Master these basics to easily navigate blockchain’s trading jungle!
Once you hold bitcoin or ethereum in a digital wallet, trading for other cryptocurrencies is a cakewalk. But how do you get ahold of those (sometimes) elusive currencies in the first place?
This article covers all steps — forward and backward — along with tips for safeguarding your cryptoassets. After all there’s always someone out there looking to siphon coins from your wallet. The good news is that protecting your stash, like many things in life, is simple when you know how.
You see, trading government-printed money for crypto is the easy part. You merely open an account, link your bank, and make purchases.
But what about the thousands of coins and tokens available on various exchanges? After all, most fiat-linked crypto wallets have a limited selection.
Sure, you can try the Simplex-affiliated exchanges that let you use a credit card. However, those purchases carry a $10 minimum fee, which adds 20% to a $50 purchase or 10% to a $100 buy.
Plus, there’s not an exchange out there that offers every cryptocurrency trading pair. I’ll leave the initial purchases up to you — the goal is to get bitcoin or ethereum into a crypto wallet.
Conveniently, exchanges with fiat onramps — like Coinbase and Gemini — not only let you purchase cryptocurrencies, but they also provide storage for your digital assets.
And once you have bitcoin or ethereum in an exchange wallet, you’ll need to learn a few simple techniques before you can trade for other coins and tokens.
But before I teach you, you should know a few things…
Disclaimer: This is not investment or financial advice. Information within this article is primarily speculative opinion, and for entertainment purposes only. Always conduct your own research before involving yourself with any project — in or out of the cryptosphere.
If you utilize certain services within this article — never at an additional cost to you — I may or may not receive compensation. Thank you for supporting my efforts in creating free content. Did you actually read this far into the disclaimer? Congratulations!
6 Basic Trading Ingredients
The macro view of trading one asset for another reveals a straightforward trail of events. But let’s stock up on the essentials before we get too far ahead of ourselves.
Once you have the five items below, you can trade and safely store your crypto. All but one are free, and you can do all of your trading with only three of them.
But to fully protect your assets — and discover new gems to pile onto your stash — I recommend all six:
1) Two-Factor Authentication (2FA) App
It’s not the only one out there, but Google Authenticator is a popular 2FA app found in your favorite app store. For every account you link via scanning a QR or entering a code, this free app generates a six-digit number.
Google Authenticator is available for both Android and Apple devices
Google Authenticator will create a new number for use during exchange logins — even when your phone is offline, You’re undoubtedly familiar with username and password login screens. But exchanges have users input a 3rd credential — the six-digit code from your 2FA app.
Pro tip: Use external storage to keep screenshot backups of the 2FA codes exchanges provide. You’ll need those screenshots should something happen to your phone.
Of course, you can’t log in using 2FA when creating a new exchange account. Once you confirm your email address and visit your exchange dashboard for the first time, getting set up with 2FA is the next step in protecting your funds.
2) Account with Coinbase or Gemini (or similar)
While Supplies Last
You can open a free Coinbase account, watch some videos to learn more about individual coins, and earn $100+ in free crypto:
The videos dedicated to each project take only a few minutes. And, they’re a great way to educate yourself on different projects while scoring deposits straight into your Coinbase wallet.
Something important to note when transacting on centralized exchanges: Get familiar with the term ‘Private Keys’ because, as the name implies, they act as a gatekeeper for each wallet you operate.
Private keys are to be held by you, the rightful owner of a wallet’s funds. Sometimes they’re 64 digits long — with bitcoin wallets, for example.
Private keys also often arranged as ‘seed’ or ‘recovery’ phrases consisting of 12 or 24 unique, randomly generated words:
Coinbase won’t ask you to write down a recovery phrase
Although you can easily buy and sell and store crypto on centralized exchanges, you don’t own your wallets’ private keys. In other words, if Coinbase is holding your bitcoin, then Coinbase is, technically, the rightful owner of that bitcoin.
However, Coinbase is a different beast than most centralized exchanges since accounts carry insurance. I’m not overly concerned about keeping crypto there.
Moreover, now that the decentralized finance (DeFi) ecosystem is growing, some of the cryptoassets trading on Coinbase can earn interest elsewhere. But that’s a topic for another article.
That said, if some unforeseen disaster strikes an exchange on which you keep funds, you may not be able to recover your cryptoassets. Ever again!
And I’m speaking from personal experience here. Thankfully, the amount was small, but the exchange’s founder stopped paying server fees, and everyone’s cryptoassets disappeared.
So, where do you ultimately keep your coins, then? We’ll get to that very soon. But first…
3) Account with Secondary Exchange
Coinbase acts as a stepping stone into broader crypto markets. To branch out into other blockchain investments, you’ll need to enroll with an exchange carrying the coins and tokens you just can’t get on Coinbase or Gemini.
