5 Easy Steps to Buy and Manage Cryptocurrency
A thorough guide to getting into CryptoCurrency
Welcome to CryptoGrad’s first publication! CryptoGrad’s mission is to educate the world about everything crypto. From buying into ICOs, to learning about the power of blockchains, we will break down everything in crypto that might seem too difficult to learn about. As for me, I’m a recent college grad who jumped head-first into the crazy world of crypto.
In this post, I will break down the 5 steps needed to buy and manage crypto. The 5 steps are as follows:
- Acquiring Cryptocurrency
- Creating and Safely Storing a Wallet
- ICO Research and Buying into Them
- Trading on Exchanges
- Maintaining your Crypto Portfolio
Step 1 — Acquiring Cryptocurrency
Everyone’s been talking about crypto and the crazy 1,066% growth (FIGURE 1) in the past year. It comes to no surprise that everyone is trying to buy crypto, but has fallen victim to its steep learning curve. If you live in the US, UK, or EU, I suggest you open an account with Coinbase to get started. Coinbase offers “The Easiest On-Ramp to the Crypto World” (FIGURE 2), and it’s true. With Coinbase, you can purchase Bitcoin, Ethereum, or Litecoin with your Bank Account, Credit Card, Debit Card, or PayPal Account. You have the opportunity to purchase the Crypto Assets at the moment’s price point for a fee. If you want to evade the fee, you can deposit money into your Coinbase account, transfer it to GDAX (Coinbase’s advanced trading platform), and trade on limits.
There are multiple ways to first acquire cryptocurrency, but I personally use Coinbase because of its security. There’s a reason why Coinbase has recently raised $100m at a $1.6b valuation and their CEO Brian Armstrong is in Forbes 40 Under 40 for 2017.
Step 2 — Creating and Safely Storing a Digital Wallet
Although you are more than welcome to leave your crypto assets within Coinbase, I’d recommend that you house them in a digital wallet. Digital wallets can either be stored in a hardware wallets (Trezor or Ledger) or digital wallets such as MyEtherWallet, Blockchain, or MetaMask (with countless more to offer). Each digital wallet is comprised of a public address and private key. Your public address is a string of characters that you give to everyone in order for them to send you crypto. Think of your public address as your home address, where you tell Amazon to deliver your purchases. Your private key, on the other hand, is a totally different string of characters used to unlock your wallet. Think of your private key as the key to your mailbox. Never, ever, ever, EVER give away your private key because you will wake up to an empty wallet.
*Side Note: There have been multiple phishing attempts to steal private keys. Never believe promos that offer free Bitcoin/Ether/Token if you provide your private key*
To recap, your wallet is your mailbox where you store your digital assets. Your public address (also referred to as public key) is the mailing address to your mailbox. Your private key is the key needed to open your mailbox and distribute your crypto assets (FIGURE 3).
Physical Wallet
The safest way to store your private key is with a hardware device (mentioned above). This is because your hardware device is offline and protected from any form of hackers. If you wish not to purchase a hardware device, you can confidently keep your crypto in the digital wallets mentioned above. MyEtherWallet (MEW) offers a paper wallet option where you can print out your public and private keys for offline storage. Make sure you hide that paper in a safe place.
Digital Wallet > Coinbase: Storing Crypto
Why then, would you go through the hassle of setting-up a digital wallet when you can keep everything in Coinbase? I have two answers to that:
- The first answer is that Coinbase is a centralized exchange. Like all centralized products, everyone using the product is susceptible to being hacked through the mercy of Coinbase. Therefore, if you have control of your private key on a digital wallet, it’s up to your actions whether or not your wallet is hacked.
- The second answer as to why you should have a digital wallet is because of the new opportunity to acquire and store ERC-20 tokens (DNT, ADT, ZRX, SNT, BAT, etc.). Coinbase is able to store three types of crypto: Bitcoin, Ether, and Litecoin. Although these are somewhat the main forms of crypto, you will be missing out on the massive opportunity acquiring ERC-20 tokens. Because Ethereum wallets such as MEW and MetaMask can store ERC-20 tokens, you will be open to great opportunities with a digital wallet.
