# Guide to Investing in Cryptocurrency This is a no-nonsense guide to investing in cryptocurrency. Focuses on only what you need to know at each step of the way. ![](https://i.imgur.com/f8wZUb8.jpg =725x) :::info **Find this guide helpful?** I hope to write more beginner, intermediate and expert guides on Cryptocurrency. I accept Bitcoin donations at wallet: `1397Yc3SW6TKmk2cKcxLgkKWoBzka7jPoZ`. Thanks for reading! ::: ## Beginners Guide If you are a total beginner to this, start here! ## Seriously, what even is Bitcoin or Cryptocurrency? Cryptocurrencies are distributed digital currencies, much like a form of digital cash. They allow for seamless, direct, and extremely fast transactions between parties. You have full control over your payments and balance, and can spend and earn with ease and transparency. Here's a quick video to get you started: {%youtube Gc2en3nHxA4 %} Cryptocurrencies, often referred to as "coins", are stored in digital "wallets" that you use to manage your payments. Your wallet is protected by a complex password (private key) that only you know about. You can spend or send money by submitting a transaction from your wallet to someone else’s using a "public address". Think of your wallet like a personal bank account that you complete control over. These currencies are unique because they don’t require a central authority to manage your money. As such, while a bank might have a database that’s an obvious target for hacking for someone to steal your money, cryptocurrencies aren’t susceptible to these attacks when stored properly. Additionally, cryptocurrencies can process transactions in a matter of seconds or minutes, and not hours or days as it may take to send money today. Watch this on how Bitcoin works: {%youtube t5JGQXCTe3c %} Read this [guide to Bitcoin](https://coincentral.com/what-is-bitcoin/) for a more detailed overview. Next, check these articles and videos to build a deeper understanding: * [Bitcoin Explainer](https://www.coindesk.com/bitcoin-explained-five-year-old/) * [Blockchain Explained](http://www.zdnet.com/article/blockchain-explained-in-plain-english/) * Video: [Blockchain 101](https://www.youtube.com/watch?v=oSP-taqLWPQ) * Video: [Blockchain and Bitcoin Explained](https://www.youtube.com/watch?v=M_zCjjy59cg) * Presentation: [Bitcoin for Beginners](https://www.youtube.com/watch?v=UlKZ83REIkA) * Presentation: [Introduction to the Internet of Money](https://www.youtube.com/watch?v=rc744Z9IjhY) Make sure to watch and read these first to gain at least a basic understanding before continuing on and doing any investing. ## Is Bitcoin or Cryptocurrency actually worth investing in? This is a really tough and complicated question. If you talk to many traditional financial experts, the answer is either "no", "definitely not", "maybe not", or "it's way too early to tell". Truth is, almost no one from the financial sphere really understands Bitcoin. And no one knows for sure if Bitcoin is actually a good investment or a massive speculative bubble waiting to burst. Bitcoins are worth a ton of money right now (at present, **more than $10k per coin**), largely on "speculation" since the currency has no intrinsic worth. But then again, neither does the US dollar bill or any fiat currency. The concept of "worth" in the financial world is complicated and Bitcoin is completely different than anything we've ever seen before. That said, this is an exciting time for the cryptocurrency world. Many, many investors have become millionaires or built fairly reliable passive incomes off of Bitcoin. Here's some more facts to consider: * If you invested just **100 dollars into Bitcoin in 2010** and held, **you would now have over 10 million dollars.** * In 2017 alone, Bitcoin has spiked up for a shocking 1300% return on investment. This means if you have invested just **$100 dollars in Dec 2016**, you would now have **over $1400** (~ $1300 profit). * In November 2017 alone, Bitcoin **rose 50% from the previous 30 days**. You'll frequently see gains of between 30-50% on months that Bitcoin is rising steadily. Ultimately, only you can decide if investing in cryptocurrency is a good idea for you. However, the main exchange now is fairly secure, and Bitcoin has proven itself to have a fairly steady rising value (with huge gains) from it's 2009 release to today. Check out the [currency charts for yourself here](https://www.coinbase.com/charts) to investigate further and see how the value has changed over time. This [article on Bitcoin](https://medium.com/@brianhoffman/bitcoin-money-or-a-waste-of-time-321767f2a4c7) lays out a case for evaluating Cryptocurrency as money and summarizes the situation well: > Bitcoin is very much a work in progress towards declaring itself a perfect money in modern economist’s definition. I still believe it has a lot of potential to become more than simply a tool to break the law with, but it will take a lot of hard work both in technology and theory to demonstrate to the world that Bitcoin is here to stay and able to take on traditional fiat money. Until that time comes it’s smart to educate yourselves on all sides of the argument, be open-minded and don’t rush to judgement. After all, everything is an experiment in the world of money regardless of where you live. Most important to keep in mind is that you should **never ever invest more in crypto than