I originally wrote a post called: 7 Top Privacy Cryptocurrencies. But as I started doing more research, I realized that most of the coins on that list were not really private. So I deleted that post and wrote this update.

In reality, there are only 2 privacy coins worth looking at, in my opinion. The top privacy coins at the moment are Monero and Pirate Chain. 

But before I get into why, let's take a look at what the best anonymous cryptocurrencies have in common.

The Characteristics of the Best Private Cryptocurrencies

I could get into every little detail of how privacy technology works and the elements of a good project, but that would be a 500 page blog post and you would probably fall asleep before you got any useful information out of it.

So I'll boil it down to the basics and give you only what matters most.

Every Transaction Must be Private

The first characteristic of a true privacy coin is that all transactions are private by default. 

There are many projects out there where there is a separate private wallet that you have to transfer coins into to have a private transaction, or you have to select the “private transaction checkbox,” when sending money.

Most people are lazy and won't use the private wallet or check that box. Even worse, some third-party wallets don't even give you the option of sending a private transaction, even if the cryptocurrency has that capability.

Because of these two issues, most transactions on these blockchains get transmitted publicly and are just as transparent as Bitcoin and Ethereum.

Active Development and Promotion

The second important characteristic of a privacy coin is the culture of the community involved with the cryptocurrency. 

• Does the community really care about privacy, or are they just out to make a quick buck?
• Does the development team make decisions that are good for the currency and their users, or are they out to stroke their own egos?
• Are there rockstar players on the core team (developers, marketers, etc.), or is the product full of bugs?

Fortunately, it's easy to follow a lot of these projects because most of them provide updates via platforms like Telegram, Twitter or Discord.

It's generally best to steer clear of projects that don't provide regular updates on their progress. Putting money into these projects is like throwing your money into a deep, dark hole.

You never know if you will get it back again.

Superior Technology

Next, the way that the technology keeps transactions private has to make sense. If you aren't too technically inclined, then ask people to explain it to you.

Someone should be able to explain the technology in a way that you can understand. However, if you ask several people and they cannot describe the tech to you in plain English, then it might not be as good as the creators say it is.

There are a lot of projects out there that tell you all the amazing things that their cryptocurrency is supposed to do. But most projects don't even come close to delivering.

Even if you are convinced by the technology, it helps to try out a few transactions for yourself. How easy is it to use? Is it something that people will find useful?

Number of Network Participants

Finally, take a look at how many people are participating in the network. The way to measure this will vary by cryptocurrency.

For Proof of Work (PoW) cryptocurrencies like Bitcoin and Litecoin, look at the number of miners and the hashpower on the network.

Hashpower is simply the amount of computer power that is being used to verify transactions. The higher the hashrate, the more popular, and secure the network is.

If you're looking at a Proof of Stake (PoS) cryptocurrency, then look at how many wallets are staking and the total amount of cryptocurrency being staked.

These are all important questions to ask yourself, when considering which privacy coins to trust.

There are obviously many more details to take into account, but those are the most important ones.

Now that you understand what to look for, let's take a look at the top 2 cryptocurrencies that focus on privacy.

Monero (XMR)

This is one of the OG privacy coins. A lot of so-called “privacy” coins have come and gone over the years, but Monero is still going strong.

There are many privacy coins that claim to be the most private cryptocurrencies, but there are very few that can live up to that claim. Monero is one of the coins that has true privacy protection.

Monero Hashpower

Since Monero is a proof of work (PoW) cryptocurrency, we are going to look at how many miners there are in mining pools, and the collective hashrate of the participants.

You can find this information by going to a website like Mining Pool Stats.

Let's look at Bitcoin first. Bitcoin is the undisputed leader in network participation and is the most secure cryptocurrency network, by far.

In this screenshot, Bitcoin has a hashrate of 165.63 EH/s. A hash is essentially a mathematical calculation. These calculations verify transactions on the blockchain.

If you aren't familiar with hashrates, here's a breakdown of how they are measured:

• 1 kH/s (kilo) = 1,000 hashes per second
• 1 MH/s (mega) = 1,000,000 hashes per second
• 1 GH/s (giga) = 1,000,000,000 hashes per second
• 1 TH/s (tera) = 1,000,000,000,000 hashes per second
• 1 PH/s (peta) = 1,000,000,000,000,000 hashes per second
• 1 EH/s (exa) = 1,000,000,000,000,000,000 hashes per second

So the Bitcoin network has a collective computational power of 165.63 Exahash per second.

That's a mind-blowing number.

In comparison, Monero only has a 2.1 Gigahash network. nothing to laugh at, but significantly less than Bitcoin.

Wallet Support

There are several well-established cryptocurrency wallets that support Monero. The top ones are Cake Wallet and Edge, but there are others.

You can find all of the currently recommended wallets for Monero here.

Being supported in major wallets is a huge boost for a cryptocurrency because it makes it more likely that people will use that currency for everyday transactions.

Exchange Listings

Monero is listed on a lot of exchanges, including several major ones. You can see their current list here.

To purchase Monero, you'll have to buy Bitcoin or Litecoin, then send it to an exchange that trades XMR. Exchange the Litecoin for Bitcoin, or just trade the Bitcoin directly for XMR.

I've made arrangements so you can get started with $10 in free Bitcoin, click the link to get the details.

Monero Benefits

The biggest benefit of Monero is its first mover advantage. It was launched in 2014 and is currently the most popular privacy coin.

On top of that, it has a passionate community and the core developers are continually working to make it better.

Monero Downsides

In spite of its popularity, widespread adoption and proven tech, there are 2 big potential issues with Monero.

First, RingCT privacy technology has worked well enough until now, but it could be vulnerable to blockchain analysis in the future.

Monero is working on upgrading their privacy technology, so this shouldn't be an issue after the changes are implemented.

Second, the supply of Monero is infinite. The reason that cryptocurrencies like Bitcoin have become a good store of value is because there's a limited supply.

But cryptocurrencies like Monero have chosen to go another route by allowing the supply the be infinite. There is a cap on how many XMR can be mined per day, but there's no limit to how many can be created.

According to the Monero team, they did this because they want to reward the miners for verifying transactions. Miners only mine because there's financial incentive to do so and this should keep miners happy in the future.

Creating new XMR every year also helps replace lost XMR and can potentially help to reduce price volatility.

The downside of this is that XMR is inflationary and could suffer from some of the same issues that we see with fiat currencies.

Pirate Chain (ARRR)

Pirate Chain claims that it's the most anonymous cryptocurrency in the world. It's a fairly new project that was launched in 2018.

The Pirate crew wanted to solve the issues that they saw with Bitcoin and Monero, namely:

• Completely private transactions (Bitcoin is not private)
• Bulletproof transaction privacy (Monero's RingCT technology has questionable privacy)
• Lower transaction costs (Bitcoin transaction fees get really expensive when there are a lot of transactions)
• Fast transactions (Bitcoin transactions can take a long time when network traffic is high)
• Limited supply (Monero has an unlimited supply)

It borrows its technology primarily from Zcash and Komodo. Zcash uses zk-snarks technology to make transactions private, which is currently the most anonymous protocol.

But Zcash suffers from one major flaw…all transactions are public by default.

As I mentioned before, all transactions on the network have to be private in order for you to have a completely private currency.

So Pirate Chain borrows the already amazing security of Zcash and takes it to the next level.

Pirate Hashpower

The hashrate in Pirate is measured in solutions per second, which you can think of as the same as hashes per second. It's not exactly the same, but it's close enough for the purposes of this post.

