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Markets crash every so often, whether it’s stock, commodity, or cryptocurrency. Just recently, Amazon stock has lost 25% of its value in a span of 3 months. Nearly 40% of Facebook’s share value has been wiped out since July; Google lost 19%. Apple is down by 26% since October. By and large, 2018 has been particularly bearish, not just for cryptocurrencies, but tech stocks as well – quite the opposite of what we’ve seen last year.
“What Goes Up Must Come Down”
Market cycles are normal with any type of investment vehicle. The price crash on both cryptocurrency and stock in Q4 strongly suggests that we are indeed going through a market downturn or a bear market. In other words, the fact that both cryptocurrency and investment funds are down suggests there isn’t anything wrong with cryptocurrency but instead it’s just a natural market fluctuation.
Bitcoin, has lost around 75% of its market price from its all-time high of $19,309 in December 2017. Speculation for Bitcoin’s price is considered as one of the main reasons for the run-up resulting in a price crash after further gains became unattainable.
Making the Most from a Price Crash
Market volatile in cryptocurrency is something experienced traders and investors have all been accustomed to. Truth is, what we’re seeing right now with Bitcoin and other cryptocurrencies is just one of the many examples of a price downturn in recent years. Here are some ways we can get by in a cryptocurrency bear market. As always, please note that this is not investment advice and is written solely for informative purposes.
HODL. Hodling is another one of those internet sensations that came about because of the immediacy of Twitter. For the unaware, it is essentially a “buy and hold” strategy used by cryptocurrency users and investors. Hodling can take a lot of patience, and mental resolve, with an almost stoical attitude towards cryptocurrency investment. In other words, they’re not into crypto just for the short-term gain, but look forward to using it more as it slowly reaches worldwide adoption.
Dollar Cost Averaging (DCA). Regarded as one of the most conservative and safer approach to cryptocurrency investing, which allows investors to accumulate crypto-assets over time. Similar to hodling, DCA requires discipline, and the ability to stick to the plan regardless of price actions in the market. It usually involves a fixed amount spread over a period of weeks or months. DCA can be considered as a “contrarian” approach to investing because investors can have more during a bear market and buy less during a bull market – the opposite of what most people tend to do which is giving in to fear of missing out (FOMO) and herd mentality.
Entry and Exit Strategies. A lot of cryptocurrency traders have an exit strategy such as placing stop loss orders below their entry points in order to minimize potential losses. Here’s an example of how an entry and exit strategy can be used during a bear market. Unfortunately, there is no guarantee that investors would be able to recoup their losses since it would all depend on future price actions. We’ll be using Bitcoin in this particular scenario.
From this hypothetical situation, it is entirely possible for traders and investors to recoup or even take some profit off of the bear market. However, it’s also possible for Bitcoin markets to go much deeper, exacerbating one’s losses and making it more difficult to recover. We don’t recommend this method unless you truly understand the cryptocurrency market and are quite familiar working with exchanges. Also, please bear in mind that selling cryptocurrencies for profit is a taxable event under state laws regarding cryptocurrencies.
Educate Yourself about Cryptocurrency. Spending some time learning about this emerging technology could be one of your most valuable investments in this day and age. Cryptocurrency will continue to evolve and will be more accessible to millions of users in years to come. Read books about cryptocurrency, enroll in blockchain and cryptocurrency courses, and steer clear from get-rich-quick schemes and cryptocurrency scams. Having a better grasp of cryptocurrency and its underlying technology (blockchain) helps clear out all the noise and drama surrounding cryptocurrency and allows you to make wise investment decisions.
**Please note that this is not investment advice and should no way be treated as such. It is for informational purposes only. Before you make any trade or investment you should consult a licensed financial advisor who is familiar with your current situation.
Many cryptocurrency critics believe that blockchain transactions are far too slow to be ever applicable for mass adoption within banking and financial institutions, failing to understand blockchain and cryptocurrency technology is still in its infancy. In this post, we’re going to look at the pros and cons of each system and explore the future of payment systems.
Banks and payment systems look in some ways more efficient than blockchain transactions, but in many cases, they’re actually more involved. In fact, as soon as they’re being used to make cross-border payments and settlements, they start to reveal some flaws. They, too, can become slow, expensive, or worse – they can lock people out through no fault of their own, and for no apparent reason.
