To start investing in cryptocurrencies, the first thing you would need is to set up your digital wallet. In the cryptocurrency realm, the term used is “wallet”.
The wallet can be likened to a bank account, which can be stored in different devices.
A cryptocurrency wallet is a software program that functions to store private and public keys and interacts with various blockchains. It enables users to send and receive cryptocurrencies as well as tracking their balance.
There are many wallets out there for you to choose from, which is all dependent on your security needs as well as whether you wish to be an active trader or a more passive buy-and-hold investor.
Once you have set up your wallet, you can then proceed to purchase and exchange the digital currency of your choice on many platforms.
Firstly, let’s explore the top 5 wallets for you to choose from to hold your crypto funds.
- Breadwallet.com
- Blockchain.info
- MyEtherWallet
- Jaxx Wallet
- Trezor
Firstly, let’s look at breadwallet.com.
For now, Breadwallet only receives Bitcoin to store in their digital wallets. This wallet is great for Bitcoin beginners as it is very user friendly and simple to use. Most importantly, the tool is free to use.
All you need to do is to download breadwallet, choose a passcode and you are ready to receive your currencies. There are no login names or passwords and no complicated cryptographic keys or configuring any settings.
However, the downside of this wallet is that it can only be downloaded to your mobile device and there is no web or desktop interfaces. It also lacks features and it is a hot wallet, which means it has less security and other parties may access your private keys easier.
The second wallet is known as Blockchain.info.
The Blockchain is catered towards Bitcoins only and is a mobile based app for both iOS and Android. It also acts as a web based wallet. The most distinguishable feature of the Blockchain wallet is the newly developed payment channel for the Bitcoin network, known as “Thunder”.
The technology enables users to send and receive Bitcoins without touching the main blockchain. This results in a very secure transaction and instant payments.
The Blockchain wallet is free and to create your account, you need to head to the main page and sign up for your account.
The third wallet is known as MyEtherWallet.
This wallet caters specifically to Ethereum currency. This wallet is user friendly as it allows you to create a new wallet without having to download the blockchain as you can simply use the web-based application.
MyEtherWallet is not your standard web wallet. You do not have to create an account on their server. You just simply create a wallet which is yours to keep, where you may broadcast your transactions on the blockchain through their full node.
Next is Jaxx Wallet.
The biggest advantage of Jaxx is that it supports many of the leading cryptocurrency platforms such as Bitcoin, Ethereum, Litecoin, Dash and many more.
It is both available to be downloaded on the mobile device or you can open it on the web.
It also has one of the best user interface as when you login to the system you know how to navigate yourself and it is pretty straightforward. They prioritize user experience.
Jaxx also has very good security and privacy settings as your private keys are sent to your local device and never to any servers. This simply means you have full access to your crypto funds and Jaxx does not hold or have access to any of your funds.
However, as the code is not an open source, the system sometimes can be quite slow to load.
Last but not least is Trezor.
Trezor is a hardware Bitcoin wallet ideal for storing large amounts of Bitcoin. It is also suitable for beginners and very user friendly and has very good security and privacy settings.
The web interface is easy to use and the device comes with a built in screen. Most importantly, it is open source software.
As it is a very secure and practical device, the cost is a little bit pricey at $99. You must also have a device to send your bitcoins.
We’ve already discussed the platforms where you can hold your cryptocurrencies. As mentioned previously, the wallets can be stored in different devices.
There are 5 types of devices where you can download and store your wallets to hold your cryptocurrencies:
- Desktop
- Cloud
- Mobile Devices
- Hardware
- Paper
Firstly, is your desktop.
Your wallets can be downloaded on a PC or laptop. They are only accessible from the single computer in which they are downloaded. It offers very good security but the drawback is you are only able to access your wallet on the desktop and nowhere else.
The second drawback is when your PC is attacked by virus, the virus may also affect your cryptocurrency wallet and your wallet may get hacked. The virus may also access your private keys and your funds.
Secondly, your wallet can be downloaded and stored in cloud or online. The wallets run on the cloud and are accessible from any devices in any location.