As you can see, there is one major mining pool and 2 very minor pools. So network participation is not high.

But these are still early days for Pirate, and this profile is typical of newer cryptocurrencies that have not been widely adopted yet.

The good news is that the collective hashrate is pretty close to Monero. 

Wallet Support

Unlike many new projects out there, Pirate has wallets for both mobile and desktop devices.

There are currently wallets for Android, Windows, macOS and Linux. They are working on a wallet for iOS and they recently launched a version for Linux ARM.

If you want to create paper wallets, they have those too.

They are good for burying your treasure.

ARR.

Exchange Listings

Again, ARRR is a fairly new crypto, so they are working on getting listed on the big exchanges.

Being a privacy coin also makes it difficult because a lot of exchanges don't like to deal with the headache of the additional regulations that can come with with privacy coins.

But if they can get on the same exchanges as Monero, that will be a huge boost to their visibility and use.

The most successful cryptocurrencies are the ones that not only have the best technology, but also have the widest adoption.

To get some free ARRR, sign up for Coinbase, then trade for ARRR. Get the details at that link.

You would have to purchase Bitcoin or Litecoin, then transfer it to an exchange that has ARRR. Then trade Bitcoin for ARRR. If you choose to use Litecoin (which saves you money on transaction fees), then you would send Litecoin, trade it for Bitcoin, then trade the Bitcoin for ARRR.

Pirate Benefits

The biggest benefit is that Pirate appears to have the best privacy technology of any cryptocurrency available today. It also has wallet solutions that work and an active community that appears to be working hard to make the most private coin in the world.

Here's a graphic that compares the top privacy cryptocurrencies.

Pirate Downsides

The obvious downside is that this is still a fairly young project. There are still minor issues with the wallets and there is a small concern with how Pirate was launched.

Why Privacy Coins Matter

Some people will say that they have nothing to hide, when it comes to their financial transactions.

Fair enough.

But even if you have nothing to hide, would you want to live in a glass house where everyone can see everything you're doing from the outside?

Of course not. 

If you have a business, do you want other companies knowing how much you're paying for your inventory or who your suppliers are? As an individual, do you want everyone to know how much you sold your house for, or how much you get paid at work?

Probably not. 

The bottom line is that we should all have the option to disclose our personal information our not. As the world becomes more surveillance oriented, privacy coins are one way to help us maintain our privacy. 

Final Thoughts on Privacy Coins

There are different niches in cryptocurrency and privacy coins are one area that has a real-world use case, with legitimate solutions like Monero and Pirate Chain.

However, technology is constantly changing, so coins that are private now, might not be private in the future.

Bitcoin is a good example.

When Bitcoin first became popular, fans bragged about its privacy. However, blockchain analytics came along and has made it possible to connect identities to specific Bitcoin wallet addresses.

The companies that do this type of analytics have gotten quite good at this. 

So there is the possibility that these 2 cryptocurrencies may not be private in the future. That's why it's important to stay on top of these projects and find out how they are coming along.

But if you value privacy, these coins are the ones to research right now. As always, do your own research and find out if they make sense for you.

They aren't for everyone.

The post The 2 Top Privacy Cryptocurrencies appeared first on Trading Heroes.

Non-Fungible Tokens (NFTs) have exploded onto the scene with astronomical market values. But you might be wondering what they even are and if you should get involved.

NFTs are digital assets that are stored on a cryptocurrency blockchain. They are like cryptocurrency wallets, but instead of storing a wallet balance, they store a unique asset. The asset could be digital art, music or anything that can be linked to or stored on a blockchain. 

This opens exciting possibilities for artists in particular because they can make money directly from their fans, instead of having to go through middlemen.

So let's dig into this exciting market and find out why they are an amazing invention, how they work, and how you can get started in NFTs.

The Most Valuable NFTs

If you haven't seen how valuable NFTs currently are, I'll show you a couple of examples first. The sales prices might surprise you.

Everydays: The First 5000 Days by Beeple

Perhaps the hottest NFT artist at the moment is Beeple, the artist name of Mike Winkelmann. He makes short films, VJ loops and digital artwork.

His NFT went for a record $69.3 million. It's a digital collage of his daily artwork from his first 5,000 days of creating one piece a day.

This is a mind-blowing amount of money, but it's also a really cool work of art. I could see this going up in value in the future because of the sheer amount of work that went into each picture and because it's the first purely digital artwork sold at Christie's.

CryptoPunk #3100

I don't understand this one.

Cryptopunks are a set of 10,000 randomly generated pixelated characters that are stored on the Ethereum blockchain. These characters were invented by Larva Labs.

The highest sale to date has been the Cryptopunk with a headband, going for $7.58M, according to the Larva Labs website.

These digital artworks were given away for free initially, but soon started to trade for large sums of money.

I think this is a fad, but I could certainly be wrong.

Other NFT Projects to Watch

Kings of Leon are the first band to release an album as a NFT. They actually launched 3 separate NFTs.

• A unique album package
• Lifetime show perks
• Exclusive audiovisual art

Rarible is a marketplace for buying and selling NFTs. There are many new marketplaces popping up, but this website makes the process of creating and selling a NFT accessible to the general public.

Fungible vs Non-Fungible Explained

Now that you have some background on the current state of the NFT market and some of the possibilities, let's get into the nuts and bolts of how they work.

The key term in NFT is “non-fungible,” so let's take a minute to  explain what this means. You probably understand what fungibility means on an intuitive level, but never knew there was a word for it.

When an item is fungible, all items of that type have equal value and can be exchanged for one another.

For example, a $10 bill is fungible. Your $10 bill is equal to my $10 bill, and both will buy the same amount of goods at a store.

This is the key component of currencies, it's what makes cryptocurrencies an effective medium of exchange. 

However, when something is non-fungible, it has its own unique value and cannot be traded for another similar item.

So non-fungible tokens can't be used as currency, but they are good for one thing…identifying unique assets. The obvious application is they can be used to identify collectibles such as digital artwork.

I'll get into the details of how this works later on in this post, but for now, understand that NFTs are used to identify unique objects.

What's the Difference Between a Coin and a Token?

If you're new to cryptocurrencies, you might think that a coin and a token are the same thing.

They are not.

In order to completely understand a NFT, it's important to understand the difference.

A coin is the native cryptocurrency of a blockchain. For example, these are native coins.

• Bitcoin
• Litecoin
• Ether
• XRP

Tokens are cryptocurrencies that are created on top of another blockchain. Blockchains like Ethereum allow developers to build applications on top of the blockchain with programs called smart contracts.

For example, these are just a few tokens created on the the Ethereum blockchain:

• Basic Attention Token
• Tether
• Dai
• Chainlink

So Ether is the native coin of the Ethereum blockchain, but other tokens can be created on top of the Ethereum blockchain. Each token has its own unique characteristics and value.

In order to transfer these tokens to another wallet on the Ethereum blockchain, it requires that you pay a gas fee in Ether, which is basically a transaction fee.

Other examples of blockchains that allow other tokens to be built on them are:

• NEM
• Waves
• NEO

Smart contracts basically enforce the rules of the application or ecosystem. They are like real life contracts except they cannot be broken because they are programmed into the blockchain.

For example, let's say that you want to buy a car from a shady seller on Craigslist. You meet up in person and you like the car,  so you hand over the cash. The seller could take your cash, then run away without giving you the title to car.

Not likely, but it could happen. 

However, if the title to the car and the cryptocurrency were both on a blockchain, the smart contract could be written such that both parties would have to sign off on the transaction in order for it to go through.

