Bitcoin prices are the worst nightmare for blockchain critics. After breaking the previously unimaginable $10,000 level, bitcoin plummeted from profit-taking. But soon after, trading normalized, sending bitcoin well above $11,000. However, this robust success represents a quandary: interest for lower-priced “penny cryptocurrencies” has never been higher, yet relatively few know where to turn.
Love it or hate it, the blockchain is here to stay. The broader acceptance of bitcoin prices at five-digits only confirms this bold statement. Unfortunately, cryptocurrencies are still frontier markets. The platforms that serve them are usually unintuitive. Coinbase, the most popular platform, only provides access to buy and sell bitcoin, Litecoin and Ethereum. Even with the addition of Bitcoin Cash next year, these are very expensive digital tokens.
With bitcoin prices to the moon, investors are seeking more approachable ways to profit from the blockchain. Penny cryptocurrencies offer a highly speculative, but potentially rewarding means to ride the euphoria. Since established wallet and exchange services like Coinbase aren’t going to touch penny cryptocurrencies, the broader exchange Bittrex has a tremendous advantage.
As previously mentioned, Coinbase currently offers three cryptocurrencies, with a fourth on the way. That would fly several years ago. Today, we have over 1,300 digital tokens, with many of them falling under the category of penny cryptocurrencies. Put another way, Coinbase only engages a little more than 0.2% of the total blockchain opportunity. In contrast, Bittrex offers so much more.
Of course, every decision has its pros and cons. For Bittrex, the platform is far less user-friendly than Coinbase. Bittrex also has its quirks, leading to severe criticisms. Much of these criticisms, though, are badly misplaced.
With this beginner’s guide to buying penny cryptocurrencies, I’ll help you safely navigate the Bittrex exchange!
Bittrex versus Coinbase
Coinbase is the premier way to buy cryptocurrencies. As such, its interface is very user-friendly, and its payment options are flexible. You can link up your Coinbase account to your bank account, or you can pay with major credit cards. Both buying and selling cryptocurrencies is a breeze.
In shart contrast, Bittrex is a trading platform, and has most of the functions associated with that business: limit orders, market orders, bid-ask spreads, you name it! If you’re not familiar with basic trading terminologies, you should familiarize yourself immediately. Bittrex doesn’t care what you know or do not know.
While this might scare off crypto newcomers, you’ll eventually recognize the advantages of a trading platform. Cryptocurrencies, and especially penny cryptocurrencies, are subject to wild swings. Furthermore, they trade all day, every day. Limit orders are excellent tools to help mitigate the digital markets’ inherent choppiness.
Another important distinction between Bittrex and Coinbase is that the former uses bitcoin as the central trading currency. Meteoric bitcoin prices cause enormous difficulty when evaluating penny cryptocurrencies due to the vast valuation differentials. Moreover, Bittrex does not currently support withdrawing monetary value in fiat currencies (ie. cash).
Bittrex has an extremely irritating flaw, right from the get-go. Unless you verify your identity, you absolutely cannot withdraw any amount of cryptocurrencies to other wallets or exchanges. The platform offers you two levels of verification: basic and enhanced.
Basic verification is fairly standard stuff: name, address, date of birth, last four digits of your social security number. Upon entering the data, Bittrex will search through public records to confirm your identity. Invariably (unless you’re one of the lucky ones), the algorithm will fail to find you, thus requiring you to submit an application for enhanced verification.
This higher level verification is also standard stuff if you’re familiar with Coinbase. Bittrex will ask you for front and back pictures or scans of a government-issued ID. After these two pictures are submitted, it will ask for a selfie. The algorithm will attempt to match the selfie with your government ID.
If it doesn’t recognize you, then you can’t withdraw money from Bittrex; hence, the “Bittrex is a scam” hysteria. The truth is, you can make the algorithm’s job a lot easier.
First, please make sure to take clear, crisp pictures of your government ID. Second, your selfie should look like a government ID photo: a clear, direct picture of your face.
On my first go-around with enhanced verification, I failed because my face was slightly angled. Essentially, if your pose is inappropriate for a driver’s license, it’s also inappropriate for Bittrex.
Although anecdotal, I heard through the blogosphere that Bittrex has difficulty recognizing non-American IDs. Therefore, before you transfer any value to your Bittrex account, make sure you can actually verify your account!
Funding Your Bittrex Account
After you have confirmed either your basic or enhanced verification, the next step is to fund your Bittrex account. Currently, the only way to do this is to transfer using crytocurrencies that Bittrex accepts. It’s cumbersome, but I’ll make it easy for you.
First, at the top left corner of the screen, you will see two pull-down menus entitled “Markets.” Pulling down reveals a search option. Type in the name of your target cryptocurrency. If it doesn’t appear, pull down the other “Markets” menu and search there. Should Bittrex support your cryptocurrency, it will appear here. If not, you will have to convert your digital token to an accepted one.
Once you see your target cryptocurrency, go ahead and click on it. You will see that token’s trading screen, which includes a candlestick chart, pricing data and trading options. Near the top, left-hand corner of the screen, under “Information,” you will see three menu options: Timeline, Order Book, and Wallet. Click “Wallet.”
Again, on the left-hand side of the screen, you have the option of depositing your target cryptocurrency. If you scroll down slightly, you will see a blue button entitled “New Address.” Click this to reveal your unique deposit address. Now copy this address in its entirety.
