A Starter Kit For Those New to Cryptocurrency
Here is a list of everything you need to get started trading and investing in cryptocurrency along with specific suggestions on products for beginners. In other words, here is a cryptocurrency investing starter kit.
NOTE: There is no one way to get started with cryptocurrency trading and investing. However, for U.S. citizens specifically, I would argue the Start Kit Essentials below are going to be the best starting place for the majority of new comers.
Keeping it Simple
A short and simple summary:
- Starter Kit Essentials: Coinbase, Bitcoin, and dollars. In other words, buy Bitcoin on Coinbase and keep it there (make sure to use two-factor authentication).
- A good starter kit also includes: Coinbase Pro, Ether, and potentially TREZOR. In other words, use Coinbase Pro to save on fees, get yourself some Ether, and consider storing your long term holds in a hardware wallet like TREZOR.
- Also, some more bold new users might want to check out: Bittrex or Binance for trading altcoins, Coinbase Wallet for accessing DApps and storing tokens (for example from ICOs), Cryptohopper or another simple trading bot if they want to automate anything, Tradingview for TA, and Cointracking or another crypto tax software that helps you keep records. In other words, although its more advanced some newcomers might want to dive right into TA, trading bots, and altcoins… and if you are doing that, you might want to use some tax software.
- One should generally avoid: Scammy lending sites, scammy ICOs, scammers on social media giving away free ETH and such, exchanges with low volume, coins with low volume and low market caps, the person who suggested a scammy coin, scammy ICO, questionable coin, or questionable exchange, anyone who tells you Bitcoin is going to $50k without mentioning it could also not do that and instead go to $5k or even $500 (or it could do both in any order). In other words, watch out for crypto scams!
TIP: If you live outside of the U.S. the specific exchange you should use can differ. Please research the top exchange in your region. Here is a list of top exchanges. The rest is universal.
Before We Get Started
Why this guide: A quick anecdote will explain the purpose of this guide. When I first started creating electronic music I didn’t know where to start. I tried to ask a range of people, salespeople, and the internet and got a bunch of confusing answers that resulted in me buying some equipment I didn’t need. The answer was essentially 1. a DAW (like Logic or Ableton) and 2. a controller (a keyboard USB controller preferably). When I started investing in crypto I had the same problem, I asked a bunch of people, and I got some pretty confusing answers. However, the answer for cryptocurrency is about as simple as the one about electronic music. For crypto, you need 1. a wallet and 2. an exchange to trade on. Furthermore, the answer is essentially just “Coinbase,” as Coinbase provides both a wallet and exchange service. With that covered, below is a slightly more detailed version of that answer.
Affiliate Links: I’ve included affiliate links when I could on this page. In most cases, we both get something out of it if you buy a product or service via one of the links (not true if you don’t use the links). I didn’t pick any of these products because of the affiliate links, I instead grabbed affiliate links from products I picked. Feel free not to use them.
In some cases there is more than one good choice: Why do I suggest TREZOR and not Ledger wallets? No good reason. When more than one top choice is on the table, I simply picked the one I think has the edge. Once you know “get top hardware wallet” is a thing, picking the right one for you should be easy. See the next point.
DYOR: Do your own research. This is what I would suggest to my friends and family, but I’m not you. The right solution for you might be different. In crypto it is always important to do your own research. In investing you must always make your own investment choices; no one on the internet who offers information for free is generally qualified to give investment advice or legally in a position where they can.
Waves and Cycles: Prices tend to move in waves, not straight lines. Which coins do well and when is subject to cycles and rotations. Expect to lose on-paper money often, and sometimes for months on end, if you HODL. If you look at the history of the crypto market, you can see that the history of crypto is a history of waves and market cycles. One has to remember that 2013 – 2014 happened, meaning sometimes crypto bubbles up and busts as part of an overarching cycle (with coins doing this often in between).