Once both parties sign, ownership of the title and the crypto would be simultaneously swapped. The smart contract would handle the escrow process. If only one party signs off, then after a time limit, the crypto and the title would go back to their original owners.

So in reality, smart contracts aren't really that smart. They are actually quite dumb because they enforce some very simple if-this, then-that rules.

But they are fantastic for automating routine tasks, like managing the ownership and sale of digital assets.

How do Non-Fungible Tokens Work?

Alright, now that you've seen how far NFTs have come and understand the terms, let's get into the nuts and bolts of NFTs.

Different Types of NFTs

Right now, there is one main type of NFT on the Ethereum blockchain: ERC721.

There are several different types out there, but this is the one most people are currently using.

You can think of these types of NFTs as spreadsheets, where each type of NFT has different column headings, depending on what the NFT will be used for.

Royalties on Future Sales

One huge benefit of NFTs is that the original artist gets a cut of all future sales. In the past, if an artist sold his painting for $10,000, that's all he got.

But with NFTs, if a piece of digital art first sells for $3,000, but later sells for $200,000, then the artist will get a portion of the second sale too.

It's a great way to reward artists for their work and helps them create more art.

How to Make a Non-Fungible Token

So you're probably wondering how you can get in on the action.

First of all, let's get real. You aren't going to draw up some crappy picture in Microsoft Paint and sell for millions of dollars on your first try.

However, if you can create something of real value and you want to do a fun experiment, then this is a fantastic little project for you to do in your spare time.

You can start to learn the market and potentially launch a very profitable NFT in the future. Creating NFTs can also help you identify the best NFTs to invest in.

Step 1: Decide What You Want to Create

Are you good at drawing? Or maybe you love photography.

Start with something you love.

If you make another me-too pixel character, you'll get lost in the sea of crazy characters and memes that are already out there. But if you create something unique, you're more likely to fail, but you could also blaze a new trail and create something very valuable.

Remember that this is a very new market, so something novel could do extremely well.

Use your creativity. 

Step 2: Find a Marketplace to Sell Your Item

Next, find a marketplace to list and sell your item. Marketplaces have different procedures and requirements to list your NFT. I can't possibly go into them all here.

So if you're interested, you can research that information on your own.

But you can start with this list of marketplaces:

• Rarible: A platform that's open to new artists and existing artwork.
• Opensea: Peer-to-peer NFT marketplace.
• Falcon NFT: Create anonymous ownership NFTs for real-world items.
• The Sandbox : Create and sell in-game items.
• HashMarks: Own a custom designed mask from a variety of artists.
• SoRare: Sports memorabilia NFTs and fantasy football platform.
• Aloha DeFi: Earn tokens by sharing your mobile data connection.
• Art Blocks: The network creates a unique NFT, based on what you're looking for.
• SuperRare: High-end NFT marketplace. There's some pretty cool artwork on this platform.

Step 3: Upload Your Art and Keep Optimizing

Your first piece might not sell. But keep at it.

Study what is selling in the marketplace and how you can put your own spin on it.

You'll probably have to try a few different things before you start to see sales. But have fun and keep at it.

Promising Future Uses of NFTs

A couple of areas that I could see the average person creating potentially valuable NFTs are in music and videos.

For example, an amazing interview with someone who rarely does interviews, could be a great video NFT.

People could pay to watch the video and they owner(s) of the video would get the royalty, minus any transaction costs. Ownership of the video could also be easily transferred. Yes, the video could be pirated, but that could happen to any video.

Music downloads could be paid for on the the blockchain and there could be music players that would only play a song that was purchased through a linked wallet.

Later on down the line, NFTs might be a good way to also prove ownership of physical collectibles, like what Falcon NFT is doing.

The Downsides of NFTs

We are in the very early days of NFTs, so there are still some downsides.

The biggest one is that a majority of NFTs are hosted on the Ethereum blockchain. I'm not a fan of the Ethereum project because it suffers from many of the issues that Bitcoin does, high transaction fees and slow transaction speed.

But my biases aside, there's already a ton of NFT volume being traded on Ethereum, so it's the place for NFTs, at least for now. I'm keeping my eye out for better platforms though.

Final Thoughts on the Future of NFTs

The NFT market is still young, so we are seeing a mad rush to purchase NFT collectibles that are generally of very low quality…at least in my opinion.

It's like the rush that we saw at the start of the internet bubble, where investors were throwing mind-numbing amounts of money at companies that had absolutely no business plan.

That said, I feel that the Beeple piece is a legitimate digital artwork and it gives us a glimpse into what is possible with the future of NFTs. 

I'm not a fan of creating NFTs on the Ethereum blockchain because of the high fees associated with transactions. If the Ethereum developers can figure out a way to dramatically lower the gas fees and increase transaction speeds, then it can truly be used for its intended purpose of Distributed Apps (DApps) and by extension, NFTs.

Until then, I'm going to be on the lookout for other NFT solutions that can help this market realize its full potential.

But most revolutionary ideas have a not-ready-for-prime-time first version, and this is no exception. I look forward to seeing where this will go and how it can be used by investors and traders to exchange valuable digital and real world assets.

The post Non-Fungible Tokens Explained: How They are Changing the Face of Trading appeared first on Trading Heroes.

As traders, we make money by identifying potentially profitable situations in the markets. This might be identifying chart patterns, playing a certain type of news event or understanding the fundamental dynamics behind price movements.

So when it comes to cryptocurrencies, it is helpful to think two steps ahead and imagine what the cryptocurrency landscape will look like, 5 years from now.

Sure, all your buddies are making 400% returns on those crapcoins now. But will they still have those profits in a year?

Will Bitcoin still be king?

Or will there be many cryptocurrencies happily sitting around the campfire, singing Kumbaya?

Nobody really knows and I'm the last person who you should be listening to, when it comes to making predictions about the technology behind cryptocurrencies.

However, I would like to give you some ideas to think about before you make your next investment or trade. This is based on my current understanding, personal experience and research on the cryptocurrency markets.

As you know, things change quickly in the cryptocurrency world, so what I think today, might change tomorrow. But if we stay informed and keep an eye on the big picture, then we should be able to see changes coming, much sooner than the general public.

This is one of those big picture ideas:

The cryptocurrency markets will consolidate dramatically.

Here's how that might happen…

Bridging the Gap Between Fiat and Digital Currency

Money as we know it, or fiat currency, has been masquerading as digital currency for quite awhile. Systems like Fedwire, PayPal and ACH have allowed you to transmit fiat currency digitally.

But even though it's digital, there are still so many rules when it comes to when and were you can send that money. If you are in the US, have you ever tried to send money to someone in Nigeria, via PayPal?

Good luck with that.

The promise of Bitcoin and other cryptocurrencies is to give anyone the ability to send money to anyone they choose, regardless of location, nationality or bank affiliation. But having so many different cryptocurrencies available can cause a problem, because you will have to exchange the currency you own for the currency that your counterparty wants to get paid in.

For example, let's say that you own $1,200 worth of DASH right now. But you want to by a new pair of pants from a website that only accepts Ripple.

On most exchanges right now, you will have to exchange your DASH for Bitcoin or Ethereum, then trade the Bitcoin/Ethereum for Ripple. That's two additional transactions and that can make your pants pretty damn expensive.

The Need for Seamless Currency Exchanges

This is where Interledger-type solutions come in. This protocol would make the exchange of digital and fiat currencies completely transparent to the two parties involved. I recently went to an Interledger Meetup in San Francisco and it made me realize that this type of solution is necessary and will probably be available very soon. Interledger has a working prototype and similar projects probably do too.