Bank-to-bank transactions through SWIFT network take three to five working days to reach its destination, which is extremely slow by cryptocurrency standards. In contrast, an average person with no connection to a bank or money transfer service can securely send and receive Bitcoin anywhere around the world with just a smartphone and a stable Internet connection in as short as ten to fifteen minutes without the risk of being censored out by the system.
Wire transfers cost somewhere between $10 to $30, plus 6% spread on foreign exchanges. In other words, if you’re sending $5,000 from Australia to Canada, you’ll pay as much as $330 on that single transaction. This doesn’t account for differences in rates from country to country (fees for sending money from US to Africa can be as high as 15%).
Bitcoin’s transaction fees peak at around $55 in December 2017 during a massive buying spree. But most of the time, sending Bitcoin to someone anywhere around the world will only cost a fraction of a dollar, to as high as $10 depending on priority and network load. And since it’s considered a borderless, global currency, users can forget about foreign exchange rates.
Companies like Abra have been using Bitcoin as a cheaper alternative to international settlement systems. Interestingly, certain banks like the ones in the Philippines allow remittances using Bitcoin, and recipients can take their pesos straight out of the ATM without an ATM card or a bank account.
Within the cryptocurrency ecosystem, on-chain and off-chain implementations can have a significant impact both on energy consumption and transaction throughputs. As a general rule, the more it shifts toward decentralization, the more challenges it needs to deal with scaling; but as more features become centralized, the more scalable it becomes. How these challenges will be overcome in the next couple of decades is anybody’s guess.
Some of the proposed on-chain solutions is the move towards proof-of-stake consensus algorithm (e.g., Ethereum Casper), and delegated proof-of-stake (e.g. EOS and Cardano). Off-chain solution include Lightning Network (e.g. Bitcoin), and side-chains. Improving the blockchain’s inner workings not only helps with efficiency, but also makes energy consumption more manageable.
Cryptocurrency might not be as nimble as people would expect from banks when it comes to local micro-transactions. However, we’ve seen some progress lately, with SegWit adoption being used in 40% of all Bitcoin transactions, enabling shorter confirmation times, significantly lower fees, and Lightning Network integration. Users can start experimenting with Lightning wallets in their beta version (Eclair, Zap, RawTX, etc.), and buy small stuff from online stores like the ones made by Blockstream specifically for that purpose.
Cryptocurrency will only get better as time goes by, and we’ve already seen some progress from greener solutions, to mining hardware, and software development. There’s no limit to the number of ways cryptocurrency can solve many of its challenges. All it takes is an open mind and a little bit of creativity.
There’s been a change in the outlook for cryptocurrency during the past few months. People seldom talk about the markets or the price of Bitcoin. Volatility has been causing a lot of uncertainty, and mainstream adoption came to a virtual standstill.
Nonetheless, the cryptocurrency space showed remarkable resilience as blockchain projects continue to expand its borders with more lateral thinking and “out-of-the-box” blockchain solutions. We’ll explore some of their use-cases and find out whether these currencies and platforms are the next big thing.
Why People Invest in These Projects
Despite the recent lull in cryptocurrency trading and mining, blockchain projects and ICOs are very much in the business for 2018. Investors and tech companies remain optimistic about the future of the cryptocurrency space amidst tightening restrictions and negativity. In fact, according to Coindesk, the amount of money raised in ICOs in the first quarter alone exceeded the total amount last year.
Most ICOs and blockchain projects didn’t end up well for a lot of investors (more than 90% failed to deliver). However, there are a few examples like Binance and EOS which turned out as good investments. Binance became one of the leading cryptocurrency exchanges with a BNB market cap of over $1 billion – the second most valuable token on Coinmarketcap. EOS, on the other hand had a successful, albeit controversial mainnet launch, and is now a full-fledged decentralized application platform second only to Ethereum.
Smart investors consider the current state of affairs as a golden opportunity to hunt for new projects with the greatest potential, particularly in their early stages when they are mostly undervalued. Investing early on has the advantage of maximum gains with the least amount of exposure. For instance, a hundred dollars’ worth of investments at ten cents per token won’t break the bank if things go south. But if it turns out to be a real investment, gains will be exponential (e.g., BNB and EOS tokens are worth a hundred times more than their initial price in 2017)
Blockchain Projects to Watch for in 2018
Finding a good investment can be a real challenge since we’re dealing with dozens of new blockchain projects and ICOs every month. If you’re lucky enough, you might be able to land on some big winners from a list of projects. But before anything else, please bear in mind that this is not investment advice, and you are solely responsible for any gains or losses. That said, here are five of the most talked-about blockchain projects in 2018.
