During 2018, Bitcoin has seen a continuation of its commodity-like nature. During the summer months of the past few years, we have observed notable declines in Bitcoin’s value relative to the winter months. Just before the new year hit in 2017, the world watched the price of Bitcoin soar past 19,000, falling short of its $20,000 milestone.
Amid the rumors of Bitcoin’s bull run returning, many people still are left with the question: How do I get in?
This is a guide to help you understand how to get in and out of the cryptocurrency market.
Step One: Open a Coinbase Account
Coinbase is an American based cryptocurrency exchange and wallet that allows you to buy Bitcoin, Ethereum, Litecoin, or Bitcoin Cash with U.S dollars. Coinbase connects to your bank account to withdraw the money. Using debit cards or credit cards will result in extra processing fees. Coinbase does engage in know-your-customer protocols; however, they will not go as far as asking for your Social Security number. The exchange and wallet service will ask you for your name, street address, and zip code. To connect a bank account, you will need to know your routing and account number.
Once you have done all the necessary setup and linked your bank account, you are now able to enter a purchase order. Coinbase will take anywhere from 7-9 days to move the funds from your bank account to your Coinbase wallet. You can choose an expedited process for an added fee. Obviously, don’t put in what you can’t afford to lose.
Once you have waited a week or succumbed to the fee, you should check the balance in your Coinbase wallet. Note that there are four different wallets, depending on which coin you decided you purchase.
Step Two: Pick Your Exchange
It can be awfully confusing to choose which exchange to trade cryptocurrencies on. Picking your exchange can be one of the most important safety precautions, especially considering you have to trust a third party to connect to your bank account. If you need help figuring out which cryptocurrency exchange to use, check out Benzinga’s picks for the Best Cryptocurrency Exchange to narrow down your choices. If you don’t have time, here’s a short list of our picks.
The Binance exchange originated in China in early 2017 and quickly hit the ground running, even stopping new customers to open accounts because of its inability to scale at the time. Now, the company is back and better than ever as it recently moved its headquarters to the crypto-friendly nation of Malta in the Mediterranean Sea. The exchange executes trades very efficiently and offers ample trading tools. Maker and taker fees are 10 basis points each, with the option of using the Binance Coin for 25% cheaper trading fees at 7.5 basis points per maker and taker fee.
The Coinbase Pro exchange isn’t really much different than Binance, other than the fact it is based in the United States and has a slightly different fee structure. The United States hasn’t made any court rulings or initiated any legislation that would prevent Coinbase from operating under its current practices. Its trading tools are easier to use than Binance, but trails the exchange in filling trades most efficiently. At the lowest 30 day volume, Coinbase Pro charges a taker fee of 30 basis points, 10 basis points more than Binance.
Step Three: Store Profits Offline
Liquidating your Bitcoin and other cryptocurrencies often may not be a great idea. The Bitcoin and Ethereum network, along with other altcoins, charge minor fees that are associated with maintaining the ledger. If a user transfers coins from one wallet to another frequently, it will result in paying more fees. These fees could potentially eat at any profits. You also may end up paying a larger mining fee when you transfer a large sum because the ledger has to piece together every little transaction.
If you do get to the point of profit where it makes sense to store your coins, you should transfer them into an offline wallet. Offline wallets allow you to sleep at night because you know the funds are not sitting on an exchange’s server.
In the event that you have a balance so large you feel uncomfortable leaving them on a desktop, I would strongly recommend a hardware wallet. These innovative pieces are portable, durable, and allow you to recover your devices assets with a 24-word recovery seed. The best part? Most of the good ones are compatible with other popular offline wallets or have a version of their own.
Step Four: Withdraw
When you’ve decided that your offline wallet has hit its threshold, it’s time to withdraw the cash. Getting money from your wallet to your bank account is rather easy, but will take about a week – maybe longer. You may notice that the Coinbase wallet has both ‘Send’ and ‘Receive’ codes.
Whichever wallet you have will have the option to send funds someplace else. Input the receive code of your Coinbase account where prompted and your funds should be available in that account within hours. From there, all you have to do is transfer your cash to the bank via Coinbase and you’re done.
As time goes on, transaction times will improve and it will be easier to move your cryptocurrency around. Eventually, regulation will take its toll on the industry and develop authoritative watch dogs where compliance rules will be set, ensuring cooperation and safety from the exchanges, banks, and wallets.