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So, You Want to Learn About Cryptos?

Jun 08, 2018

Cryptocurrency investing can be complex and may require multiple steps. We at Quantamize seek to make the process of buying, storing and selling cryptocurrencies more transparent and navigable. Are you ready to learn a little bit about the cryptocurrency investing process? Lets begin.

Purchasing an Altcoin

Let’s start off by defining what exactly an Altcoin is. An Altcoin (alternative coin) is any cryptocurrency that is not Bitcoin (BTC). Some of the most well-known Altcoins include: Bitcoin Cash (BCH), Ethereum (ETH), Litecoin (LTC), and Zcash (ZEC).

These major Altcoins are easily accessible to investors and can be purchased using fiat currencies on centralized exchanges such as Coinbase and Gemini. But how can you purchase some of the smaller Altcoins such as Stellar (XLM), Monero (XMR), and EOS (EOS)?

Potential investors must first purchase either Bitcoin, or one of the major altcoins, from an exchange such as Coinbase or Gemini. The coin that is acquired through this transaction can then be used as a transfer vehicle, facilitating crypto-to-crypto trading on periphery Altcoin exchanges.

When considering which coin to purchase as an intermediary, investors should consider factors such as liquidity, transaction fees, and availability (how many exchanges offer trading for that coin). Among the most popular exchanges that allow investors to swap one altcoin for another include:

  • Poloniex
  • Binance
  • Bitfinex
  • Gemini
  • Bitstamp

The transfer is conducted by having the receiving exchange’s wallet address match the input entered on the delivering exchange. Once the transfer coin has been received by the Altcoin exchange, the desired Altcoin can now be purchased.

So What’s the Damage?

The saying “there’s no such thing as a free lunch”? applies to cryptocurrency trading as well, since every crypto purchase and sale has a fee associated with it. There are two types of transaction fees:

  • Exchange Transaction Fees (fees charged by exchanges for any transactions. Fees may adjust lower if your transaction volume increases)
  • Blockchain Transaction Fees (fees charged by a blockchain for any transactions. Blockchain transaction fees have notably declined recently as price, trading value and trading volume have fallen since the beginning of the year)

In the tables below, you can see some of the cryptocurrency exchange  transaction fees

EXCHANGE TRANSACTION FEE %
Gemini 1.00%
GDAX 0.30%
Kraken 0.25%
Bitstamp 0.25%
Bittrex 0.25%
Upbit 0.25%
Bitfinex 0.20%
Huobi 0.20%
Bithumb 0.15%
Bibox 0.10%
Binance 0.10%
Bit-Z 0.10%
HitBTC 0.10%
OKEx 0.10%

Note: there are also “wallet” storage fees, but we’ll get to that later!

 

Understanding transaction fees is critically important to identifying the costs you are incurring to execute transactions efficiently across cryptocurrency exchanges and blockchains.

Storing Your Cryptocurrencies

So now that you’ve learned how to buy altcoins, and the costs associated with doing so, , what do you do with them? Well, there are two common methods for safely storing your cryptocurrency holdings:

Cold Storage (a cryptocurrency wallet not connected to the internet)

  • Paper Storage (a piece of paper with your private and public keys on it)
  • Hardware Wallets (electronic devices which sign transactions through private keys, and allows investors to recover funds through a backup seed key if the device is damaged or misplaced)
  • USB Drive (storing a file with the public and private keys associated with your cryptocurrency investments
  • Desktop Wallets (an application that can export the files of a private key in an online environment. Private keys are offline, transactions through the wallet requires internet connection)

Hot Storage (a cryptocurrency wallet that is either connected to the internet, or uses a software program on a computer, typical fee-free)

  • Desktop Wallet (can also be a hot wallet if it needs to connect with the internet to retrieve cryptocurrency storage data
  • Application Storage (applications such as the Coinbase trading app or the Gemini exchange. They serve as custodian for your cryptocurrency investments)
  • Exchange storage (investors may leave their cryptocurrency investment on an exchange, with the address generated by the exchange. This method of storage is the most vulnerable)

You may be asking yourself if using either hot or cold storage is necessary. Cryptocurrencies are digital assets, which means they can’t be stored physically, resulting in higher risk. Cryptocurrency exchanges are susceptible to hackers, and investors accounts may be vulnerable as well. You wouldn’t just leave your wallet on a park bench, would you? If you are someone who would, we hope you have very good identity protection. For the rest of you, storage is a way to ensure that your cryptocurrency assets remain YOUR cryptocurrency assets.

If you’re interested in trading cryptocurrencies, but aren’t sure where to begin, click the link below and view our suite of cryptocurrency investment products. Our 3-day window “Buy/Don’t Own” trading signals, as well as our numerous CryptoFolio products can provide you with the research you need to make informed crypto investment decisions.

https://www.quantamize.com/Products/Crypto-Signals