It was a fun event.

…and the fact that they had wine didn't hurt.

A post shared by Hugh Kimura ?? (@tradingheroes) on Nov 9, 2017 at 7:33pm PST

I also realized that when this becomes available, then there should be a fairly rapid consolidation of cryptocurrencies, leading to most people in the general public only holding 2-3 primary currencies to pay for things in real life.

Here's why…

Take a very specific use case token like Storj. You will only have it if you want to store data on the Storj network, or you want to make money by renting out your drive space to people on the network. Right now, people are buying it for pure speculation. But they will need to sell it at some point because you can't buy a new TV on Amazon with Storj.

Something like Interledger should make the process of turning Storj into US dollars, fast and easy.

Therefore, the value of these types of coins will probably drop in value very quickly when something like Interledger goes online: 

• Coins tied to very specific services like: Sia, Storj and Civic
• Coins that have very high transaction costs
• Coins that have very slow transaction speeds

Which brings me to Bitcoin…

Have You Actually Used It? Bitcoin Fails as a Real World Currency

With all the hype surrounding Bitcoin at the moment, not many people have actually stopped to try and buy something with it.

Let me tell you, it's pretty shit. 

I tried to buy a Ledger Nano S from the Ledger website and the transaction timed out. But I was still charged for the transaction.

…and it cost me 15% more than if I bought with Paypal…which I will never get back, even after the refund.

I'm not the only one who believes this. The founder of Bitcoin.com has sold all of his Bitcoin and says that it is useless.

It's important to understand the shortcomings of Bitcoin and other cryptocurrencies because it is the reason why an Interledger-like solution might lead to a consolidation of the cryptocurrency markets. 

Why Something Like Interledger Could Lead to Cryptocurrency Consolidation

In a nutshell, Interledger works by creating a network of trusted dealers who do currency exchanges. Transactions run through this network, when an acceptable “path” is found. It may take multiple “hops” to finally exchange the source currency for the destination currency.

For example, let's say that you want to spend your Monero to buy a new M6 straight from the factory, in Euros. 

The transaction might look something like this:

• Dealer A: Accepts Monero from you and coverts it to Ripple
• Dealer B: Accepts Dealer A's Ripple and converts it to USD
• Dealer C: Accepts Dealer B's USD and coverts it into EUR and sends it to BMW

Obviously, the more dealers the transaction has to go through, the more transaction costs there are and the more expensive the transaction gets.

Therefore, these networks will probably start to rely on a select few currencies to keep the transaction costs low. On the customer side, people will probably want to keep the same currencies on hand because they know that it will lower their transaction costs, through the network and person to person.

So the coins that will probably win out are the coins with the fastest transaction time and the lowest transaction cost. 

Hint: It's not Bitcoin.

But it could be, if the Lightning Network can create a solid product.

So many possibilities

Conclusion

Interledger is not the only group that is trying to do this. There are other teams working on similar solutions.

It's not important to know all of the details, but it is important to understand how these solutions will affect the overall cryptocurrency landscape. The ICOs that survive may not be as valuable as you think they will be, simply because it will be so easy to exchange for them, only when you need them.

The real winners in the cryptocurrency world should be the solutions that actually deliver on the promises that Bitcoin was supposed to provide…cheap, fast, monetary transactions to anyone in the world.

Which cryptocurrencies do you think will be the ultimate winners? 

The post Why the Future of Cryptocurrency is in Consolidation appeared first on Trading Heroes.

Ether is one of the hottest cryptocurrencies at the moment…and for good reason.

Aside from Bitcoin, Ethereum has the most promise to deliver short-term, real-world benefits.

But if you are still trying to figure out how to trade Ethereum, then this post will show you exactly what you need to know to get started.

We will also give you an understanding of how the Ethereum Network works, the risks involved, different trading strategies and how to place your first trade.

To learn more about cryptocurrencies in general, read this blog post before you continue.

Let's do this…

What is Ether?

I think that the Ethereum website says is best…

Ether is the crypto-fuel for the Ethereum Network.

In other words, Ether is the “money” that used for payment on the Ethereum Network. So you're not actually learning how to trade Ethereum, you are learning to trade Ether. What does this money buy, you ask?

It can pay for software services on the network, in addition to being a real-world currency.

Therefore, in order to understand the value of Ether and what can potentially make the price go up and down, we need to have a basic understanding of how it works.

What is Ethereum?

This is where things get exciting…

Ethereum is basically a software platform, like Microsoft Windows or macOS. But online. The goal of Ethereum is to allow people to build decentralized applications on top of the Ethereum platform.

So it would be like when Dropbox builds an app on top of macOS. Dropbox hosts your files, in exchange for a monthly hosting fee. On the Ethereum network, the fee for a similar storage service is paid in Ether, instead of US Dollars or British Pounds.

The difference between Ethereum and current web application solutions is that these apps (and the currency) are open to everyone, free from censorship and much more secure than existing solutions. This is because Ethereum apps are decentralized.

What makes these apps decentralized? 

The network is built on a database that is hosted on many computers around the world. Each computer has a copy of the database and multiple computers have to agree on a change to the database, before it is implemented.

Although everyone stores this data, you need to have a special password (or a private key) to unlock your data. The private key is as close to unhackable as you can get in the online world, so the data is probably even more secure than if you stored it on a cloud-based service.

This database is called a blockchain.

What is a Blockchain?

A blockchain is a different type of database.

It's actually more like an accounting ledger…that has levels of trust. Once a transaction is confirmed by the network, it gets added to this ledger. Then newer entries get added on top of that entry.

The best analogy that I've heard for a blockchain is a fly caught in amber.

When a fly gets caught in the amber, it is like an Ether transaction that gets recorded on the blockchain. As time passes, more layers of amber get added and it is impossible to change the position of the fly in the amber, or insert a different insect into that part of the amber. The deeper the fly is in that amber, the more confidence you have that it is a fly from a long time ago.

In the cryptocurrency world, that ledger entry on the blockchain can be seen for as long as the blockchain remains in existence. As time passes, more “layers” or transactions also get added to the blockchain and those older transactions become even more trusted.

So unlike traditional databases that can be erased or changed, older blockchain entries are a permanent record of transactions or events.

This is why people are investing in this technology.

Total Float and Coin Inflation

Trading is all about understanding supply and demand. Either on a chart or by analyzing fundamental reasons. So no trading guide would be complete without a look at Ether supply.

One key difference between Ether and Bitcoin is: Unlimited supply. 

There are never going to be more than 21 million Bitcoins. That is how the software was setup and that is what makes Bitcoins potentially so valuable.

Simple supply and demand.

On the other hand, the same amount of new Ethereum will continue to be produced every year..forever.

At first glance, that may seem like a bad thing. But if we think about it for a minute, that is actually a good thing.

It all comes back to the purpose of Ethereum. That's why it's important to understand at least a little bit about how each cryptocurrency works. 

The purpose of Ethereum is to build a network of decentralized computer programs. However, there will be a certain amount of cryptocurrency that will be lost every year.

Cryptocurrency can be lost when computers crash, people lose their paper wallets or forget their account passwords.

That is another thing that will make Bitcoin even more valuable in the future. This is great for a cryptocurrency like Bitcoin, whose sole function is to serve as a way to store monetary value.

Not so great for running applications on networks like Ethereum however. If the money on the network gets more and more expensive, then it will become harder to host and use the applications on the network and eventually the network will fail.