Zilliqa (ZIL). Launched in January, the project puts a lot of work in building a highly scalable decentralized platform using a method known as “sharding.” Unlike in Bitcoin, each node will be working in parallel within a group of nodes called “shard,” verifying a subset of all the transactions occurring at the same time (also called parallel processing). Sharding works perfectly in many centralized systems (Ultima Online, Google, etc.). However, it presents an immense technical challenge when applied on a decentralized environment. Ethereum has been working hard on it as part of its on-chain scaling solution in hopes of solving the security/scalability/decentralization trilemma. Zilliqa’s entry into the whole sharding scene threatens to steal the thunder from Ethereum by becoming the first to come up with a workable solution. Some estimates it to be around January 2019. Key features include:
faster transaction throughputs (speed improves as the network grows)
employs practical Byzantine Fault Tolerance as a consensus mechanism
reduced energy consumption (mining is spaced a hundred blocks apart)
maintains a decentralized network structure (a new shard is created for every 600 nodes)
Basic Attention Token (BAT). Cutting the middleman goes beyond peer-to-peer transactions to include decentralized, blockchain-based digital advertising in the form of an open-source, ad-free browser with its own currency. Brave Browser is one of today’s hottest Internet browsing software because it allows users to block ads and trackers completely free. In fact, as many as 3 million people have already been using Brave, becoming one of Google Play’s top ten in the Android browser category. The project is moving towards the creation a decentralized advertising platform using its own currency – Basic Attention Token – to incentivize both content creation and user attention. It works in some ways like Google Ads but in a more transparent and decentralized manner. The key advantages of BAT from an investor’s point of view include:
good potential for adoption (sold out BAT worth $35 million in 30 seconds)
strong support from the community (Brave browsing experience receive a lot of positive feedback from users)
Kin (KIN). Canadian messaging app company Kik Interactive is making headway into cryptocurrency adoption with the launching of Kinecosystem. The company hopes to build a community of users and developers sharing resources, and making digital goods and services. However, unlike most blockchain startups with no real users, Kin’s integration into the Kik Messenger meant its value could potentially rise with over 300 million active users. The company is now moving towards the next phase, inviting all developers and content creators in building the ecosystem for large KIN payouts. Gains will take time, but you might want to consider its advantages, namely:
KIN’s practical use-case as a digital currency on an existing application (Kik has been in use since 2010)
user base is mostly made up of digital-natives (teens, millennials, and active mobile users)
Kik’s emphasis on anonymity
DeepBrain Chain (DBC). Blockchain companies like DeepBrain Chain sees decentralization as the future of the AI industry. Development of AI applications use up a huge amount of computing power. DeepBrain Chain works by utilizing computational resources across millions of nodes on the neural network in building AI applications which are then published onto the blockchain. Nodes that successfully deploy mirror images will receive payouts in DBC. It plans on migrating out of NEO to its own mainnet in Q4, with its own consensus algorithm (proof of importance and delegated proof of stake). The goal is to become the deep learning machine for the AI industry. Successful adoption is achievable through:
growth in people’s interest in the AI industry
reduced computational cost of AI companies through resource-sharing
secure, decentralized method of storing AI information.
Wormhole. Bitcoin Cash might soon be able to run smart contracts through its proposed protocol layer known as Wormhole. Developers plan on forking the Omni Layer to create a platform for smart contracts on top of Bitcoin Cash. Much of it is still in the works as of this moment, but news is, they’re going to issue a token named “Wormhole Cash.” Investors and crypto-enthusiasts are keeping track of its progress since it is expected to have a very high demand upon release.
The cryptocurrency space has been constantly evolving even as the noise and the hype surrounding cryptocurrency have mostly faded. Cryptocurrency is here to stay, and we’ll be seeing more projects in the near future that will bridge the gap between the average user and blockchain technology.
Cryptocurrencies exploded on the scene in 2010 and ever since then people haven’t known what quite to make of this new way of exchanging goods and services – one that, in the future, may take over fiat currency. Governments are having an even tougher time trying to regulate cryptocurrencies to ensure they don’t get abused by criminal organizations.
But probably more important to most central governments is their own financial interests in having a strong fiat currency. In fact, the greatest fear among regulators is not whether cryptocurrencies can be used for making secure transactions or if it has real value, but on people putting their wealth in places where governments have no access or control over. If this happens, fiat currencies will lose value or utility over time as more and more people trade cash for cryptocurrencies, thereby removing its grip on the economy and on people’s lives.
