What is cryptomarket and how does it differ from a stock exchange? Why do traditional markets avoid working with cryptocurrencies? How to buy and store your first virtual money? Here’s a complete guide to the basics of cryptomarket.
Cryptomarket… what really is it?
Cryptomarket is a platform that allows its users to trade cryptocurrencies or digital money for other assets, like fiat currencies or other digital currencies. Cryptocurrency market usually uses the purchase and sale spreads as the transaction fee or simply charges for using the platform.
Digital currency exchange can be a stationary business or exist exclusively online. Stationary market exchanges traditional money for digital currencies. Internet markets, on the other hand, exchange digital money.
Cryptomarkets are often registered out of USA or Europe to avoid regulations and taxation. They do, however, deal in Western fiat currencies and have accounts if a few different banks to make paying in various currencies easier. Most cryptomarkets can accept credit card payments, bank transfers or other forms of payment in exchange for cryptocurrencies.
These markets usually send the cryptocurrencies to the users’ personal crypto wallets. Some also have the option to convert digital currencies into anonymous prepaid cards, which can be used to withdraw money from any ATM, while other cryptocurrencies are supported by other physical assets, like gold.
What to look for when choosing a cryptomarket?
Let’s say that you were convinced by an article about high return rates on crypto. What should you pay attention to before you start investing?
The reputation of the exchange – the best way to find opinions about an exchange is to look for individual users’ and professional sites’ reviews. You can also ask questions on forums like Reddit or Wykop.
Fees – most markets should have some info about payments on their website. Before you join one, make sure you understand everything about deposit, transaction, and withdrawal payments. The fees can differ drastically, depending on the exchange.
Payment methods – which payment methods are available on this market? Credit, debit? Transfer? PayPal? Does this exchange work with your local cards? If the options are restricted, using this exchange might be tricky. Remember that buying crypto using a credit card always calls for identity verification and comes with a premium price, as there is a bigger risk of a scam and higher transaction fees. Using a bank transfer, however, might take more time as banks need to process it.
Verification requirements – most of the Bitcoin transaction platforms require some sort of identity verification to buy or sell. Some exchanges allow you to keep your anonymity. Although the verification can take up to a few days and seem redundant, it protects the market from scammers and money laundering.
Geographical restrictions – some of the functions available to users are only usable in some countries. Make sure that the exchange you want to join allows full accessibility in your country.
Exchange rate – different exchanges have different rates. Differences of 10% or more are not unusual.
Buying, storing, and selling cryptocurrencies (and how it works)
Let’s start by buying Bitcoin – you can exchange it for other currencies later on. There are two types of transaction: fiat to crypto or crypto to fiat. Both can be done right on the exchange.
First, you have to open an account on the market platform. Next, you verify your identity – it’s required due to the anti-money laundering laws. Charge your account with a currency you’re using, but keep in mind that you have to check if trading directly in that currency is possible.
There is no set rule as to when you should buy cryptocurrencies. It’s usually not a good idea to buy while the crypto is at the peak of speculation bubble, and when the market is broken. The best time may be when the price is low but stable.
Alright, so you bought your tokens, but where should you store it? Well, first of all, away from the market!
There is no real reason to store your cryptocurrency at the exchange. The cryptocurrency markets have a long history of break-ins and bankruptcy, the most known case being the hacked Mt.Gox exchange, which sucked out millions of dollars out of its users.
But if not on the exchange, then where should you store your cryptocurrency? You should probably be thinking about an online or a mobile wallet (as in, any wallet that exists on a device that will ever be connected to the internet) as a “hot” type crypto wallet. The money put on this type of wallet is easily accessible, so it’s worth to use it to store some of the money you will be using on the internet or in an offline world.
Although using hot wallets for transactions is very easy, it has a big downside – they are easy to hack. Recent ransomware attacks and previous failures of big markets should be enough of a warning for new users.
Although you shouldn’t put a lot of money in your hot wallet, it’s still important to make backups of you wallet, so you can avoid losing money due to an error. By using your private key, there should be no pain in returning any wallet to its previous status.
When you put your cryptocurrency on a device that is totally offline, it’s called a cold wallet. They are the best solutions for people who want the absolute safest way to store their e-money. Cold wallets are also the most appropriate for long-term investors, who won’t need to access their cryptocurrency for months or even years.
Cold wallets aren’t safe from every single threat, but if you follow the instructions and take appropriate precautions, they are significantly minimized. Considering how popular the cryptocurrencies got in the recent years, it’s no surprise they also got the attention of regular thieves. That’s why a cold wallet is a much safer option.
And now you know the difference between stock market exchange and cryptocurrency markets, and why we won’t be seeing a merge between the two too soon. You also know how to pick the best cryptomarket, as well as the basis for obtaining and storing cryptocurrency tokens. It’s time to do your own research – as we said before, investing on the market requires some knowledge and quickly shots down people, who approach it too nonchalantly.