That is why the same amount of Ether is produced every year. Eventually, the amount produced every year will become a smaller percentage of the total outstanding Ether. At some point, an equilibrium should be reached between the amount of Ether being lost and the amount being produced.

Therefore, from a fundamental analysis standpoint, you need to understand what types of applications are being built on the network and how much demand there is for them. The quality of the applications will be one factor that determines the value of the Ether.

Tokens Built on Top of Ethereum and Crapcoins

Now here's where things get a little weird. The applications that can be built on top of Ethereum can also create their own currencies. These are called tokens and will become an increasingly big part of the cryptocurrency trading landscape.

This is a current screenshot from CoinMarketCap.com. four out of five of the top five currencies, by market capitalization, are built on the Ethereum platform. The other big platform is Omni, which is built on top of the Bitcoin blockchain.

The great thing about tokens is that anyone can create one.

But that is also a bad thing.

Some startups will bolt-on a token to their existing app and use that as a way to raise cash, instead of going to investors. That's great if the token serves a genuine purpose.

However, in the coming months, you are going to see a ton of crapcoin launches (initial coin offering or ICO) that have nothing to do with value and everything to do with making a quick buck. One example, in my opinion, is the upcoming Kik ICO.

I don't see any reason for a messaging app to have its own currency. Where are you going to use that currency outside of the app? Nowhere, it's a dumb idea. But they will raise a ton of money and investors will probably lose their investment.

You see these ICO ads more frequently nowadays.

Be very wary. A lot of ICOs are just trying to take advantage of the hype and are just launching coins to make money. If not controlled, these crapcoins could damage the reputation of Ethereum and possibly affect the price.

Of course, some of these ICOs will succeed. But I think this will be a very, very small percentage.

The Asian Connection

Ethereum a big deal almost everywhere, but it's absolutely huge in Asia, especially China. So in order to understand how valuable Ether will become in the future, we need to keep an eye on the applications that are coming out of China.

Organizations like the ChinaLedger Alliance are pushing Ethereum technology forward, so that is a positive sign for Ether traders and investors.

How to Trade Ethereum / Ether

Alright, now that you have some background on how Ether works, let's get to the trading bit.

Buying Ether has become fairly easy. Here is how to do it.

Step 1: Sign Up for an Account on an Exchange

There are several good exchanges out there, so do your research. The exchange you use will depend on where you live, governing laws and personal preference.

Luckily, many exchanges allow you to purchase Ether directly. Other smaller cryptocurrencies require you buy Bitcoin first, then exchange it for your target cryptocurrency.

Here is a list of the more reputable exchanges out there. If you want to get $10 in Bitcoin (which can be traded for Ether), just by signing up for Coinbase, then click this link. I don't know how long that offer will last, so if that link doesn't work, you missed out.

• Poloniex
• Coinbase
• CEX

You may have to provide some proof of identification when you sign up on some of these exchanges. This is to prevent money laundering, so just to it.

There are also exchanges that don't require you to sign up for an account.

• Changelly
• ShapeShift

These are more for if you have other currencies that you want to convert to Ether. In that case, these exchanges make it super easy to do the conversion.

No password to remember and you don't have to provide any personal information. It feels pretty sketchy when you first do it, but I have never had a problem with it.

Step 2: Fund Your Account by Buying Ether with Fiat Currency

Next, fund your account with a credit card or bank transfer. Usually, the credit card option is faster so I would recommend using that.

Getting money into your account with a bank transfer can take as long as a week. The upside with a bank transfer is that your deposit limits will usually be higher.

Ether Trading Strategies

There are two basic trading strategies, when it comes to trading Ether.

• Buy and hold
• Active trading

Here's how to do both…

Buy and Hold

Since there is a lot of upside potential in cryptocurrencies, there are many traders that are taking a buy and hold approach. So if that is your strategy, you would just buy some Ether and store it in a safe place.

This is called putting it into cold storage.

What is a safe place?

Well, there are two options, paper wallets or hardware wallets. I would not recommend storing Ether in mobile apps, computer wallets, exchanges or online wallets for any length of time. Those options are great for short-term transactions, but are not safe for long-term storage.

Ether Paper Wallets

Benefits:

• Cannot be hacked online
• Can be stored in a safe off-site location like a safety deposit box
• Don't have to worry about computer failures

Downsides:

• Can be accidently thrown out or destroyed
• Once you lose the paper wallet, your money cannot be retrieved
• Someone can possibly steal your password while the wallet is being created

To create your first paper wallet, follow these steps: 

1. Buy a “dumb” laser printer like this. You want a laser printer that has a very small memory capacity and USB connectivity. Hackers can potentially steal your wallet password from the memory of a printer or intercept it from a WiFi transmission. So buying the simplest printer you can find is the best security precaution. You also don't want to buy an inkjet printer because the ink will smear, if it gets wet.
2. Speaking of water, buy waterproof paper like this. Make sure that it is specifically designed for laser printers. Losing hundreds, or even thousands of dollars in Ether, just because your paper wallet got wet, is just plain stupid. That type of waterproof paper is also tear-proof. So it can survive almost anything, short of a fire.
3.  Use a wallet generator to create your first wallet. This is one, but there are others out there. You may need to be online to start the process. But once you have the first wallet address, disconnect from the internet, then generate a new address before you print out the wallet. This is a safety precaution because there is always the potential that the website might transmit the wallet information back to a hacker.
4. Then print out the wallet, making sure that you generate a new wallet every time. It takes a couple of tries to figure out how to get the front and back to line up. But once you get it, you can start churning out wallets. You can also print out your wallets to PDF and store them on an encrypted flash drive. But remember that the more backups you have, the more ways someone can steal your Ether.
5. Finally, fold up the paper wallet so the private key is hidden. This is the password that will allow you to spend the money in the wallet, so protect this at all costs.
6. Optional: If you want to get fancy, you can order tamper evident seals so you know if someone has been peeking at your private key.

When you are done, it should look the picture at the beginning of this section.

Once your currency is on paper, store it away in a safe place. When you are ready to cash in the currency, use an online wallet or mobile wallet app to get the coins from the paper to your exchange of choice, or your bank. Some exchanges may give you the ability to go straight from the paper wallet to the exchange's online wallet.

To get the detailed Ether paper wallet guide, read this.

Hardware Wallets

Another good option for buy and hold investors is the hardware wallet. Trezor is the most popular one right now.

The website says that it is a Bitcoin wallet, but it stores Ether too.

Benefits:

• Compact, all your Ether in one place
• Cannot be hacked online
• Hard to hack offline
• Easy to use
• Backup your wallets and restore them later, even if your device is lost or stolen
• Water resistant and durable
• Can store multiple cryptocurrencies at the same time

Downsides: 

• Susceptible to the vulnerabilities of any electronic device
• Since all of your Ether is in one place, if someone has your PIN, it is easy to steal
• If someone gets your recovery card, they can reset your PIN

The ideal buy and hold solution would probably be a combination of paper wallets and a hardware wallet. But it's just a personal preference.

Learn more about the Trezor here.

Speculation / Active Trading

Pending Orders

Active trading is a little tough because not all exchanges give you the ability to set pending orders and stop losses, like with Forex brokers. But exchanges like Poloniex do allow you to set stop-limit orders.

However, if your exchange does not allow this, you have to setup alerts, so you are aware of market movements and can place trades manually. Exchanges like Coinbase don't allow pending orders.

To setup alerts, you can use TradingView. Alerts are only available in the Pro plan, but if you are an active trader, it is well worth it.

Start by searching for the ETHUSD currency pair in the search box. Add it to your watchlist and click on it. The chart will come up.