Gateways for Cryptocurrencies
Cryptocurrencies and decentralized blockchain ledgers have very little need for regulations by themselves. Nor do they need any government regulation or human intervention to function properly and securely. Decentralized blockchain ledgers are, in fact, in many ways more secure than any centralized bank or financial institution.
The main purpose of regulations, as viewed by the governments, seems to gravitate on the government’s role as custodians of fiat currencies, making sure nothing gets past online wallets, brokers, and exchanges without proper authorization and identification, which is in keeping with statutory laws preventing unlawful use of fiat currency (FinCEN, AML, CFT, KYC etc.).
Some countries implement even more stringent rules against cryptocurrencies, from banning the creation of new currencies through ICOs, to the outright prohibition of cryptocurrency mining. However, many of these restrictions and prohibitions achieved nothing except encourage more people to dodge regulations by going deeper underground.
These factors make legislation for cryptocurrencies a tough balancing act, since it has to serve its purpose of protecting the people against the unlawful use of money without making it too prohibitive as to encourage clandestine exchanges, creation, and distribution of cryptocurrencies.
Gateway #1: Online Wallets and Exchanges
Governments, banks, and financial institutions came in to “regulate” this seemingly uncontrollable trading activity which involved using government-backed fiat currencies. In order for exchanges to operate unimpeded, they need to implement strict identification and verification procedures before granting certain privileges to subscribers such as increasing buying and trading limits and the ability to link their bank and/or credit card accounts to their wallet accounts.
Coinbase, Kraken, and Poloniex are well-known examples of online wallets and exchanges that implement KYC and other client verification procedures.
Gateway#2: Initial Coin Offerings (ICOs)
Investors and venture capitalists (VCs) saw the high stakes of creating tokens using blockchain technology. All that stands between them and making a fortune is finding and rallying the support from people and tech communities through the sale of equities in exchange for privileges as pioneers and early adopters of their newly created coin. In a span of nine years, there are over a thousand altcoins that have been created – and counting. Ethereum project is one of the few Initial Coin Offering (basically the same as a IPO) whose altcoin turned out to be a strong currency in the market.
ICOs has been a controversial topic in the cryptocurrency sphere. From the viewpoint of regulators, they saw the need to impose regulations for such investments because they place a lot of risk on people, especially with cryptocurrency’s volatility, unpredictability, and ICO’s susceptibility to scams. China and South Korea went as far as banning ICOs altogether, and other countries threatened to follow suit if the benefits fail to justify the risks, or if scams involving ICOs spins out of control. Of course, banning them outright is foolhardy, but these countries do need a better system of regulating them just like any other IPO.
Gateway #3: Cryptocurrency Mining
Miners are one of the strong pillars that upholds the integrity and security of cryptocurrency networks.
There are some mining regulations in most countries, while in a few places mining is explicitly prohibited. Regulations can be beneficial for several reasons. Some mining pools don’t generate enough profit to be considered sustainable for business while shady cloud mining services exist as actually Ponzi schemes. In some countries, the high cost of electricity is prohibitive enough to discourage people from mining.
For cloud mining companies, most of the burden comes from excessive regulations pertaining Money Service Business (MSB) or Money Transmitter Business (MTB) which must be complied with to legally receive payments via credit cards or bank transfers, and send payouts to their subscribers. Often the best recourse for these cloud mining companies is to move their businesses in countries which are more receptive to mining.
Limits of Government Regulations
There are plenty of ways violators can dodge restrictions, and fixing all the loopholes meant shutting down the entire network (or the Internet) or reverting to a centralized form of currency.
Whether or not these regulations could prevent unlawful use of cryptocurrencies is beside the point since many countries are still inconclusive about the effectiveness of anti-money laundering laws in preventing organized crimes, terrorism, and corruption.
Instead, governments should be focusing more on enforcing laws and tracking down wrongdoers without putting undue restrictions on every citizen whose lives depend on their ability to use fiat or cryptocurrencies.
People now have a choice. Whether or not cryptocurrencies will coexist as a better alternative to fiat currency or replace it altogether is something which people will have to decide for themselves.
Interested in mining? Learn the basics of cryptocurrency mining at CryptEdu.com or start hassle-free cloud mining at Cryptmin.com today.
