We explain how to trade cryptocurrency for beginners. 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:
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. New investors can choose between
Each option has its pros and cons, but notably, only an exchange-broker-wallet hybrid like Coinbase/Coinbase pro allows one to trade and invest directly using a single platform. This page will focus on that option due to its ease of use for beginners (although we will note Coinbase alternatives along the way).
NOTE: Coinbase Pro used to be known as GDAX.
TIP: A cryptocurrency wallet is a place where you store encrypted passwords that represent coins (roughly the equivalent to storing money in a bank account). A cryptocurrency exchange is like a stock exchange or like a currency exchange in a foreign airport (a place people can trade cryptocurrency for other cryptocurrencies and fiat currencies like the US dollar). Just like if you want to trade stocks you need a bank account and access to the stock exchange, it is the same deal with 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:
TIP: There are a few sides to cryptocurrency. 1. you can trade and invest in it, 2. you can use it for transactions (anywhere a coin type is accepted), 3. you can break out a graphics processing unit and some software and mine coins , 4. you can develop for it, etc. All those and more are valid and interesting ways to interact with the crypto space, but with that in mind, this page is focused on “trading” cryptocurrency (and therefore also investing in it). With that said, even if you want to do the other things with cryptocurrencies, you still need to be set up for trading (as most miners will sell at least some of the coins they mine).
On cryptocurrency mining: As noted, one way to invest in cryptocurrency is via cryptocurrency mining. That is a valid way to start investing if say you love computer gaming and need a new rig and want to invest in small amounts of cryptocurrency while maybe making back some of the cost of the rig (and maybe even breaking even) but that is an entirely different subject. The average investor will want to trade USD for cryptocurrency on an exchange and avoid the complexities and investments of mining. In all cases, unless you already have a good rig with a great graphics card, you’ll need to put down USD upfront anyway.
For those who want to trade cryptocurrency with the above notes in mind:
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, etc and a currency exchange).
After you master Coinbase, then you are ready for say Coinbase Pro 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 probably want to trade USD for crypto on an exchange like Coinbase Pro. Once you have done that, you could 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.
TIP: Do not do “margin trading” unless you know exactly what that is and are an expert. Cryptocurrency is volatile; you can end up losing all your money in an instant if you aren’t careful.
TIP: If you don’t understand the tax implications of trading cryptocurrency tread very carefully. There are some nasty traps you could fall into when trading coins. For one, they are not necessarily considered “like-kind assets.” If that is confusing, then consider sticking with trading USD for coins in Coinbase until you grasp the concept. Learn about cryptocurrency and taxes.
The process for beginning to trade cryptocurrencies is simple, but there are a few notes that are vital to your understanding. These are similar to the ones above, but this time they are applied to using Coinbase.
First, to sign up for Coinbase.com.
TIP: Coinbase accepts some non-US currencies as payment, but options may be limited. See Payment Methods on Coinbase.com for more information.
Important notes for trading with Coinbase:
In other words, trading cryptocurrency is simple to start, but there are some essential aspects to understand before you start trading with a wallet-exchange like Coinbase.
The last thing to note is that there are countless other options for setting up wallets and trading currency. Most will, however, pair with a Coinbase account (making it a logical place to start).
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