Then right click on the chart where you want to add an alert. In this example, let's say that we want to add an alert near the last high, around $400, because we want to sell our long position.

This is what it would look like. You could also add another alert to let you know when prices are low and it might be a good time to buy.

Locking in Profits

Another potential risk with Ether trading is that not all exchanges allow you to store money in your local fiat currency. Or you may need to jump through a few hoops to be able to do that. So if you sold some Ether that you own, you may have transfer the money back into your bank account in order to lock in your profits.

Then you would have to send the money back to the exchange to buy again.

The problem is that each time you transfer money to and from your bank, that can take up to a week!

Terrible for active traders.

So what can you do about this? Well, that's where our friend Tether comes into play.

As I wrote about here, Tether is not a cryptocurrency that you invest in or trade to make money.

Why?

Because it is pegged to the US Dollar. So one Tether will always be worth about $1 USD.

…a little hard to make money that way.

But Tether is fantastic for locking in your gains on an Ether trade. Simply trade your ETH for USDT and you have locked in your profits (or stopped the bleeding).

Then when you are ready to buy Ether again, simply trade it back on the exchange. No extended waiting times.

Now let's dig a little deeper into Ether trading and look at technical and fundamental analysis.

Technical Analysis of Ether

Ether trading is still in its infancy, so we don't have many reference points to do proper technical analysis. As I wrote about here, we have only seen the first big wave of cryptocurrency speculation, so I believe that there is still a lot of potential for the currency to go up.

It's just a matter of when.

So before you break out your Gann Fan, Fibonacci retracement tool, or star charts…remember that we are trading a very immature market. I believe that there is a lot of potential in this technology, but we also need to limit our risk. It could blow up tomorrow, or best case scenario, there will be a lot of volatility in the currency price.

Therefore, simple support and resistance should be good enough to trade Ether. Buy low, sell high. 

When we look at the chart, $140 seems like the best support level, right now. As you can see, price has already bounced off this level.

Could the price go lower than $140? Of course.

But based on our very, very limited data set, that seems like the best technical level to watch right now. The first target would of course be a move up to the previous high of around $400.

Also notice the flash crash that happened in June. You should setup an alert, in case that ever happens again.

Fundamental Analysis of Ether

The success of Ethereum will depend on the quality of the apps that are launched on the platform, the decisions that the development team makes and the public perception of the tokens that are launched on the platform.

So keep an eye on all of these things. Some useful resources to track are:

• Ethereum Twitter account
• Ethereum Blog
• /ethereum Subreddit

Conclusion

So that is everything you need to know about how to trade Ethereum…I mean Ether.

Again, I can't stress this enough…there will be a ton of volatility in Ether, so be sure to pick a strategy that matches your personality and get into trades for as cheap as possible. Cryptocurrency trading is NOT for the faint of heart.

Ether has retraced over 70% from its highs, so keep that in mind before you decide to get involved. 

If I missed something or you have a question, let me know in the comments below…

Whew, this guide took awhile to write. So if you found it helpful, feel free to send me a tip in Ether, to this address:

0xeb3adffa7a0ad3ba1f612ea29fd9c12dd8623c8b

Thanks and happy trading!

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The post How to Trade Ethereum: The Beginner’s Guide to Ether Trading appeared first on Trading Heroes.

As traders, our job is to take advantage of opportunities in the markets. Sometimes, these opportunities come in the form of entirely new markets.

I've been interested in cryptocurrencies for a few years now, but I've been very reluctant to trade them, much less write about trading them. I felt that there was just too much risk.

Especially for the average trader.

…and quite frankly, I didn't understand them well enough myself.

The first time that I saw them as viable for trading was when I went to this conference. I saw Chris Dunn talk about trading Bitcoin, but I was still skeptical that it would stay around for the long-term.

…until recently.

I credit my friend for talking to me about it on Twitter and opening my eyes to the potential in trading this emerging market. I'm not sure if he wants to be named, but you know who you are. I sincerely appreciate the education and helping me see the light!

This is a perfect example of the benefit of staying in touch with other traders on platforms like Twitter.

Anyway, as I have done more research and have actually started trading them, I have found that there are tremendous opportunties. With some coins, it's potentially like being able to get pre-IPO shares of Microsoft.

But there are also big risks.

Remember, the dot-com bust?

There will probably be losses of that magnitude too. That's just how these new technologies work.

So in this post, I want to share with you my knowledge of the cryptocurrency markets and give you a total beginner's guide to trading them. Be sure to bookmark this page because I'll continually update the information, as things change.

For you crypto veterans, this will be very simplified, but my goal is to make this information as easy to understand as possible so new traders can make an informed decision about the opportunities. Once people get the general concepts, then they can geek out about the details.

This is the future of FX trading. So in addition to USD/CHF, CAD/JPY and EUR/GBP, we also need to be aware of XLM/USD, ETH/BTC and XRP/LTC…

What is a Cryptocurrency?

Let's start at the beginning.

You may have heard many things about what a cryptocurrency is, but you may still be searching for an understandable definition. I hear ya, I was in the same boat for a long time.

Instead of getting too technical, here's the easiest way to think about cryptocurrencies:

A cryptocurrency is basically money on software platforms.

It's important to keep in mind that the teams/companies that are behind these cryptocurrencies are not only creating a new form of currency, but a new software platform. To demonstrate how this works, let's take a look at other software platforms that you are probably already familiar with.

Examining how these platforms work will help you understand cryptocurrencies. 

Here are a few software platforms that many people use:

• Windows: A software platform for personal computers
• Dropbox: A software platform for storing and sharing documents
• Fedwire: A software platform that sends money between financial institutions

On each of these platforms, a type of money is used, in exchange for using the platform:

• Windows: You pay US Dollars (or your local fiat currency) to buy a license for Windows to use on your computer. If you buy a computer that already has Windows on it, the license fee is included in the purchase price.
• Dropbox: You pay US Dollars (or your local fiat currency) to buy a subscription to use the software for a month or a year, depending on which plan you buy.
• Fedwire: You pay a transaction fee to use the system and you send fiat currency itself.

Each of these systems also have a database connected to it:

• Windows: Database is stored on your local computer
• Dropbox: Database is stored on the Dropbox servers
• Fedwire: Database is stored on the Fedwire servers

Cryptocurrencies essentially replace the US Dollars (or your local fiat currency) that you use to purchase these software services. The “database” that cryptocurrencies give you access to is based on blockchain technology. 

More on blockchain technology in the next section of this guide.

But wait, what are the software services that you are getting? Isn't a cryptocurrency like Bitcoin just a currency, like US Dollars?

Not quite.

The goal of cryptocurrencies is usually to improve on some type of existing software system or network. When you send money via PayPal, Fedwire or Western Union, you are basically sending fiat money electronically, similar to Bitcoin.

However, that's where the similarity ends.

Platforms like PayPal have severe limitations on what you can and cannot do. For example, you cannot send/receive money from certain countries (like Nigeria).

Cryptocurrencies like Bitcoin want to make financial transactions more open and accessible to everyone around the world.

Other cryptocurrencies solve other problems, which we will explore later in this guide.

Is Cryptocurrency Real Money?

Yes.

Since this is a new concept to most people, it will take some time to become widely accepted. This is where Bitcoin has been instrumental in paving the way for this new technology.

Websites like Newegg take Bitcoin, along with the other traditional payment methods. Here's what the checkout screen looked like after I added a drone to my cart.

Risks of Cryptocurrency Trading/Investing

Now that you understand the basics, what are the risks of trading these cryptocurrencies? There are quite a few, but here are the top three.