The word’s first cryptocurrency came about in January of 2009 to address a common problem considered to be one of the underlying causes of the Great Recession: the lack of restraint in money creation. The economic crisis of 2007-2009, brought the reliability of financial institutions into question, and had people asking why and how it all happened.
Most often, the answers to these questions will have one common denominator – money, or more specifically, fiat currency. Did the unknown person who first created cryptocurrency in 2009 did so to replace fiat currency altogether? Or only as means to curb the effects of inflation and provide an alternative means of exchange?
Why We Use Money
Money is very much a part of our everyday lives that we often take for granted why we have to use money in the first place. Obviously, we’re using it to pay for goods, services, and debts. But have you ever asked yourself how much it’s really worth? For instance, is a dollar bill really worth a hundred dollars just because it says it is?
The straightforward answer is ‘no’, it doesn’t have intrinsic value. It’s only a piece of paper, much like your paycheck, sanctioned by the government to pay for goods, services, and debts within the country. Governments use fiat currency as a store of value. This value changes over time due to inflation and deflation. Although it doesn’t have a fixed or real value like gold and silver, it makes up for its shortcomings by making transactions a lot easier for us.
Hence, fiat currency has value only because it is backed by a central authority and because it serves its purpose – to establish a financial system that allows people to transact and conduct their businesses using a standard currency. In other words, we use money because we trust the government who issued it that it’s worth something, and because it makes buying, selling, pricing, and storing wealth more convenient.
Who Makes Our Money?
Strictly speaking, governments don’t make our money; only central banks do. However, governments can make certain things like small pieces of printed bills to have value with the words, ‘let it be done’, which translates into Latin as ‘fiat.’ This is how we get the term ‘fiat currency.’
Governments cannot sanction the indiscriminate creation of money without adversely affecting the economy. The hyperinflation of Zimbabwe perfectly illustrates how a government can ruin the entire economy by permitting the creation of untold stacks of money. This resulted in prices of goods and services going astronomical. For instance, 100 trillion Zimbabwean dollars could only buy you a candy bar. Eventually, the Zimbabwean dollar went out of circulation and the country started using foreign currencies.
If creating too much money causes prices to catch up resulting in inflation, why do countries still increase their money supply? The answer to this question is complicated. But suffice to say, our governments and financial institutions have a hand in all of this, and we, as users of fiat currency, have no control over it – until a new kind of currency came along.
Bitcoin, and the Birth of Cryptocurrency Mining
The appearance of the world’s first cryptocurrency sparked very little interest. Nobody understood why people should even spend time and money on something which doesn’t exist in physical form. But as more people started using cashless transactions without having the physical form of money, it dawned on them that fiat and cryptocurrencies share a common feature: they now exist and are being used electronically, and they are both used as a store of value.
However, there’s one BIG difference: the first one is backed by a central authority, while the other is not. In the world of cryptocurrency, everyone can create more currency by way of mining rewards in which they will have to solve, or to more precisely, find the right hash required by the network to confirm blocks of transactions which are added on top of the blockchain. To avert inflation, only a specific number of blocks could be mined at a given time and it will have a fixed supply. In the case of Bitcoin, the code was set to 21 million BTC.
Another key difference, which is also a byproduct of not having a central authority, is decentralization. In a decentralized banking system, everyone can have a copy of a distributed ledger, known as a blockchain ledger. In Bitcoin, such ledgers are stored partially or in full on nodes, i.e, computers linked to the network which miners have access to. These nodes also need consensus before transactions can get through. As a result, fraudulent or invalid transactions are easily caught and rejected by the network.
Bitcoin introduced a Utopian view of how an idealized banking system would look like. But is it going to deliver on that promise, or are we headed for the worst bubble ever seen in the history of mankind? To answer this question, we need to turn on how things are going in the cryptocurrency mining business.
Mining Profitability and the Current Price Bubble
Profitability for cryptocurrency mining is very promising indeed. Recent data from https://bitinfocharts.com/ shows how much you’ll earn at 1 TH/s mining crytpocurrencies. At this rate, you’ll earn 3.5887 USD/day for Bitcoin, 1.9947 USD/day for Bitcoin Cash, 0.108 USD/day (1 MH/s) for Ethereum, and a staggering 3.4973 USD/day (1 KH/s) for Monero.
