There are over 2000 cryptocurrencies in existence now. This article will be one of the multi-part series to get you started in the world of cryptocurrency! If you wish to find out how to purchase altcoins on exchanges, read on!
What are Altcoins?
Everyone knows Bitcoin. It is digital gold in the world of cryptocurrency. The attributes of Bitcoin correlates to gold (the commodity). Both Bitcoin and gold has a limited supply and they are both difficult to mine. Similarly, major currencies like the USD, EUR and YEN trade against gold just like most cryptocurrencies trade against the BTC.
As such, all other cryptocurrencies except Bitcoin fall into the category of altcoins. Some major altcoins are Ripple, Ethereum, EOS and Litecoin.
A Brief History
The Ethereum blockchain, through smart contracts, was the first to enable developers to issue their own tokens in exchange for capital to fund their business operation and growth. It is known as initial coin offering (ICO).
Why Buy Altcoins?
In the earlier section, I mentioned that Bitcoin is digital gold and therefore a good store of value. Due to institutional funds buying in, I strongly believe it is going to grow in value over the next 5-10 years.
However, my view is that being digital gold does not value-add much and its growth would not be able to surpass tokens from blockchains that create a strong network of dApps (decentralized applications) and users. When was the last time you see gold outperform Apple or Facebook?
Therefore, my advice would be to diversify your crypto portfolio to include a mixture of both Bitcoins and altcoins. Now, how do we purchase altcoins on exchanges?
How to Buy Altcoins on Exchanges?
There are many cryptocurrency exchanges in the market now. I have personally tried a few of them (read: About me – apps I am using) but in this article, I will be focusing on how to set up your Binance account and purchase your first altcoin. The main reason why we have to set up a cryptocurrency exchange (like Binance, Bittrex or KuCoin) is because most exchanges do not list many altcoins. They offer only the major coins against fiat like BTC/USD, ETH/USD and LTC/USD.
Time needed: 1 hour and 30 minutes.
Set up Binance Account and Purchase your first Altcoin
- Register for a Binance account and login
This part is pretty straightforward. Once you are done with account registration (use this link), you can login to your Binance account.
- Check your user account page
Once logged in, you can check your user settings. Here, you can configure some of your settings like withdrawal limits, change password, use BNB (Binance Tokens) to pay for trading fees, 2FA and etc. You need to pass KYC to access higher withdrawal limits.
- Check your cryptocurrency balance
This is where you might need to be careful if you are new. When you enter your balance page, many tokens with 0 balance will appear. Find the token (e.g. BTC) that you are going to deposit and copy its address.
Different cryptocurrency might not all share the same exchange wallet address. I have not personally tested the following. Theoretically, if you transfer e.g. BTC to an ETH wallet, the transaction will fail and your bitcoin could be lost forever. Therefore, always be careful and confirm your “To” and “From” addresses when dealing with cryptocurrency.
- Deposit cryptocurrency into Binance
Remember where you first purchase Bitcoin or Ether ? For me it is Coinbase, but I mostly use Gemini now due to lower fees. You will need access to that exchange to transfer some cryptocurrency into your Binance account.
The incoming cryptocurrency can also be your offline wallet or hardware wallet, wherever they are stored at.
- Purchase your first altcoin
Head over to the exchange section and you can find a wide variety of trading pairs in Binance. In this example, I am looking at the BTC/ETH pair. There are a few options: you can place a limit buy (set the price you wish to buy at), or just do a market order (purchase at market price).
Note: If you are purchasing a significant amount, I would recommend you to first purchase some BNB to pay for the transaction fee as it is 25% lower as of writing (the discount rate will diminish until 5th year of Binance operation)
- Review trade history
If you have placed a market order in the previous step, the trade is now completed (for limit order you have to wait for your order to be filled – you can check the order history for more detail). Go to the trade history page to review your purchase.
- Withdraw your altcoins to a safe wallet
Always remember to transfer out your coins if you do not wish to trade them anytime soon. Do note that while deposits into Binance are free, withdrawals will incur some fees. Similar to deposit, watch out for where you are withdrawing your coins to and make sure it is your own wallet address.
It is not best practice to store your cryptocurrencies on any exchanges as they are often subjected to security loopholes and hacks. As we progress further, I am confident that blockchain and exchanges’ security will be strengthened. Regardless, as of now, I highly recommend you to keep your cryptocurrencies in offline wallets or hardware wallet like the Ledger Nano S. I use a couple of offline wallets and the Ledger Nano S. Will try to share more about them soon!
How was your experience of purchasing altcoins on exchanges? Feel free to share yours at the comment section below!