This article is a guest post by Ashley Knowles, and originally appeared here
My journey into crypto started with Ethereum; I had pondered buying in to Bitcoin many times (and regret not doing so, like everyone else) over the years, but it wasn’t until a good friend recommended I look into the booming Ethereum that I took the leap and joined in on the action. There was a dream. Buy crypto currencies at a seemingly low buy-in rate, and hope it goes to the $1000+ prices (at the time) of Bitcoin. It was farfetched. 6 months later I’m wiser and more experienced; I burned myself. I bought big with Ethereum, rode the wave from $40 to $400, and then down again to $215, all the while buying more and more thinking “this is going to make me rich”. Nah. The dream didn’t quite play out. I made a tiny 5x profit. And in doing so I learned more about crypto, trading, and all of the many other ‘altcoins’ available.
Altcoins, or ‘alternative’ coins, sometimes even called ‘shitcoins’, are really just that; alternatives to the big market cap coins of Bitcoin, Ethereum and Ripple. We’re talking about coins and tradable tokens with names like Dogecoin, AdEx, Antshares, TenX and SafeX, just to name a few. The bulk of these coins are merely specialised implementations of the more established blockchains, targeted towards specific payment solutions (TenX for example), voting/democratic purposes, and in some cases, ‘forthelulz’ (for example Dogecoin, Reddcoin, etc).
It’s my opinion only that altcoins are mostly just fads. They aim to ‘enhance’ specialised or niche areas, but lack the ‘global’ reach and impact of Bitcoin & Ethereum.
Fundamentally, this is how and why they get the nickname of ‘shitcoins’.
What kind of investor are you? Do you like to put your money into low risk, long term ‘assets’? Or are you interested in higher risk and faster returns?
This is important. Throwing $5,000 into a shitcoin and losing 20% within hours is going to hurt you mentally; and likewise, making 20% will shoot your heart racing over the moon. Weigh up how much you can throw away, and how much risk you want to put into crypto currency. If you don’t have a budget and a month’s worth of salary saved as an emergency fund, DO NOT go throwing your money into crypto currency; get your finances in check first! (This is budgeting 101; if you have debt and/or no savings, you need to sort your life out first).
If all of this sounds cool and you’re ready to risk your hard earned (and surplus) cash, then you can think about sinking your teeth in.
If you’re new to investing, you will want to understand fundamental and technical analysis. These terms refer to the different types of information that traders will use to trigger buying and selling events when it comes to assets of all sorts; stocks, bonds, property and even crypto-currency.
Fundamental analysis (FA) is the process of researching what you’re getting in to. Let’s take Bitcoin as an example; you read the news, and see that China is allegedly banning its citizens from owning Bitcoin; this surely sounds like a bad thing for Bitcoin, right? Maybe; but it’s not necessarily how the market will react. But being in touch with the news pertaining to Bitcoin will have you more informed and knowledgeable to make a decision to buy or sell Bitcoin. Only through this kind of constant research can you react to the market and reduce your risk by selling your Bitcoin before everyone else does, or if the news is more positive, buying it to make a larger capital gain. Fundamental analysis is the equivalent to being an experienced worker; the more you know about a specialised area, the better your instinct and decision making process will be when you come across something that may make you question whether to buy or sell.
Technical analysis (TA) is a little trickier. Think computers, automated trading, wall street crashes, etc. TA is the process of analysing historical trading data, usually by using price graphs over different periods of time, and overlaying ‘indicators’ on these which indicate different types of moving averages, volume of trades, and other such “technical” information. Investopedia has a good introduction article if you want to learn more about Technical Analysis.
You made it this far, so I assume you’ve built up some knowledge, have some surplus cash and are looking for your first altcoins to get started.
Platforms such as CoinSpot in Australia, have a larger selection of coins to start investing in, with 55 coins currently listed to trade on the ‘all coins’ page.
CoinSpot‘s front page gives you a quick indication of recent movers; generally coins that have made the largest gains in the past hour. This is generally a good indication of coins which are on the rise; or potentially coins that might soon decrease in price.
Buying altcoins on CoinSpot could not be easier; once you’ve registered and verified your account, CoinSpot will use a third party ‘Poli’, to securely transfer from your bank account to CoinSpot, funding your trading account. Once your account is funded, you can buy coins and they will show up in your CoinSpot wallet.
I’ve used CoinSpot for over 6 months now and have never questioned its security. However, online platforms are open to being hacked, so being mindful of the potential risks of using online platforms for trading is important, especially when dealing with larger amounts.
For the newly initiated traders, it is safe to leave your coins within the CoinSpot wallet. In fact, for a lot of coins, once you transfer them away, you cannot transfer them back to CoinSpot to cash out again, and must instead use services such as ShapeShift.io to convert your altcoin to a more widely accepted crypto like BitCoin.
When setting up and using your CoinSpot account, it is highly recommended that you:
Of course, never click on links in emails from people you don’t know, and always verify that the sender of the email is who they say they are.
For the hard core trader, or long term holding, you may consider using a hardware wallet such as the LedgerWallet Nano S or a Trezor wallet. These hardware wallets will store specialised keys required to transfer your coins, and once you transfer your coins to these types of wallets, they are considered to be ‘offline’. Offline wallets are widely considered the most secure way to keep cryptocurrency.
Altcoins can be a valuable short term trading asset for investors who have the knowledge and patience. In some cases, Altcoins may be valid long term assets, but it is recommended that due diligence and analysis of the cryptocurrency ecosystem be performed prior to making a long term decision to hold such assets. Only invest what you are willing to lose; and ensure your financial position is adequate to substantiate such an investment. As always, this article does not intend to be financial advice, and you should speak with your financial advisor.
Poli Payments is used by CoinSpot to securely transfer your money directly from your bank account, into CoinSpot’s bank account, effectively funding your CoinSpot trading account. For the new investor, this may seem like an odd process; being redirected from CoinSpot to Poli, and then being asked to enter your bank’s login details. This can throw a lot of people into thinking it is insecure, and entering your bank account details into some random website is generally considered to be idiot-101. Always check that the website you have visited is the website you intended; CoinSpot will always use HTTPS signified by a green padlock or ‘secure’ statement in the left hand side of your browser’s address bar, as will Poli. You can find out more about Poli here. Rest assured, this is a legitimate process and is used by many Australian companies to provide payment solutions.