Not too long ago, I wrote about how I was never going to buy Bitcoin. Back then, it was going for $11,000 a coin. Today, the price is around $65,000 a coin.
Bitcoin and other cryptocurrencies can be extremely volatile.
But that's what makes them appealing for so many people.
Much like daytrading was popular during the dot com boom and real estate flipping was popular during the housing bubble, cryptocurrency is where the speculators are because there is so much activity. When you think about it, speculating in crypto is really no different then foreign exchange (FOREX) – a market that has existed for decades.
Even the CEO of Nasdaq has come out and said that once the market matures, Nasdaq would be open to becoming a digital currency exchange. While we're not there yet, one day we will be.
Until then, a lot of folks think they can become bitcoin billionaires. And some will. But there will be bodies left in the wake. There always are.
There's a reason Las Vegas keeps building new casinos and hotels every year – people love the action. And taking a piece of that action pays quite well.
That said, what if you want to dabble in crypto? What if you want to buy a modern day lottery ticket?
Here's how:
Know the Popular Coins
Dr. Barth mentioned that there were over 1,800 cryptocurrencies… I suggest that if you are going to make a bet, bet on the more well known ones.
I'll expand on the different types of cryptocurrency scams shortly but the best way to avoid all that (but also avoid all the wild speculation) is to stick with the “major” coins:
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- Bitcoin Gold (BTG)
- Ethereum (ETH)
- Litecoin (LTC)
- Cardano (ADA)
- Ripple (XRP)
- Stellar (XLM)
- Dogecoin (DOGE) – *wink wink*
- Binance Coin (BNB)
- Chainlink (LINK)
Bitcoin is the most well known cryptocurrency, Bitcoin Cash and Bitcoin Gold are two forks from Bitcoin. (Here's how to buy Bitcoin.)
Practically all of the coins in the above list happen to be the transacted on Coinbase, one of the major trading hubs.
There are other coins (many many other coins) out there. These five are the ones that have had the longest history and while there are perfectly legitimate coins outside of this list, they are simply less well known and with less history to rely on (honestly, not that history makes much of a difference).
If you want to see the biggest coins, CoinMarketCap is a great site to see all that information.
How to Avoid the Crypto Scams
Cryptocurrencies are the wild west. You won't be sitting into a saloon trying to win with Aces and Eights, but highwaymen will rob your stagecoach if you don't protect it. (here ends the wild west analogy, but it's not that far off)
When you sign up to an exchange, you'll notice they put a heavy heavy emphasis on security. Turn on 2FA, never send money, etc. (If only more banks would do this!)
As for the coin-related scams (vs. scams associated with any financial account), there are two main types of cryptocurrency “scams” to watch for – fraudulent coins (scam & fake coins) and fraudulent schemes (investment packages).
Since there is very little regulation in the cryptocurrency market, that leaves room for a lot of fraud. Since the technology can be very complex and hard to understand, you may be tempted to buy coins from less than savory individuals. Just recently, the feds arrested the two founders of Centra and charged them with fraud after a $32 million initial coin offering (ICO). Centra was supposedly making a debit card for cryptocurrencies but instead of actually doing that … the two founders decided it was easier to shutter the company and leave the country. The feds caught them before they could.
The best to avoid scams like these is to stick with the tried and true coins that have a broad base. Avoid smaller ICOs from new companies and individuals.
It's also important to avoid anything that looks like a Ponzi scheme. Ponzi schemes are notoriously difficult to spot (Hi Madoff!) because they sounds so good. You may invest in some “cryptocurrency fund” or “investment package” that promises some kind of return. It may even be a multi-level marketing type of situation where you get paid if other investors jump on.
Treat it like a currency, rather than some long-term investment.
You're buying low and trying to sell higher.
How Could Cryptocurrency Take Off Higher?
Money has two roles – store of value and a means of exchange. Store of value just means it has value and holds onto that value. Since people are buying and selling coins, it's some evidence that it holds value. The means of exchange is a little trickier because it's relatively hard to spend coins.
If you think about gold, it's a store of value and a means of exchange. It's not as widely accepted as fiat currency, like the dollar, but it's not too hard to use it as a means of exchange. Try to spend a gold coin in a store and it'll be a little messy, but doable. Try to spend bitcoin and they may not take it.
Cryptocurrencies like bitcoin will become easier to use and accepted in more places. As they are accepted in more places, the value of those coins is likely to go higher as their utility increases. That's what the long term holders are hoping for.
The second worry you need to keep in mind with regard to cryptocurrencies is that many won't last.
In the early years of the automobile, there were hundreds of car manufacturers. Very few survived to this day.
In the early years of the airline, there were hundreds of airlines. Very few survived to this day.
This will be the same for cryptocurrencies. Many will not survive a year, let alone five or ten years.
One of these horses will win the race, you just don't know which one.
Good luck. 🙂
How to Buy Cryptocurrency
If you asked this a few years ago, it was going to be a complicated answer. Today, it's actually quite simple.
