How To Buy Cryptocurrency
This article is written by Isonex Capital as a guide for newcomers to the cryptocurrency space. It can appear overwhelming for many, particularly if you are not technologically minded. This could be the first time in history that a new asset class has been created where everyone can take part in the early stages.
Cryptocurrencies have become a hot new investment asset, but they are far more than the latest volatile investment bubble set to burst at any time and disappear. Unlike fiat currencies, which are no longer backed by gold or any other asset, cryptocurrencies are backed by the utility and technologies that the companies behind each one is undertaking to bring to market. They look set to replace fiat currencies in this new digital age that the world is embarking upon through the implementation of blockchain technology. Until now, cryptocurrencies have held a very niche market with an appeal limited only to the more tech-savvy. The average person has no doubt heard of Bitcoin but would be hard pressed to put facts to the name. This article is an attempt to inform anyone new to cryptocurrencies of the processes involved in buying and successfully storing cryptocurrencies.
Cryptocurrencies have been around for longer than many people realize, but it is only in recent years that they have gained traction. This has lead to an explosion in the number of businesses accepting payment in cryptocurrencies. Small start up hybrid banks are enabling clients to hold both fiat and digital assets in the same account. These smart banks are gaining market share and making their traditional counterparts take notice of the way forward. We are on the verge of a technological revolution where every citizen has a chance to invest in this nascent asset class.
There are two methods for investing in cryptocurrencies. The first is to buy the currency itself and hope that it increases in value, the other is to buy futures and bet on a future price rise. In this article we will focus on the first method. It is important that before you commit to any investments in cryptocurrency you first carefully consider your decision. While it’s entirely possible to make a lot of money by investing in cryptocurrencies, particularly for the long term holder as this market will grow exponentially. The recent volatility in cryptocurrency values has seen fluctuations of billions of dollars within the space of a day. The golden rule of investing is that you should never invest more than you can afford to lose.
One very sound piece of advice for anyone new to cryptocurrencies is to buy incrementally. Volatility, due to a lack of maturity within the space, means that we have no idea where the price might be from one day to the next. When we factor in the influence that Bitcoin has on the entire market, even a favorably performing cryptocurrency can be pulled down in a bear market. It would be rash to buy large volumes, only to see spectacular depreciations in the short term. When you buy in slowly, you are dollar cost averaging your portfolio.
The first step to take in cryptocurrencies is to create a cryptocurrency wallet, so that once you have bought your crypto you will be able to safely store it. There are many different types of wallet available on the market and they all serve a purpose. So your choice depends upon your personal needs. Essentially different wallet types offer varying functions such as extra security or convenience. Below is a detailed list of the various wallet types. You may have heard the terms hot wallet and cold wallet. A hot wallet is online whereas a cold wallet is offline.
- Desktop wallet: Desktop wallets are downloaded to a specific device or computer and they can normally only be accessed from that particular device. Generally speaking they offer convenience over security, were your device compromised, then your wallet could be breached
- Mobile wallet: Similar to desktop wallets, the wallet is downloaded as an app on your phone. The key benefit of this type of wallet is convenience, allowing you to spend your coins in a physical store by scanning a QR code. It’s a good choice for day to day transactions but not advisable for the storage of larger sums
- Web wallet: Convenience over security, this is because the wallet provider retains your private keys, giving them full control of your assets. If the exchange is hacked your digital assets could be stolen. It is therefore advisable to only store small amounts on a web wallet
- Paper wallet: One of the most popular and secure wallets. This type involves printing or writing your private and public keys onto paper, plastic card or metal tags ensuring your digital assets are secure. The keys are offline until you need to use the wallet. Keep those numbers safe at all times
- Hardware wallet: This is a physical device that stores your private and public keys within the hardware device. The device is offline until transactions are made, even then you enter your private pin directly on the device’s display and not the computer. This makes it virtually impossible for hackers to gain access
Your choice of wallet or wallets is personal but each is only as good as your own diligence and safe keeping.
An entry exchange is an exchange that accepts fiat currency as a base currency. Some crypto exchanges only accept Bitcoin or Ethereum as a base currency. If the crypto you wish to buy is on such an exchange then you will have to first find an entry exchange to buy the base crypto with fiat currency.
