To start trading cryptocurrency you need to choose a cryptocurrency wallet and an exchange to trade on.
From there it is as simple as filling out a form and waiting for the transaction to process (once your information is verified with the exchange you pick).
In other words, if you want to trade cryptocurrency you need:
- A cryptocurrency wallet (or two).
- A cryptocurrency exchange (or two) to trade on.
Simple as that. The rest of the page will explain the details and other important things to know.
How to invest in cryptocurrency: If you want to invest in cryptocurrency, and not just buy/sell/trade, then you have a few options. Generally new investors can choose between
the GBTC trust sold on the stock market, a cryptocurrency IRA (we don’t want to recommend one until we have reviewed them), an exchange to buy coins on and a wallet to store the coins in, or an exchange-broker-wallet hybrid like Coinbase/GDAX (which allows customers to buy/sell/store cryptocurrency).
Each option has its pros and cons, but notably only an exchange-broker-wallet hybrid like Coinbase/GDAX allows one to trade and invest directly using a single platform. This page will focus on that option due it its ease of use for beginners.
What You Should Know Before You Start Trading Cryptocurrency
There are only a few things to know about trading cryptocurrency beyond what was noted above. Below are a few of the most important things to know before getting started:
A cryptocurrency exchange is not part of the regular stock exchange. Below we will suggest using an exchange/broker coinbase, but you can also use the related GDAX (the pro version of Coinbase with lower fees). Neither of these are the same as Wall Street and its exchanges (same general mechanics, different specifics, and different entities).
A beginner might prefer to trade cryptocurrency stocks on the stock market (GBTC is a trust that owns Bitcoin and sells shares of it; trading this avoids you having to trade cryptocurrency directly). The main Bitcoin stock here in 2018 is GBTC. Be aware that GBTC trades at a premium (meaning bitcoins are generally cheaper than buying shares of the GBTC trust), which isn’t ideal. Also, cryptocurrency trading is a 24 hour market, where the traditional stock market is not. Learn more about the GBTC Bitcoin Trust and the related pros and cons before you invest.
The simplest place to buy, sell, and store coins is arguably Coinbase (and our tutorial below will help you get set up with that), but you can only buy, sell, and store Bitcoin, Ethereum, Litecoin, and Bitcoin Cash on Coinbase. If you are serious about trading cryptocurrency you’ll need another exchange like Coinbase’s GDAX, Bittrex, Binance, or Kraken (and you’ll likely want to find a wallet to store your coins in). See a top 5 list of cryptocurrency exchanges and the Best Bitcoin Exchanges ranked (the aforementioned are my picks).
The cryptocurrency market is insanely volatile here in 2018. You can make a fortune in a moment and lose it in the next whether you trade Bitcoin, another coin, or the GBTC Bitcoin trust. Consider mitigating risks, hedging, and not “going long” with all your investable funds. TIP: If you trade only the top coins by market cap (that is coins like Bitcoin Ethereum), or GBTC, then the chances of losing everything overnight are slim (not impossible, but slim). Other cryptocurrencies are more risky (but can offer quick gains on a good day).
What You Need to Know to Start Trading Cryptocurrency
For those who want to trade cryptocurrency despite the above notes:
A beginner should start by choosing a company with a good reputation that offers an exchange and wallet (to help keep the process simple).
A beginner should also start by trading prominent coins, so in 2018 that is coins like Bitcoin (BTC) and Ethereum (ETH)… in the future this could change.
Since the above is the case, a good start for any American wishing to trade cryptocurrency is starting with Coinbase.com (the most popular cryptocurrency website in America, and a service that offers a single platform for a Bitcoin wallet, Ethereum wallet, Litecoin wallet, Bitcoin Cash wallet, and a currency exchange).
After you master coinbase, then you are ready for say GDAX and other exchanges like Bittrex, Binance, or Kraken.
TIP: A good first foray into cryptocurrency investing is the obvious, buying a major cryptocurrency like Bitcoin. After that you’ll likely want to trade USD for crypto on an exchange like GDAX. After that, you should try trading BTC and ETH for other cryptocurrencies. Trading “crypto pairs” can be rewarding, but it is more complex and often more risky than just buying a single cryptocurrency as an investment.
How to Get Started Trading Cryptocurrency with Coinbase.com
The process for getting started trading cryptocurrencies is simple, but there are a few notes that are vital to understand (just like above, but this time applied to using coinbase).
First, to sign up for Coinbase.com.
Sign up for Coinbase.com to create a digital currency wallet where you can securely store digital currency.
Connect your bank account, debit card, or credit card so that you can exchange digital currency into and out of your local currency.
Buy Bitcoin, Ethereum, and/or Litecoin (trading USD, aka US dollars, for cryptocurrency).
Sell Bitcoin, Ethereum, and/or Litecoin (trading USD, aka US dollars, for cryptocurrency).
Consider signing up for another exchange and trading cryptocurrency for cryptocurrency (and then transferring that back into Bitcoin, Ethereum, and/or Litecoin, and then back into coinbase, and then back into USD). Don’t forget to record your transactions for the tax man and to brush up on the tax implications (I can’t stress that enough).