There are several reputable exchanges that will let you buy various cryptocurrencies using your country's fiat currency (if it's USD, you probably have the most options).
Now that you know what you want to buy, where do you buy it?
Definitely stick with the main cryptocurrency trading hubs:
Coinbase
Coinbase is one of the most popular and well known crytocurrency platforms and takes a few seconds to sign up. Once you are registered, you'll want to set up a phone number to enable two-factor authentication via SMS (text message), an absolute must with financial accounts. If you want to buy and sell, you'll need to enable 2FA.
From there, you can link financial accounts (bank account, debit card, or wire transfer) to add funds to your USD wallet. After that, you can transact in BTC, BCH, ETH, and LTC.
Coinbase charges you 1.49% of each transaction, adding it to the purchase price on a buy and deducting it from the proceeds on a sale. If you buy $100 of BTC, the cost will be $101.49. If you sell $100 of BTC, you will receive $98.51 from the sale. There are other fees associated with purchases using a credit/debit card (3.99%) but no account maintenance fees or minimum balances.
Those four major coins are the only ones supported by Coinbase at this time. Also at this time, when you buy or sell at least $100 within 180 days of registration, you get $10.
Robinhood – Free Stock
Robinhood, the same folks who brought you free trades via app, also have a Robinhood Crypto. It's accessed the same way as Robinhood, through their app, and you can buy and sell various cryptocurrencies without paying a commission. This makes it cheaper than anywhere else.
The following cryptocurrencies are available on Robinhood – Bitcoin, Ethereum, Bitcoin Cash, litecoin, Dogecoin, and Ethereum Classic. You can watch Ripple, Qtum, Stellar, NEO, Zcash, Monero, Dash, Bitcoin Gold, Lisk, and OmiseGO but you cannot buy or sell.
Robinhood Crypto is not available everywhere. It is currently available in 46 states and the District of Columbia (not in Hawaii, Nevada, New Hampshire, and West Virginia).
If you don't already have an account, you can get a free share of stock valued anywhere from $3 – $150, though the average is $10 on this new account promotion.
Coinsquare – Best for Canadians
You will find that a lot of exchanges will take USD but few will transact in Canadian Dollars.
If your cash is in Canadian Dollars, you would much rather buy and sell in CAD. Your alternative was to exchange it to USD (losing some in the forex process) and then buy crypto – which makes no sense.
Your best option is to use Coinsquare.
Coinsquare supports several cryptocurrencies include Bitcoin, Bitcoin Cash, Squarecoin (their coin), Dash, Dogecoin, Ethereum, and Litecoin.
As for fees, it's 0.1% as the maker and 0.2% as the taker. Reasonable structure.
CEX.io
CEX.io started as an exchange and a cloud mining service. Eventually, they shut down the mining part of the business to focus solely on being an exchange.
CEX is an exchange registered in the United Kingdom that transacts in eight crytocurrencies. They have Bitcoin, Bitcoin Cash, Ethereum, Bitcoin Gold, DASH, Ripple (XRP), Steller Lumens (XLM), and ZCash (ZEC). They accept US Dollars, Great British Pounds, Russian Rubles, and the Euro.
It's a very popular exchange and you can even purchase with a credit card (with a 3.5$ + $0.25 fee) but verification can be a little more cumbersome. They accept Visa and MasterCard and will have to verify the card, which includes you sending a photo of you with the card – a verification officer will review it so make sure it's clear!
The transaction fee schedule is a little more involved, since it's based on your trading volume and whether you make (create) or take (fulfill) the transaction. The fees start at 0.25% as the taker and 0.16% as the maker, but go down with volume in a 30 day window.
Binance
Binance is a relative newcomer, having been founded in 2017, by a former CTO of OKCoin (Changpeng Zhao). The company was founded in China but left to Taiwan ahead of the Chinese ban on cryptocurrency trading and now as a claim as the largest crypto-exchange! There are, however, some who question its trading volume and the volume of some of its peers.
That said, what separates them from many others is the sheer number of cryptocurrencies available. Coinbase sticks to the most well known four, CEX expands to eight, but Binance has pretty much everything. Also, whereas other exchanges will let you exchange a few fiat currencies into a few coins, on Binance you can exchange anything.
As for fees, there is a 0.1% trading fee. If you hold any BNB (their coin), the fee is deducted from your BNB balance and you also get a 25% discount. The fee is reduced if you transact more in a 30 day period.
Changelly
Changelly is slightly different than the other platforms because you don't have a wallet on Changelly. It's strictly a platform for the exchange of coins and cash. When you buy or sell, you have to handle the wallet part by scanning in the QR codes to complete the transaction.
This is one of the reasons why Changelly offers some of the best exchange rates and why it's worth a look once you start really getting into it.
Woody says
At the beginning, I think you meant to say $65,000 not $6,500 for the price of Bitcoin.
Yeah, it’s been on quite the run!