Disclaimer: By no means do I claim to be a financial adviser or expert. I wrote this guide initially to help friends with limited or no experience in crypto to acquire currencies for long term investment. Always do research before investing and never invest what you cannot afford to lose. I welcome feedback and will make corrections and updates as needed.
Step 1: Build your Portfolio
The portfolio we will build will consist of 5 different cryptocurrencies. The reason we choose to invest in more than one currency is to diversify our portfolio and minimize risk. Even though it’s quite unlikely, imagine putting all your money only in Bitcoin and tomorrow it becomes obsolete - you will lose everything you’ve invested and we don’t want that. We want to buy Lambo’s and watch our monies go to the moon.
The 5 currencies for our portfolio are:
- Bitcoin (20%)
- Ethereum (20%)
- Litecoin (20%)
- Ripple (15%)
- NEO (25%) (UPDATE: Follow the news regarding China's ICO ban and regulations. Perhaps hold of until you're satisfied that NEO is a "safe" coin for investing. )
Why these coins? These coins are in the top 5 in terms of market cap, apart from Neo that is now in the top 10. They have proven to deliver on their technologies and promises and higher market valuation ensures that it is more difficult for crypto whales to manipulate the price.
Step 2: Choose your Exchange
In order to own any crypto currency you first need to buy it. There are many ways to acquire crypto currencies but we will cover only buying it from exchanges for now. Not all exchanges sell all currencies but most of them sell Bitcoin.
To acquire our cryptocurrencies we need to register with the following two exchanges:
Step 3: Setting up 2 Factor Authentication (2FA)
Because your money will be stored on the exchange until we move it to a wallet (later), we need to make sure our money stays safe and that nobody can log into our accounts. One measure we should always use is 2FA which we can set up using the instructions below. But first we’ll need to install Google Authenticator on our Android’s or Iphone’s.
Bitstamp:
- Click on your name in the top right
- Click on “View my account”
- In the left menu click on “Security”
- Click on “Enable 2FA”
- Scan the QR code with Google Authenticator by opening the app and clicking the plus + icon > scan barcode
- The new 2FA numbers will be added to your phone
- Enter them into the required field on the Bitstamp web page and click enable
Bittrex:
- Click on “Settings” in the top right menu
- Click on Two-factor Authentication in the left menu
- Scan the barcode using the Google Authenticator app
- Enter the number in the required field and click “Enable 2FA”
You now have 2FA set up on both exchanges and will have to always enter these numbers when logging in and making deposits or withdrawals. IMPORTANT: It’s important that you don’t uninstall the Google App or lose your phone. In this event you won’t be able to log into your account and you would have to contact Support to have it reset. Alternatively you can use an app called Authy which allows you to backup and use on multiple devices. Getting it reset could take forever as we’ll soon find out with verification. Verification can take a long time due to of the number of daily requests that are increasing as more and more people are entering the crypto space.
Step 4: Getting verified on your Exchange
Getting verified does a couple of things:
- Enables you to fund your account using fiat currencies (Not-all exchanges offer this)
- Increases your deposit/withdrawal limits
- Increases the security of your account, as resetting anything would require you to re-submit your documents
- Enables you to withdraw your funds via bank transfer
To get verified follow the following steps:
Bitstamp:
- Click on your name in the top right
- Click on “View my account”
- In the left menu select “Verify Account”
- Follow the online instructions and supply all necessary documents in the required formats
- For extra safety also verify your mobile number if possible
Bittrex:
- Click on “Settings” in the top right menu
- In the left menu select “Basic Verification”, “Phone Verification” and “Enhanced Verification” and follow the online instructions.
- Supply all necessary documents required.
After you have sent your verification documents through it could take a few days, sometimes even 2 weeks or more. Do write to support if it takes more than 2 weeks and complain as it might help speed up the process.
Step 4: Time to buy some coins
After the smooth and definitely non-frustrating verification process we are finally ready to purchase our coins. You will first need to decide how much money we can afford to lose - yes, that’s right “afford to lose”. Because we only invest money that wouldn’t force us into a deep depression or commit hara-kiri should we lose it all tomorrow. We would never invest our life savings or our entire salary because we are responsible investors after all. For the remainder of this tutorial and to make it easier to calculate I will use an investment of 1000USD as an example.
Bitstamp:
Whenever you make a deposit to Bitstamp they will automatically convert your USD or EUR deposit to Bitcoin once the transaction is verified. So to start we’re going to buy 1000USD’s worth of bitcoin and split it up.
- Click on “Deposit” in the top right menu
- In the left hand menu select your preferred option for payment in fiat currency, either EU Bank (SEPA), International bank or Credit card.
Note that credit card is the easiest and quickest but also charges the highest fees. It is important for us to calculate fees into our equation as it will leave us with less spending money. We can determine fees using the Bitstamp fee schedule but again for the sake of not making this a mathematical tutorial we will assume that we have paid no fees and we’re left with a grand’s worth of Bitcoin to spend at our leisure.
So, now we have the Bitcoin in our account. If you don’t see it in the top info bar on the site, make sure you select the correct currency pair BTC/USD on the left hand side in blue.
