Buying and selling Cryptocurrencies - how to get a better deal in a bubble economy

Buying and selling cryptocurrencies is a complex subject. There is more than one way to go about it. This article will attempt to address some trading tips that should help you to not show up at a gunfight with a butter knife.

In my opinion, the single best way to buy cryptocurrency is to buy it from someone you know, who has it. Both of you will get a better deal and there is some comfort in dealing with a friend who will attempt to put things right if something goes wrong. Simply agree on a price and give your money and wallet address to the seller. The first time you do this, it's nice if both the buyer and seller are in the same room. The seller will usually have done this before and can talk the buyer through what's happening and what the confirmation process looks like.

Fees

Most transactions (moving crypto from one wallet address to another) will incur a small fee. The amount will depend on the currency and quantity being moved and sometimes the types of both sending and receiving wallets. This happens quite automatically and you simply have to decide whether buyer or seller or both will be covering the fee cost.

Pricing

There is no authority on crypto coin pricing. A coin is worth whatever someone is willing to pay. This is market rate pricing. If someone is happy to sell you a coin for less than the going rate, that's perfectly fine. They may be having difficulty selling it or they may not have access to the latest pricing information. People also often pay more than the market rate for a coin if there is poor supply in the place they are buying. To see (Coinbase) market rates for Bitcoin against Euros type "1 BTC in EUR" into Google search. If you want to see average prices across different markets, take a look at bitcoinaverage.com. For specific and near real-time prices for any currency pair on any exchange, go to tradingview.com.

Currency Symbols

Get used to referring to currencies by their ticker symbols. A ticker symbol is a three or four letter abbreviation or acronym representing a currency. Most cryptocurrency symbols are not included in international standards or definitions and as a result different exchanges may refer to the same currency with different symbols. For example Kraken refers to Bitcoin with the symbol XBT whereas many exchanges use BTC to refer to the same Bitcoin. Anytime you see a cryptocurrency symbol starting with the letter X, it's a good indication that currency has more than one symbol. Prefixing with the letter X is an attempt to conform to international conventions that use X to denote currencies not controlled by a nation state. A list of cryptocurrencies and their symbols is available on wikipedia and a more complete list (but without alternate symbols) at coinmarketcap

Currency Pairs

A currency pair is two currencies that can be exchanged. It indicates that either can be bought with the other. For example:

• USD-BTC represents the currency pair United States Dollar and Bitcoin indicating that USD can be exchanged for BTC or vice versa.
• USDT-BTC represents the currency pair USD Tether and Bitcoin. Never confuse a Tether currency with the currency it purports to represent. They are not the same thing and in some cases, Tethers are a very dangerous and extremely worthless currency to hold.
• EUR-BTC represents the currency pair Euro and Bitcoin.
• BTC-LTC represents the currency pair Bitcoin and Litecoin.

Exchanges

There are many exchange markets and theoretically, you are free to choose one that gives you the best deal. In practice your options are limited by where you live, where you bank and what currency you have readily available.
Some countries regulate trade in crypto currencies and this may further limit your options.
Most exchanges also limit the currency pairs that can be traded. For example:

• It's usually easy to exchange US Dollars or Euros for Bitcoin. It may be harder to buy altcoins with a fiat currency. Many altcoins are traded in BTC or ETH currency pairs. So to buy Stellar Lumens, you may have to first buy Bitcoin with your Euros or Dollars and then trade Bitcoin for your Lumens. Good exchanges regularly add to the list of currency pairs that can be traded.
• My personal opinon is that exchanges which use Tether currencies (especially USDT) should not be trusted at all. There is absolutely no evidence that every USDT token is backed by a real US Dollar. Since that is the most important principle of a Tether currency and it is notably absent in USDT, any exchange willing to gamble customer money in the presence of this gaping flaw is criminally negligent. If you trust your money to an exchange which behaves in this way, I will laugh at you when you lose all your money. Sometimes you have no choice but to use such an exchange because the currency you want to buy is only available to you through that exchange. If that's the case, my advice is to move the currency back off that exchange and into a private wallet as soon as the trade is complete. This achieves two purposes:
  • your money is exposed for a shorter period of time and is safe as soon as you get it off the exchange.
  • the exchanges learn that customers don't trust them to hold money and their liquidity suffers until they put things right.

Timing your trade

Obviously your objective is to buy at the lowest possible price. Look at the chart for the currency you want to buy at tradingview.com. Check all the available timespans for the currency (1 day, 1 week, 1 month, etc). Try to determine if the price is in a bull (increasing price) or bear (decreasing price) trend. There is some guesswork involved. Try to time your buy at or near the bottom of a bear trend. In practice, it's impossible to know where the bottom is before it gets hit and goes the other way, but you can try to get close. If the currency is increasing in value try to avoid buying if you think it is more than halfway through a bull run. There is often a sharp dip after a strong peak and you might lose 30% or more of your investment just by buying 10 minutes too early. A common (but by no means consistent) trend is for a sharp peak to be followed by one or both of a sharp decline and a steady less sharp decline. This will be demoralising if you have bought near the peak. Good times to buy are often when the currency price has been stagnant for longer than normal and when the currency is on a slow but steady and predictable price increase.
When you are selling, try to do so while the currency is doing great. Selling because you've just realised that it has been dropping for ages is often a punishing experience. Often long declines are followed by sharp increases. So panicking and selling at the bottom of a price drop is like getting punched in the gut three times. First, when you realise you've just lost a bunch of money. Second, when you accept this and sell in despair and finally a massive third gut-buster when the coin you just sold goes on a massive bull run and reaches new highs that nobody thought was possible.
Of course you will have learned from my mistakes and you'll only buy low and sell high. :)