Pragmatic Cryptocurrency

What is cryptocurrency and how is cryptocurrency different that other currencies?
How do I buy and trade cryptocurrency?

Exchanges

Looking to make larger purchases at a particular price? Then you will probably be best served by trading fiat for crypto currencies through an exchange. This section will cover the basics of using centralized exchanges. Trading on decentralized exchanges is beyond the scope of this course.

Exchanges typically charge fees as a percentage of your trade. Coinbase (with some of the highest fees) charges 0.5% at their lowest volume tier, so of a $10,000 order $50 will go to Coinbase; Paxos’ itBit exchange charges 0.35% at their lowest volume tier, so of a $10,000 order $35 will go to Paxos.

I like both Coinbase and Paxos for their transparent licensing and stellar track record:

Trading with Coinbase

Coinbase has some of the highest fees out there, but because of their first mover advantage they have achieved widespread name association with cryptocurrency. They allow you to fund your account with credit cards, debit cards, direct deposit/ACH, and wire transfers; other exchanges only tolerate wire transfers in and out of fiat currency. Their Know Your Customer (KYC) process, to verify you are not a money launderer, is straightforward.

The BTC/USD trading pair

Creating a buy order

  1. Select “Buy” in the Order Form
  2. Create a “Limit” order to purchase at a particular price
  3. Specify your “Limit Price” … the price that you are willing to pay
  4. Coinbase has a handy “Max” option which will automatically calculate the amount of BTC you can purchase using all available USD in your account
  5. Click the “Place Buy Order” button to add your trade to the order book

Creating a sell order

  1. Select “Sell” in the Order Form
  2. Create a “Limit” order to sell at a particular price
  3. Specify your “Limit Price” … the price that you are willing to sell
  4. Click the “Place Sell Order” button to add your trade to the order book

To save on fees for Buy and Sell orders always make sure the “Post Only” option is enabled.

Trading with Paxos/itBit

Getting fiat money in and out of Paxos is a bit more involved than Coinbase, as they charge a percentage fee for most types of incoming and outgoing transfers, and have a more limited number of ways to get fiat money in and out. I usually use Paxos for making crypto purchases once I’ve made a wire transfer in (from my Fidelity account which doesn’t charge for wire transfers) and then hold or sell the crypto at another institution.

The BTC/USD trading pair

Creating an order

  1. To save on fees, select “Post Only” of the Buy and Sell sections
  2. Specify your “Limit Price”
  3. Click the “Place Buy Order” or “Place Sell Order” button to add your trade to the order book