you can risk losing entirely**, this is rule #1 of cryptocurrency investing. :::warning All this above said, a large subsection of traditional financial investors consider cryptocurrency in a **very negative light**. Words like "fad", "waste of money", "throwing money away", "totally worthless", et al. At the end of the day, read about this, become informed, and decide for yourself if you think this is the worth the risk. ::: ## Which currencies do I actually want to invest in? To start out your crypto journey, you should invest only in the safest "Tier 1" currencies to get your bearings. **Tier 1 currencies** are: * [Bitcoin](https://coincentral.com/what-is-bitcoin/) (BTC) - Released as an open-source software in 2009, Bitcoin is often credited as the world’s first cryptocurrency and is best defined as a digital currency that exists electronically. The original cryptocurrency. * [Ether](https://coincentral.com/what-is-ethereum/) (ETH) - With the second largest market cap in the cryptocurrency world, Ethereum has drawn a lot of attention from investors and crypto enthusiasts alike. This relatively new cryptocurrency not only presents a significant change to the status quo, it also allows for the quick development and deployment of new applications. Ethereum essentially enables dozens of new and extremely innovative cryptocurrencies to exist. * [Litecoin](https://coincentral.com/what-is-litecoin/) (LTC) - Litecoin (LTC) is a decentralized peer-to-peer cryptocurrency that was released on October 7th, 2011 and went live on October 13th, 2011. The edge Litecoin has over Bitcoin is that the payment transaction costs are extremely low, and it is capable of facilitating payments around 4x as fast. To start out, you only need to focus on these until you get into Tier 2 and Tier 3 currencies later in your investment cycle. ## How much should I invest? :::warning **Disclaimer:** I am not a financial adviser, I am a random schmoe on the internet. This article is for informational purposes only, and should not be considered financial advice. Decisions based on the information in this article are the sole responsibility of the reader. ::: This is of course up for debate. Many cryptocurrency enthusiasts and investors recommend you should hold between **3-10%** of your full investment portfolio in crypto in total. This is a risk spectrum, with holding 1-2% there being on the "safer" side while 10% there is for those significantly more risk tolerant. Start by determing how much you invest in stocks, bonds, mutual funds, etc right now. How much money do you have in any traditional "market" of some kind? For example, if you have 50k invested overall in your portfolio, you can consider eventually moving 3-10k of that into cryptocurrencies in total. You'll want to invest that amount over time, rather than all at once. :::danger Most importantly, **never ever invest more in crypto than you can risk losing**, this is rule #1 of crypto investing. ::: Start small, and continue to invest over time as you become more comfortable. ## Cryptocurrency Glossary Here's a glossary of terms to keep in mind as you research more about Cryptocurrency: * **Blockchain** - A digital record of transactions (ledger) that have happened that cannot be easily forged or altered. Simply put, a distributed database of currency transactions. * **Exchange** - The most common place where people buy and trade cryptocurrency is on the exchanges. Exchanges are places where you may buy and sell your crypto, using fiat (i.e US dollars) or trading one cryptocurrency for another. * **Wallet** - A cryptocurrency wallet is a secure digital wallet used to store, send, and receive digital currency like Bitcoin. This is where the cryptocurrency lives, similar to a "bank account". * **Public Address** - A special string of alphanumeric characters used to receive bitcoin. Think of this like a bank routing number where people can wire you currency. * **Mining** - Miners are people that verify blockchain transactions and in order to incentivize people to mine, they are given a prize for their work – either in new coins, transaction fees, both, or otherwise. Mining basically means running a program that slowly yields small fractions of a currency. ## Level 1: Invest only in Tier 1 This is the beginning of your journey into cryptocurrencies. Start like this: 1. Register for [Coinbase](https://coinbase.com) 2. Submit identity verifications 3. Setup funding accounts (bank for lowest fees) 4. Download the Coinbase mobile app 5. Buy Tier 1 currencies [Coinbase](https://coincentral.com/coinbase-review/) is the safest and most secure online cryptocurrency site. Always start with Coinbase. You can be reasonably confident that your bank and personal information is secure there. [![](https://i.imgur.com/teJ8EkF.png =500x)](https://coinbase.com) :::warning While Coinbase is reasonably secure, there are no real guarantees in this life, so read [this guide on account security](https://blog.coinbase.com/how-to-increase-your-coinbase-account-security-4b7164926631) and [this guide for more security tips](https://blog.coinbase.com/how-to-safely-store-digital-currency-with-coinbase-2dd405588753). Be cautious and careful. ::: ### How much to start investing with When ready for step 5, you'll want to spread your money between the three Tier 1 currencies like this: **50% Ether (ETC), 35% Bitcoin (BTC), 15% Litecoin (LTC)** Start with a reasonably small amount of coin to get your bearings. For example, if you transferred $2000 to kick-off investing, put $1000 into ETH, $850 into BTC, $150 into LTC. As you continue to invest further, try to maintain this ratio. **Bonus: Buy close to a 24 hour low for a currency**. If you want to maximize your investment, go to the chart for each currency and check the 24 hour window. Note that lowest value listed and be patient and wait until the current exchange is as close to that as possible (i.e within 20% of the low value). Download the Coinbase mobile app and setup alerts to trigger when the currency reaches a particular value. ### Dollar Cost Averaging The safest overall strategy for investment is to invest into cryptocurrencies spread out over time, investing an amount every week (or every month). :::info [Dollar Cost Averaging](https://medium.com/@_Hypron/dollar-cost-averaging-465dc8d593be), or DCA for short, is "an investment technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of share price." This is a technique used by both traditional investors (stocks, etc) and by cryptocurrency investors to reduce risk. By purchasing a financial instrument regularly, you average the price you bought at — if the value of the instrument goes up, so does your gain. If the value goes down, your average price invested goes down as well, so you are down less money than if you had invested everything at one price. This is especially important when investing in something as volatile and risky as Bitcoin. ::: You can read more [about this strategy](https://www.reinisfischer.com/dollar-cost-averaging-part-cryptocurrency-portfolio) or [watch this helpful video](https://www.youtube.com/watch?v=fDfB7V7qiMA) to understand the benefits of this approach further. In order to DCA invest, all you have to do is **make an investing schedule and stick to that**. For example, if you plan to invest $3000 into Tier 1 currencies, instead splitting that into 10 investments of $300 made each month (or $150 every 2 weeks). ### Is my money safe in Coinbase? Coinbase is very safe and secure and can be a reasonable place to store your money over time. If you have more than $5k in Coinbase, you should make sure to at least [use a Coinbase vault](https://support.coinbase.com/customer/portal/articles/1612208-the-coinbase-vault-) for safe keeping. For most people, most of the time, you should be perfectly safe in Coinbase Vault even for large sums. However, there are some limitations and caveats to keep in mind. The coins on Coinbase are being managed in a wallet entirely by Coinbase, and this means that **you do not have the private keys for the wallet** and therefore the coins are not technically within your possession. If you want to be extra cautious and be in full control, you should be using a private wallet to store your currency. The two best options for a [secure private wallet](https://blockgeeks.com/guides/cryptocurrency-wallet-guide/) are: 1. **Hardware wallets** like [Ledger Nano](https://www.ledgerwallet.com/products/ledger-nano-s) or [Trezor](https://trezor.io) - Secure hardware wallet that are offline and can store all your coins safely. (_Safest option, recommended_) 2. **Mobile Software wallets** like [Coinomi](https://coinomi.com/) - Mobile app on your phone that acts as a wallet for all your coins. Still connected to the internet and on-device so less secure. 3. **Desktop Software wallets** like [Jaxx](https://jaxx.io/) - Desktop app on your computer that acts as a wallet for all your coins. Still connected to the internet and on-computer so less secure. 3. **Other various wallet types** [as outlined here](https://blockgeeks.com/guides/cryptocurrency-wallet-guide/) including desktop and paper wallets. Here are the key considerations for deciding where to store your coins for safe keeping: * If you are security conscious person who wants absolute control over your currency stored with a maximally secure offline storage method, and are willing to weight security over convenience, then you absolutely need to use a [hardware wallet](https://www.ledgerwallet.com/products/ledger-nano-s). * If you want a middle ground, and an easy place to store all your coin where it's a bit harder to hack, use [Coinomi](https://coinomi.com/) mobile app to use your phone as a software wallet. * If you have **more than $15k+ of currency in Coinbase**, you should use either a software wallet or hardware wallet. If you are at all security conscious, we do not recommend holding this much in Coinbase, even in a vault. In reality, for most people most of the time, Coinbase is safe even for large amounts, but better safe than sorry. Once you've selected your wallet (or decided to keep your currency stored in Coinbase), then you can start investing further! :::warning Security and caution must be emphasized when holding any serious sums of coin. Be sure to read [this guide for additional security tips](http://bitcoinsecurity101.com/getting-started/). For context of why this matters, years ago the largest Bitcoin exchange was hacked ([Mt. Gox](https://en.wikipedia.org/wiki/Mt._Gox)) and $450 million dollars was stolen. ::: ### Tracking your Profits! You'll want to use an app to track your profits and gains. This is important to better understand how the currencies are