Beginners Guide to Buying & Storing Cryptocurrency
Cryptocurrency is gaining popularity in the modern world that we now find ourselves living in. At the time of writing the cryptocurrency market cap is around $403 billion dollars – that’s 403 followed by 9 zeros!
Unfortunately, there are many criminals and scammers who operate in the crypto space, and that makes many people, particularly newbies, extremely vulnerable to this form of investment.
To address this vulnerability, here is our guide for newbies entering the crypto space
First of all, invest in a hard wallet such as a Ledger Nano X or Trezor.
What is a Hard Wallet?
A hard wallet is a small device similar to a USB memory stick that you keep yourself – think of a hard wallet as your personal crypto bank.
To purchase cryptocurrencies, you will need to acquire them through a cryptocurrency exchange, such as Binance.com or Coinbase.com. Once you have acquired your crypto assets, you can either leave them on the exchange or move them somewhere else. We recommend that you move your tokens to your hard wallet. Exchanges are vulnerable to hackers, may be closed down by authorities investigating anomalies, and are generally deemed unsafe places to leave your assets.
In 2014, an exchange called MtGox suspended trading, closed its website, and filed for bankruptcy protection against creditors. Just prior to that time MtGox was the biggest bitcoin exchange in the world and processed up to 70% of all bitcoin transactions. Even the largest crypto exchanges may prevent withdrawals at very short notice.
Since the suspension of MtGox, creditors have not received any of their deposits, and the legal case is still ongoing in 2020. At best, MtGox creditors may receive 25% of their digital assets once the legal process has reached completion, which could by anytime depending on the Japanese legal system.
At the time of writing in 2020, an exchange based in Hong Kong and Malta called OKEx has suspended all withdrawals. This was due to one of the private key holders being investigated by Chinese authorities.
More and more crypto exchanges are appearing every year and so far in 2020, no less than 75 crypto exchanges have shut down.
The point here is that the safest place for your digital assets is a hardware wallet, where you store the keys safely offline. Nobody can shut down your hardware wallet – it’s your personal crypto bank, so invest in one.
One of the most common mistakes newbies make
Many newbies enter the cryptocurrency space by buying bitcoin and then moving to Ethereum and then altcoins. As the hunger for knowledge of digital assets grows, newbies will find some Youtuber or crypto guru who extols the virtue of some unheard-of token or project. Many of these projects will amount to nothing, the price will sink to zero, and these newbies will lose all the money they invested in them. That’s just how it is.
An alternative route into crypto is to simply buy bitcoin or Ethereum at regular time intervals and keep it in your hard wallet.
There is a great website https://www.bitcoindollarcostaverage.com , which illustrates the outcomes of averaging-into bitcoin in your chosen time frame and amount.
Most newbie investors coming into crypto drift from Bitcoin to Ethereum to altcoins because the rewards can be significantly greater. We’ve all heard Youtubers boast of their 10x, 20x, 100x, or even greater token recommendations. They don’t tell you about all the bad recommendations they’ve given. Alt coin speculating can be rewarding if you buy the right tokens at the right time, but it can be painful if you get it wrong.
What are altcoins?
Most altcoins run on the Ethereum network and meet a standard called ERC20, which is a technical standard that all tokens must meet in order to run on the Ethereum network.
If you have an Ethereum wallet, you can simply send your ERC20 tokens to your Ethereum wallet address and store them there.
How to determine if a token is ERC20
- Search for the token on Coingecko.com or Coinmarketcap.com
- On the token’s page, you will find a contract address under the tokens name with a small icon to copy the address.
- Copy the address. If there is no contract address the token is probably not ERC20
- Paste the contract address into the search field at https://etherscan.io/
- Verify that the contract address on https://etherscan.io/ is listed as the token
- If the token is listed on Etherscan as your token, then it is ERC20
A significant amount of the people who have made good profits in cryptocurrency are simply HODlers. These are investors who accumulate bitcoin or Ethereum and store it as a long term investment. HODL – means ‘Hold on for dear life’, and is a term often used in crypto.
Altcoins may be good investments during alt coin seasons, which usually take place when Bitcoin(BTC) loses its dominance. You can check Bitcoin’s dominance here – if the trend is down, it maybe a good time to enter the altcoin market. However, altcoins should be treated as higher risk / higher reward assets and you should not go all in on one token. Only risk what you are prepared to totally lose on altcoins – view them as wild cards.
One more thing with regards to altcoins is to do your own research (DYOR)
Do not just take a Youtuber or other tipsters advice blindly.
You can research a project by first going to coingecko.com or CoinMarketCap.com and searching for the altcoin. Once you have found the altcoin, you can visit the project website or view a basic chart. This will give you an overview of the project. From there, you can drill down into specifics and try and see the project from a user’s perspective.
Which Wallet to store your ERC20 Tokens?
Check out our guides here How to Send or Receive ERC-20 Tokens with Ledger Nano and Beginners Guide to Buying & Storing Cryptocurrency