We’ll use KuCoin for this example. The Singapore-based exchange carries a broad selection of assets to trade against BTC and ETH. Plus, they employ a robust assortment of cybersecurity measures.
Now, there are hundreds of exchanges out there. Many are legit, but I’d venture to say that most are scams that artificially inflate trade volume, practice fractional reserve banking, and aren’t afraid to ‘hack’ themselves if they run into financial trouble.
While I enjoy KuCoin, you may very well find others you like using better. But once I teach you how to trade on KuCoin, you’ll have a solid foundation for trading just about anywhere.
Again, don’t keep significant funds on an exchange. Keep them in your own wallet…
4) Hardware Wallet(s)
Centralized exchanges are for trading only. After conducting trades, when you want to keep some funds offline and away from scammers and hackers, there’s no better place than a hardware wallet.
Centralized cryptocurrency exchanges are for TRADING coins and tokens, NOT for storing them.
Multiple hardware wallets are on the market today. I enjoy Ledger products, while others prefer wallets from Trezor or KeepKey. No matter which you gravitate to, the point is to keep your private keys off of the interwebs — where bad actors lurk.
Hardware wallets offer next-level crypto security
There are also web-based wallets where your private keys stay with you. But since they’re online, I’m not convinced they’re as secure as physical products.
Your private keys never leave the device when using a hardware wallet.
Now, upon setup, a hardware wallet will provide you with the device’s private keys. Write them down and keep them safe!
And if you have an old smartphone lying around, add some mobile crypto wallets to easily build your own hardware wallet.
5) External Storage Devices
As you begin to self-store private keys and 2FA codes for various wallets and exchanges, it’s essential to prepare for the worst.
Let’s say you have multiple mobile wallets and exchange accounts tied to your phone. Then your phone falls off a cliff and into the ocean. Are you prepared?
Pro tip: Make folders for each account, store them on an external drive, then make regular backups on a separate device, preferably held in a separate location.
Microsoft’s .txt files occupy minimal storage and are ideal for keys and passwords linked to individual accounts. Remember to take screenshots of QR codes and don’t email them to yourself.
6) Price Aggregator Sites
These are great for cryptoasset discovery. Some projects have promising futures — often unreflected by their current price. You may be, or later become, a bitcoin or ethereum ‘maximalist’ satisfied with holding only one or two different cryptos.
But eventually, most people fall deeper into the distributed rabbit hole in search of the next 10x investment. Proper research is essential, and don’t let a fancy whitepaper fool you.
Does and organization truly need blockchain or a cryptocurrency to fuel their underlying business model? Some do, but many are cash-grabbing scams that don’t. Either way, enter the land of Altcoins (anything not bitcoin) at your own risk.
Since we’re now clear on the Do Your Own Research aspect, here’s where you find in-depth, researchable info about 1,000s of coins and tokens unavailable on Coinbase or Gemini: CoinGecko / CoinPaprika.
And there are many more. Keep in mind that the once-independent CoinMarketCap is now under Binance’s control. Is it a coincidence that Binance regularly sits atop the site’s exchange rankings? You tell me.
Maybe you’re into stablecoins that do their best to hover around 1 U.S. dollar per unit? Here’s an index: Messari Stablecoin Index.
No matter your preference, aggregator sites provide a convenient, 24/7 snapshot of crypto markets. Once you discover what to trade, here’s how to trade…
Trading Crypto for Crypto
Okay, so you’ve explored CoinGecko and found a promising project. You’re holding BTC or ETH and decide to make a trade.
We’ll use the non-mobile version of the KuCoin exchange to trade ETH for XYO.
Why XYO, you ask? Well, if you recall from the above disclaimer, this article is not to be construed as investment advice. I’m not qualified to tell you what to buy, but I can show you what I’m buying.
I chose XYO because, per independent analysis by Flipside Crypto, the project consistently ranks high on the site’s ‘Most Undervalued’ list:
As of June 26, 2020; subject to change
To acquire XYO, the first thing we’ll do is send ETH from Coinbase to KuCoin…
Sending ETH to KuCoin
After opening a free KuCoin account, get yourself all set up with 2FA. You may be familiar with this process already, but either way, don’t proceed until your crypto is under 2FA protection.
Once your passwords and PINs are all set, locate and copy your ETH deposit address:
1) Access Your Main Account
Hover over the ‘Assets’ tab in the top-right corner of the page.
Float the cursor down and click on the ‘Main Account’ tab. This multi-coin wallet is where you transmit funds in and out of your KuCoin account.
Trading occurs from within a separate but internal account — your ‘trading’ account. Deposits into your trading account can only originate from your main account.
