The topic of this post is Bitcoin exchanges, but frankly one can use my post as a guide to buying any cryptocurrency from any exchanges. I have previously written about my experiences buying Ripple XRP from the Bitstamp exchange, the wallets one should be looking at and where to find news on coins, but Bitcoin is in everyone’s faces at the moment, given its meteoric rise in the last couple of months and days, so I am going to focus on it.
Let us assume you are a complete noob, with no investment in cryptocurrency whatsoever.
Disclaimer: As a cryptocurrency noob of four months, I am aware that what I write on my blog might be seen as ‘giving advice’, so let me put the following message out there; Everything I have written in this post are my past and current experiences as well as observations. I am not advising you to buy Bitcoin or Ripple XRP or LiteCoin or any other coin, as I am not a financial advisor. Everything I have bought I am prepared to lose and will put it down to learning. Everything else (links, images, knowledge, advice where to look for information), you can find on the web yourself, or you can read my post. I am LONG on all my purchases, meaning everything I have bought to date is sitting in my wallet. I have no interest in selling any of it in the short term. If you have invested in something I wrote about and lost your money because the price went up or down, then that is your problem not mine.
Decide which exchanges to use to buy Bitcoin?
There are a number of well known Bitcoin exchanges. My primary exchange is Bitstamp because it is easy to use, fast and reliable, but there are many others I have signed up too namely Binance, Coinbase, CEX.IO, eToro, Bitfinex, Bittrex and Kraken. The latter I wouldn’t recommend, only because my experience with Kraken was pure frustration with all the errors and delays, but it is entirely up to you. Coinbase is a well known exchange in the US, but in recent days they have suffered lot of problems due to the sheer demand of sign-ups. Before deciding which exchange to sign-up too:
- Look at websites that list and review exchanges only. Here is a good one called Best Bitcoin Exchange (It is all in the name). Rather than me explain what one should look for in an exchange, read this website from top to bottom and click into a few review links and go from there.
- Another reason I signed up to Bitstamp was because they have a great choice of deposit methods (EU SEPA, International Bank, Bitcoin, Ripple, Litecoin, Ethereum, Bitcoin Cash, Astropay, Credit Card).
- Bitfinex offer great security features and have loads of alternative coins. They also allow deposits, but state it will take up to 7 days. It is better to deposit crypto from another exchange (e.g. Withdraw from one exchange and deposit into Bitfinex in the same currency. I did XRP to XRP and it was flat out. The transfer took less than 10 seconds.
Go ahead and sign up to at least two or more highly rated exchanges.
The reason I recommend two or more exchanges is so one’s risk is spread across multiple exchanges. In the unlikelihood of an exchange being hacked or your coins being stolen, your risk is reduced to that exchange, but if you have picked a good exchange that offers excellent security measures this is all very unlikely.
Most of the exchanges mentioned are asking for some form of identification; your email address, maybe a photo of your driver’s licence or passport, proof of residence etc. and they normally take a day or two to verify you. Not all of them are that intrusive. Bitfinex for example asked me for a username & email address and that was it and the account was created very quickly. I was trading within the hour. Most of the big exchanges are overloaded with requests at the moment, so try and register an account during the week. Avoid weekends.
Depending on your location it is best to sign up with an exchange in your region as transferring money can take a few days depending where you are.
The exchange has verified you – now what?
Decide how much money you are willing to lose 😉 because seriously Bitcoin and (most coins) are a real gamble at the moment. There are many theories on why it is so volatile. If you have been following Bitcoin all year, and thought it was a crazy price back in January when it was $1000, well think again, because it has just touched $17000. All those lovely low entry points below $2000, $3500, $5000, $10000 have long gone.
Getting in now means you are buying this at a premium price if one wants to make 50 to 100% profit. But wait, who is to say $16000+ is a premium price, when no one really knows the true value of Bitcoin? Of course everyone who is anyone is waiting patiently for the price to crash, so they can jump onto the Bitcoin bandwagon. So far Bitcoin has avoided the cliff edge / the falling knife / the bubble burst and has steadily climbed to record levels, that is not to say it will not drop. Of course it will drop.
[edit: 8 December 2017, 5pm] Bitcoin dropped at least 1600+ dollars today. So there is proof it can drop any time.
Are you still keen to buy Bitcoin? Go ahead and log into your chosen exchange and deposit some cash. This process differs at every exchange. Take Bitstamp for example, they don’t actually accept money on their website, instead share their bank details and a unique reference number for the amount of cash one wished to deposit. Go to your bank account and wire your hard earned cash to the account that was issued. Don’t forget to mention your unique reference number. Your money will transfer in a couple of days depending on your location and will cost a small fee.
While you wait for verification on the exchange, please sort out your security.
Make sure you set up a secure password to your exchange account. Use at least 14 characters in your password, made up of various symbols, numbers, uppercase and lowercase letters. A great site to generate a password is Password Generator. Seriously don’t skimp on your password. There are horror stories every day of people being hacked. Make your password as secure as possible.
Remembering a strong password can be tricky and that is where LastPass password manager comes into play. I’ve blogged about this great password manager before, so be sure to read that post. LastPass is a lifesaver when it comes to logging into secure websites and mobile apps.
On the exchange’s website always set up two factor authentication (2FA) on your account. Most exchanges insist it is set up before one can trade. There are a number of services available. A good exchange will offer many choices. I use Google Authenticator for the 2FA, which is an app on my Android phone. It generates a random 6 digit number every 15 seconds, which needs to be entered before it expires.
I also use a physical USB key called a YubiKey. It is a hardware multi-factor authenticator that links to my Lastpass account. Stay away from services offering codes via SMS messages. They are not secure enough. (Google it if you don’t believe me).
There are other services to bolster your security and it depends on the exchange one is using. Read more reviews of the exchange before depositing cash into them. IT IS NEVER TOO LATE TO BAIL OUT OF AN EXCHANGE if one reads a bad review or three.
Get familiar with the exchanges trading screens before trading.
Most trading screens can be quite daunting with a lot of technical terms and buttons, along with charts etc. The way I learnt the screens was by watching YouTube videos. There are dozens of videos showing examples of folk trading. Most exchange sites have a FAQ section. Read their pages and learn as much as you can about the different screens. I like Bitstamp because one can choose the difficulty. The easiest trade is an Instant Order, which allows one to enter in the amount one wishes to spend and then the exchange shows;
- A buy BTC or Sell BTC button.
- The fee they’ll charge to make the trade.
- The approximate Bitcoin (BTC) you will receive.
- A Buy BTC button.
After hitting that BUY BTC button your order will be placed. Don’t worry, someone will gladly sell you some Bitcoin. If you are not spending $17000 dollars then you will be getting a fraction of a Bitcoin, which is not big deal. Note the decimal numbers down. To see your balance visit ‘Closed orders’ or ‘Transactions’ and on most good exchanges there is a wallet section for each of the cryptocurrencies.
How to determine the value of your Bitcoin?
There are a number of websites giving conversion rates, XE.com recently added Bitcoin to Dollar, Bitcoin to British Pound and Bitcoin to Euro and vice versa.
The one thing I have learnt about trading stocks over the years is to not be too greedy. Set a realistic profit target and take profit when your target is reached. A good friend of mine Jav Bose runs a stock analysis website called 2centview.com and he has some great advice on his investing strategy page. It is worth a read for sure and likewise his blog. The same investing strategy can be applied to Bitcoin and all the other cryptocurrencies.