They are very convenient to access unlike your wallets stored on the desktop. However, bear in mind that your private keys are stored online and other parties may potentially access your wallet easily.
The next wallet is your mobile wallet. You can download your wallet on your mobile device via the App Store or Google Playstore and others. Having your wallet on your mobile makes it very convenient as you have access to it anywhere you go.
A lot of them are quite secure as they have multiple signature accesses as well as backup features in case you lose your phone.
This way you would not risk losing your crypto funds as the backup feature has backed up your private key to unlock your wallet.
The fourth wallet is your hardware wallet. A hardware wallet means you store your crypto funds on a USB or hard drive. Although hardware wallets complete their transactions online, they are stored offline and this enhances the security.
Last but not least is you can store your wallet on paper. Paper wallets are wallets printed out on a piece of paper. They are very easy to use as you have the option to carry it wherever you go, or you can even store it somewhere safe.
Because they are printed out, they provide a very high level of security. While the term paper wallet can refer to a physical copy or printout of your public and private keys, it can also refer to a piece of software used to securely generate a pair of keys which are then printed.
Now this leaves us with an important question, where should you store your wallet which contains your crypto funds?
This all depends on whether you are an active or passive user of cryptocurrency. To asses which user you are, you need to answer the following questions:
Do you need a wallet for everyday purchases, or just buying and holding your digital currency?
Do you plan to use several currencies or just one single currency?
Do you require access to your digital wallet wherever you are, even when you are on the go or only from home?
For instance, if you are the type of user who constantly spends your crypto funds to purchase daily necessities, you may want to store your wallet in your mobile device or on cloud.
However, if you plan to buy and hold your currencies for future investments, it is best for you to store your wallet on a hardware or paper wallet.
Once you have chosen the best platform to hold your currencies, you can now proceed to the many digital currency exchanges to purchase your cryptocurrency and kick start your investment!
Cryptocurrency Exchanges For Investment
First and foremost, let’s get familiar with cryptocurrency exchanges. What is cryptocurrency exchange? Cryptocurrency exchanges are websites which allows you to buy, sell and exchange cryptocurrencies for other digital currency or fiat currencies like USD or Euro.
If you are very well versed in your crypto investment game and are used to trade professionally, you will likely need to use an exchange platform that requires you to open an account and verify your identification.
However if you are relatively new to the realm of cryptocurrency as a beginner I advise to start with platforms which do not require you to open an account. These exchanges are usually very straightforward and you can start trading occasionally until you get the hang of it.
There are 3 types of cryptocurrency exchanges:
Trading Platforms
These are websites that connects buyers and sellers where they charge certain fees for a completed transaction.Direct Trading
These platforms offer direct person to person exchange. You may exchange with individuals from different countries as well as different currencies. Direct trading does not necessarily adhere to the market price, as the individuals trading may set their own exchange rate.Brokers
These are websites that anyone can visit to purchase cryptocurrencies. However, the price is set by the broker. Cryptocurrency brokers are similar to foreign exchange dealers.
Before making your first trade, it’s important to take note of these 5 key information to minimize your risk and maximize your return on investment.Reputation
Before you start your exchange on your selected site, ensure you’ve gathered sufficient information regarding the site such as reviews from professional traders as well as well-known industry websites. You may also join forums that discussescryptocurrency issues such as Bitcoin Talk or Reddit.Fees
Most exchanges will have fee-related information on their websites. Before joining any sites, ensure you have understood the exchange jargons; deposit, transaction and withdrawal fees. Fees may vary according to the exchange you choose.Payment Methods
Take note of the payment method available. Does the site use credit and debit card? Wire transfer? PayPal? If a particular exchange has very limited payment methods then it may not be convenient for you. Always remember that purchasing currencies via credit card will always require an ID verification and it comes with a premium price to increase the security measures.
Meanwhile, purchasing cryptocurrency via wire transfer will take longer as it takes time for banks to process.
Verification Requirements
Majority of Bitcoin’s trading platforms both in the US and the UK require a form of ID verification to make deposits and withdrawals. Some exchanges will also allow you to remain anonymous. Bear in mind that verifications may take up days but this is protect exchanges from any sort of money laundering.Exchange Rate
Do not be surprised that different exchanges offer different rates. Therefore, always remember to shop around and to not immediately settle on an exchange. This makes a big difference on your investment as cryptocurrencies are known to fluctuate in value up to 10% and even higher in some circumstances.
