How to Get From Dollars, to Altcoins, and Back Again in Simple Terms
To buy altcoins you need an exchange that allows you to trade dollars for altcoins, like Kraken, or you’ll need to buy Bitcoin or Ethereum on a platform like Coinbase, and then trade one of those for altcoins on an exchange that allows that, like Bittrex.
With that in mind, while a handful of exchanges allow you to trade dollars for a handful of altcoins, it is far more common for altcoins to be traded for Bitcoin, Ethereum, or Tether.
Of those three, Bitcoin and Ethereum are easier to buy with dollars.
Thus, most people will end up acquiring altcoins by first purchasing Bitcoin or Ethereum and then purchasing altcoins on a crypto-to-crypto exchange.
Thus, to buy altocoins:
- Sign up for an exchange that allows you to trade dollars for coins. For example Kraken, Coinbase, or Bitfinex.
- Sign up for a cryptocurrency-to-cryptocurrency exchange that allows you to trade the altcoin you are looking for. For example Bittrex or Binance.
- Find out what trading pairs are offered for the coin you want to buy. For example, if you want to buy Tron (TRX) on Binance, you can look and see the pairs TRX/BTC and TRX/ETH are offered (that is Tron for Bitcoin or Tron for Ethereum).
- Obtain the coin you need for the trading pair on an exchange that allows you to purchase the coin in dollars, send that coin to the exchange with the trading pair, and then buy the coin.
- Then, reverse the process to sell the coin.
NOTE: My preferred pairing for beginners is Coinbase/GDAX (GDAX is Coinbase’s trading platform) and Bittrex. Kraken is a good first step as well. These are all U.S. companies and some of the more popular and user friendly exchanges. Coinbase is the most user friendly of all these (but has the least trading pairs), meanwhile Bittrex is the hardest to grasp of the four (but has the most trading pairs).
That is the basics, but there are some important considerations:
- Each coin has a ticker symbol. Learn the ticker symbol and don’t confuse it. It can differ by exchanges. If you aren’t careful you could end up buying NEOS instead of NEO, or Bitconnect (BCC) instead of Bitcoin Cash (BCC).
- You should set up two factor authentication (2FA) on any exchange you use. This is a necessary layer of security in the crypto space since its generally impossible to recover stolen funds.
- You’ll likely want a wallet to store your coins in for long term holding. You can keep them on the exchange, as an exchange generally doubles as a custodial wallet service. However, this method of storage isn’t advised. Not every coin can use the same wallet, so make sure to use official wallets and research the best wallet for your coin. Learn about wallets.
- Consider whether you are going long or short in a coin. If you are going short, consider the steps it will take to get the coin from your wallet, to the exchange, into Bitcoin or Ethereum, then to an exchange where it trades for cash. Now consider trying to do that when everyone is selling in a panic. Altcoins don’t have the same liquidity the top coins that trade for USD do.
- You can use Tether (USDT) as an alternative to cashing out into dollars. It is meant to be a stable coin that holds its price. You can trade your USDT to for USD on Kraken and some other exchanges.
- Crypto tends to go in cycles. In the past the demand for altcoins has skyrocketed at certain points and then cooled down again for months on end. Consider dollar cost averaging over time to build a position in a coin gradually. This will help you avoid mistiming the market. It can always go lower or higher! Learn about “the rotation.”
- DYOR. Do your own research. The best exchange, coins, and trading strategy for you should be based on your own research. If you listen to everything you hear on social media you’ll at best end up with referral links and a bag full of coins that were pumped. The hot coin of the day is great for a short term play, but your best long term holds will be the hidden gems you find on your own.
- Look at the chart of a coin over time. Is the current price an all time high? Did the coin go up 50,000% in the past 3 weeks? Did you hear about this from a bunch of manic people on social media telling you this was the next Bitcoin? You don’t need to learn technical analysis, and you don’t need to do a fundamental analysis, but you should at least eyeball the chart on CoinMarketCap.com.
Anyways, that is the gist of how to buy altcoins and what you need to know to avoid some pitfalls. All the above links will provide you with step by step guides and explanations. Feel free to ask follow up questions below.