How to Obtain Cryptocurrency

I recently wrote some intermediate to advanced articles on cryptocurrency (How Will the Futures Market Affect BTC Price and Ripe for Altcoins), but what about those new to the ecosystem? This article covers the basics of how to obtain cryptocurrency.

1. Buy, Don’t Mine

Yes, technically you can mine. It’s not too hard to set up the software, but it is a bad financial investment. Mining these days is expensive and involves dedicated hardware like ASICs. By using an ordinary PC, or even a fancy PC with the latest graphics cards, you will be making essentially no money or losing money once you factor in electricity costs.

2. Start with Bitcoin or Ethereum and a Trusted Institution

Some folks want to get started by getting a hardware wallet or buying offline from an individual they met on Localbitcoins, Facebook, or, worse yet, Craig’s List. If you are trying to buy drugs this might be a good idea, but it’s usually a bad idea.

I recommend Coinbase as an entry point. You can use a credit card for instant buys, or you can link your bank account for slower buys with lower fees. At Coinbase you can buy bitcoin, ethereum, or litecoin. I don’t recommend litecoin, but I like both of the others. In the vocabulary of the cryptocurrency world, every coin other than bitcoin is called an altcoin. Technically, ethereum is an altcoin. In practice, however, it’s a major and relatively stable system which isn’t as risky as other altcoins.

3. Altcoins Matter

Investing in cryptocurrency is risky, so don’t misunderstand what I’m about to say: Bitcoin is the safe bet of the cryptocurrency world. It is, as they say, digital gold. Altcoins are like the modern day penny stock. They range from risky to wildly risky, and that is compared to bitcoin.

That being said, they are the drivers of innovation in the crypto space. They are also like the start up businesses of the ecosystem. New ideas spring up and a coin is made to implement that instead of changing the stable bitcoin. Like small stocks, altcoins present massive risk and massive reward. On net, I recommend investing in some altcoins.

4. Basic Finance and Crypto as the New Stocks

What is the smartest way to invest in stocks? A index fund pegged to the S&P 500 or another standard stock index. What is the wrong way to invest in stocks? Crack open a newspaper and buy whatever sounds good that day.

Coinmarketcap is the S&P of the crypto world. Index funds don’t really exist, but if you can get into the Prism beta they kind of exist. Instead of investing in a premade fund, you will likely need to manually purchase small amounts of many coins. Altcoins are super risky, so diversification is key.

I’m not always a fan of diversification and I know Cuban said diversification is for idiots. He has a point that it drives down potential returns, but mark my words: He was talking about diversifying already safe investments like bonds and fortune 500 stocks. He would diversify on altcoins in a heartbeat. Don’t believe me? Look here where he says he wouldn’t even put more than 10% of total wealth in bitcoin.

I recommend buying altcoins via ShapeShift or Cryptopia.

Initial Coin Offerings (ICOs) are a whole other thing, but the same general strategy applies. They are risky af, so go for a large number with a small amount in each. Or just stay away entirely as they are alot of work to buy as well. I recommend TokenMarket for that.

5. Conclusion

Now that you have been introduced, head back to the top of the article and read the two linked articles! Remember this when it comes to crypto: Don’t invest more than you can afford to lose. Good luck and have fun!

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