Now we can see that our USD has been converted to 0.2390 BTC (This number will change as BTC becomes stronger or weaker to the dollar).
NOTE: As we’re buying long term to hold (hodl) and we are confident that over a period of several months or years our investment will grow, we will not be buying at the most optimal price. We could! By using technical analysis and checking every day when the price drops we could buy at the most optimal price at the time. For now let’s continue and get some coins for fear of FOMO!
It’s time for us to diversify yo!! First we’re going to buy:
- Bitcoin: $200 - As we already own this we’ll buy all other coins and leave the remainder as our investment.
- Ethereum: $200
- Litecoin: $200
- Ripple: $150
And we’re going to use this currency convertor to help us do that.
In the top right menu click on “Buy/Sell”:
- We want to buy Ethereum (ETH) so we have to change the currency pair by clicking on the currency pair link on the left and selecting ETH/BTC
- Click on “Buy ETH”
- Using our currency convertor we type in 0.048 and click convert to see that it converts to around 200USD (remember this will change depending on the price of Bitcoin at the time). If it doesn’t work out to 200USD we keep changing the numbers to 0.05, 0.06 etc until when we convert it rounds to about 200USD. It’s a pain I know but unfortunately crypto currencies have 8 decimal places and we need to get used to it.
- Type the number 0.48 into the “Amount” field on the Bitstamp buy page and click on “Buy ETH”
- Repeat this process for the 2 remaining currencies Litecoin (LTC) and Ripple (XRP).
- Remember only 150USD for Ripple!
- Also remember to select the correct currency pair on the top left, LTC/USD for Litecoin and XRP/USD for Ripple.
Bittrex:
Currently there is no option on Bittrex to fund your account with fiat currencies. This means we cannot use a credit card or a bank transfer to send the money to our account. But this is OK because we now own Bitcoin and because of that we’re kind of a big deal. We’ll just send some Bitcoin from Bitstamp to Bittrex.
To do this we do the following:
- Login to Bittrex
- In the top menu on the right click on “Wallets”
- There will be a list under “Account Balances” containing all currencies that Bittrex supports. Bitcoin should be in that list. If it’s not, use the search bar on the right to search for BTC.
- Next to the Bitcoin you will see a plus (+) and minus (-) icon. We want to add Bitcoin to our account so we click on the plus (+)
- In the popup window titled “Deposit Bitcoin (BTC)” there will be a field with an address. This is your Bitcoin wallet address on Bittrex and this is where you have to send the Bitcoin to.
- Copy this address.
Now back to Bitstamp:
- Click on “Withdrawal” in the top menu on the right.
- In the left hand menu select “Bitcoin”
- Paste the copied address into the “Bitcoin address” field.
IMPORTANT: It is always good practice to test a wallet address before sending any big amounts to it. Bitcoin transactions are irreversible and if you make a mistake you will lose all the funds you have sent to the incorrect address. Always double check the address a few times and always send a very small amount like 10USD’s worth before sending the full amount.
- Enter the 2FA number from your Google Authenticator into the required field and click “Withdraw”.
- You will receive an email to verify the transaction.
- Once the transaction is finished it can take up to an hour for it to show up in Bittrex. This is tedious especially when you’re testing it with a small amount and it means you have to do it twice. Unfortunately that is the downside of Bitcoin, slow and costly transactions.
Once the Bitcoin shows up in your wallet on Bittrex it’s finally time for us to buy some NEO. I know that we could have said screw NEO by now because this is way too much effort, but NEO has so much potential to move right now and could increase in value in the coming months more than any of the other coins in our portfolio and we simply HAVE TO HAVE IT!!! Remember Lambo’s and moon rockets!! **(Update: The Chinese government has imposed bans and regulations on ICO’s. There will be follow up info and we’re still not sure how this affects NEO. I suggest being cautious when buying NEO at this time!)
To buy NEO:
- Click on “B Markets” in the top menu on the left.
- In the search bar type NEO and click on the NEO link that appears.
- Under the “Trading” menu where it says “Buy NEO” click on “Max” as we want to spend all our BTC on NEO.
- Click on “Price” and select “Last”. This will make sure that we are buying NEO at the last available price and that our order should execute immediately. Unlike on Bitstamp where we could just buy in one step, we have to actually do a currency trade and therefore it is slightly different. We are actually trading at the moment. Trading Bitcoin for NEO.
- Now click on the “Buy NEO” button to complete your order.
If the order executes you would have purchased NEO at the last available market price for the NEO/BTC currency pair. Where NEO is the base currency and BTC the quote currency. Not only did we just buy NEO, we also did our first ever trade. Congratulations to us!!!
Step 5: Sit back and watch your monies grow
You are now the proud owner of a solid top 5 cryptocurrency portfolio and also some of the best performers in terms of growth. But it is very important to move our coins from the exchange to an offline wallet as exchanges get hacked and people lose funds all the time. More on this in the next tutorial.
Coming up:
- Moving funds to an offline wallet
- Setting up a portfolio dashboard to keep track of profits
- How to convert your profits to cash
- What would you like to know about?
- Much, much more!