Part 2: How to purchase alternative cryptocurrencies (Altcoins) that are not listed in any of the mainstream exchanges
As mentioned above, only a handful of cryptocurrencies can be purchased directly using fiat. So how do we go about purchasing the other 1300 over cryptocurrencies?
There are 2 main ways in which people use to purchase other cryptocurrencies
-Through shapeshift/changeally
-Through exchanges like Bittrex/Poloniex/Binance and many others
Shapeshift/Changeally:
Shapeshift: https://www.shapeshift.io/
Changeally: https://changelly.com/?ref_id=da899aa3acb9
Shapeshift and Changeally are 2 different websites that provides similar services. You send currency A to them, they send currency B back to you, something like a conventional money exchanger we have in the real life. However, they tend to charge slightly inflated rates (maybe you will lose out 5~10% from the market rate if you use such services).
However, they bring about alot of convenience (many people don't mind paying more for convenience) and they are also built into various mobile wallets like Coinomi.
I would advise you to download Coinomi wallet if you are using android, transfer your Bitcoin/Ethereum/Litecoin/Bitcoin Cash to this Coinomi wallet and Shapeshift/Changeally from here to get the alternative coins you want. Personally I have only used Shapeshift.
*Please please, screenshot and write down your 12 words seed code when you download your coinomi so that your coins dont go missing if your phone is lost. If you lose the seed, you lose your coin, simple as that.
Do note that if you are using the web version of Shapeshift/Changeally, you will need to have the specific cryptocurrency wallet available on your desktop/phone to receive the coins after changing. Be very careful about the addresses, any miskey-ing of address would result in funds being lost. (Will be elaborating on this next time).
Shapeshift/Changeally do not support many alternative coins, but the alternative coins that they support are some of the top and most stable coins, so chances are, the coins that you are interested in would probably be there.
Using exchanges like Binance/Bittrex/Poloniex:
Binance: https://www.binance.com/
Bittrex: https://bittrex.com/Home/Markets
Poloniex: https://poloniex.com/
Personally, I only own accounts from Binance and Bittrex and only have funds in Bittrex. But I will be transferring over to Binance once the coins that I own are listed there.
In this exchanges, the main pairing would be
-BTC-A (BTC represents Bitcoin while A represents your alternative coins)
-ETH-A (ETH represents Ethereum)
-BNB-A (BNB represents Binance Coin) - Only for Binance
-USDT-A (USDT represents USD Teter) - USDT basically is pegged to the prevailing USD price with maybe 3% deviation up or down)
This might seem to be a foreign concept to gauge but I will try to break it down into simpler terms for you.
In these exchanges, they do not accept fiat. Most of the trades are done in Bitcoin. In other words, the prices you see are all in term of Bitcoin or Satoshis. 1 Bitcoin = 100 000 000 Satoshis. So taking the current price of Bitcoin which is USD $17 000, 1 Satoshi is = $0.00017.
In crypto, we actually mainly look at satoshi values for trades. Why is this so? Most of the trading are done in BTC pairing and hence, if your coin value increased in terms of dollar but has fell in terms of satoshi, it basically means that you coin is doing worst in comparison to Bitcoin. Any increase in the coin value is due to Bitcoin and not due to your alternative coin. In this scenerio, your money would be better off being placed in Bitcoin.
This is quite confusing so let me try to help you digest:
For example,
In October 2017, Bitcoin was worth ~$5000 and your alternative coin A was worth 100 000 satoshi ($5)
In December 2017, Bitcoin has rosed to ~$15 0000 and your alternative coin A is now worth 50 000 satoshi ($7.50)
As you can see, the $ value of your coin A has rose by $2.50, which presumably might seem like a good thing, but the satoshi value has fell by half. Yes, you are making a profit, BUT your money would be better off being put into BTC because in the time your coin A grew by 50% in dollar value, Bitcoin has grew by 200% in dollar value.
This is a mistake that alot of newbies make. They think that the dollar value is almighty, but in this world of crypto, BTC/satoshi value is king.
So what do we need to do if we want to purchase coins from these exchanges? We will need to purchase Bitcoin from Coinbase/Coinhako/Gemini and transfer it to these exchanges for us to buy our alternative coins. But if you remember what I said earlier on, it is expensive to transfer Bitcoin around. So there is this small little hack that people use.
- Purchase Ethereum/Litecoin from Coinbase/Coinhako/Gemini
-We do this because ETH and LTC have shorter block time (which means your funds will travel faster because it will need 6 blocks confirmation before a transaction is considered successful) and also it is way cheaper. - Transfer it to Binance/Bittrex/Poloniex
- Sell the coins for Bitcoin or Binance Coin
- Buy the alternative coins you want.
This will greatly shorten your time and save you money as the fees for Bitcoin is ridiculously high and the block time is long. Some transactions might take over a day to confirm if the network is congested.
What are the difference between the exchanges?
Each exchanges charge different fees and have different interface.
Bittrex has a 0.25% fees for every transaction (limit orders)
Binance has a 0.1% fees which can be cut into half if you use Binance Coin.
Poloniex has a 0.15% maker fees and 0.25% taker fees.
*Every trade occurs between two parties: the maker, whose order exists on the order book prior to the trade, and the taker, who places the order that matches (or "takes") the maker's order. Makers are so named because their orders make the liquidity in a market. Takers are the ones who remove this liquidity by matching makers' orders with their own.
In layman term, if you put an order in, the fees would be 0.15%, but if you were to buy or sell off directly at current highest bid, the fee would be 0.25%.
Some background is that Bittrex and Polo are mainly used by USA while Binance is a Hong Kong based exchange which is mainly used by Asian.
*Bittrex is currently experiencing insane backlog in verification and has halted new account creation. As such, I dont think you can make an account in the near future.
Thats all for now, I will be talking about cashing out for SGD soon. Do feel free to tell me what you would like to know next or if you have any feedback for me. Thank you!