From your wallet or exchange which houses the target cryptocurrency, transfer your desired holdings to the deposit address. A good rule of thumb is to test transfer a small amount to ensure you followed the transfer protocol correctly. Remember that with crypto transfers, you have no way of retracting coins once you confirm the transfer. Double check, triple check, quadruple check your transfers!
Also, always make sure that you are transferring like-coin to like-coin. For instance, transfer Ethereum coins to Ethereum deposit addresses, not Ethereum Classic addresses!
Sell Your Stash for Bitcoin
Assuming that your target cryptocurrency wasn’t bitcoin, you will have to take another step before you can buy penny cryptocurrencies. Since bitcoin is Bittrex’s main cryptocurrency, you will have to sell your newly transferred holdings for bitcoin.
Go back to your target cryptocurrency’s trading screen. On the right-hand side of the screen, just under the pricing data, you will see the selling option. Enter the number of units you would like to sell, and the sales order type (last, bid, or ask). Once you’re ready, hit the sell button, which takes you to a final confirmation screen.
Please note that the above process automatically sells your target cryptocurrency for bitcoin. Depending on market conditions, your order may be processed immediately, or it may take an indefinite period of time. If you need to sell right away, cancel an open order and try placing another one.
In many, if not most cases, (reasonable) orders should be fulfilled fairly quickly. Now that you have bitcoins in your account, it’s time to buy penny cryptocurrencies!
How to Buy Penny Cryptocurrencies
Like any investment market, cryptocurrencies feature an abundance of options. Some are high-level opportunities with reasonable chances for success; others shouldn’t be touched with a twenty-foot pole. With Bittrex’s trading platform, you open the door to the blockchain’s broader possibilities.
To see the full list of penny cryptocurrencies, click on the Bittrex corporate logo at the top left corner. You will literally see hundreds of digital tokens. Click on any name that you’re interested in. The platform will then take you to that virtual currency’s trading screen.
On the left-hand side of the screen, you have the ability to buy your desired coin. Also, you will see how much Bitcoin you have to spend. The process from here is nearly identical to selling for Bitcoin. Enter the units you wish to purchase, select the buy order type, and confirm the order.
Since bitcoin prices are smoking hot, you should have zero problems with your transaction. Congratulations on purchasing your first penny cryptocurrency!
Selling Penny Cryptocurrencies for Cold, Hard Cash
By now, many of my readers know that I’m one of the biggest proponents of cryptocurrencies and the blockchain. I wrote about bitcoin prices hitting $10,000, and I still believe we could move higher. Yet at some point, you will want to cash out your holdings, particularly your speculative penny cryptocurrencies.
Here’s the best way to do this. First, from the steps above, sell your penny cryptocurrencies for bitcoin. Next, go to your bitcoin trading screen, and click on “Wallet.” In the middle of the screen is your withdrawal interface.
Now, login to your Coinbase account. Under “Accounts,” find your bitcoin wallet. Click the “Receive” option, which reveals your bitcoin deposit address. Copy this address and paste it into Bittrex’s address box, under “Withdrawal.” Carefully go through the aforementioned transfer protocol.
If you’re having trouble getting to your Bittrex account’s bitcoin wallet, an alternative approach is to click on “Wallets” on the main header menu option. Find bitcoin and click on the “-” button next to it, which apparently stands for withdrawal. Login to Coinbase and repeat the above steps.
Once your bitcoins have been transferred from Bittrex to Coinbase, you can now sell your bitcoin holdings for dollars. Finally, transfer your dollars to your bank account.
Advantages of Trading Penny Cryptocurrencies
With all the steps involved, why bother trading penny cryptocurrencies? Wouldn’t regular penny stocks do the trick? In reality, penny cryptos are far superior to their equity counterparts.
I’ve done my fair share of penny-stock trading, mostly in gold mining to fund my doomsday bunker project. In all seriousness, penny stocks are fun to get into, but not fun to get out. These markets are extremely speculative, and therefore, extremely illiquid.
Penny cryptocurrencies, while highly speculative and risky, are not nearly as illiquid as most penny stocks. Again, bitcoin prices are on fire, sending the entire blockchain complex up on the bull train. That means you should be able to buy and sell speculative tokens with very few problems.
Also, the digital markets never rest. You can literally be in your pajamas at 3 a.m. Sunday morning, and you will still find robust trading activity. This gives you, and everybody else in the world, flexibility to get your trade on.
A Word to the Wise
While I trust Bittrex, I don’t trust it that much. Indeed, as largely unregulated assets, cryptocurrencies aren’t for folks with heart problems. Translation: common sense trumps any investment advice.
Consider that during bitcoin’s recent correction, Coinbase crashed, preventing its members from either buying or selling. Their customer-service bots were profusely apologetic. But it goes to show you that many areas of “blockchain trading” needs substantial improvement.
I can’t say whether or not Bittrex will crash at a critical moment. I also can’t determine if this platform is the real deal, or if it will pull a Mt. Gox. Nevertheless, when dealing with penny cryptocurrencies, it’s better to be safe than sorry.
Get into a regular habit of taking profits, converting said profits into bitcoin and selling it for cash. All the paper profits in the world do not amount to anything if you can’t buy anything with it!
[Ed’s Note: This article was originally published in December 2017.]
As of this writing, Josh Enomoto is long all the cryptocurrencies mentioned in this article.