evolving over time (even on a daily, weekly, monthly basis) and track how much you've made or lost. * If you are using an iPhone, you should pay for [Crypt Pro](https://itunes.apple.com/us/app/crypto-pro-bitcoin-ticker/id980888073?mt=8) which is the best app for tracking your cryptfolio. If you are too cheap, [check this list](https://steemit.com/cryptocurrency/@sirwinchester/the-best-cryptocurrency-apps-for-iphone-trading-charts-portfolios-wallets-converters-and-more) or just use [Blockfolio](https://www.blockfolio.com/). * If you are using an Android phone, use [Blockfolio](https://play.google.com/store/apps/details?id=com.blockfolio.blockfolio). See [this guide for a few other options](https://www.androidauthority.com/best-cryptocurrency-apps-for-android-581192/) Check [this list for more options](https://steemit.com/bitcoin/@pedrombraz/the-best-way-to-track-your-crypto-portfolio) for how to easily track profits on your investments. Once you've setup a portfolio tracking app, go to your [Coinbase transaction history](https://www.coinbase.com/transfers) and begin entering the "trades" into the app of your choice. Now the app will give you real-time profits and losses over time. ### Investing Further and Using Alerts Setup the Coinbase mobile app on your phone and get used to reading the exchange values. Look at the 24 hour lows and the 1 week lows for each currency. Setup alerts for a value of your choice near the low-ish side of the coin within 24 hour window. For example, Litecoin might currently be at $100 with a $91 dollar low within 24 hours and an $82 dollar low within a week. Set up several alerts on the mobile app for $93, $87, $84 for Litecoin. When these alerts are triggered, these are good times to increase your investment by making further buys in a particular currency. Be patient and take your time. Continue to make buys at a level you are comfortable with until you've invested 65% of your 5-10% crypto investment target. For example, if you've decided to take 10% of your portfolio into crypto and that works out to $5000 dollars total, put at least 65% of that ($3250) into Tier 1 over time. ### Trading with GDAX for cheaper fees When you are feeling comfortable with Coinbase, Coinbase has a sister site which has your same Coinbase account but much lower fees called [GDAX](https://gdax.com). Go there, login there and you'll find that if you buy your coins on GDAX rather than Coinbase, the trading fees are way way cheaper (0.25% compared to 1.5% on Coinbase). You'll need to sign in with your Coinbase account, pick a currency and then make LIMIT or MARKET buys. This is more complicated than Coinbase. The basic steps are: 1. Go to [GDAX](https://www.gdax.com) 2. [Deposit funds](https://www.gdax.com/accounts) from bank or Coinbase to GDAX for your purchase 3. Select your "product" (currency) at the top (i.e BTC/USD or ETH/USD) 4. Select "MARKET" tab on the left hand side 5. Enter an amount to buy into the "Amount" field in USD 6. Press "Place Buy Order" 7. Transfer the purchased currency back to Coinbase wallet or vault [![](https://i.imgur.com/qX5hOqm.png =200x)](https://www.gdax.com) That's it! GDAX is run by Coinbase, so learn to use this as this will help you get ready for more advanced investing later. If you aren't able to pick it up quickly, just explore around anyways. You can always return to Coinbase for ease of use but the higher trading fees. ## Intermediate Level Investing Come to this section after you've bought Tier 1 multiple times as alerts come up at certain targets and are fairly comfortable with trading at Tier 1. You probably have about 65% of your alocated crypto investments made already by this point. ### What are the currency tiers? There are generally three basic levels of cryptocurrencies that you can hold: * Tier 1: Safer and more expensive to buy * Tier 2: More volatile and medium expensive * Tier 3: Very risky bets and much cheaper No cryptocurrency is a "safe" bet but Tier 1 are likely to retain their value over the long-term. You'll eventually want to spread your investment across all three. :::info The tiers outlined in this document are rough categorizations and evolve over time. These are not fixed distinctions, but instead intended to provide a framework for thinking about cryptocurrencies. ::: ### How should I split my crypto investment? You should diversity your crypto investments across all three tiers of currencies eventually. When starting out, you will want to put 100% of your investment into Tier 1 currencies. As you become more comfortable, you will then take Tier 1 earnings and move them into Tier 2 currencies. Eventually, you will want to hold a full portfolio that breaks down like this: * Tier 1 Currency: 65% * Tier 2 Currency: 25% * Tier 3 Currency: 10% In this way, the majority of your investments should always be in Tier 1, a medium portion in Tier 2, and the smallest amount in the much risker Tier 3. ### Using a Cryptowallet (Important!) Past this point, you are about to leave the safe confines of Coinbase. Keep in mind that Coinbase **can only ever store Tier 1 currencies** such as Bitcoin, Ethereum, and Litecoin. If you ever want Tier 2 or Tier 3 currencies, you **cannot store them on Coinbase** and will need a separate wallet. Your options for storing these alernate coins (altcoins) are: 1. Store the currencies directly on an exchange (not recommended for any amounts greater than $1000) 2. Store currency on a mobile software wallet like [Coinomi](https://coinomi.com/) - Mobile app on your phone that acts as a wallet for all your coins. 