There are only a few things to know about trading cryptocurrencies. Below are a few of the most important things to know before getting started:
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 riskier (but can offer quick gains on a good day).
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.
Those are all valid and interesting, but with that in mind, this article 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 essentially need to be set up for trading.
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 a whole other 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 despite the above notes:
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.
TIP: Do not do “margin trading” unless you know exactly what that is. Cryptocurrency is volatile and 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 trade very carefully. There are some really nasty traps to fall into when trading coins (because they aren’t 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.