Profitability calculators such as https://www.coinwarz.com/ is a lot more conservative when it comes to the calculations, weighing in several factors in addition to the hash rate such as power consumption (watts per hour), power cost, pool fees, bitcoin difficulty, block reward, Bitcoin to USD exchange rate, and hardware cost.
For instance, you just bought an AntMiner S9 that comes with a PSU for 3000 USD. Using the the Bitcoin mining calculator, we can see that 14 TH/s, using 1.375 kWh at 10 cents per kW, and a pool fee of 1%, yields 1134.61 USD per month. Scale it down to 1 TH/s and you’ll get 81.0436 USD per month. In 30-days of mining, you’ll get 2.70 USD per day, which is slightly lower to the estimated daily profit from https://bitinfocharts.com/ at 3.5887 USD/day.
Genesis Mining offers a mining package of 1TH/s for 2 years at 830 USD. Assuming that Bitcoin to USD rate stays the same for 2 years straight (which is very unlikely), using bitinfochart’s estimated daily profit would yield 2583.864 USD by the time the contract expires. Subtracting the cloud mining fee gives you a net profit of 1,753.864 or 2.4025 USD per day.
You might consider this profit too small; but that’s the reality of mining as far as the number goes. Compare this to how much you’d earn in two years, putting that same amount of money in the bank and you’ll quickly notice just how great the differences are. This brings us to the all-important question of how our financial system will turn out given the numbers and the current situation our banks are now facing.
Cryptocurrency as a Store of Value
There’s no question when it comes to mining profitability nowadays with the current uptrend of Bitcoin and other major currencies. However, as of date, we don’t see a lot of countries using cryptocurrencies to pay for goods and services. But this will probably change as more people turn from mere speculators to users, miners, and investors. Countries like Zimbabwe will probably use cryptocurrencies to curb their inflation, stabilization the economy, taking the power away from the government and the central banks and putting it where it belongs – in the hands of the people.
We might not have exact numbers as to how many people are now into cryptocurrencies, but their presence can be felt with the unprecedented rise in their prices. What we’re seeing right now could be the first signs of mass adoption where every people in the world will have cryptocurrency wallets in their mobile phones and laptops. Consequently, this would mean a more stable currency like fiat, and hence be able to function much like it.
There’s much to be seen as to the long-term effects of replacing fiat with cryptocurrency in the global economy. Some speculate this shift could result in mass disruption as fiat currencies lose their value over cryptocurrencies. But as we can see, banks are now looking into the possibility of adapting to this new wave of digital banking to avoid being wiped out by the tides of change. More likely we’ll see a slow transition as cryptocurrencies become increasingly common.
Interested in mining? Learn the basics of cryptocurrency mining at CryptEdu.com or start hassle-free cloud mining at Cryptmin.com today.
There are currently three ways a person can buy cryptocurrency: mining, buying from online wallets and exchanges, and buying or receiving from others.
In this article, we’ll be focusing about the ins and outs of buying cryptocurrencies from online wallets, exchanges, selling online, and walk you through the whole process with a step-by-step illustrative guide on some of the most popular online wallets, exchanges, and marketplace.
Cryptocurrencies vs. Fiat
Cryptocurrencies have unique properties which make them a lot different from our fiat currencies. They exhibit both properties as a medium of exchange for paying goods and services and as a commodity like gold and other precious metals that have intrinsic value.
It takes hours and huge amounts of computing power minting (or ‘mining’ in cryptocurrency parlance) these digital currencies, the same way gold is mined with hundreds of man-hours using expensive tools and equipment.
In comparison, fiat currencies use very little resources, if at all. Banks don’t even have to print or stamp paper bills and metal coins these days; they simply type in an arbitrary number on their computers to create more money.
Why People Buy Cryptocurrencies
In some countries where inflation has severely diminished the purchasing power of fiat currency, people turned to cryptocurrency and mining as their sole refuge against the rising prices of commodities and the unrestrained creation of money by banks and financial institutions.
Others view cryptocurrency as an opportunity for investment, particularly Bitcoin and other major currencies like Ethereum. Bitcoin’s value has been going up unabated for nearly a year, and more people are starting to look into it as a result of its rising demand, popularity, and to some extent, the use and promotion of cryptocurrency education.
For some users, they see it as a more affordable and secure way to send and receive money without going through any bank or financial institution. It’s almost like sending an email from one person to another where information is shared only between the sender and recipient.
Whatever your purpose is, you can always have an edge if you know the different methods of buying cryptocurrencies and how to take advantage of the differences in pricing, volatility, wallet features, and other factors.
