From the barter system to Crypto, human civilization has witnessed a huge shift in mediums of exchange. Forms of money have become diverse. Even definitions of crypto have become much more diverse.
Well, everyone today is very keen to invest in crypto currency and knowledge of the process is compulsory as a little ignorance or mistake may result in loss of funds. Before knowing the process, we must know some basics of cryptocurrency;
Basics of Cryptocurrencies
- Cryptocurrency received its name because it uses encryption to verify transactions.
- Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders.
- Units of cryptocurrency are created through a process called mining.
- Applications that provide crypto services such as COINDCX, BINANCE, COIN SWITCH, WAZIRX, etc. are called cryptographic/crypto exchanges.
- Cryptocurrency is not a tangible asset, rather it is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.
Examples of cryptocurrencies:
- STELLAR LUMEN’
- SHIBA INU COIN’
Steps to but your first cryptocurrency
STEP 1- CREATE AN ACCOUNT ON A TRUSTED CRYPTO-EXCHANGE
- Download its app from the play store/app store on your device (say COINDCX)
- Click on create new account
- Enter your basic details such as Mobile number, email-id, name, age, and gender as asked by the application.
- An OTP will be sent to your submitted email id and mobile number
- Correctly enter both the OTPs to proceed.
- Next, you are required to complete the KYC (know your customer) process. So, keep your documents handy.
- You are required with two documents; the first is Tax-id (PAN CARD) and the second is address proof (AADHAR/PASSPORT/VOTER ID).
- Upload your documents properly by following the on-screen instructions.
- Your KYC details will be verified within the stipulated time.
- Once verified successfully, we are free to make transactions after linking our registered BANK ACCOUNT
Remember- When comparing different platforms, consider which cryptocurrencies are on offer, what fees they charge, their security features, storage and withdrawal options, and any educational resources.
STEP 2- FUNDING YOUR ACCOUNT
Money can be deposited and withdrawn only through and into a registered bank account. Although to fund our crypto wallet, there are many options available such as UPI, DIGITAL WALLETS, and net banking (subject to charges). International crypto exchanges also accept other modes of payment such as CREDIT CARDS, WIRE TRANSFERS, ACH, and deposits from other platforms.
An important factor to consider is transaction fees. Also, the time taken for deposits to clear varies by payment method.
Once the money is deposited, you are all set to place your first order.
STEP 3- PLACING THE ORDER
TYPES OF ORDERS:-
- MARKET ORDER- This type of order indicates that you want your order to be filled immediately at the next available price. Market orders generally execute at the current bid price. Whatever happens, happens now!
- LIMIT ORDERS- If your priority is to buy or sell at a specified price or better, you may use a limit order instead. Setting up limits allows traders to specify a price for the trade to be executed.
For example- The market price of XLM is INR 29-31. I placed a limit order for 500 XLMs at INR 28. My order will be placed only if the price reaches 28 INR/XLM else my order will be canceled.
Traders use a limit order when they have a target entry or exit price and are willing to wait for the market to move in their favor.
- STOP LIMIT ORDERS- When a trader is unsure of the direction in which the price of a cryptocurrency will move.
For example- let a coin be trading at INR 10 at a particular moment. The price will start rising and the market will be bullish once the price hits INR 11. He could also set a price say 10.5 INR. For a lower price, this means that when the coin price falls to 10.4 or lower the order gets executed.
- BRACKET ORDER- It is an order type where traders can enter a new position along with a target/exit price and a stop loss order. This helps traders in locking in their profits or minimizing their losses at the same time. Execution of main orders results in two or more orders getting placed. Execution of one of these orders results in the automatic cancellation of the other order.
- TRAILING STOP LOSS ORDER- This helps in setting the maximum loss that the traders are willing to bear. The specific SL(STOP LOSS) price informs the exchange about the loss traders can risk losing. INR 2000 and you can bear a loss of only 10%, so when the price reaches INR 1800, the sell order will be automatically executed and you will get INR 1800 back.
EXECUTING THE ORDER
- Choose any crypto coin combination of your choices such as BTC/INR, XRP/USD, XLM/INR, and many more combinations.
- Enter/select the preferred quantity Example- 50,100,500
- Select the type of Order.
- Make unlimited BUY/SELL orders.
ARE CRYPTOCURRENCIES SAFE?
Definitely Yes, crypto transactions require a two-factor authentication process. For instance, you might be asked to enter a username and password to start a transaction. Then, you might have to enter an authentication code sent via text to your cell phone.
Although the process is a bit technical and complex, cryptocurrency transactions are hard for hackers to tamper with.
While securities are in place, that does not mean cryptocurrencies are un-hackable. Several high-dollar hacks have cost cryptocurrency start-ups heavily.
Cryptocurrency has no tangible asset behind it, so its pricing solely depends on the demand-supply factor. Moreover, unlike government-backed money, the value of virtual currencies is driven entirely by supply and demand. This can create wild swings that produce significant gains for investors or big losses.
FRAUDS AND SCAMS
TYPES OF FRAUDS:
- Fake websites feature fake testimonials and crypto ads promising massive, guaranteed returns, provided you keep investing.
- Scammers pose online as billionaires or well-known names who promise to multiply your investment in a virtual currency but instead steal what you send. They may also use messaging apps or chat rooms to start rumors that a famous businessperson is backing a specific cryptocurrency. Once they have encouraged investors to buy and drive up the price, the scammers sell their stake, and the currency reduces in value.
- Straightforward cryptocurrency hacking, where criminals break into the digital wallets where people store their virtual currency to steal it.