3. Store currency on a desktop software wallet like [Jaxx](https://jaxx.io/) - Desktop app on your computer that acts as a wallet for all your coins. 3. Store currency securely on a hardware wallet like [Ledger Nano](https://www.ledgerwallet.com/products/ledger-nano-s) or [Trezor](https://trezor.io) - Secure hardware wallet that is offline and can store all your coins. The easiest way to store the currencies (and by far the least secure), is to store these investments directly on a secondary exchange outside of Coinbase. This can be quite risky and is not recommended for amounts over $1000. If you have amounts between $1k-30k, you can easily and quickly setup a software mobile wallet such as [Coinomi](https://coinomi.com/). This way you can relatively safely store all your currencies on your phone. However, your phone is connected to the internet and in theory could be hacked, so be wary. :::success For the security conscious or if you have more than $30k in investments, then use a hardware wallet like [Ledger Nano](https://www.ledgerwallet.com/products/ledger-nano-s) or [Trezor](https://trezor.io). This way you will have absolute control over your currency stored with a maximally secure offline storage method. ::: ## Level 2: Expand into Tier 2 investments When you are ready to expand into Tier 2 investments, register for a [Bittrex account](https://bittrex.com). Bittrex is an extended exchange that supports a huge number of currencies outside of Tier 1. You can use this exchange to trade for almost any currency you want. Remember that only up to 35% of your total crypto investment should be outside of Coinbase and Tier 1. 1. Sign up for a [Bittrex account](https://bittrex.com) 2. Submit identity verifications 3. Transfer Bitcoin from Coinbase to Bittrex 4. Wait for transfer to complete 5. Buy Tier 2 currencies [![](https://i.imgur.com/AcCqzSy.png =500x)](https://bittrex.com) ### 3. Transferring Money to Bittrex Bittrex operates on Bitcoin rather than USD. **Never setup your bank or credit card on Bittrex.** Coinbase should be the only site with that information or access to your accounts. Instead, we'll transfer money from our Coinbase Bitcoin wallet to a Bittrex wallet: 1. Go to [bittrex wallet](https://bittrex.com/Balance) 2. Hit (+) on Bitcoin in balances section 3. Add a new address 4. Copy the destination address to your clipboard (i.e "1tgj5qmmFteECdqdsf756luhQcsagk9w") 5. Go to [Coinbase BTC wallet](https://www.coinbase.com/accounts) 6. Hit "Send", paste in address and enter an amount of BTC to transfer 7. Wait a while (could be 30 minutes, or up to a few hours) 8. Once transferred, now you have BTC to trade on bittrex ### 5. Buy Tier 2 currencies Once transfer completes, you'll see some BTC amount in your bittrex wallet. Now you can begin purchasing Tier 2 currencies to diversify your holdings. The Tier 2 currencies include the following (in order by market cap): * [Bitcoin Cash](https://www.coingecko.com/en/coins/bitcoin-cash) (BCH) * [Dash](https://coinmarketcap.com/currencies/dash/) (DASH) * [Monero](https://www.coingecko.com/en/coins/monero) (XMR) * [NEO](https://www.coingecko.com/en/coins/neo) (NEO) * [Stellar Lumens](https://www.coingecko.com/en/coins/lumens) (XLM) * [OmiseGO](https://www.coingecko.com/en/coins/omisego) (OMG) * [ZCash](https://www.coingecko.com/en/coins/zcash) (ZEC) * [Ark](https://www.coingecko.com/en/coins/ark) (ARK) * [Vertcoin](https://www.coingecko.com/en/coins/vertcoin) (VTC) Note that new currencies can mature and reach Tier 2, but this is a short list at present. Generally speaking, Tier 2 currencies will be in the top 30 coins and will have a market cap of more than 300M with many having a market cap of over 1B. You can [check the market cap for any coin here](https://coinmarketcap.com/). :::warning There is no such thing as a 100% "safe" investment in cryptocurrency. These Tier 2 currencies could be a worthwhile investment or could completely lose their value. Ultimately, the choice of investing is entirely up to your risk tolerance. Always **do your own research** on sites like [Cryptominded](https://cryptominded.com/coins/) and [Cryptonator](https://www.cryptonator.com/) before proceeding. ::: Buying works like this: 1. Go to [Bittrex markets](https://bittrex.com/Home/Markets) page 2. Pick a Tier 2 currency to purchase by exchanging the currency for Bitcoin 3. Click at the top in Bitcoin markets and search for currency (i.e XMR) 4. Click on the page for that currency such as [this one for Bitcoin -> Monero](https://bittrex.com/Market/Index?MarketName=BTC-XMR) 5. Choose an amount to invest in this currency (easiest is to split evenly your money between up to six Tier 2) 6. Go to this [BTC calculator](https://www.coingecko.com/en/coins/bitcoin) and enter that amount. For example, to invest $100 in Monero, type 100 into the calculator. 