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Buying Cryptocurrencies

In my previous post (here) I offered some thoughts about the cryptocurrencies that I believe will be the winners in the coming crypto hype cycle that follows the halvings of BTC and BCH in 2020. In case you are wondering, both are expected in May 2020, which is rapidly approaching.

I sent the post to a close friend that I have had several of these discussions with, in the hope that it would help him to get online and make that first small purchase to try crypto out.
He then asked an obvious question, which may well apply to other readers: Where do I buy this stuff from?

In the much earlier days, when I made my original predictions, it was much harder to buy and sell blockchain assets, whereas there are a number of high quality exchanges that exist now. In those earlier days, there was essentially one main exchange – Coinbase – and not much else. These days, there are several websites that could take the title of best Bitcoin exchange. In addition to these firms, there are other smaller companies that have moved into the space. A great example would be the Swedish firm Trijo (I interviewed the founder here last year).

For a beginner to cryptocurrencies and blockchain assets, the process ought to be quite simple. Buying an asset and holding it ought not to be that complex. There is little reason for a beginner to be day trading or using leverage. There are now exchanges that are well suited to both activities, but for the beginner – which most people are in blockchain – keeping the risks “low” while getting market exposure ought to be the goal.

 

(I describe it as “low” risk because crypto is a very high risk investment arena – do not try and convince yourself that you are doing something “safe”!)

If there are any issues to truly understand about which exchange to use, they are twofold.

Firstly, how secure is it? A substantial proportion of the risks in buying and owning cryptocurrencies lay in the exchange being used. There is both the fiat to exchange transaction and then the secure storage if you choose to keep your coins on an exchange. It is generally advisable to purchase your own storage device – personally I use a Trezor, but there are several types of device on the market – so that you have complete control of your coins. However, it is not always easy for a person to secure their own assets, which means that sometimes an exchange is preferable. It is very difficult to judge the security of an exchange as an outsider. All we can really do is select an old and well established exchange that has a very good reputation.

The second issue to address is the cost to trade. Just as with anything in life, some businesses cost more to use than others. Finding an exchange that has acceptably low transaction fees ought to be important. In my earliest days I was a Coinbase user. Their services and security are obviously very good, but they are expensive. I have since switched to a much lower cost, but equally secure exchange and am very happy with it. Hopefully you can find your own secure location with low fees. This is very difficult for me to offer guidance on, because I do not know where you are resident and not all exchanges serve all countries.

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