entry for cryptocurrencies.

Step 1: Figure out if your current bank will allow direct deposits on a crypto exchange.

Back in the earlier days, banks did not understand the many details on how crypto exchanges operated. This made it easier to directly link your bank account to an exchange, allowing direct deposits both for withdrawing from the market and depositing. This first step is easy to do — simply contact your bank and ask if this is a viable option.

Step 2: Find an exchange that supports your bank as well as has a credible reputation.

As mentioned in prior articles, exchanges are targets for coordinated attacks. This is controversial primarily due to the fact that the exchanges are almost all centralized entities — this is hypocritical to the “decentralization” aspect blockchain is trying to implement. There are decentralized exchanges, however; stay away from them for now. They function through the use of smart contracts and it can be difficult for new users to navigate through and understand how to complete a trade. For now, look at centralized exchanges that have a great reputation and provide a decent amount of liquidity (you want to easily find a buyer/seller).

An additional item that you will need to be aware of is not all exchanges have the same coins listed. You must do some research on the different exchanges and what coins they offer. If certain coins that you wish to purchase are on a different exchange, you can sign up for that particular exchange and transfer between the exchanges.

Some notable exchanges are Binance, Coinbase, and Bittrex. Initially, you will need to find an exchange that allows fiat deposits (some exchanges trade only cryptocurrencies).

Step 3: Submit the appropriate documentation and set up 2-factor authentication.

Usually, if a particular exchange has credibility they will ask for new users to provide various forms of documentation so they can prevent fraud and keep the community safe. It is typical for an exchange to ask for a piece of ID(passport, drivers license, etc.). Included with your ID, they may also require you to submit a photo with you holding a sign with some specific information that they want on it. These steps are not unusual, but you should always make sure you are sending your personal documents ONLY to credible exchanges. Once you submit all the proper documentation, you will be verified by the exchange.

Before you start trading, an easy trick to ensure a higher level of security is to set up 2-factor authentication. 2-factor authentication requires a secondary measure every time you try and log in to the site. This will be in the form of an email, text message or even Google authentication.

Step 4: Remove your cryptocurrencies off the exchange!

Out of all the steps listed here, this one is by far the most important step to follow. These exchanges will all have their own proprietary online wallets where you can store your newly purchased coins. Storing your coins in their wallets is one of the riskiest ways for one to hold tokens. As mentioned before, these wallets are subject to potential attacks due to the centralization of the exchanges. The key to removing this risk is to directly send your new coins to a third-party wallet. If you will be frequently trading out your coins, store them on a hot wallet like Jaxx. If you decide you want to hold on to your cryptocurrencies, store them on a cold wallet for the highest level of security. This step is useful in a security sense, and it also forces you to become more familiar with how to transfer coins to different wallets making you more comfortable with the entire process.

Step 5: Learn about your country’s regulatory environment, i.e. Capital Gains Tax

There used to be this grand vision that cryptocurrencies would operate in a completely free market, void of all regulatory infringements. Unfortunately, this is not the case. You must educate yourself on your nation’s specific laws regarding the purchase and trading of cryptocurrencies. This is country specific, so don’t just refer to a YouTube video as it may not be applicable to you. It is highly recommended you follow the rules that govern your actions in a market like crypto. Missing this step can potentially set you up for some very serious legal consequences. Always respect your country’s law.

This 5-step process will set you up for success when starting your cryptocurrency investment endeavour. It is important that you do your own research on the various coins that you want to purchase. This is a very volatile market. It takes a logical and rational mind to succeed. Don’t get too emotional or fixated on projects that you really like — for who knows, that project might go to 0 in a very short time period.

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