Risk: Cryptocurrency is volatile and a bit like the wild west. The old adage “don’t bet more than you can afford to lose” applies well here. Please be aware that crypto traders often discuss their wins and not losses with others. Many traders and investors will take heavy losses and then go on to discuss crypto like its all “moons and lambos”… historically crypto does well in short spurts and otherwise spends a lot of time losing value (take a look at the historic charts over the past 2 years, try to not focus too much on what is happening this week/month). See cryptocurrency investing tips.
Products that Make Sense in a Cryptocurrency Starter Kit and Key Concepts
First let’s cover essentials:
A wallet: TRZEOR (a hardware wallet) for longterm cold storage (Ledger’s Nano S is also a valid choice). The Core wallets (software wallets) if you want to host a copy of the blockchain. Coinbase Vault (third party hosted wallet) if you want to handle everything via Coinbase. A paper wallet for very long term storage (try Cryptosteel for TREZOR for a metal version of a paper wallet). LINK: Buy a sweet TREZOR wallet.
An exchange: Coinbase/GDAX for investing and trading. Coinbase for converting USD to Bitcoin and Ether back and forth you dollars, GDAX for trading the major coins. Signing up for Coinbase gets you access to GDAX (they are meant to be paired and use the same logins). Try Bittrex, Kraken, or Binance for trading alts (Kraken also deals in USD, but isn’t an option in all states). Bitfinex is great, but the barrier to entry means it isn’t suitable for newcomers. See a list of exchanges I think are suitable for newcomers. LINK: Sign up for Coinbase and get $10 worth of Bitcoin free when you buy or sell $100 worth of crypto.
How to trade: You can trade dollars for coins or coins for coins. Trading coins for coins requires you to figure out the value of both coins to ensure you are getting a good deal… but as a plus, the market tends to price coins fairly when it comes to coin-to-coin trading pairs. Start with dollars for coins until you wrap your head around coin-to-coin trades. If you want to be long in crypto, but don’t care about the long term capital gains tax, it can make sense to use coin-to-coin trades to grow your stacks (rather than risking going to fiat AKA selling to dollars). On most exchanges you need Bitcoin and Ether for coin-to-coin trades, that makes these essential. On exchanges where you can’t use dollars, you’ll generally want to use Tether (USDT) or another stable coin.
Coins to buy: Bitcoin (BTC) is the obvious choice, Ether (ETH) is a close second, and some might argue XRP (sometimes called Ripple) is almost as important. That said, in my opinion and in general, a well researched selection of the top 15 or so coins by market cap are the safest bets. I prefer the more stable ones with longevity (BCH, TRX, and ADA shouldn’t be ignored, but they haven’t been proven over time like BTC, ETH, LTC, XRP for example). If you trade coins further down the list or buy into ICOs, consider weighting your investments toward the top coins. Use Coinmarketcap.com to figure it out. LINK: There is no link, I do feel like Bitcoin and Ether should pay me for shilling them though <— joke.
Coins to avoid: Avoid anything that isn’t you buying a coin directly via a major exchange. The only exception is perhaps a popular ICO you have put time and effort into researching. I’ll be blunt, you need to avoid platforms like Bitconnect (a scam), ICOs that seem at all shady (read the white paper carefully), and almost every coin that someone shills on the internet… especially if it includes incentives like a referral code (the harder they push, generally the worse idea it is and/or the worse the timing is).
Trading bot: Cryptohopper for automating the trading process. There is a range of bots to choose from, but in terms of price, usability, and community Cryptohopper is the go-to for a first foray into automated trading. They offer a free trial, and that means you don’t have to put money down to get started. If you automate your trading, start with a very small amount of money until you get the hang of the software. Saying that automating your trading doesn’t mean guaranteed profits is an understatement. LINK: Cryptohopper is great, sign up for a free trial by clicking this link.
Dealing with taxes: The more you trade and move crypto around, the harder your tax reporting will be. Cryptos are investment property and you owe the capital gains tax when you sell, use, or trade crypto. Try a program like CoinTracking to help you organize your trades (to be fair, this is the most wonky of the products I’m suggesting; problem here is that there isn’t a lot of options… it is much better than nothing). LINK: our Cointracking.info affiliate link (feel free to check out the DEMO).