Factors Affecting a Cryptocurrency’s Price
A casual visitor at coinmarketcap.com will quickly notice how fast the price of a certain currency changes – in a matter of seconds! (Check out the site and reload the page once every 5 minutes and see for yourself.)
This rapid movement in price is attributed to the cryptocurrency’s volatility. The fewer there are in circulation, the more volatile a certain currency is. Conversely, as a currency gains widespread adoption due to its abundant supply, price starts to become more stable.
Supply and demand also determines the current price of a particular currency.
In some instances, the relationship between supply and demand and the current price is a direct result of fear of missing out (FOMO). This is the typical bandwagon mentality people get into when something new or ‘trending’ comes along. Bitcoin is not a new thing, except for the vast majority who never heard of it. But towards the middle of 2017 when everything people talked about is Bitcoin, suddenly, everyone is dipping their hands into it.
Similarly, fear, uncertainty, and doubt works in much the same way, but with opposite results. People can succeed in convincing millions to sell their Bitcoin or face massive loss and cause huge price dip as people sell them in panic.
We can infer if a certain news or upcoming event has, or will likely cause fear when it coincides with sustained price drop such as the Bitcoin hard fork of August 1 where Bitcoin price went down unimpeded for 3 days, two weeks prior to the split, and on September 12-15 where Bitcoin came crashing down to USD 2947.69 with China’s ban on Bitcoin exchanges and ICOs a week later.
Price spread which is determined by comparing prices of cryptocurrencies in exchanges all over the Internet can also affect how a particular currency is priced. Exchanges work in some ways like trading where buyers and sellers negotiate on bid and ask price.
Price variance within the exchange itself is often negligible as both sides are given the average price by default (this can be changed by buyers and sellers as they wish). However, when comparing the average price from one exchange to another, we start to see a significant difference in pricing. (Clicking the link under ‘Volume’ at Coinmarketcap allows you to see this in real time.)
Opening/Installing Your Wallet
Your wallet is the key (no pun intended) to the world of cryptocurrency. This software allows you to make transactions with other wallet users and interact with the blockchain ledger using a pair of keys known as the private and public keys. For a detailed discussion about cryptocurrency wallets, go to Everything You Need to Know About Cryptocurrency Wallets.
Creating an Online Wallet Account
Setting up an online wallet is as easy as signing up for an email or social media account. Here are the steps in creating your Coinbase and Blockchain wallet.
To get started with Coinbase, go to their signup page and type in your name, email address, and wallet password. You will be sent a verification email by Coinbase. Go to your email and click Verify Email Address to activate your account.
Coinbase currently supports Bitcoin, Ethereum, and Litecoin. It generates your private and public keys for all three of them when you sign up to their wallet service. However, you don’t have access to your own private keys; only your public keys/wallet address.
You can start sending and receiving Bitcoin, Etherium, and Litecoin with your wallet account. However, if you want to buy cryptocurrency with fiat from Coinbase using your bank account or credit/debit account, you need to go through their payment verification process.
Blockchain.io is a block explorer for Bitcoin which allows everyone to see the status of every Bitcoin transactions ever made and are constantly being made in real time. To provide Bitcoin users, traders, and miners with an online wallet to store their private and public keys, they’ve also introduced their own Blockchain Wallet for Bitcoin.
(Update: as of August 2017, Blockchain began supporting Ethereum.)
Blockchain Wallet generates your private and public keys when you sign up to their online wallet service. However, unlike Coinbase, Blockchain allows users to export/import their private keys.
To create your online Bitcoin wallet account, go their signup page and type in your email address and a strong wallet password. A popup notification will inform you that your wallet and wallet ID has been created, followed by a welcome message.
(Note: your wallet ID is different from your wallet address/public key. This is just a series of numbers and letters that you’ll use every time you log in to your Blockchain Wallet account.)
Check your email and click ‘YES THIS IS MY EMAIL’ to complete the setup.
Installing a Desktop or Mobile Wallet
Desktop and mobile wallets require you to download and install the app on your device. They are considered more secure than online wallets because your private keys are stored within the device and have backup features.
Some desktop and mobile wallets are ‘open source’ which means tech-savvy wallet users can see exactly how the wallet works under the hood. Depending on how you look at it, open sourcing a wallet can be good or bad (e.g., transparency vs. phising/hacking, etc.).
Here are the steps on how to install an Exodus desktop wallet and Jaxx mobile wallet.
