This is written for someone new to the world of online trade (be it Forex, Stocks, Futures or Cryptocurrencies). If you’re already familiar with how the world of Forex and trading exchanges works, you can skip this article!
Once you’ve started and traded your fiat for one crypto or another, you may want to expand your knowledge and portfolio into the many other types of digital assets. Investing in “alt-coins” as they are known, is a lot like investing in stocks. Each cryptocurrency will be aiming to solve a real world problem, provide a solution, or a product/service. They will all be at different stages of development – from the equivalent of an IPO (Initial Public Offering), called an “Initial Coin Offering” or ICO, in the crypto world, through to actual use-case.
Gateway To Buying & Selling Cryptocurrency
In order to do this, a lot of the time we have to open multiple exchange accounts. Because places like Coinbase only offer access to the most established cryptocurrencies, investment opportunity is thus limited. Instead, you must be willing to venture a little farther afield. Places like Binance offer access to hundreds of other alt-coins, so we’re going to dive into the who-what-when-where and why of this nuanced little niche.
Imagine you are an Australian with a tonne of Australian dollars, but you really like some of the companies operating in the USA. In order to get in over there, you would probably need an address there, or to be operating with a third party investor/financial party located in the USA. You would then need to send your AUD, to them, in exchange for USD. They would then use those USD to buy the stocks you want.
It’s not as confusing as it sounds.
It’s the same in the Cryptosphere. In order to use your AUD to buy Cryptos, you first need to send it into a Crypto form. Once it’s been converted in Bitcoin, Ethereum, Litecoin, XRP or one of the other large players, you’ll be able to access the other “stocks” (alt coins) to add to your portfolio.
What’s worth noting, is that you may be able to buy one of these “major” coins cheaper than the other. For instance, XRP is often down against the other bigger coins, like BTC, which means that it is “relatively” cheaper. So you might think this is a better tool to buy your alt-coins with. In the picture below though, taken from Binance, you’ll notice that XRP itself can only buy 2x other coins on Binance. TRX (Tron) and ZRX (zCash). This means that in order to get access to the other coins, you’d first have to sell your XRP over to Bitcoin or Ethereum. For this reason, it’s worth knowing what you want to buy, and where.
Which one to use?
In contrast, Bitrue offers far more pairs (things that can be bought with XRP), than Binance. Having some kind of notion of the projects you like is therefore paramount – otherwise, the best recommendation is to buy Bitcoin or Ethereum, as the two are virtually available everywhere and against everything.
How to decide whether to buy Bitcoin, or Ethereum?
The best way to decide whether you should buy BTC (Bitcoin) or ETH (Ethereum) is to look at the chart of the two against each other. Yes, they also trade against one another. You’ll notice that the weekly chart shows that Ethereum has been steadily losing value against Bitcoin for a long time. Overall, this means if you do buy Ethereum, you don’t want to hold on to it for long. If it’s having a small bounce up, like in the next chart, then it could be a good idea to buy just as a foot-in-the-door to get your goal alt-coin.
Why is it devaluing?
Bitcoin has had a resurgence in price this year. Because Bitcoin’s “Dollar Value” has gone up, Ethereum’s “Bitcoin Value” has gone down. Why? Because we still use fiat for all of our general purchasing. Ethereum’s dollar value, you’ll see, hasn’t changed as drastically as it’s Bitcoin’s value has.
In the next graph, you’ll see that Ethereum’s value against Bitcoin (Yellow) has gone down, but it’s dollar value has actually risen steadily since the 18th of July. All cryptocurrencies are tied to each other for now, and Bitcoin is king and dominant. When it moves upwards, it affects the entire cryptosphere. After it surges, money made then tends to flow back into Alt-coins and we see a rise there corresponding to a slight pullback in Bitcoin.
So the bottom line?
Check the hourly charts and see which is doing better in the short-term. If Ethereum is up in a minor pull-back, as it is above on the hourly chart, then it’s a good buy. If it’s hitting new lows, then you’re better off to purchase Bitcoin instead and go from there.
What exchanges should you use to buy alt-coins?
We’re going to discuss the exchanges we have personal experience with. If we haven’t used them, we won’t talk about them as we can’t vouch for their ethics, efficacy or system.
A quick note on “Wash Trading”. A lot of exchanges have been accused of wash-trading to inflate their volumes so their ranking improves on places like CoinMarketCap.Com. Because of this, don’t believe everything you see on the website. In essence, some exchanges just trade back and forth against each other. CoinMarketCap is now rolling out a system that lets them plug an API in and see whether the trading is from genuine accounts, or via wash-trading. Some exchanges have refused to comply or ignored it, where others have stepped up and said “sure”!
Yes, these guys were also on our “Get Started” with Crypto guide. Binance is ranked the #1 exchange by volume, and they have massive liquidity. We believe this is real trading, and they also accepted CMC’s requests to verify their volumes. This is fantastic, because low liquidity makes it very hard to purchase what you want, at the price you want. Higher liquidity also means less volatility, as it takes a lot more money to push orders around if there are a lot more orders. Their interface is clean, and you can be setup and trading with them in under 24 hours. Within a few days, you can have a verified account that lets you withdraw up to 100BTC worth every 24 hours. That’s quite a bit of cha-ching! Binance is based in Malta.
2. Bitrue Official.
These guys are relatively new, but they have been providing a world of new opportunities. They have new features, and their own BTR token to save you fees for day-trading and trading in general. Their “Power Piggy” option gives you a chance (daily) to lock up your alt-coins in a power-saver that gives out 7.3% interest per year. Because this is such a good deal, it’s only offered to a certain amount of investors and you have to be quick to get your foot in the door. The payout is great though, and if you buy their BTR token, your interest earnings can go up to 10%. Yes, this is high, hence why they have limited space and funding allocated for it. These guys are based in Singapore.
This new Exchange is a part of the VeChainThor ecosystem. What does that mean? It’s an exchange created in tandem with VET (VeChainThor), in order to continue growing their reach and capabilities. The difference with OceanEx is that they offer custodial services and cold wallets. This is a security thing. Cold wallets mean funds cannot be hacked as they are not accessible online at all, and are instead printed and stored in a physical manner. Custodial service is a legal term for financial investment firms who need to invest in something that is secure and guaranteed. It’s a big deal because it shows that commercial investment does have an interest in Cryptocurrency and their exchange. We have found OceanEx to be good to use, and they use VET as their base currency, while also trading in Bitcoin and USDT.
These guys have a straightforward platform, that also offers leveraging up to 100x for those who want to margin trade. For those who haven’t done margin trading before, we recommend you steer clear of it for now. But in terms of volume, BitMex is another good option. Their platform is a little bit older in style, which may suit some people not as familiar with the newer types of websites that are around.
This is one of the first exchanges we came across when we began investing in Cryptocurrencies. Their exchange is fairly straightforward and basic, and does the trick nicely. Their allowed withdrawal limits are about 1 BTC per day, drastically less than Binance. Once verified, your limit is bumped up to about 5 BTC per day. They do allow margin trading too.
*Disclaimer: Some of the links in this article contain referral codes. Some of these give you (the user) discounts on services, and we also receive a small commission.