The technology underlying bitcoin is building a new web and new companies, but trading the new currency is trickier than it looks.
Here’s the thing about cryptocurrencies: you can make your own currency (your own money!) with its own rules, so you can design your very own mini-economy to get people to work together in new ways. Cool, right?
The trick is that many projects and companies are launching their own cryptocurrency to use with their products, when arguably they don’t really need them for the product to work. Worse, they’re launching cryptocurrencies to use with their products before they even have products!
So on the one hand we have cool new tech that people are figuring out, and on the other hand we have people taking advantage of all the uncertainty and ignorance. The result? Buying and selling cryptocurrency is like the Wild West right now.
Did you hear about the kid who asked his dad for a Bitcoin? His dad says, “Son, what in the world do you want with $15,000, I mean $8,000, I mean $11,500?” Get it? The price of Bitcoin goes up and down so fast that it makes losing money easy.
Still, getting a little bit of Bitcoin or another cryptocurrency, like Ethereum, isn’t a bad idea. If the price goes to the moon you’ll make money, and even better, it’ll let you keep an eye on all the cool ideas people are working on. Just don’t put in any money that you can’t afford to lose!
Coinbase is an easy and solid way to get started. Just sign up, verify your bank account, and a few days later you’ll be able to purchase Bitcoin (yes, you can buy a fraction of a bitcoin). You can leave it with Coinbase, or send it to your own wallet.
(Side note: Bitcoin works kind of like an email message. You have an account and an address, which you control. This is your wallet. You can send Bitcoin there as easily as sending an email. But if you lose the address or the keys to that address, you’ll lose your money forever!)
Notice, though, that Coinbase charges you good money to buy Bitcoin. Coinbase also runs a trading website called GDAX (gdax.com). If you open an account there (also free), then you can transfer money from your bank account to GDAX for free—and avoid the regular Coinbase fees for purchasing Bitcoin!
Pause a moment and send me some good karma for that little tip there. I’ll wait.
What if you want to buy a different cryptocurrency, like Ethereum or Litecoin? No issues, you can do that through Coinbase or GDAX as well.
If you want to buy a cryptocurrency that Coinbase doesn’t support, then buy Bitcoin the way we just discussed, and then send it to another exchange like Poloniex, Gemini, or Kraken. You’ll have to get verified at these exchanges first. There you can trade your Bitcoin for whatever cryptocurrency you’ve set your little heart on.
But again, keep it light. The people who got rich bought when Bitcoin was worth less than a penny, and they never sold. Don’t day trade unless you’re an actual professional.
Welcome to the future, and have fun.
Tim Roy is a former lawyer, now coding for a blockchain startup. Despite being good with numbers and computers, he’s not day trading cryptocurrency, because he’s not a professional trader.