7. Copy the BTC amount from the calculator (i.e 0.008883) representing that target investment amount 8. On Bittrex, go to the "Trading" section and the "Buy" form on the left 9. Paste the amount of BTC from step 7 into the "Total" field 10. Scroll down to "Order Book" and click the number in any bid in the "BIDS" section 11. The bid price should have been transferred to the "Bid" field 12. Confirm that the bid price you clicked is filled in AND the "Total" BTC entry is correct 13. Hit "Buy Monero" ![](https://i.imgur.com/y8I9uTo.png) Now your bid for $100 of Monero is on the Market. In most cases, in between 1-30 minutes, the order will be completed. You can track both [open and closed orders here](https://bittrex.com/History). Repeat this process to purchase each of the desired Tier 2 currencies. Feel free to continue transferring and investing on Bittrex in Tier 2 over time. The desired target would be to have about 25% of your total crypto investment in Tier 2. If your total cryptoinvest was $5000, you'd want to put $1250 into Tier 2 in total spread out across 2-6 of currencies. You can split evenly or read into them and invest more heavily in your favorites. ## Level 3: Expand further into Tier 3 investments The time has come and you are ready for Tier 3! This means you have a total desired cryptoinvest amount (i.e $5k), you have 65% of that invested in Tier 1, 25% of that invested in Tier 2. Hopefully you've seen some profits over time as well across your cryptfolio. Now you are ready to get into the high-risk, high potential reward world of Tier 3 crypto currencies. These currencies are low cost, and highly likely to be totally worthless. Proceed with caution, your investment will almost certainly lose money. The name of the game here is 2% research and 98% LUCK, plain and simple. Investing in Tier 3 looks like this: 1. Go to websites showing crypto gains and losses over recent windows of times 2. Pick a few nascent coins to bet your money on 3. Transfer Bitcoin from Coinbase to Bittrex as needed 4. Wait for transfer to complete to Bittrex 5. Buy Tier 3 currencies ### 1. Research the coins by gains and losses Go to [Bittrex markets page](https://bittrex.com/Home/Markets) and start scoping out coins with high "% Change". Click on that column name to sort by percentage gains. Take note of any currencies that catch your eye. Next go to sites such as [Cryptominded](https://cryptominded.com/coins/), [marketwatch](http://thestockmarketwatch.com/crypto/best-cryptocurrency.aspx), [cryptonator](https://www.cryptonator.com/winners-losers/USD/) and [coinmarketcap](https://coinmarketcap.com/gainers-losers/). Go to news sites like [Cryptocurrency reddit](https://www.reddit.com/r/CryptoCurrency/) and [Cryptocoins News](https://www.cryptocoinsnews.com/), [Coindesk](https://www.coindesk.com/), [Coin Telegraph](https://cointelegraph.com/tags/cryptocurrencies). On these sites, look for coins with large % gains in the hour, 24 hours or this week. Generally speaking Tier 3 coins will **have a market cap of less than 300M**. :::danger Tier 3 coins selected should generally have a [market cap listed](https://coinmarketcap.com) of **between 20M-300M**. Do not invest in coins with a market cap of less than 20M, as these are often too volatile to be worthwhile in the majority of cases. ::: ### 2. Pick a few coins to bet on Pick a spread of 4-8 Tier 3 currencies to invest in. Based on gains, news, reddit, and anything that catches your eye. Again, this is basically a crapshoot. You hope that one of the picks gets lucky, so have some fun with it. ### 3. Buy Tier 3 Currencies Take your favorite 4-8 currencies and begin exchanging BTC for them! Go through each and buy orders off of Bittrex just like you did for Tier 2. Repeat this process to purchase each of the desired Tier 3 currencies. Feel free to continue transferring and investing on Bittrex in Tier 3 over time. The desired target would be to have about **10% of your total crypto investment in Tier 3**. If your total cryptoinvest overall was $5000, you'd want to put $500 into Tier 3 in total and spread out across 4-8 of the currencies. You can split evenly or read into them and invest more heavily in your favorites. ## Researching Currencies Although cryptocurrencies are all based on blockchain technology, they are not all created equal. Here are some differences that you need to understand to make informed trading decisions for Tier 3: * **Transaction speed**. How long does processing transactions take for this coin. * **Total available supply**. How much of this coin is currently available? * **Supply limits.** Will there be a limited or unlimited supply of currency? * **Use Case.** Is there a real-world need for this software/currency? * **Adoption.** Real world adoption of the technology * **Investors.** Any big investors in the project? * **Team.** Do the founders have a reputable background? These are just a few of the characteristics that you should look at. But once you start digging into these details, you will begin to see which projects could work for their intended purpose and which ones are probably scams. ### Currency Types Almost every currency software has a different intended purpose and individual implementation, with inherent strengths and weaknesses. The following are the four major categories of cryptocurrencies: * **Global Financial Transactions** - Easy way to exchange money for general purpose payment. Examples include: Bitcoin, Litecoin, Ripple, Stellar Lumes. * **Application Platforms** - Platforms by which other currencies can be developed more easily. Examples include: Ethereum, Storj. * **Private Financial Transactions** - Currencies with an emphasis on privacy, anonymity and security. Examples include: Monero, Dash, ZCash. * **Specialty Currencies** - Meant to pay for things on a specific service or specific niche. Examples include: ReddCoin, GameCredits. Take a look at these different use cases and figure out which ones make the most sense to you. Then understand how each software implementation works and think about what will probably do well in the future. ### What Affects the Price of a Currency? There are many things that can affect the price of a cryptocurrency including: * **Exchanges.