How I Started Trading Cryptocurrency

How I Started Trading Cryptocurrency
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I’m not a financial genius. I’m not a qualified financial advisor, an accountant or professional in the financial services industry and I’m not offering any advice. What follows is one person’s meandering through the sometimes confusing world of cryptocurrency trading. What I wanted to share is the experience I went through entering this sometimes opaque maze.

While Bitcoin (BTC) is the most well-known cryptocurrency it’s far from the only coin available. At last count, there were about 2,500 different cryptocurrencies on the market. In effect, that means trading in cryptocurrencies bears some resemblance to the stock market or traditional fiat currency trading. What’s less clear is why some cryptocurrency coins change in value differently to others.

Volatility and maturity

One thing that is clear, when you look at pricing graphs and trends, is that the price of different coins can move quickly, with increases and decreases of value in excess of 10 per cent possible in just minutes.

In the reading I’ve done about how new markets develop, most experts say that the volatility is to be expected. If a market persists and the holdings of an asset and spread of owners expands, the volatility eventually settles down.

This is part of what informs my strategy. I’m looking at cryptocurrencies as a long term investment. Although the exchange I use provides near-instant updates on the value of my holdings, which can move by a couple of percentage points every hour or so, I’ve learned to resist checking what’s happening unless I’m adding to my holdings.

My simple strategy

Cryptocurrency trading is still new and while zealots will point to how it will wrest control of financial systems away from governments and break us free from the yoke of tyranny we’re trapped in because of how faceless entities that control financial markets. I see cryptocurrency as part of my overall long-term financial planning.

Given the speculative nature of the markets, I’m not moving all my superannuation or other savings into crypto. It is possible to create a self-managed superannuation fund that is based purely on cryptocurrencies but I’m not quite ready to do that.

I’ll be investing relatively small sums of money for now, adding $100 or so as I have “spare” funds.

Rather than plunging everything into one specific coin, I’m spreading myself around several different currencies. My portfolio is still developing but I expect to hold about ten different types of coins.

I fully expect that some of the coins I choose, which all look to have significant upside at the moment, to totally tank and become worthless. But I’m expecting (hoping?) others will appreciate in value and far exceed any losses I might incur.

Moving fiat currency to crypto

I started by creating an account at CoinSpot on the recommendation of a friend. There are other exchanges but there were a few things that I particularly liked.

  1. They’re compliant with new AUSTRAC rules governing how exchanges in Australia are meant to operate.
  2. They use two-factor authentication (2FA) for log-ins. Aside from the usual username/password, I needed to set up Google Authenticator so I can log in securely
  3. I can add fiat currency to my account using either BPay (which incurs a 0.9% fee), POLi (which has no fees) or I can make cash deposits via newsagents (with a 3% fee).

They don’t have an app but the website is fully responsive.

With the movement of fiat into my CoinSpot account, I’ve used but BPay and POLi. Both worked fine for me but, while your bank may offer POLi payments, CoinSpot won’t use them unless the bank supports 2FA for those transactions. I have accounts with a couple of banks and while I could use POLi with one, as it supports 2FA for funds transfers, I couldn’t with the other.

Buying my first coins

I started my cryptocurrency journey with a small purchase. I used BPay to move $150 into my CoinSpot Account and purchased some Ripple (XRP), Star (STR) and Steem (STEEM).

My second set of purchases, using $500 I transferred into my account using POLi, added some Neo (NEO) and Eos (EOS) to my portfolio.

The entire process is very easy with CoinSpot. When you decide to buy a coin, you can choose whether to purchase either a set number of coins or up to a dollar value. I choose the dollar value option as it’s easier for me to work with rather than dealing with several decimal places for fractions of coins.

One thing I haven’t yet done, but I can do, is to use one type of coin to buy another. I suspect I’ll be doing that with slower-performing coins.

I’ve been conducting my purchases in the evening with the coins appearing in my wallet by the next morning, after transactions clear.

At the time of writing, my $650 starting fund was valued at $690, with the initial $150 purchases made a week ago and the next $500 made over the weekend.

Other tools

There are literally dozens of free price trackers available so you can follow the values of different coins.

Most allow you to enter your coin holdings into a portfolio so you can track what’s going on with the value of your coins. And they’ll send you alerts when specific coins hit particular values so you can either buy or sell depending on what you want to do.

I’m using Crypto Tracker and BitWorth. I’d suggest trying a few and then settling on the one or two that deliver the types of views you like.

I’m also a member of a couple of private cryptocurrency trader groups on Facebook and I read various cryptocurrency trading websites, via my RSS reader, to keep track of what’s going on.

What’s next?

I’ll be transferring some more money into my account to make purchases of Bitcoin (BTC), Litecoin (LTC) and Ethereum (ETH). That won’t be a massive investment as I’m still learning the ropes but both seem to have significant upside with many predictions suggesting a doubling in value by the end of the year.

I’ll also set up some buy orders to automatically purchase particular coins when their values hit specific values.

The trap, I suspect, is that I get too engaged in the entire trading game. So, by automating part of the process, I can ensure I don’t spend too much time counting my crypto-chickens before they hatch.

I’m also thinking about ICOs, or Initial Coin Offerings. This is where new coins are established and you can buy them before they hit the open market. There’s still a lot I don’t understand about the mechanics of ICOs but as I learn more and engage in one or two I’ll report back.

Are you actively engaged in cryptocurrency trading? What tips can you offer? Are there any mistakes you’ve made that you’d like to share?


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