Harry Hamburg – Exponential Investor (United Kingdom) –
Well, the crash is still going strong.
At least it is at time of writing. Hopefully it’s recovered somewhat by the time you’re reading this tomorrow.
Although right now it’s not the crypto crash that’s line news. At time of writing, stockmarkets around the globe are down between 2% and 5%.
As I said yesterday, that wouldn’t even be news in the crypto markets, but in normal ones, it’s huge. This crash has wiped over $4 trillion from stockmarkets in eight days.
To put that into perspective, the total worldwide crypto market currently stands at $290 billion. Stockmarkets have lost almost 14 times that amount in this crash.
Even at its peak in January, the crypto market was only worth $835 billion. Stockmarkets have fallen by almost five times that amount in the last eight days.
Will this wider stockmarket crash be good or bad for cryptos? Will they be seen as a safe haven from financial markets, or will they be dragged down along with everything else. Only time will tell.
There is however, a glimmer of hope in an otherwise FUD (fear, uncertainty and doubt) filled crypto market. And it comes from an unlikely place: US regulators.
US Senate Banking Committee rules on the future of Cryptos
By the time you read this, the testimonies will already have been given.
Yesterday was the Senate Banking Committee hearing on the future of crypto regulation in the US.
We’ve already seen the effect Chinese, Korean and Indian statements on regulation can have crypto markets. Just imagine what impact the US will have.
So were the testimonies good or bad for crypto?
Well, to quote Jay Clayton, chairman of the US Securities and Exchange Commission (SEC):
To be clear, I am very optimistic that developments in financial technology will help facilitate capital formation, providing promising investment opportunities for institutional and Main Street investors alike.
Thankfully, the testimonies were very positive. There was talk of clamping down on scams and regulation. But it’s clear the US has big plans for crypto, and a ban will not be on the cards.
Here was Clayton’s conclusion:
Through the years, technological innovations have improved our markets, including through increased competition, lower barriers to entry and decreased costs for market participants. Distributed ledger and other emerging technologies have the potential to further influence and improve the capital markets and the financial services industry. Businesses, especially smaller businesses without efficient access to traditional capital markets, can be aided by financial technology in raising capital to establish and finance their operations, thereby allowing them to be more competitive both domestically and globally. And these technological innovations can provide investors with new opportunities to offer support and capital to novel concepts and ideas.
History, both in the United States and abroad, has proven time and again that these opportunities flourish best when pursued in harmony with our federal securities laws. These laws reflect our tripartite mission to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. Being faithful to each part of our mission not in isolation, but collectively, has served us well. Said simply, we should embrace the pursuit of technological advancement, as well as new and innovative techniques for capital raising, but not at the expense of the principles undermining our well-founded and proven approach to protecting investors and markets.
J. Christopher Giancarlo, chairman of the Commodity Futures Trading commission, was equally positive.
Here was his conclusion:
We are entering a new digital era in world financial markets. As we saw with the development of the Internet, we cannot put the technology genie back in the bottle. Virtual currencies mark a paradigm shift in how we think about payments, traditional financial processes, and engaging in economic activity.
Ignoring these developments will not make them go away, nor is it a responsible regulatory response. The evolution of these assets, their volatility, and the interest they attract from a rising global millennial population demand serious examination.
With the proper balance of sound policy, regulatory oversight and private sector innovation, new technologies will allow American markets to evolve in responsible ways and continue to grow our economy and increase prosperity.
You can read Clayton’s full testimony here.
And you can read Giancarlo’s full testimony here.
What the committee will rule is anyone’s guess. But from the testimonies at least, it looks like crypto could have a bright future in the US.
As I’m writing this on Tuesday, by the time you read this the hearing will have already taken place. All the news will already be public, in a big way.
Hopefully cryptos will have rebounded strongly. Already today, the market is up over $80 billion since 8am.
However, as we already know, cryptos don’t tend to do what people think they will. The crash may have a lot further to go yet. I guess we’ll just have to wait and see.
Now, on with part four of the guide.
In case you missed my earlier parts, you can find them here:
Buying, trading and withdrawing your cryptos
Today I’m going to take you through all the steps in making your first crypto buys and trades.
In the earlier parts of this guide I covered some general rules for investing in cryptos and how to store them safely. Now we get to the fun part.
Okay, before we start, some disclaimers.
In this example I am going to take you through buying Ethereum on Coinbase, and trading it for IOTA on Binance.
This is not an endorsement of Coinbase, Binance or IOTA. It was just the simplest transaction I could think of to use as an example. Remember, always do your own research (DYOR).
I know there are a lot of guides out there that tell you how to trade cryptos. But most of them are plain text or videos.
I don’t find either particularly helpful for something like this. That’s why I’ve screenshotted all the steps in my example trade, so you can keep referring back as you make trades for yourself.