1. Some Technologies Will Fail

Remember that cryptocurrencies are basically software, created by people or companies. So just like Webvan or Pets.com in the dot-com bust, some of these technologies will fail.

…and they will fail spectacularly.

Right now, there is a lot of buzz around certain cryptocurrencies increasing several thousand percent, in a few months. This has a lot to do with ignorance and hype.

Just like when people found out that this new thing called the “internet” would change the world of business.

Did it change the world?

Of course.

But was there a lot of dumb money that overhyped the first wave of internet companies?

Totally.

So just remember, trading cryptocurrencies is kind of like trading a software stock. Some of the software will change the world.

Others will explode in a giant ball of fire.

There are also a lot of scam coins out there, so be careful. Like penny stocks that are just a company on paper, almost anyone can create a new cryptocurrency.

Learn how to separate the scams from the deeply underpriced currencies. Then use proper risk management and play the odds.

2. It Requires Technical Savvy

Let's face it, cryptocurrencies were created by super nerds. Like with Linux, there is still quite a bit of technical know-how that is required.

You don't need to know how to code, but if you are “not good with computers” you may want to stay away from cryptocurrency trading, at least until they start building more user friendly interfaces.

Don't get me wrong, I'm not calling anyone dumb. I'm just saying that if you don't possess a certain skillset, then you shouldn't get involved in that area. This could cause you to lose a lot of money, very quickly.

For example, I don't know how to sew, so I don't make my own clothes. If I did try to make my own clothes, everyone who meets me would think I'm a weirdo for wearing fucked up pants.

You get the picture.

So if you aren't so tech savvy, but still want to get involved, find someone you trust to trade for you.

3. There's a Lot of Broker and Technology Risk

Since this is emerging technology, there are still a lot of unknowns with trading at scale and how brokers and the software will react to certain surprise events. If you think that Forex brokers are risky, then you should consider cryptocurrency brokers at least twice as risky.

Not just because they could be shady, but there a still so many unknowns with the technology.

However, I would still trust the bigger cryptocurrency exchanges over a lot of offshore binary options brokers

So the lesson is: Don't keep too much of your coinage at the exchanges.

Move them off to your own wallet as soon as possible.

I'll get to wallets later in this guide.

What is a Blockchain?

Simply put, a blockchain is a database.

However, there is one huge difference between how you probably currently think of a database and how a blockchain database works.

In most cases, a traditional database sits on one computer or in one location.

Even if a company has redundant servers around the world, the data might only be backed up between 3 to 5 locations. On top of that, these companies collectively spend billions of dollars a year on cyber security, to protect this data.

With a blockchain database, the data can be backed up on potentially thousands of computers all over the world, for a much, much lower cost. The information in these databases is heavily encrypted and sometimes files are broken up into pieces, so even if one piece is exposed, it will not expose the entire file.

If the information on one server does become compromised by hackers, the other copies of the databases have to “agree” that the compromised data was a legitimate change to the data. If the other copies do not agree, then the change is rejected and it is changed back to match the others.

Obviously, this is an oversimplified explanation of the technology, but I hope that you are starting to see the benefits.

Instead of just one point of failure, like on a single server, you now have multiple copies of the same database all over the world that is almost impossible to crack and will “fix” itself in the case of a hack. This can also save a ton of money on cyber security software and services.

Example

Let's say that a hacker gets into your bank's computer tomorrow and transfers all of your money to his account, then deletes any trace of the transaction. With today's technology, you would probably be screwed.

But with a blockchain currency like Bitcoin, if one server was hacked and a fake transaction was inserted into the database, then it wouldn't match the transaction record on the hundreds other copies of the database. This transaction would be seen as a fake and rejected.

Your money would be safe. 

This is one of the many reasons why blockchain technology is so exciting.

The Characteristics of a Currency to be Aware of

Although cryptocurrencies are all based on blockchain technology, they are not all created equal. Here are some differences that you need to understand to make informed trading decisions:

• Transaction processing speed
• Total supply currently available
• Will there ultimately be a limit on the total number of currency available?
• Will there be an unlimited supply of currency?
• Is there a real-world need for this software/currency?
• Real world adoption of the technology
• Any big investors in the project?
• Does the use of the software make sense?
• Do the founders have a reputable background?

These are just a few of the characteristics that you should look at. But once you start digging into these details, you will begin to see which projects could work for their intended purpose and which ones are probably scams.

This understanding will also allow you to assess the long-term viability of these different currencies and which ones will be more desirable in the future.

Example

Tether is a cryptocurrency that wants to be the proxy for fiat currencies. So there is a Tether USD version, EUR version, etc. But each one is pegged to the value of the currency, so you can never make any money trading it.

It is purely to provide stable and liquid transactions. So one USD Tether will always be worth about $1.

If you didn't know this and bought a bunch of it, thinking that it's cheap compared to Bitcoin, you will tie up your money in an asset that will never appreciate. Sure, you won't lose money either, but you would have lost out on other opportunties.

So understand the nuances of each crypto, it's very important.

What are the Different Cryptocurrency Use Cases?

Almost every currency software has a different intended purpose and individual implementation, with inherent strengths and weaknesses.

It's like Windows vs Mac.

…or iOS vs Android.

Here are a few examples of the different types of cryptocurrencies and what they are designed to do. This is not an exhaustive list, just a sample.

Note: I don't necessarily support these currencies, I'm just using them as examples of the different use case niches within cryptocurrencies. 

Worldwide Financial Transactions

• Bitcoin
• Litecoin
• Tether
• Ripple
• Stellar Lumens

Application Platforms

• Ethereum
• Storj
• Siacoin
• MaidSafe

Private Financial Transactions

• Monero
• Dash
• Zcash

Specialty Currencies

• GameCredits
• ReddCoin

Take a look at these different use cases and figure out which ones make the most sense to you. Then understand how each software implementation works and think about what will probably do well in the future.

To see our extensive list of cryptocurrency sectors, read this post.

How do You Buy Cryptocurrencies?

First have to go to an exchange or service that will allow you to purchase cryptocurrencies. Some of the bigger exchanges are:

• Coinbase
• Kraken
• Bitfinex
• Binance
• LocalBitcoins

Many of them will allow you to use a credit card or link a bank account. As much as possible, do not store your cryptocurrency at the exchanges because they can be hacked. See the cold storage section in this post for details on how to store you coins safely.

It's easy to get Bitcoin, Ether and Litecoin. But if you want the smaller altcoins, you will have to do an exchange.

How to Buy Altcoins

First buy Bitcoin or Ethereum because those are the coins that are most easily transacted against the smaller altcoins. When in doubt, buy Bitcoin. If you want $10 of Bitcoin for free, use this link (while supples last).

Then find out where the altcoin that you want is traded. Go to Coinmarketcap and click on the coin you want to buy.

Next, click on the Markets tab for that coin. For example, here's where you can get NEM. The Source column will show you the exchanges where this coin is being traded.

Notice how most of them are traded against Bitcoin or Ether. 

Open an account at the most reputable exchange on the list. Once you are in your account, find the “deposit” wallet address for the altcoin you want to buy.

Here's an example from Poloniex. Copy this wallet address.

Next, login to the account where you bought your Bitcoin or Ether. If you bought it from Coinbase, then you can go to: Accounts > Send and paste the deposit address into that field.

Enter the amount you want to send, then click the send button.

It may take some time for the transaction to go through, so be patient.