Exodus is one of the popular multi-currency, desktop wallets available online. It’s compatible with Windows (64-bit), Mac, and Linux, has backup features.
Download and install the app to your computer. Read the onscreen popups and click OK. You can start using your wallet to send and receive currencies. To buy cryptocurrency with fiat, you may open an online wallet account like Coinbase, or an exchange account like GDAX or Poloniex.
Jaxx is an open source, multi-currency, mobile wallet and is compatible with Android and iOS. It also doubles as desktop wallet when installed in Windows, OS X, and Linux.
Go to Google Play or iTunes on your mobile device and search Jaxx Blockchain Wallet. Download and install the mobile app.
To set up for first use, choose Create Wallet and use the Express Setup. If want to pair this wallet with your laptop or PC, choose Pair/Restore Wallet and enter the 12-word Backup Phrase. You can see your Backup Phrase in Menu>Tools>Backup Wallet>View Backup Phrase.
Caution: view your backup phrase only when necessary and make sure no one else is looking. People can use your backup phrase to re-generate your wallet on their device and have access to all your funds.
Setting up a Hardware Wallet
Hardware wallets like Trezor and Ledger Nano S are considered the most secure of all types (excluding paper wallets). However, they’re not cheap and setting them up are not as easy as as the other types of wallets.
To use your hardware wallet, you need to hook it up to a computer or mobile device using the the USB cable that comes with it.
Here are the steps in setting up your Trezor and Ledger Nano S wallet.
Before setting up any kind of hardware wallet, check for any sign of tampering to make sure it runs completely free of any third party software or hidden app.
Go to wallet.trezor.io on your browser and plug in your Trezor wallet. Type in your Device Label and enter your 4-digit PIN.
To be able to restore your accounts in case of damage, loss, or theft, you’ll be required to write down the 24-word recovery phrase on a piece of paper or the small booklet that comes with it. Enter your PIN to complete the setup.
Trezor currently supports Bitcoin, Ethereum, Ethereum Classic, ZCash, Litecoin, Namecoin, Dogecoin, Dash, and all ERC-20 tokens.
Setting up a Ledger Nano S is a little different from Trezor, but the process is essentially the same.
Here, you’ll be using the two buttons and the LCD screen of the hardware wallet.
Plug in the device on your laptop or PC and choose between configuring a new device or not. Choose yes (P) and type in your new password twice.
Next, you’ll be asked to write down the 24-word recovery phrase to backup your wallet. After scanning and writing down all the words, your device is now ready to use.
To use more features for your Ledger Nano S, connect your hardware wallet to your laptop or PC, go to their download page and choose between wallet apps and management apps for your Ledger Nano S.
It currently supports 18 currencies including Bitcoin, Ethereum, Bitcoin Cash, Ethereum Classic, Dash and Litecoin.
BUYING FROM AN ONLINE WALLET
To get the feel of having your own assets stored in the cryptocurrency network, you need to need to buy them with fiat currency.
For Coinbase, you need to add a payment method by going through their payment verification process, after which you can start buying Bitcoin, Ethereum, and Litecoin using your credit, debit, or bank account.
Buying cryptocurrencies with fiat will incur some fees (4% when using credit/debit account, and around 1.49% with bank accounts).
This feature is available only in 32 countries including Canada, UK, and Australia.
BUYING FROM AN ONLINE EXCHANGE
People can buy cryptocurrency directly from online exchanges. GDAX is an online cryptocurrency exchange run by the same company that operates the Coinbase online wallet.
Buying from GDAX also requires identity and payment verification process via Coinbase. To start buying, you need to fund your GDAX with your account balance from Coinbase, bank account, bank wire, or BTC address.
Some users can get away with paying less (or zero) transaction fees when buying their cryptocurrencies from online exchanges like GDAX. However, it also comes at the expense of speed and convenience.
To keep your currencies safe, you may choose to send them to your desktop, mobile, or hardware wallet after accumulating a substantial amount from exchanges. It’s always risky to keep your currencies in exchanges.
BUYING FROM A MARKETPLACE
Paxful is a popular cryptocurrency market for Bitcoin buyers and sellers online. However, unlike exchanges, buyers and sellers can interact with each other and negotiate with the price and payment methods – it’s basically an online marketplace.
The most commonly used method is through PayPal and uses Escrow for secure transactions. Buyers can narrow down their search when buying a particular amount of Bitcoin.
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