You can click on any image for a bigger version.
Getting in – Ethereum
As I discussed in part one of the guide, bitcoin and Ethereum are the main trading pairs on most exchanges. This means you need to own them to buy other, smaller cryptos.
In almost all cases, you can’t just buy a smaller crypto using cash. You have to trade into it with another, bigger crypto. That’s how most crypto exchanges work.
The main gateway crypto used to be bitcoin. But over the last six months or so, many exchanges, especially the bigger ones, now have just as many trading pairs with Ethereum.
This is good news for us. The high transfer fees of bitcoin make it terrible for trading small amounts. And the very slow transaction speeds mean it’s still bad even if you’re trading larger amounts.
Ethereum is much, much faster and cheaper to transfer. So if you are looking to get other cryptos, I’d recommend buying Ethereum over bitcoin in order to get into the trades.
The easiest place to buy Ethereum (right now) is Coinbase.
You can go through its website or mobile app. It’s very easy to set up an account, but you will need to have your driver’s licence or passport to hand so it can verify you.
The verification usually only takes a couple of minutes. But I do know of it taking longer.
Coinbase is insured and keeps the vast majority of its holdings in cold storage. In this sense, it’s a much, much safer place to story your cryptos than a typical exchange. But I would still recommend transferring your holdings to your own wallet, as I said in part three of the guide.
The price you pay for ease of use and security is fees. Coinbase famously charges high fees. I find the trade-off in terms of ease of use to be okay, but you may disagree.
The good news is legitimate competitors are now coming out. Last month trading app Robinhood announced it will introduce fee-free crypto buying and trading this month. At time of writing, this is only for US customers, but it does plan to expand to the UK.
Another alternative is Coinfloor.
Currently, Coinfloor only deals in bitcoin, not Ethereum. But it is adding Ethereum very soon.
If you’re putting in or pulling out a lot of money, Coinfloor is probably the way to go. In my experience, for bigger sums, it usually works out cheaper.
Its fees are smaller and it is very liquid. It’s also based in London and is highly reputable.
When you first join Coinbase, your weekly buy limits are low. They soon increase, but this can be frustrating. So for larger amounts, you can use Coinfloor.
In today’s example, I’m only buying a very small amount of Ethereum, so we are using Coinbase.
To buy Ethereum on Coinbase
- Set up your account and add your debit card as a funding method.
- Log in to your account and then click on the Buy/Sell tab at the top (1).
- Click on the Ethereum box (2).
- Enter the amount you want to spend and click “Buy Ethereum instantly”.
To deposit your Ethereum on Binance (or any other exchange)
Most exchanges work in a very similar way. So once you get familiar with one, you can work out how to use most of the others fairly easily.
Binance is one of the biggest and most reputable exchanges, with a very big list of cryptos. So that’s why I’m using it in this example. But the process of depositing, trading and withdrawing is very similar for most other exchanges.
Here are the steps:
- Go on to Binance and make an account.
- Log in, then hover over the funds dropdown at the top and click “Balances”.
You’ll then be able to see a list of different cryptos.
- Type “eth” into the search box (1) to bring up the Ethereum section.
- Click “Deposit” (2).
(If you were depositing a different crypto this process would be the same, but you’d search for that crypto’s name instead of Ethereum).
You’ll then be taken to the Ethereum deposit page.
- On this page you’ll be given your Ethereum deposit address (1).
This address is unique to you. It is very important to get this address right, as that’s the one you’re going to send your Ethereum to.
- Click “Copy Address” (2).
Now open up a new tab in your browser and log back into Coinbase.
- Click on the Accounts tab (1) and then on the Eth Wallet box on the left-hand side.
- Click the Send button on the Eth Wallet box (2).
A popup box will appear.
- Paste your Binance deposit address into the address bar (1) (right click, paste).
- Choose the amount you want to send from your Ethereum wallet in Coinbase. You can either choose max, or set an amount. And you can specify in GBP or in Ethereum.
- Click “Continue”.
Check the details.
- Check the address is the same as the one Binance gave you (this is very important).
- Check the amount is correct.
- Click “Confirm”.
It will take about 10 or 15 minutes for the send to go through. If the network is busy, it can take longer. Don’t stress out.
- You can check the status of your send on your account page (1) (2).
- Many times Coinbase keeps your send on “pending” for a long time. This is nothing to worry about.
Now go back on to Binance and log in. Or just go back to your Binance tab if you left it open.
Go back to the deposits page (hover over funds and click on “Deposits”) and see if there have been any confirmations.
The amount of confirmations an exchange needs varies from crypto to crypto and from exchange to exchange.
In this case, you’ll be able to trade your Ethereum after 30 confirmations. This usually takes about 5 to 20 minutes. It can take longer if the network is busy.