* Please Note: Ethereum wallets can store ERC-20 tokens, but not Bitcoin/Litecoin. Bitcoin wallets cannot store ERC-20 tokens. Make sure you are transferring crypto assets between the correct wallets. An example of a bad transfer is if you move an ERC-20 token to Coinbase, because the token will not be accessible through Coinbase and can be as good as gone.
Withdrawing from Coinbase to your Digital Wallet
To transfer your Coinbase crypto to your digital wallet, you have to provide your public key as the destination address. Once again, please make sure to provide a Bitcoin public address when withdrawing Bitcoin, and an Ethereum public address when withdrawing Ethereum.
Gas Fees in Ethereum
When trading Ethereum and ERC-20 tokens, gas fees must be taken into account. Gas essentially is the transaction fee when sending Ethereum or ERC-20 tokens to another account/person. Depending on how fast you want your transaction to be processed, you can increase or decrease your gas limit. As of today (August 18th, 2017), a gas limit of $0.002 is enough for a transaction to go through in about 5 minutes. The average gas price right now is $0.134, according to ETH Gas Station. Generally speaking, MEW and MetaMask automatically calculate the average gas price, and you can therefore expect to pay about $0.13 per transaction. We’ll get into advanced tactics in setting gas limits when we reference ICO purchases.
Step 3 — Researching ICOs, the Real Gold Mine
Defining ICOs
ICOs, or Initial Coin Offerings, can be defined as the first time a company makes its token available for sale to the public. Although every company’s token has different utility within its own products, the majority of tokens can be traded on the secondary market almost immediately after its ICO. Some notable ICOs are found below:
Observe how recent each ICO is. With the majority being in 2017, ICOs have overtaken Angel & Seed Stage Internet VC funding globally in the summer of this year.
How I Research Companies
Another important number to observe is the amount raised compared to its recent performance. In June of 2017, Bancor issued their Bancor Token (BNT) at an ICO price of $3.864 per token. Although the company raised a ridiculous amount of money ($153,000,000 worth of ETH at the time), it’s token’s current value is 35% below ICO price. Therefore, one must take several items into account when researching companies’ ICOs. When I research companies, these are the biggest things I look for:
Purpose
- What is the problem that the product and token are looking to solve?
- What is the current industry like? Is the product necessary?
Founding Team
- What background do the founders have in the industry they’re trying to disrupt?
- Where is the founding team located? Are they in a tech-populated area, or in a place that you’ve never heard of? Note: a lot of companies will say that they are out some island for legal reasons, but do your due diligence and research LinkedIn profiles to see where they are located.
- Note: Don’t weigh your decision too much on the advisors listed. Vitalik Buterin (Co-Founder of Ethereum) publicly stated that a lot of ICOs listed him as advisor without his permission.
Partnerships
- Are there partnerships between the company in question and other successful companies? You can usually find these in the company’s blog site, typically blog.company.io.
Roadmap
- Is a working product already built, or is the company just a white paper with no existing product?
- When are they proposing to have a beta product built?
Token Allocation
- What percentage of tokens are being awarded to the co-founding team?
- What is the vesting schedule for those tokens to be awarded?
Token Distribution
- What percentage of the tokens are being stored for future token sales?
- What percentage of tokens are to be used for community adoption?
Slack/Telegram/Reddit Community
- Every company should have a Slack or Telegram community where the team interacts with the general community. A good Slack community boasts several thousand members with an active community leader from the team that swiftly responds to questions or comments.
- A good company publishes regular updates on development and operations.
Adoption
- Even if all of the above requirements are satisfied, how easily do you see the general community adopting the product being built? Remember, companies build these amazing blockchain-based products to better the world, but there is a steep learning curve right now (hence why you’re reading this).
Overall Design
- No matter what, a great product has to have an awesome website and product UI. Great examples of design include District0x’s and Status’ website.
Buying Into ICOs
Buying into ICOs is the way to make big returns at this current time. For the sake of this explanation, I will only specify purchasing ERC-20 tokens with ETH during ICOs. Note: the majority of ICOs only take ETH as a form of payment.