Below is a list of proven exchanges
- Coinbase: Coinbase is a digital currency exchange headquartered in San Francisco. They broker exchanges of Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic and Litecoin with fiat currencies in around 32 countries and Bitcoin transactions and storage in 190 countries worldwide
- Kraken: Kraken is a US-based cryptocurrency exchange operating in Canada, the EU, Japan, and the US, and “the world’s largest Bitcoin exchange in euro volume and liquidity”. Kraken provides Bitcoin pricing to the Bloomberg Terminal
- Binance: Changpeng Zhao is a Chinese-Canadian business executive, who is the founder and CEO of Binance, the world’s largest cryptocurrency exchange by trading volume, as of April 2018. In March 2018, Binance announced its intentions to open an office in Malta after stricter regulations were imposed in Japan and China
- Bittrex: Bittrex is a US-based exchange headquartered in Seattle. The exchange is the 13th largest by daily trading volume and is renowned for the vast number of cryptocurrencies listed. Bittrex is not a regulated exchange under US securities laws
Open an account at a reputable exchange, either from the above list or another reliable source.
For this demo, we will use Kraken. One of the main difficulties for newcomers investing in cryptocurrencies is actually converting conventional money into cryptocurrency. Kraken makes this process as simple as possible, as it accepts GBP, Euro, Japanese yen, USD and Canadian dollars as base trading currencies. Kraken is one of the largest Bitcoin exchanges in euro volume and liquidity. No single exchange can hold all the cryptocurrencies available, but once you have signed up and purchased a base trading currency such as Bitcoin or Ethereum, you can follow a similar process to transfer it to another exchange in order to make other purchases.
You will need the following to create a Kraken account: an active email address, a PC with an up-to-date browser (e.g. Chrome or Firefox), a bank account or credit card and personal identification (e.g. a passport or identity card)
Please be aware that you cannot participate in an ICO or token sale directly from your Kraken account, as it will lead to tokens being irretrievable. In order to participate, you must first transfer your crypto to an ERC20 compatible wallet.
To create an account, first make sure you are visiting the official Kraken site, at https://www.kraken.com.
You can quickly create an account directly on the home page by typing your email, preferred username, and password.
The minimum password length is eight characters, but we recommend using a long unique password created by a password manager.
If the password is less than 25 characters long, it must contain one special character and one number, and it cannot contain your username.
For more advanced options you can click the “Sign Up” button at the top right of the home page, which will take you to https://www.kraken.com/signup. Note that the advanced account creation is completely optional.
On this page, you enter the same details as before, but in Advanced Options you can confirm your country of residence and time zone, and optionally add a master key or PGP public key.
The master key is a security feature that can be used to recover account access in case you lose your login credentials. If enabled, it is required during password resets, two-factor authentication bypass requests, and when unlocking the Global Settings Lock security feature on Kraken.
You can only create a static password as your master key on this page but once you access your account you can change it to be a dynamic passcode by using an authenticator app or a Yubikey.
If you use PGP encryption for emails, you can enter your public key, then all of their automated system emails will be sent to you encrypted.
You should receive an activation email containing a code which you can paste into the form on the site, or alternatively you can complete activation by clicking the link in the email.
If you do not receive an activation email, check your spam folder, if you have not received the email contact Kraken support.
Confirm your password, complete the captcha and click the — Activate Account — button
Congratulations! You have successfully created your Kraken account, you’re ready to get started with buying your cryptocurrency of choice
This demonstration uses USD to XRP, but Kraken accepts USD, Canadian dollar, British pound, euro and Japanese yen
Kraken holds numerous cryptocurrencies.
After you verify your account, deposit funds to your Kraken account by going to Account > Funding > Deposit and selecting the type of deposit.
Place an order to buy XRP by going to Account > Trade > New Order.
Select the currency pair with the fiat currency that matches the currency of your deposit. Make sure you select the correct currency pair. The currency pair you select determines which currencies are bought and sold. For example, if you select XRP/USD, clicking Buy means that you buy XRP and sell USD. With the same currency pair, clicking Sell means that you sell XRP and buy USD.
In the New Order tab, select the Simple interface and place a buy order for XRP
Enter the amount of XRP that you want to buy. You can choose to buy at the current market rate or place a limit order
Tiers of verification
On the Kraken exchange, there are five different tiers of verification. Essentially, the more verified your account, the higher the deposit and withdrawal limit you can enjoy. You must verify your account in order to trade under current regulations, so to start off, you won’t be able to deposit or withdraw, which makes verification essential if you want to use the exchange.
