Bitcoin Investing and Trading
Owning Bitcoin enables you to trade it for more than 1,500 cryptocurrencies on the cryptocurrency markets. Many of these ‘altcoins’ provide only a BTC/ALT (Bitcoin/Altcoin) currency pair, since they’re not rooted in the traditional financial system.
This means that you can’t buy them directly with fiat and you’ll first have to sign up to an exchange that deals in fiat, buy yourself some bitcoins, and transfer them to the exchange that sells the altcoin you’d like to purchase.
TIP: When signing up for exchanges, make sure to activate Two-factor Authentication as it significantly increases the security of your account.
Some reputable cryptocurrency exchanges specifically designed for trading:
Beyond being purely theoretical, trading is also an acquired skill, so practice is very important. Before you begin to gamble your life’s savings, you should consider honing your skills on real markets with fake money.
The intricate workings of trading are beyond the scope of this guide, and there are many articles, videos, books, guides, and courses available on the internet designed explicitly for newbies.
Information is power, and especially as a trader you’re going to need to be on top of your game if you’re going to produce amazing results for yourself.
Please note that we’re not encouraging trading without a proper understanding of the fundamentals. Check yourself before you wreck yourself.
People get really excited once they start to understand why Bitcoin (and cryptocurrencies in general) have a lot of value. For many, this understanding causes significant drive for action, combined with a fear of missing out.
Before taking those first crucial steps to buy Bitcoin, take a moment to mentally prepare yourself for the rollercoaster that is ahead of you. Bitcoin and other cryptocurrencies are notoriously volatile, and many people’s wallets have been drained due to the panic selling that occurs when significant price dips happen.
Intro to ICOs
There are a lot of things to consider when exploring the possibility of investing in Bitcoin, or using Bitcoin to invest in some other crypto project. Typically, cryptocurrency projects use a special model called ‘initial coin offering’ (ICO for short) to raise funds.
ICOs are a new form of crowdfunding based on cryptocurrency tokens; the early investors are motivated to purchase the tokens with hopes that later on they’ll be widely adopted, and their investment will pay off.
How to Invest in ICOs
Treat ICOs from an investor perspective. Educate yourself on the investment mindset. Try to understand what they’re aiming for, and emulate the behaviour. Analyze their white paper, and reach out to their team with any questions you might have. See how fast they respond, and in what manner. Every little detail matters, and businesses with a well-developed model have no qualms to explain what their product/service can do for you.
There are no rules regarding ICO timing. Sometimes the team develops the product to prototype level before asking for an investment; other times the team kicks off the project with a fundraiser; some projects have multiple ICOs over their lifetime.
Use tools that rate ICOs based on features and code, inform yourself (from multiple sources) on what the most important aspects to consider before investing are, and do research on the team behind the project.
Questions to assess the outlook of the project:
- Does their idea make sense?
- Who is on their team?
- Have they confirmed their participation on Twitter?
- What blockchain platform is this new cryptocurrency based on?
- Does their whitepaper explain the process and the idea in detail?
- Do they have a dedicated security team?
ICO Investing Precautions
There are no guarantees in Bitcoin, and there are usually no refunds either, so make sure that your decisions to take action (invest) are 100% solid before going through with them. Make sure to fully understand the rules, terms, and conditions of the project that you want to support.
As a rule of thumb, individuals who use the veil of anonymity (although they have every right to do so) and vaguely address their responsibility for the success or failure of the project could be using initial coin offering to try to steal the investments. It could be impossible to track them down so show caution and do your due diligence before investing in an ICO.
But, this does go both ways. The fact that a project doesn’t have a face is not a significant indicator of whether the person running the show is an honest human being. Projects with a face can also go ‘bankrupt’ under dubious circumstances and cause investors to lose money in a completely transparent, legitimate way.
In a way, this double-edged sword is reminiscent of the real-world economy; what you need to look for in a potential investment opportunity is the ability to create value, and a convincing enough way to present it.
We have to raise caution here:
1. Research thoroughly
2. Be patient
3. Do not invest more than you can afford to lose
- Bitcoin Resource List
- Track the price of Bitcoin
- Forums with informative discussion about Bitcoin
- Bitcoin news, podcasts and forums