A complete step by step guide to trade in cryptocurrencies
Trading in cryptocurrencies can be a complicated and an intimidating process for most folks as there is a lot of uncertainty surrounding its legal and financial existence. Some people want to trade in cryptocurrencies because of its ground-breaking and futuristic technology and some are interested in trading merely due to a promise of hefty returns.
A complete step by step guide to invest in cryptocurrencies:
Step 1: Choose and Understand the Cryptocurrency
The biggest challenge for any cryptocurrency trader is to choose the right cryptocurrency when every other day a new coin is launched and the hype surrounding it may manipulate one into buying a wrong currency.
As of date there are more than 12,000 cryptocurrencies available in the crypto universe and most investors know only a few of the popular ones like Bitcoin, Ethereum, Binance Coin, Solana, Litecoin, Dogecoin, Shiba Inu, etc.
While there is no harm investing in these fairly well known and comparatively safe currencies, a lot of other upcoming and lesser-known currencies might also have tremendous growth potential and might be worth considering.
The biggest challenge any crypto participant faces are shortlisting and deciding on which cryptocurrencies to put their money on. Just like any other investment class some of these crypto currencies fulfil speculative purposes and some fulfil growth objectives. Each of these tokens are backed by different fundamentals like underlying blockchain technology, mining technique, liquidity and accessibility.
One needs to decide on which digital token to trade as per their needs and risk appetite. Always do your through research prior to trading in cryptocurrencies and always read the white paper of the coin throughly.
Step 2: Choose an Exchange Platform to Buy
There are specific online exchanges dedicated for trading in cryptocurrencies. The most popular global ones are Binance, FTX, Coinbase, Kraken, Bithumb, Bitfinex, Bitstamp, KuCoin. Popular cryptocurrency exchanges in India are CoinDCX, WazirX, CoinSwitch Kuber, Bitbns, Unocoin, etc.
Banks and other brokerage companies do not offer a platform to buy and sell digital tokens. They can only be purchased from specifically dedicated cryptocurrency exchanges. A good cryptocurrency exchange provides a platform which has a very easy to use design and which offers ease in trading to its participant.
Other important features to look out for are that it should offer competitive prices and fees on withdrawals and deposits. The exchange should have an active and responsive customer support facility. Lastly, it should be trusted and secure as crypto world is not entirely regulated and all the transactions are completely anonymous.
Step 3: Open a Cryptocurrency Exchange Account
To start investing in digital coins, enthusiasts need to open their account by registering themselves on any exchange platform of their choice. Registration form will prompt the investors to fill in some basic information. Furthermore, applicants need to comply with mandatory KYC regulations by submitting a valid PAN card along with other government issued documents like aadhar card or passport.
Next for cryptocurrency trading, participants need to submit details of the bank account they wish to pursue their trades from such as bank name, bank account number, account type, IFSC code, etc.
Step 4: Choose a Wallet to Store your Holdings
Digital tokens are stored in crypto wallets that unlike physical wallets do not exist physically but are specially designed software programs that are designed to store the coins.
These wallets do not actually store cryptocurrencies, they actually store the public and private keys which one needs to access the blockchain where investor’s digital tokens exist. They are called keys as they unlock the token on the chain. Investor needs both public and private keys to complete any transaction and wallets keep the keys safe.
Investors should choose digital wallets based on their need, convenience and security.
Best bitcoin wallets for investors to choose from are Metamask, Coinbase, Trezor, Blockchain wallet, and many more. Many exchanges like Binance, Coinbase also provide wallet services to their consumers.
Step 5: Ensure Security of your Crypto Wallet
One must always ensure safety of their crypto wallets. Participants must use a VPN(Virtual Private Network) to add an extra layer of protection for secured and encrypted transactions which adds anonymity to transactions keeping ones holdings protected from maliciousness. This is specifically true for traders who hold a lot of digital currency.
With this 5 steps a participant is ready and set to commence trading. An Indian participant should always comply with the tax requirements that have been laid down for trading in cryptocurrencies.
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