How To Purchase Your First Altcoin

May 18, 2018

 

Quantamize's Altcoin CryptoFolios

Altcoin Overview

An Altcoin is any cryptocurrency that is not Bitcoin (BTC). An investor may want to own a variety of Altcoins to diversify their cryptocurrency portfolio, enhance their risk/reward or decrease volatility in their cryptocurrency portfolio. 

Selecting an Altcoin can be a challenging process. Major Altcoins such as: Bitcoin Cash (BCH), Ethereum (ETH), Litecoin (LTC), Zcash (ZEC) are available on Coinbase/Gemini (centralized & insured exchanges) and can be bought directly with Fiat currency.

This post illustrates process of purchasing other Altcoins such as Stellar (XLM) that cannot be bought on centralized exchanges. 

Steps for Acquiring the Altcoin

  • An investor can create an account on a centralized exchange such as Coinbase or Gemini that directly accepts wire transfers

The investor will need to transfer the amount of Fiat currency they would like to own in a chosen Altcoin into a centralized exchange which accepts fiat currency, for example, Coinbase/Gemini. The desired Altcoin must be selected now, which is defined as the coin which will facilitate the process of purchasing the Altcoin. Ideal transfer coins have strong liquidity, low transaction fees and are listed on many of the major cryptocurrency exchanges. Bitcoin and Ethereum are popular choices. 

  • An investor needs to find an exchange where both the desired transfer coin and desired Altcoin are listed as a trading pair. Popular exchanges with altcoin trading pairs are: Poloniex, Binance, Bitfinex, Gdax, Gemini, Bittrex, Bitstamp, Bit-Z and Kraken.
  • Next, the investor must purchase the full amount of the chosen transfer coin with the amount of Fiat currency which reflects the amount of the intended altcoin purchase
    •  Example: if USD$1,000 equivalent of the Altcoin, Stellar (XLM) is the target, USD$1,000 of the transfer coin must be purchased. 
  • The amount of transfer coin purchased now will be transferred onto the Altcoin exchange
    • To do this, requires the receiving exchange wallet address for the Altcoin must 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
    • Find the Altcoin and be sure to purchase the altcoin pair with your transfer coin. 
    • Note: exchanges charge fees and cryptocurrency markets are volatile. If the initial desired amount is equal to USD$1,000 in Fiat, it is possible that less than USD$1,000 will be purchased in the Altcoin
    • Therefore, it is very important to plan the entire transaction to execute the transaction as quickly as possible. Time is of the essence

The last step is to now transfer the Altcoin back into hard storage or cold storage so that your Altcoin is safely stored and not vulnerable on the exchange. 

Stay tuned for our next Crypto QuantShot which will discuss this process!