As seen in FIGURE 4 (Recent ICOs), ZRX token ICO’d on August 15th and already offers more than 10x returns if you participated in the ICO. Although some ICOs are difficult to buy into (adToken sold out in one block, about 23 seconds), others are structured with a cap to distribute as many tokens to as many people as possible. A good example of a well structured ICO is 0x Project’s ZRX token. 0x asked that those wishing to participate in the token sale had to pre-register several days prior. After closing the door to registrations, 0x capped the maximum amount to purchase at about $1,900. Therefore, everyone registered had 24 hours to purchase their allocated maximum without having to worry about missing out on the ICO.
adToken (ADT) on the other hand, was distributed to those who timed their purchase perfectly and paid high amounts of gas. This incentivized miners to process their transactions first. As mentioned above, $0.13 is the average price to mine a transaction. The highest amount paid in gas for the ADT launch was over $10,000. Although this is a ridiculous amount of gas, this person was unable to acquire adToken since the transaction was too late. Although one might think that higher gas fees equals first in line, one must also take into account the time they actualized the transaction. Therefore, if you really want to get into an ICO, have a fair amount of gas ($20 — $30) and actualize the transaction about a minute to half a minute before the ICO opens.
To summarize buying into ERC-20 token ICOs, you must have the correct token crowdsale address (found in a company’s blog post), a fair amount of ETH for gas ($20 — $30), and the amount of ETH willing to use to purchase the token. You will send the ETH to the token address and see the tokens arrive into your digital wallet.
Step 4 — Trading on Exchanges
Now that you have your crypto and have participated in your first ICO, you are ready to buy and sell crypto on exchanges for large profits. Below are a list of exchanges where you can expect tokens to be listed after their ICO:
Companies are advised by their legal teams to not contact the exchanges to list their token. Instead, tokens have been listed on exchanges largely through community effort. Therefore, if you would like any of these exchanges to list a certain token, feel free to reach out and ask, as that is their preferred form of listing request.
Selling your Crypto Assets
In order to sell you crypto assets on exchanges, you must create a profile in each exchange and load your profile’s wallet with the crypto you’re looking to sell. Exchanges such as Liqui, Bittrex, and Poloniex display an address for you to send your crypto in order to sell. Ether Delta, on the other hand, asks that you have your crypto in MetaMask or Parity as a Chrome Extension. Once you have the crypto assets loaded up in your exchange’s account, you are free to buy and sell in the same form as in Coinbase.
Step 5 — Portfolio Management
You’ll notice that your crypto will be spread across multiple wallets and exchanges at a time. A great way to manage your crypto’s dollar value is Blockfolio, an app that tracks crypto prices in real time. Another suggestion regarding your portfolio management is to always organize your holdings in your preferred manner. If you’re risk averse (not risky) you’d organize your holdings in 60% mature, 40% infant. Mature crypto assets can be regarded as Bitcoin, Ethereum, and Litecoin (think about what you can buy through Coinbase). Infant crypto assets can be defined as those with major gains and losses, essentially recent ICO tokens. They are not as well established in the crypto market as the mature ones, but are the ones with major returns.
*Tip: If you believe that the price of the mature crypto assets will fall in the future, you can always sell them on Coinbase for US dollars and re-purchase at a lower price (buy low, sell high).
*Always put up what you are willing to lose, because in the world of crypto, you’ll never know what will happen*
Conclusion/Disclaimer
If you actually read through all of this, thank you for your time! I put this publication together to help everyone understand and purchase crypto. Also, don’t forget to file your taxes and include your crypto earnings as capital gains.
All of the suggested tokens/wallets/exchanges are my own opinion because it’s what I’m use to. I’d love to hear community feedback on better products because new ones pop-up every day. Also, if you see any mistakes on my end, feel free to point them out!
If you enjoyed this publication and got into crypto with these 5 easy steps, feel free to send a little ETH/ERC-20 this way!
CryptoGrads ETH Address: 0x66cF0A0257609C5299C1a2D6C44c9F172353d345
CryptoGrads BTC Address: 1LUk4FjG1TZQgL22mrLF7RzAykMRDftZbB
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