Now Let’s Cover some Bonus Information:
Research: There isn’t one site for research, but there are a few important ones. TradingView is a good resource for learning about Technical Analysis and hearing a range of predictions. CoinMarketCap is good for an overview of the market. Reddit, Twitter, Facebook, and BitcoinTalk are all useful for research. Google is your friend. Remember people are often wrong, even the best analysts tend to be wrong a great deal of the time (especially in the short term).
Avoiding Fees: If you fund your Coinbase USD wallet, then transfer those funds to GDAX, and then trade using limit orders on GDAX you can trade cryptocurrency without fees. Otherwise exchanges and brokers generally charge fees for orders (sometimes market orders cost more, other times they don’t, it depends on the exchange).
Understanding orders and order books: The order book is where buy and sell orders are placed. These are placed with limit orders. Market orders are instant orders that buy or sell limit orders. Stop orders are triggered when price conditions are met. Learn more about order types.
Forks: When a coin forks you get free coins for holding it. However, you need to hold it in an official wallet or third party platform that supports the fork. Forks are a nice bonus, but don’t go chasing them at the expense of making a bad trade or investment. Learn about forks.
Mining: Most people won’t start by mining. However, if you are interested you can check out a mining guide for hobbyists to see if it is right for you.
Strategy: Having a solid grasp of some indicators, chart patterns, and investing strategies will go a long way in crypto. In general, it is conservative to average in and out of positions, don’t go all in at once and you’ll limit the chances of mistiming the market. It is also conservative to use stops if you are trading and not investing (don’t just HODL and hope it goes up again, often it does not; if you do HODL, HODL strategically). Be aware of common patterns like bull flags, bear flags, double tops, and double bottoms. Get used to using indicators like MACD, RSI, Stoch RSI, and Fibonacci retracement levels. Use Google to research all of those terms.
Signals, Pump and Dump Groups, Manipulation, and Natural Price Movement: “Signals” are buy or sell suggestions, they are generally produced by software. In the best of cases they can tell you when a coin is a good buy or not. Some signals are sent out by groups (“signal groups”) and are based on solid data that is hard to parse without the aide of software. These can be useful. Meanwhile, pump and dump groups are the black-hat version of this. These are groups who accumulate a coin and then pump (increase the price quickly) it leaving unsuspecting FOMO buyers to buy as the pump group exits the market (as they “dump” the coin). This practice is toxic, but it is also common in cryptocurrency. Try to avoid these groups and make sure to avoid being their victim. Let’s be honest, the markets are somewhat manipulated. However, some of what looks like manipulation is actually just mass FOMO and speculation. Crypto lacks some fundamentals and is highly speculative, so prices can move quickly in any direction as a result.
Keep a cool head and put strategy and logic over emotion: We are human, so we have emotions. Emotions get in the way of trading. Emotions are what make you buy the top and HODL into the ground. Specifically, watch out for FOMO (the fear of mission out). Come up with a strategy based on the historic performance of the market, and question yourself if you decide you need to change up your strategy suddenly.
Bottomline: A starter kit is all about getting dollars into the top cryptos and then back into dollars. In between you likely will want to store crypto and trade in and out of some coins. Thus, you need an exchange and a wallet. For me, it is equally as essential to automate some trading, check charts, and make sure my tax info is in order (hence the other suggestions in the kit). Lastly, all the rest from strategy, to keeping emotions in check, to avoiding scams is about capital preservation. Crypto can be a bit of a war zone, so conservative tactics like averaging in and out and avoiding pump and dumps go a long way. Given all this, a proper starter kit in my opinion covers all the above but specifically consists of: Coinbase, Bitcoin, dollars, GDAX, Ether, TREZOR, Cryptohopper, Tradingview, and Cointracking (or another crypto tax software that helps you keep records).