The cryptocurrency market scares off new users because it seems to be something complicated and risky. But this is not so if you follow simple rules. We tell you where to start for an inexperienced trader so as not to lose all the money
Inexperienced users can make a lot of mistakes when starting to work with cryptocurrency. For example, choosing an exchange where it is risky to store funds, or specifying the wrong address when transferring crypto assets. Each of these and many other oversights can lead to partial or complete loss of invested funds.
To avoid these mistakes, detailed instructions on how to start working with cryptocurrency, how to buy it and where to store it.
1. Decide on a strategy
First of all, it is important for a user starting to work with cryptocurrency to decide on their strategy. It depends on where the trader will store his assets.
If he prefers to buy coins and forget about them for a long time, it is safer to keep them in a cold wallet. If the user wants to try trading crypto assets, it is better to choose an exchange.
Both methods have their advantages and disadvantages. It is more convenient to keep assets on the exchange: they can be sold at any time, exchanged for other coins or withdrawn into fiat money.
This is especially true during sharp market fluctuations. If a rapid decline in the price of bitcoin begins, the coins stored on the exchange can be immediately exchanged for dollars or other currencies.
A cold wallet is less convenient in this matter. Coins will have to be sent to the exchange first, in order to be sold later.
Accordingly, while the transfer is going on, there is a risk of losing on the depreciation. On the other hand, storing cryptocurrency in a cold wallet is safer.
Any, even the largest and most famous exchange, can be hacked, as happened with KuCoin, or the ability to withdraw funds can be disabled without warning, as OKEx did.
Another problem with cold wallets is the lack of multicurrency. For example, it is not possible to store Ethereum on a Bitcoin wallet. Accordingly, the more a novice investor wants to buy different coins, the more wallets will be required to store them.
The solution could be hybrid wallets that work, for example, as applications on a smartphone. This is a safer way to store funds than on an exchange, and at the same time, most of these wallets allow you to make purchase and sale transactions with popular cryptocurrencies.
2. Create a crypto wallet and open an exchange account
After choosing a strategy, you should create a wallet for storing cryptocurrency: either download the application to your computer or smartphone, or create an account on the exchange.
Both options can be selected. Experienced traders keep on the trading floors part of the assets that are needed for operations. The remaining funds are kept in over-the-counter wallets.
When choosing an exchange, it is safer to pay attention to large, popular sites. They have more means to provide protection against hacker attacks. There are also lower risks that well-known exchanges will turn out to be fraudulent projects. However, this only reduces the likelihood of loss of funds, but does not eliminate it.
You can find the most popular exchanges using crypto market data aggregators such as coinmarketcap.com or coingecko.com. With the help of these services, you can sort the sites by trading volume.
For example, now the largest exchanges in this indicator are Binance, Coinbase PRO, Huobi, Kraken, Bitstamp. However, not all exchanges provide services for users from all country , it is important to check this before registering.
When registering on the exchange, and especially before transferring funds to it, it is important to check the terms of the user agreement. Some exchanges may not provide services to traders from your country.
The site, if it finds out that you have violated this rule, may block your account. Another important condition concerns verification. The exchange may require you to verify your identity in order to open an account or to withdraw funds from it.
When registering, you can use the referral link trick. Most marketplaces reward their users for inviting new customers. If a new user signs up using your referral link, you will receive as a reward a small percentage of the commissions they pay for transactions. The trick is to create a new account using your own referral link, and receive a small income from this from your own operations.
3. Buy bitcoin
There are two main ways to buy cryptocurrency. The first is directly on the exchange if you have created an account on it. Many large trading platforms now provide an opportunity to replenish the balance directly from the card or through the payment system. For this, a commission is taken, as a rule, in the amount of 3-5%.
This method is convenient in that you can transfer dollar or other currencies to the exchange and immediately buy various coins. Then they can be traded, left to be stored on the balance sheet or transferred to a cold wallet.
The second way is through exchangers. These are special services for buying and selling cryptocurrency. They allow you to purchase most popular coins and immediately send them to an exchange or wallet, or vice versa, exchange cryptocurrency for traditional ones and withdraw them to a bank card or electronic wallet.
Exchangers work as follows:
- You choose the cryptocurrency you want to buy and the payment method;
- Specify the amount for which you want to purchase cryptocurrency;
- Specify the address of the wallet where the cryptocurrency will go. It can be a cold wallet (you can see its address in the application), or an exchange wallet. To see its address, you need to log into your account on the exchange, select exactly the coin you are buying, and click “top up balance”;
- Confirm the application for the purchase and transfer funds. It is important to transfer the amount strictly specified in the application, otherwise the service will not recognize the transaction, and the funds will not come;
- On many services, after payment, you need to click the “I paid” button. If this is not done, the service will receive the money, but will not transfer the cryptocurrency to you.
Exchangers charge a fee for their services. Its size is usually 2-4%, although it can often be higher. To choose the most profitable option, you can use services for monitoring exchangers. They aggregate information from all exchangers and allow you to sort them at the most favorable rate.
If you decide to trade cryptocurrency and register on the exchange, it is safer to replenish the balance directly through it, and not through exchangers. In this case, you can lose a little more on commissions. But on the other hand, the risk of using an exchanger launched by scammers will decrease.