** Which exchanges have the currency available? How easy is this currency to trade? The more exchanges that support a currency, generally speaking the higher the price can go. * **Updates.** How active is the development, are there any upgrades being released? A currency solving an issue via an update may cause value to increase. If a new security protocol is scheduled to be released, it might mean a positive sentiment for the market. * **Media Exposure.** How hyped is the currency? Is there a mention on mainstream news, on Reddit, on crypto forums? Cryptocurrencies gain their value when they receive a positive media exposure, simply because more people are interested in buying the coins. * **Wallet Support.** How easy is it to store in a wallet? If a cryptocurrency doesn't have a good wallet, that will hurt price. But as soon as one is available, then it makes the currency much more accessible to the masses. * **Ecosystem.** Some cryptocurrency platforms, like Ethereum, host other applications. These applications, in turn, can have their own currencies or tokens. If any of these do well, this can have a positive effect on the underlying platform currency. * **Government Regulation.** Be aware of current trends in government regulation and steer clear of currencies that could get red flagged by government agencies. ## More Sophisticated Trading Strategies There are of course much more sophisticated trading strategies not covered in this guide yet. Stay tuned for more advanced guides on trading. In general, there are two major areas to explore when learning more advanced trading strategies: * **Technical Pattern Analysis**. Relying on your own ability or the ability of others to spot common "patterns" in the price movements of a currency over time. Leveraging this technical analysis correctly can help you predict trends while trading. * **Algorithmic Trading.** Relying on software to analyze the market based on code instructions and then having the "bot" (software) make trading decisions for you based on certain logic and triggers. This favors automating the trading process. ### Technical Pattern Analysis Trading cryptocurrencies is less difficult if you know the rules that the market flow follows. Learning these patterns can give you an edge as you look at price fluctuations for a coin. Pattern analysis involves: 1. Checking the price movements for a currency on an a detailed movement chart over a period of time using a site like [Tradingview](https://www.tradingview.com/chart/?symbol=BITSTAMP:BTCUSD). 2. Scanning the recent activity looking for one or more pattern formations to be forming. 3. Deciding that a pattern has been detected and then making a predictive decision based on that new information if appropriate (you think the price will be rising up or down) 4. Buying or selling some amount of a coin based on that prediction. 5. Revising your prediction and adjusting accordingly if your initial prediction was wrong. Each pattern is a different series of price movements that form a particular "shape" on the chart. There are a few major pattern formations to look out for: * [Candlestick Formation](https://steemit.com/trading/@stranger27/learning-to-trade-cryptocurrency-popular-single-reversal-candlestick-patterns) * [Head and Shoulders]() * [Double top and double bottom]() * [Triangle Pattern]() * [Flag Pattern]() Read more about how to interpret each of them [here](https://steemit.com/trading/@stranger27/learning-to-trade-cryptocurrency-graphic-analysis-popular-patterns) and [on this cheatsheet](https://steemit.com/cryptocurrency/@cryptoroger/cryptocurrency-trading-signals-chart-patterns). :::warning Pattern analysis is at the same time both seemingly simple yet also extraordinarily complicated and nuanced. Predictions based on these patterns can be wildly incorrect as the pattern is all based on individual interpretation and are **not at all uniformly reliable**. Many people find their predictions early on are almost always wrong, especially at first. You'll need up intuition over time by making mistakes. However, they can provide you insights into the market that can provide you a significant advantage when done right. As with everything, proceed with caution. ::: ### Algorithmic Trading with Trading Bots and Scripts For more advanced trading, the best approach is through software automation. This is known as **Algorithmic Trading**. Essentially software that is buying and selling for you based on a coded algorithm. You do not have to be a programmer or mathematician, but that will likely give you an edge. Anyone can do this. All of the above services offer bots that you can rent, for a fee of course. * [Cryptotrader](https://cryptotrader.org/) - Platform built to allow experienced bot developers to make profit by renting