Tier 1: enables crypto deposits (no limits) and crypto withdrawals ($2.5k daily and $20k monthly)
Tier 2: enables conventional currency deposits ($2k daily & $10k monthly) and withdrawals ($2k daily and $10k monthly). Tier 2 also raises your monthly crypto withdrawal limit from $20k to $50k and your daily limit to $5k
Tier 3: raises fiat deposit limits ($25k daily and $200k monthly) and withdrawals ($25k daily and $200k monthly). Tier 3 also raises your crypto daily withdrawal limit to $50k and the monthly limit to $200k
Tier 4: is for high net-worth individuals or corporate accounts. To get one of these high-level accounts, you must contact Kraken support
How to verify your account
When you log in to your Kraken exchange account, you will see the account dashboard. Click the ‘Get Verified’ tab to navigate to the verification section of the site.
Scroll to the bottom of the ‘Get Verified’ page to find the forms to fill in and increase your verification tier.
The thing to understand is that you cannot skip forward to a higher tier, You must ascend in levels one at a time to reach a higher tier.
How to secure your Kraken account
By default, your account is only secured with a login name and a password. The next step to increase your security is enabling two-factor authentication on your account. To do this, just click the ‘Security’ tab in your account dashboard, this will take you to the security section of the site.
Flick the two-factor authentication slider from ‘off’ to ‘on’. You will then be shown three different options to choose from. We recommend using the Google Authenticator app. This option doesn’t require you to buy a hardware device and is more secure than a static password.
Once you have selected the Google Authenticator app, you will be given the option to adjust the settings. Most users should click — Next — on the recommended settings.
The next step is to download the Google Authenticator app on your phone, for both Android and IOS devices
Then you will need to scan the QR code on your screen and enter the 6 digit code generated into Kraken.
Once done, your account will be protected by two-factor authentication. This means you will need to use your authenticator app when logging into your account. You can make your account even more secure by turning on 2FA for deposits/withdrawals and trading.
How to trade on the Kraken exchange?
Once you have verified and funded your account, head over to your account dashboard and select the — Trade — tab. This will bring up the Kraken exchange trade screen.
The first thing to do is to select — Buy or Sell — On Kraken, XBT means Bitcoin. This is selected as the default trade. You can change this to other cryptocurrencies by clicking — XBT — and the little down arrow, which will populate a drop-down showing all the tradable crypto assets.
The second step is to key in how much of your selected cryptocurrency you want to buy. You will also see two buttons — Market — and — Limit -. Market means that you buy at the current market price. Once you are happy with your buy order, just click the green buy button and your cryptocurrency will be credited to your account.
Selling on Kraken works in a very similar way to buying. If you are holding Bitcoin Cash in your account and want to use it to buy more Bitcoin (XBT), you can do this by firing in a sell order into the BCH/XBT market. This will convert your selected amount of Bitcoin Cash into Bitcoin.
Just enter the details you want in the order form and click the ‘Sell BCH For XBT’ button to finish processing the transaction.
How to make a withdrawal from your account
When withdrawing your digital assets, it is recommended to send a test amount first on larger volumes. This ensures you have the correct address
In order to withdraw digital assets and cryptocurrencies from your Kraken account, you must first add and confirm the withdrawal address. The withdrawal address, unless transferring your assets to another exchange to trade, would most probably be to your wallet. The address (public key) must be inputted correctly, otherwise you will almost certainly lose your crypto.
To make a withdrawal, follow these steps:
Navigate to the — Funding → — Withdrawal — page and select the currency you want to withdraw on the left hand sidebar.
Read the instructions carefully.
Next to the ‘Address’ field, select a previously added address, or click the blue button marked — Add Address — to add and confirm a new one. If you are adding a new withdrawal address, follow this guide to confirm the withdrawal address.
Enter the amount you would like to withdraw in the — Amount — field. Use a period as the decimal separator, and use a leading zero for amounts less than one. Do not use any commas. Additionally, make sure the amount is greater than the minimum listed directly under this field.
Click — Review Withdrawal -. Double check that all of the information is correct and then click — Confirm withdrawal -.
You have now completed a digital asset withdrawal from your account! You will see a message and receive an email notifying you that a withdrawal from your account has been requested.
Always be careful when withdrawing digital assets and cryptocurrency. Once a withdrawal has been sent and marked as a success in your Kraken account, it is impossible to cancel or reverse the transaction. As far as i am aware this is the same for all exchanges.
Remember, you cannot participate in an ICO or token sale directly from your Kraken account, as it will lead to tokens being irretrievable. In order to participate you must first transfer your crypto to an ERC20 compatible wallet.
**Isonex Capital is dedicated to the growth of digital currencies within the global marketplace and in facilitating investment into the blockchain ecosystem. We strongly believe in investor protection through security and transparency. We are committed to helping newcomers gain an understanding of the risks involved in this new asset class. If you would like to find out more about us, visithttps://isonex.io