2) Find Your Ethereum Deposit Address
Within your main account lies access to every coin and token available on KuCoin. From here, you can either perform a search for ETH or simply scroll down.
Click the ‘Deposit’ button to reveal your KuCoin ethereum wallet address. Here’s an example address:
Copy your ETH address to your clipboard — you’ll need to paste it into the wallet from which you’re sending funds.
Here’s how the transfer appears from within Coinbase:
All that’s left is to wait for the network to process the transaction. KuCoin sends a deposit notification email whenever funds arrive.
4) Transfer Funds to Your Trading Account
You can skip this extra step on most exchanges. But KuCoin adds the feature as an extra layer of cybersecurity.
To make an internal account transfer, navigate back to your main account. Locate the asset, and click the ‘Transfer’ button:
Move funds into your trading account:
Now that your trading account contains funds, let’s make the actual crypto-to-crypto trade.
5) Enter the Exchange
Click the ‘Markets’ tab in the top-left section of the home page.
6) Find Your Trading Pair
Typing ‘XYO’ into the search bar reveals the XYO/ETH trading pair:
Click ‘XYO/ETH’ to access the trading area. Before conducting trades, the system prompts you for the six-digit ‘Trading Password’ created during initial account setup. Enter your PIN and prepare to trade.
7) Determine Your Trade Type
At this point, you have a few options in regards to the price at which you’re willing to trade.
Stop orders are a different beast, so we’ll stick to Limit and Market orders for now.
Limit orders give you the option of making a sale or purchase at prices that differ from the current rate.
Using the order book on the right side of the screen, the system automatically calculates the best price at any given time.
Buy and sell prices are found in an exchange’s order book, typically indicated by red and green numbers. The top of the order book (red) is where the limit sell orders wait to be filled. And the bottom section (green) is where the limit buy orders wait to be filled.
If you’re patient and willing to wait days or weeks until another trader is willing to sell at the price you want, you can use Limit orders to set your own prices.
But if you want your crypto like right now, place a Market order instead.
A Market order lets you buy cryptocurrency immediately, at the going market rate. And the system automatically calculates the trade for you.
You can use the percentage boxes — 25, 50, 75, 100 — to allocate a percentage of an asset to one given trade. For this example, I’m allocating 100% of my trading account’s ETH holdings to swap for XYO:
As you can see in the above image, we're all set to trade 0.195 ETH for XYO at the ‘best market price’ right now.
Keep in mind that prices are always changing, and performing the same trade later, even a few minutes later, yields different results.
8) Make the Trade
Click ‘Buy XYO’ to execute the trade. A pop-up appears after a successful trade:
The trade takes roughly one second to occur. My trading account’s ETH supply is empty and in its place are 114k XYO tokens:
Now, remember when we discussed private keys? Since KuCoin holds my keys, not me, I’m sending these funds off to a hardware wallet.
Again — don’t leave significant amounts of crypto on exchanges!
I sent my new tokens from KuCoin to an external wallet before even writing this sentence.
So, where can you stash your XYO tokens?
Well, since XYO’s platform lies on top of the Ethereum network, most ETH wallets can hold the project’s native cryptocurrency.
Don’t have an ethereum wallet? Here’s a freebie — the MetaMask extension brings ETH to your browser.
There are also multiple mobile crypto wallets allowing you to take self-custody of your private keys.
But, as I hope you’re fully aware of by now, use a hardware wallet for the tightest crypto security.
Trading Crypto for Fiat
I’m guessing you’ve already figured this part out. To receive fiat in exchange for crypto, you sell it back to the exchange tied to your bank account. Coinbase or Gemini, for example.
Here’s a hypothetical, full-circle example based on today’s ETH/XYO trade:
Buy ETH from Coinbase
Send ETH to KuCoin
Trade ETH for XYO
Await XYO price increase
Trade XYO for ETH
Send ETH to Coinbase
Sell ETH for profit
Remember, just because that scenario could happen doesn’t mean it will. XYO tokens may never again rise higher than today’s price. I can’t predict the future, but I can hope that the project continues to innovate.
I’ll admit, when I first began trading crypto, the process was daunting. Fiat-linked accounts are a breeze, which is excellent for helping widespread crypto adoption.
The tricky parts are the crypto-crypto trades. But with your newfound knowledge, those value transfers are easily achievable.
Start small. Send a tiny bit of ETH or BTC to an exchange, then make trades with minuscule amounts. Before long, it becomes natural, and you’ll fly right through your trades.
But until then, priority #1 is keeping your crypto away from the industry’s many thieves. Don’t send too much crypto around the blockchain until you’re comfortable with making transactions.
And always remember, crypto exchanges are for just that — exchanging. Except for insured custodians like Coinbase, don’t treat crypto exchanges like a traditional savings account.