When you see the balance in your destination exchange account, you are now ready to buy altcoins. Here's what it would look like when you have a Litecoin balance at Poloniex. This can be found in Balances > Deposits and Withdrawals in Poloniex.

Now go to the Exchange area of the website. In Poloniex, it would look like this:

Then click on the BTC tab. These are the currencies that you can exchange for Bitcoin. Click on the altcoin that you want to trade. Here's and example from Civic (CVC).

Next, scroll down and look for the buy/sell box. Enter the amount of altcoin that you want to buy. If you want to trade all of your Bitcoin, click on the link at the top with your total balance.

Click the Buy button and you are all set. The trade might not happen right away, so check your Orders > My Open Orders page to see the status.

The exact process will be different at different exchanges, but the basic idea is the same for all exchange.

How do You Store Cryptocurrencies?

With fiat currency like US Dollars, you can store them at the bank or in your wallet. It's pretty straightforward.

But with digital currencies, there are a few wrinkles that you need to get your head around, but the idea is similar. Let's take a look at how cryptocurrency storage works.

You store your cryptocurrencies on the blockchain in a “wallet.” This is simply an address on the blockchain. It's like how the website address tradingheroes.com directs you to my website, on the internet.

Each wallet has a public address and a private address. The public address is the address that people send funds to. The private address is the “password” that you use to access and send your funds.

Never expose your private key until you are ready to spend your funds, otherwise you will probably lose all the money in your wallet.

Here's an example from a Bitcoin paper wallet:

Now that you understand the basics of cryptocurrency wallets, let's look at the different wallet options out there. Here are the different ways that you can store your loot:

• Online wallet: This is probably the easiest way to store your money. But it is also the least secure. So it's not a good long term storage solution, but it is fine for buying things and funding your trading accounts. Exchanges like Coinbase also have their own wallets built in.
• Mobile wallet: You can download a mobile app like Mycelium to store your spending money. It is more secure than an online wallet, but if your phone ever breaks or it gets hacked, everything in your wallet will be gone.
• Desktop wallet: Similar to a mobile app but just for desktop computers.
• Hardware device wallet: These are hardware devices that are built especially for storing cryptocurrency keys. They are safer than the options above, but they are still susceptible to the things that can damage all electronic devices.
• Paper wallet: You can also store your private key on paper, like in the picture above. This is the most hacker proof, but it is also the least convenient. If you are going to go this route, be sure to store them in a safe place (like a safety deposit box) and don't actually use paper. Use something like this to make sure that your money isn't lost to something as simple as a spilled beer.

Cryptocurrency Tracking Apps

Before I wrap it up, you will probably need an app to track cryptocurrency prices on your phone. So here are a couple of apps that might work for you.

• Blockfolio: A simple app that allows you to add a watchlist and add trades so you can track your portfolio, ala stock trading apps. The most useful thing about this app is that it displays all currencies on your watchlist in the currency of your choice. Some apps insist on displaying the value in Bitcoin, which is annoying.
• Coincap: This app allows you to display currencies by market capitalization, volume and other ranking factors. They also have cool charts. Very useful for seeing what is being actively traded. Also displays prices in your currency of choice.

These apps are not for storing or trading currency. They are just to check the markets.

What Can Affect the Price of a Cryptocurrency?

There are many things that can affect the price of a cryptocurrency…sometimes very quickly.

Here is what you need to be aware of when you trade cryptocurrencies.

Of course, there is no guarantee that these things will move the market. But based on what we have seen so far,

Exchange Listing

This is a big one.

When Coinbase added Litecoin to their already limited list of cryptocurrencies that can be bought, they made it easily accessible to the average person.

Their interface is the best I've seen so far. It makes it so easy for the non-technical person to buy Litecoin.

Soon after the Coinbase launch (marked with the arrow, in the chart below), the price of Litecoin started to skyrocket and it has never looked back.

Now, you might be thinking that this could simply be a coincidence.

…and it could.

But it is very, very likely that exposing Litecoin to Coinbase's user base helped boost the price.

So when a large exchange announces that they will start listing a cryptocurrency that you are trading, take notice.

Watch exchanges like Coinbase, Bitfinex, Poloniex or CEX.

It could give it the boost you have been looking for.

Software Upgrades

Over the past few years, there has been a lot of discussion in the Bitcoin community about upgrading the core software functions of Bitcoin. The primary discussion has been around the transaction speed of Bitcoin.

If you have ever funded your trading account with Bitcoin or tried to buy anything with Bitcoin, you will understand what I mean. For a digital currency, the transaction time is a little slow.

It can take about 30 minutes or more, to do a single transaction.

Upgrading this speed has been hotly debated and finally led to the creation of Bitcoin Cash. After the split of Bitcoin Cash, Bitcoin has taken off to new highs.

There will be countless other software changes across all cryptocurrencies, so make sure that you understand the implications of those changes. 

Public Hype

Just like fake tweets can affect the price of a stock, any type of hype can affect the value of a cryptocurrency.

Good or bad.

So before you dismiss something as just hype, remember that hype moves markets too. But if you do trade hype, be sure to close your trade out long before the hype has a chance to cool off.

Otherwise, it could be a very expensive lesson. 

Wallet Improvements

Since you are reading this post, you probably want to start actively trading cryptocurrencies. But there are many other people who are investors and want to buy and hold for the next few years.

This is where storage becomes an important part of the cryptocurrency valuation equation.

Unlike traditional fiat currency that can be stored in a bank, your trading account, or your mattress at home, cryptocurrencies need to have a compatible wallet (or cold storage solution) to be stored safely.

Remember that cryptocurrency is simply software. So the wallet software needs to be able to work with the cryptocurrency software.

It's like trying to use the Windows version of Microsoft Office on a Mac.

That simply won't work.

Therefore, if a cryptocurrency doesn't have a good wallet yet, that will prevent less technical investors from buying the currency.

But as soon as one is available, then it makes the currency much more accessible to the masses.

…and thus, more valuable.

If you find that a cryptocurrency does not have a good wallet solution yet, that could be one signal that it is undervalued.

Looking for opportunities to buy, immediately after the launch of the first high-quality wallet, could give you a nice short-term profit.  

Platform Applications

Some cryptocurrency platforms, like Ethereum, host other applications. These applications, in turn, can have their own currencies or tokens.

If one of these DApps or Decentralized Apps does very well, this can have a positive effect on the underlying platform currency.

The value of the tokens should theoretically be independent of the value of the platform.

However, not everyone understands this and the success of one DApp can drive the price of Ether…at least in the short term.

So if you are trading a platform cryptocurrency, watch promising apps on the platform closely. 

Government Regulation

Finally, government regulation can have a huge effect on the value of a cryptocurrency.

One example is in Venezuela, where the police have been arresting Bitcoin miners on made-up charges. This has forced miners to go underground or start mining Ether instead.

But this could happen in any country. Any decision by the NFA or SEC could affect the value of certain cryptocurrencies. The SEC has already banned certain Initial Coin Offerings (ICOs), due to the potential pump and dump situation that could happen with those coins.

Be aware of current trends in government regulation and steer clear of currencies that could get red flagged by government agencies. 

Conclusion

So that is the Trading Heroes Beginner's Guide to Trading Cryptocurrencies. I hope that it answered any questions that you may have had about trading currencies like Bitcoin or Ether.

There will be more detailed posts on specific currencies and how to do some of the things mentioned above.

If you have any more questions or comments, leave them below.

Happy Trading!

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The post The Total Beginner’s Guide to Cryptocurrency Trading (Bitcoin, Ether and More) appeared first on Trading Heroes.