out their trading strategies to investors that lack programming experience. * [Haas](https://www.haasonline.com/pricing/) - Service that provides a wide range of bots capable of trading between 500 altcoins. You as an investor can develop your own script bot, to which the sky is the limit in its capabilities – or choose between a wide variety of backtested clones. * [Gecko](https://gekko.wizb.it/docs/introduction/about_gekko.html) - Free and open source Bitcoin TA trading and backtesting platform that connects to popular Bitcoin exchanges. [Video here](https://www.youtube.com/watch?v=3IWoRzqCSRE). * [Zenbot](https://github.com/carlos8f/zenbot) - Open-source Node.js trading bot * [Optimal Buy GDAX](https://github.com/brndnmtthws/optimal-buy-gdax) - Scheduled buying of BTC, ETH, and LTC from GDAX optimally ## Where To Go From Here? At this point, you likely have a healthy portfolio of cryptocurrency spread across Tier 1, 2 and 3 currencies. You are comfortable using GDAX and Bittrex for your transactions. You are using a software or hardware wallet. But where you go from here? Few suggestions: * Check out [other exchanges for fun](https://coincentral.com/how-to-buy-bitcoin/) to try trading with new sites. * Get more involved in cryptonews sites like [Cryptocurrency reddit](https://www.reddit.com/r/CryptoCurrency/) and [Cryptocoins News](https://www.cryptocoinsnews.com/), [Coindesk](https://www.coindesk.com/), [Coin Telegraph](https://cointelegraph.com/tags/cryptocurrencies). * Check out [crypto podcasts](http://badcryptopodcast.com/) or other media. * Start looking into earlier and earlier coins to invest in. Chat with developers. * Look into building your own crypto apps. Or once you hit a certain investment target, just [**HODL**](https://coinsutra.com/hodl-popular-cryptocurrency-terms/) and chill. Sit on the investments and let them work for you over time. ## Appendix and FAQ ### Origins of Bitcoin Satoshi Nakamoto is fictional name provided as the inventor of the first ever cryptocurrency, Bitcoin. Some believe that Satoshi Nakamoto is, in fact, a pseudonym for a group of people. The community believes that Nakamoto started working on the project in 2007. In 2008 the Bitcoin domain was registered on a site that allows the anonymous registration of domain names. Bitcoin.org was up and running a year after Satoshi started working on the concept. Nakamoto then quickly moved to publish a piece that explained in full what Bitcoin was, how it worked and how double spending would be prevented. The first mining took place in January 2009 after the project was registered on SourceForge.net – a website focused on open source software. A few days later the first ever transaction using cryptocurrency took place. Bitcoin was actually intended to be a peer-to-peer electronic cash system and not a currency. Many had tried and ultimately failed in their attempts to design digital money previously. He wanted to create a digital payment system that was decentralized in the same way files are shared over a peer-to-peer network. The public bitcoin transaction log shows that Nakamoto’s known addresses contain roughly one million bitcoins, or over $2 billion. To this day the identity or identities of Satoshi Nakamoto is or are not known, but there is no doubt that Satoshi Nakamoto has already left an incredible legacy on the financial industry. ### Um, wait a second. Why do different currency exchanges have different prices for the same coin? Check the [bitcoin price here on Coinbase](https://www.coinbase.com/charts). Now check the price on [this bitcoin price tracker](https://www.coindesk.com/price/). Chances are the prices are not actually the same between these two places. This reveals a larger truth which is that different trading platform **are not synchronized with each other**. Meaning their prices are independent of one another. Then coin prices vary because the price in each platform depends on the traders themselves. When you buy a currency, another person is selling that currency to you on the exchange. The buyer "bids" and then a seller accepts the bid. The buyer can pick any bid they want, and sellers are able to decide if they want to accept. Now imagine this happening at high volume with thousands of buyers and sellers. The point in which the bids are accepted becomes a range that determines the "market price" at any given point. On a particular exchange, as the bids that are accepted by sellers increases or decreases en masse, this is what controls the actual "price" listed on that exchange. This is also what determines if a particular currency is going up or down. Since exchanges each have their own different market prices, a person could in theory buy a bunch of coin on one market and **sell it on another market** to make a instant and massive profit. This is a very common trading strategy called **Arbitration**. This means buying on an exchange with the lowest price then transfering the coin into the exchange with the highest selling price. You can [read more about this here](https://www.coinspeaker.com/2017/06/10/real-life-example-arbitrage-bitcoin-ethereum/). ## Donations :::info **Found this guide helpful?** I hope to write more beginner, intermediate and expert guides on Cryptocurrency. I accept Bitcoin donations at wallet: `1397Yc3SW6TKmk2cKcxLgkKWoBzka7jPoZ`. Thanks for reading! :::