You can check how many confirmations your send has by refreshing the page.
How to make your first trade
Okay, now your Ethereum is safely deposited, it’s time to trade it for a different crypto.
- Once your deposit is confirmed it will appear in your balances (hover over “Funds” and click “Balances”).
- To make it easier to spot you can check the “Hide small assets” box (1).
- Now to go to the exchange, hover over the Exchange tab and click “Basic” (2).
You’ll be greeted with this scary looking, ever-changing world of colours, numbers and graphs.
Don’t worry, it’s not half as daunting as it looks.
This is basically just showing you a history of the trades people have made and what people are proposing to trade next. You don’t need to worry about most of it.
- Click on the Eth tab (1) because you’re trading Ethereum.
- Search for the crypto you want to trade into (2). In this example, I’m using IOTA.
As you can see, there’s a big green box for buy IOTA and a big pink one for sell IOTA.
In this case, we’re buying IOTA.
On the left are the bid and ask prices.
The bid prices are in green. These are what people who want to buy IOTA are bidding at.
The ask prices are in pink. These are what people who own IOTA and want to sell it are asking for.
Now you have a choice. You can choose to match the bid price and hope one of the askers will sell, or you can just choose to buy at the ask price.
In most cases, it’s probably wise just to go with the ask price, as it will save you a lot of time. Due to the amount of bots on these exchanges, it can be very hard to actually buy anything if you try to undercut the ask price.
But if you have a lot of time on your hands, you could just use the bid price and wait it out.
In this case, I am just going with the ask price.
- So I click on the cheapest price (1) and it comes up in my Buy IOTA box.
- I then click 100% (2) because I am trading all of my Ethereum for IOTA. You are free to choose a different amount, if you’re planning on buying more than one crypto.
- I then click “Buy IOTA” and the order goes through instantly.
If it didn’t go through instantly, my trade would appear here, in open trades.
I could then choose to wait it out and see if it got filled, or cancel it and try again at a different price.
Now, if I was selling IOTA for Ether, the process would be reversed. I would use the pink “Sell IOTA” box on the right, not the green buy one on the left.
And for a quick sale I would sell at the green bid price, for an instant sale.
You can then check your trade went through by going back to your funds page. Now, as you can see, instead of Ethereum, I have IOTA.
Withdrawing your crypto from the exchange
Remember, you don’t want to leave your cryptos on an exchange any longer than you need to.
As I said in part three of this guide, I recommend getting a hardware wallet to store your cryptos on.
- To withdraw to your own wallet, hover over the Funds tab at the top and click on “Withdrawals”.
- Then copy your wallet address into the Withdrawal Address box (1) (your public address, NOT your private key).
- Click on “Max” (2) to withdraw all of the maximum amount you can, after the exchange takes its cut.
- Click “Submit”.
Binance will now send you an email asking if you’re sure you want to withdraw your crypto. You need to click on the confirmation link in this email before your withdrawal will go through.
After this, it will take a few minutes for your withdrawal to send. You can see its progress on the Withdrawals page.
Then that’s it, you’re all done.
You’ve successfully bought, traded and withdrawn your first cryptos.
You can check if your withdrawal went through by typing the public address of the wallet you withdrew to into an online explorer of your chosen crypto.
In this case, I can see mine in the IOTA Tangle explorer. But every crypto has a different explorer.
That is, unless it’s an ERC20 token as I wrote about in part three. In which case you can use the Ethereum explorer to see it because you’ll have sent it to your Ethereum wallet.
I can appreciate this process might seem daunting at first. But the more you do it, the easier it gets.
To start off with, I’d recommend only doing it with very small amounts of money, like I used in this example, until you get the hang of it.
A word on moving cryptos
It’s advisable to always test your transfers with small amounts, before you move the whole lot.
It’s very easy to make mistakes and it’s better to make a mistake with a very small amount than with a very big one.
I wrote last year about how to transfer your cryptos safely, after losing a significant amount of money doing it wrong.
You can read my fundamental rules of transferring cryptos here. I recommend you do, before you make any trades.
How to find which exchanges which cryptos are on
Chances are, if you’re buying a few different cryptos, you’ll need to use a few different exchanges.
You can find which exchanges the crypto you want trades on fairly easily though. All the information you need is on coinmarketcap.com.
So, for example, I was trading IOTA. So to find which exchanges it was on, I went on CoinMarketCap and clicked IOTA.
Then I clicked “Markets” (1).
I saw it was trading on Binance (2) and chose to use Binance for the trade.
You can use the same process to find the exchanges of any crypto you like.
Right. That was a lot to take in! But I hope it was helpful.
In the most likely final part on Friday, I’ll be showing you how to cash out back into pounds sterling and talking about possible tax implications.
Editor, Exponential Investor