Investing in the cryptocurrency market space can be a bit intimidating for a traditional investor, as investing directly in cryptocurrency (CC) requires using new tools and adopting some new concepts. So if you do decide to dive into this market, you’ll want to have a very good idea of what to do and what to expect.
Buying and Selling CC requires you to select an exchange that deals in the products you want to buy and sell, be it Bitcoin, Litecoin or any of the over 1300 other tokens in the game. In previous editions, we briefly described the products and services available on several exchanges, to give you an idea of the different offers. There are many exchanges to choose from and they all do things in their own way. Look for things that matter to you, for example:
– Deposit policies, methods and costs of each method
– Withdrawal policies and costs
– Which fiat currencies do they use for deposits and withdrawals
– Products they deal in, such as crypto coins, gold, silver, etc
– Transaction costs
– where is this stock exchange located? (USA / UK / South Korea / Japan…)
Be prepared for the Exchange setup procedure to be detailed and time-consuming, as Exchanges generally want to know a lot about you. It’s similar to opening a new bank account, because stock exchanges are brokers of value and want to make sure that you are who you say you are and that you are a trustworthy person. “Trust” seems to be earned over time, as exchanges usually only allow small amounts of investment to begin with.
Your Exchange will keep your CCs in storage for you. Many offer “cold storage” which simply means that your coins are kept “offline” until you indicate that you want to do something with them. There is a lot of news about Exchange hacking, and many coins stolen. Think of your coins as being in something like a stock market bank account, but remember that your coins are digital only and all blockchain transactions are irreversible. Unlike your bank, these exchanges do not have deposit insurance, so be aware that hackers are always out there trying everything they can to get your hands on your crypto coins and steal them. Exchanges generally offer password-protected accounts, and many offer two-factor authentication schemes – something to seriously consider in order to protect your account from hackers.
Since hackers like to rob exchanges and your account, we always recommend using a digital wallet for your coins. It’s relatively easy to move coins between your Exchange account and wallet. Be sure to choose a wallet that holds all the coins you want to buy and sell. Your wallet is also the device you use to “spend” your coins at merchants that accept CC for payment. The two types of wallets are “hot” and “cold”. Hot wallets are very easy to use, but leave your coins exposed to the internet, but only on your computer, not on the Exchange server. Cold wallets use offline storage media, such as specialized hardware memory sticks and simple hard copies. Using a cold wallet makes transactions more complicated, but is the most secure.
Your wallet contains a “private” key that authorizes any transactions you wish to initiate. You also have a “public” key that is shared online so that all users can identify your account when they engage in a transaction with you. Once hackers get your private key, they can move your coins anywhere they want, and it’s irreversible.
Despite all the challenges and wild volatility, we are confident that the underlying blockchain technology is a game-changer and will revolutionize the way transactions are conducted in the future.