TradeDOG 101: How to invest your first dollar into cryptocurrency? Part 1 ‘Crypto Exchanges’

Your guide to understanding how crypto exchanges work. This guide will encompass all the major aspects related to these exchanges so that you can get well versed before your first trade and investment.

Photo by Austin Distel on Unsplash

Bitcoin and other cryptocurrencies have been included as an important asset in multiple funds; investors’ portfolios. People from over the globe are rushing in to join the crypto movement but they get intimidated due to its complex aspects.

Some queries which arise for the first time crypto adopters are- Where to begin? What is a wallet? How to transfer capital from banks’ accounts to the wallet? Which exchange is credible? Whether to HODL some coins for the long haul or try luck in trading.? These questions bump them so hard that either they delay their plan or some scam lures them. TradeDOG understands this concern and would like to address some of them here.

To get a better understanding of the answer, the foremost importance is attributed to crypto exchanges. Let us learn how exchanges work and how important they are in providing features that beginners really need to sustain themselves for long enough. At first, we need to begin with the fundamentals which are quite important while investing your first dollar in this new class of asset- ‘Cryptocurrencies’.

Getting started

Investing in cryptocurrencies is similar to investing in stocks, forex, and bonds except they require a little more knowledge of the crypto concept than the former.

You first need to open an account with an exchange and go on buying bitcoins or digital currencies with the following payment methods.

Bank transfer

Credit card

Debit card

PayPal

P2P

Altcoins, if you have some

Most of the credible and reliable exchanges and websites will require your KYC verification in order to start buying and selling. This KYC verification can be done through any government recognized ID. The most popular exchanges are Binance, Bitmex, Kraken, Coinbase, Bittrex and Poloniex wherein they have different fees and procedures pertaining to buying and selling crypto assets. We would suggest any of the above 5 exchanges for opening an account if you are beginning. We will create more exchange specific content to help you differentiate how exchanges work, and how you can initiate your first trade.

A typical landing page on an exchange

Binance limits the purchase of bitcoins to $20,000 to new users. This limit will, however, increase if your trade volume increases over time. Different exchanges have different fee structures, some of them include maker and taker fees which is basically for the market makers who provide liquidity to the order book. For our Indian friends, it is important to note here that only P2P is available on exchanges like Unocoin, WazirX, but as per the latest update, soon instant transfer would be available.

Importance of Exchanges

These are basically crypto buy and sell and platforms that provide its users with the convenience of a centralized exchange while giving the security and freedom of a decentralized one. Major exchanges will send you an email to enable the authorization of the device you are using to access that specific exchange. Additionally, you can also activate a 2FA or two-factor authentication for added security. We recommend you to activate this feature. If you want to know more about this, please write in the comments.

Major aspects of these exchanges:

Liquidity: make sure you check out the exchange’s crypto volatility and liquidity. The exchange will only be able to deliver optimum benefits if it provides instant liquidity to cryptocurrencies.

Liquidity is the ability of a coin to be converted into cash and other digital assets without compromising its own value; it is a major aspect in all exchanges. Participants can trade easily and quickly at fair prices. Beginners should look for such exchanges where liquidity is not a limitation. Good liquidity ensures smoother trade execution, higher possibility of order processing.

Beginner Friendly: Beginner-friendly exchanges offer a multitude of benefits to their users such as many trading pairs, walkthroughs on their website, easy to use tools and more. They are very important in supporting the new lot which is confused due to many intimidating factors in crypto.

Types of exchanges:

Fiat exchanges: Platforms which provide an exchange of fiat currencies such as INR, USD, GBP, AUD to cryptocurrencies. Beginners can choose these exchanges to make their first purchase. Some major fiat exchanges are eToro, Coinmama, Coinbase, Cex.io and more.

Crypto exchanges: Most exchanges limit their users to only trade crypto for crypto, but a few allow trades in fiat currencies such as USD for cryptocurrencies. A typical example of such an exchange is Kraken, which accepts funds in the form of USD, CAD & GBP and allows trade with Monero, Ripple, Bitcoin, Bitcoin, and Ethereum.

They also provide a multitude of services to their users such as-

Margin Trading

Leverage trading

Order types- Market order, Limit Order, Stop Limit, Stop Market etc

Multi-currency wallets

Referral programs

Payment gateways

Multi-language support

Legal Complications

Crypto is highly volatile due to uncertainty, you should make sure to perform your research on the crypto laws decreed by your country and read the terms and conditions of the crypto exchange you will use for trading and investment.

Conclusion

This was pretty much about exchanges and their services for beginners. The continuing thread to this article will walk you through different aspects of crypto exchanges such as what is trading volume, Maker-Taker fees, leverage, orders, services and more. In the next thread, we will learn what drives an exchanges’ popularity, which exchange has more liquidity, which offers better leverage and their founders.

TradeDOG’s intent lies in making investment and trading easier for retail investors and users1 by substantiating your learning and help you venture into crypto markets with full confidence. Watch out for our social updates on Telegram Twitter and Facebook and stay ahead with the competitive advantage of our extensive due-diligence on projects, digital assets and market trends.

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We are an elite team of professional traders and analysts with substantial levels of experience investing in global markets across multiple asset classes.

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TradeDog®

TradeDog®

We are an elite team of professional traders and analysts with substantial levels of experience investing in global markets across multiple asset classes.

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