Since Bitcoin has started to take off, there has been new exposure surrounding alternative cryptocurrencies, sometimes known as altcoins. You may have heard of some of these other currencies such as Dogecoin, Litecoin, Peercoin, etc… As it turns out there are hundreds of these altcoins in existence and you can make money trading these altcoins.
What is a Cryptocurrency?
First off, a cryptocurrency is a digital currency that incorporates the principles of cryptography. The benefit is that the encryption is theoretically impossible to counterfeit, thus making a commodity that can be instantly traded online that can’t be duplicated, counterfeited or double spent. Because of this system, proponents of cryptocurrency believe that it is just as secure (if not more so) as fiat currency (real money) and much more convenient.
The benefits include fast transfers with minimal transaction fees. Merchants that accept cryptocurrencies benefit by the minimal transaction fees.
The most popular and established cryptocurrency is Bitcoin. Bitcoin has recently risen in value and has an estimated worth around $800 as of this writing. Bitcoin has started gaining mainstream acceptance and is accepted by merchants and organizations such as Overstock.com, the Sacramental Kings, and Las Vegas Hotels.
The acceptance and popularity of Bitcoin has lead to this recent price jump and one result is that people have made money on trading the currency. I’ve personally have the experience of making money from the increase in Bitcoin prices. You can read about my experience in my previous post about my Bitcoin experience.
So, after my Bitcoin experience, I started to educate myself about other cryptocurrencies and specifically ways to trade for cryptocurrencies.
Although bitcoin is rising in value and it’s possible to invest in bitcoin, I think that it’s value has gotten to the level where it’s an expensive investment. In addition, the difficulty in the algorithm has made it too difficult for the average person to mine any substantial amount of bitcoin. Finally, I also felt that it may be unlikely that we’ll see the same exponential increase in the value of Bitcoin.
However, there are a number of alternative cryptocurrencies that are gaining in popularity and value and it is potentially possible that one of those may take off in the same way that Bitcoin rose in value over the last few months.
Trading in cryptocurrencies is the same concept as trading in the foreign exchange. You are simply converting currencies into other alternative currencies that you believe may take off in value.
There are a number of cryptocurrency exchanges. I personally chose to open an account with Cryptsy. (referral link) I picked Cryptsy because it was one of the larger exchanges. Also it was based in the United States and being from the United States myself, I felt most comfortable working with a company based in the States. Also, when I visited different cryptocurrency forums and reddit posts, Cryptsy seemed to be a frequently mentioned exchange, so I felt it had a well established user based. And finally, I visited the site and found their interface easy to use and pleasing to the eye.
So, I started my Cryptsy account and transfered in a couple of bitcoin that I kept. You’ll note that I funded my account with bitcoin. Cryptsy has not yet implemented funding through USD, so you’ll need to start with a cryptocurrency. I’d recommend using bitcoin. If you don’t have bitcoin, you can purchase them through an exchange such as Coinbase. (referral link)
Coinbase is a US based company that focuses on exchanging bitcoin and USD. I personally used them when I cashed out my bitcoin, so I’m comfortable with them as a company. I found their service quick and convenient.
Now, once you have some bitcoin, you can start funding your exchange account and investing in cryptocurrency.
I did some looking into which cryptocurrencies I felt might be poised for a rise in value. Quite frankly, I’m not an economist so I’m not as familiar with the number crunching that goes into a deep analysis of currency trading. There are a couple of websites that have a basic comparison of the relative values of currencies vs. bitcoin. Here’s a short list of some of these sites:
- coinwarz: Comparison list of mining profitability for cryptocurrencies. Has some nice visible graphs.
- Coinchoose: Listing of the most profitable cryptocurrencies based on information from different exchanges
- Coinmarketcap: List of different cryptocurrencies based on market cap.
Then I took down a list of some of the most profitable cryptocurrencies that I found and visited their forums and reddit pages. If this process sounds a bit like guesswork, I will readily admit that selecting currencies for investment is high risk and will advise against putting in money that you can’t afford to lose.
I will also add that when I started this process I already had my eye on investing in Dogecoin. Dogecoin is a newly created popular altcoin based on the Doge meme. It was started in December and quickly rose to one of the top traded currencies on the internet. If you simply visit the Dogecoin reddit page, you’ll see that it is one of the most active cryptocurrency reddit pages. I highly recommend subscribing to the Dogecoin reddit if you want to keep up on the latest news regarding Dogecoin.
I had seen the recent news about Dogecoin and had already been mining Dogecoin on my computer, but I felt that it was gaining in popularity and acceptance at such a rate that it was poised to take off. So, I was really interested in purchasing and investing in Dogecoin. So I actually had a primary strategy in mind when I started my Cryptsy account.
I used a portion of my Bitcoin to purchase Dogecoin on Cryptsy. My timing was lucky because later that same weekend Dogecoin made huge news by raising over $35,000 to fund the Jamaican bobsled team to the Olympics. Overnight, Dogecoin more than tripled in value. The value that I had invested into Dogecoin rose over $1000 overnight. (Of course, I have to cash out to see the earning) Frankly, I’m holding onto my Dogecoin because I believe that it will continue to rise in value.
Beyond Dogecoin, I took a chance and picked out a few other altcoins and made small investments in several other altcoins through Cryptsy. I’ve seen some some small gains on some and small losses in others. Overall, I’m close to even with my other investments, but Dogecoin has been a huge winner for me. I still think that Dogecoin is on the rise, so I’m holding onto the coins that I bought on Cryptsy.
Summarizing Steps to Invest
So, the above steps is how I started off on my cryptocurrency investment adventures. I personally feel that Dogecoin is the one currency that is really poised to take off. I think that it is still a good investment and has a really low barrier of entry at this time.
But here’s a quick summary of the steps to start investing in cryptocurrencies.
- Identify how much you are willing to invest. Seriously, don’t put your life savings into this. Think of it this way, identify how much money you would take with you to play at the blackjack tables in Vegas and keep your crypto investment fund to that amount.
- Then convert your currency into a cryptocurrency such as Bitcoin. I personally use Coinbase and can recommend them.
- Next, open an exchange account. I use Cryptsy and so far have a good experience with them.
- Finally research and buy your coins. There are numerous online resources. I listed a few above. If you are looking for a starting coin for an investment, I can tell you that I personally like Dogecoin.
The companies and services that I mention in this articles are the ones that I personally use. There are plenty of other cryptocoin services and exchanges out there. Please feel free to do your own research. I can only indicate that I’ve had good experiences with the services that I’ve used listed in this article and I continue to use them and recommend them to others who are interested in investing in cryptocurrencies.
My final word of advice is to do your research and don’t invest money you can’t afford to lose. Although I’m positive about Bitcoin and the rise of other cryptocurrencies such as Dogecoin, no one can guarantee what will happen to these cryptocurrencies. It can just as easily go down as up like any investment. But if we’re lucky it may take us to the moon!