As cryptocurrency is gaining more attention around the globe, there is a vast array of exchange platforms to choose from. But not all exchange platforms are created equal. These are the top 5 most visited exchange platforms in no particular order.
- Coinbase
- Kraken
- Cex.io
- ShapeShift
- Poloniex
Firstly, is Coinbase.
Coinbase is one of the most popular exchange platforms to date. It is used by trusted investors and millions of investors around the globe. This platform is user friendly as it makes it easy for you to securely buy, use, store and trade digital currency.
The platform allows you to exchange currencies like Bitcoin, Ethereum, and recently, Litecoin. They also have a digital wallet that is available on iPhone and Android.
However, the selection of tradable currencies are dependent on the country you live in. Currently, Coinbase only allows transactions in the US, Europe, UK, Canada, Australia and Singapore.The method of payment is also quite limited and restricted to bank transfers, credit/debit cards and PayPal. To get started, all you need to do is to sign up for your account and you are good to go!
The second platform is Kraken.
Kraken is the largest Bitcoin exchange in euro volume and liquidity and is the first partner in the cryptocurrency bank. Kraken allows the exchange of Bitcoins, where you are also able to trade Bitcoins and euros, US Dollars, Canadian Dollars, British Pounds and Japanese Yen.
Kraken also allows the trade of other digital currencies such as Ethereum, Monero, Ethereum Classic, Augur REP tokens, Litecoin, ICONOMI, Zcash and many more.
Kraken also caters towards more experienced users where it offers margin trading and other advanced trading features. Cost wise, Kraken has very decent exchange rates, low transaction fees as well as minimal deposit fees.
However, like Coinbase, the payment methods are also very limited. Kraken is also more suitable for advanced traders and investors and it may be a little difficult for newcomers as it has an unintuitive user interface.
To open up a basic account to start trading, you need to sign up for your account on their main page where it requires your personally details. A more advanced account additionally requires a government issued ID and a proof of residence.
The third exchange platform is Cex.io.
This platform enables its users to easily trade fiat currency with cryptocurrencies and vice versa. For traders looking to trade Bitcoins professionally, the platform offers personalized and user-friendly trading dashboards and margin trading.
CEX also offers a brokerage service which provides inexperienced traders a very simple way to purchase Bitcoins according to the market rate. CEX is a very practical mobile product where it is supported worldwide and has a very decent exchange rate.
However, depositing currencies in your account is quite expensive.
To start your trading on CEX, you need to head on to the mainpage and sign up for your account.
Next up is ShapeShift.
ShapeShift is tailored towards users who wish to make instant straightforward trades without signing up for an account or relying on a platform to hold your funds.
It also supports the exchange of multiple cryptocurrencies including Bitcoin, Ethereum, Monero, Zcash and many more.
However, it does not allow fiat currency exchange with cryptocurrencies and the payment methods are very limited as users are not allowed to purchase their digital currencies with debit/credit cards or any other payment system. Payments are to be done via cryptocurrencies only.
Last but not least is Poloniex.
This platform offers a secure trading environment with more than 100 different Bitcoincryptocurrency pairings and advanced features for professional investors.
Poloniex has a fee schedule for all its traders. Therefore, the fee that is charged varies depending on if you are a maker or a taker. Makers are traders who displays their orders on the order prior to the trade. Takers are users who “takes” the makers order.
For makers, their fees range from 0 to 0.15% depending on the amount traded. For takers, fees range from 0.10 to 0.25%. The reason why the fees vary is because maker-taker model encourages market liquidity by rewarding the makers of that liquidity with a fee discount.
In order to start trading, you have to sign up for an account on Poloniex’s mainpage.
To start investing, you have to firstly possess a digital wallet. Then, shop around for suitable exchange platforms according to your preferences.
The main factor to take into account before starting your investment is to acknowledge whether you are an active or passive user of cryptocurrency; are you in it for the short-term, or the long-run?