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Ten Really Basic Questions For Cryptocurrency Newcomers Answered

Slowly and steadily exchanges are pulling the plug on INR based trading. This was expected. What I did not expect was the sheer level of FUD this can cause. The markets on Koinex went down by over 50%, we reported when it was 33% down. It appears that the underlying problem here is the lack of Crypto education or understanding.

Hence, this article is aimed at answering some of the most basic stuff about cryptocurrencies that everyone, atleast the newcomers should know.

Note: Some questions are generic and some are very specific to the current regulatory situation in India. This is not a blockchain tutorial, we haven’t answered what is DLT, Blockchain or decentralisation.

Since it is a long article I figured I can give you links to the specific questions:

  1. What is Cryptocurrency and Bitcoin?
  2. Where do you store Cryptocurrency?
  3. Why should I invest in Cryptocurrencies?
  4. Where can you buy Cryptocurrencies?
  5. Difference between shares/stock and Crypto
  6. What are ICOs? Why are there so many Coins? Which are the good ones?
  7. Are my coins safe on Exchanges?
  8. My exchange has stopped INR deposits and withdrawals? What now?
  9. I bought Bitcoin when it was at Rs 14 lakhs, What now?
  10. I think the price will never go up. What should I do?
  11. Bonus Question – The Crypto-slang language

1. What is Cryptocurrency and Bitcoin?

First of all, Bitcoin is a cryptocurrency. There are many other cryptocurrencies like Ethereum, Neo, Tron and so on. Bitcoin was the first ever cryptocurrency created by Satoshi Nakamoto in 2009.

A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. The virtual currency uses cryptography to secure and verify transactions and also generate more units of cryptocurrency. You can transfer units of crypto to anywhere in the world or you can buy it and store it as an asset.

In India Cryptocurrency is not a legal tender. It means that you cannot pay or receive cryptocurrency as a payment instead of Rupees. But Cryptocurrency is not banned, you can trade cryptocurrencies in India but it is difficult to buy or sell using INR due to regulatory restrictions. There are options to buy or sell crypto using P2P exchanges or Over the counter traders.

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2. Where do you store Cryptocurrency?

Cryptocurrencies are stored in a secure digital wallet. A wallet has two keys (Addresses), Public key and private key. A Public key is your wallet address. You can receive cryptocurrency on your wallet from anyone to your public address. Think of it as your account number. When you give it to someone, they can send money to it.

Some examples of Public Keys/Addresses:

  1. Bitcoin – 3HY1ohq6u1jUQskrrdD8J6mZ8fsHfd9FVk
  2. Ethereum – 0x010c0003e542101d581392bdfc4a968072f7bf8f
  3. Neo – ARavMMjas3a4rLiZ9NJCeLTfZDziKVkptz

For you to send Cryptocurrency to someone you need a private key. It is a key that should not be shared with anyone. You need the private key to access your wallet in order to send cryptocurrency to anyone else around the world.

The most secure place for a cryptocurrency is a hardware wallet. A hardware wallet is not connected to the internet and hence is not prone to online hacking. It is also called a cold wallet sometimes. If you plan to hold your assets for a long time it advisable to move your funds to a hardware wallet or a paper wallet.

Ledger nano S
Ledger Nano S Hardware Wallet from Cryptocurrencies

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3. Why should I invest in Cryptocurrencies?

Cryptocurrencies are a product of technological innovation. Many crypto projects are offering better solutions with decentralisation and distributed ledger technologies like Blockchain.

If you believe that these innovations will be a widely used technology and can make people’s lives better in future or now, you can invest in such projects. Cryptocurrencies are the tokens/coins of such projects that also act as a fuel. If a product is successful, the prices of the cryptocurrency will increase.

This is the risk you take when you invest. You invest in land hoping for the prices to go up. You invest in shares and stocks, hoping for the company to perform well. Similarly, you invest in cryptocurrencies with the hopes that the technology behind that crypto will be successful.

The prices can sky rocket, the prices can go to Zero. Cryptocurrency investments carry a lot of risk. Be careful.

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4. Where to Buy Cryptocurrencies?

You can buy cryptocurrencies from exchanges. In India there are many exchanges like Koinex, Zebpay, Coindelta, Bitbns, etc that offer multiple cryptocurrencies to buy and sell. However, some of these exchanges have currently disabled INR based purchases due to regulatory restrictions from the RBI. You can check the latest status of INR on these exchanges here.

Alternatively you can also buy Cryptocurrencies from Peer to Peer exchanges like Localbitcoins, Instashift, giottus and many more. You can compare the prices on multiple Indian and International exchanges and decide where to purchase the cryptocurrency from.

Some exchanges offer only Crypto to Crypto trading. It means you can only buy cryptocurrency using another cryptocurrency like Bitcoin, Ethereum, USDT, etc.

Note: You can buy Cryptocurrency on one exchange and transfer it your personal wallet or another exchange. It is not mandatory to buy and sell or even hold your coins on the same exchange. 

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5. Difference Between Shares/Stock and Cryptocurrencies

Shares are units of ownership of a company. If a company has 10000 shares and you own 1 share, you own 0.01% of the company. While in cryptocurrency, you do not own the units of the company. The cryptocurrency coin or token is just a medium of exchange of value of utility.

Currencies like Bitcoin can be used to transfer value. For example if you want to send $1000 to someone in London. You can buy $1000 worth of BTC and send it. The receiver can redeem it on any exchanges in the UK. Cryptocurrency transfers are cheaper than many other forms of transfer especially banks.

On other hand, Bitcoin can also be used to invest money. You can buy bitcoin now as an investment and sell it when the price is higher.

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6. Why are there so many coins and which are the best to invest? What are ICOs?

Each company or foundation releases its own cryptocurrency to uniquely be identified with it. They also raise money by Initial coin offerings or ICOs. In an ICO, an investor pays in Legal tender or any other existing cryptocurrency to acquire an amount of the new tokens/coins that the company is generating. After the money is raised, these tokens get listed on exchanges and can be traded.

There are 100s of companies doing an ICO every year. It is subjective to decide which one is the best one. I may like a project you wouldn’t. There are also numerous scams happening around the world with Cryptocurrency ICO, so you need to be vigilant where you invest the money.

An ideal way to determine if a coin is worth investing in by checking their product, their team, community response (asking around), and finally if it really solves an issue. If a company is reinventing the wheel sooner or later it maybe become irrelevant.

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7. Are my Coins safe on Exchanges?

In many big exchanges they are usually safe. But, no exchange is fully safe. A hacker can hack into an exchange and steal cryptocurrency. It would mean you will lose your holdings. However, this happens rarely with reputed exchanges. If you are planning to hold short term, keeping your funds in reputed exchanges is safer.

For long term, it is advisable to move your funds to a personal software or hardware wallet.

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8. My Exchange has stopped INR Deposits or Withdrawals, what should I do?

It is really upto you. But the question you should ask is what is it that you want to do?

  • If you want to Hold your positions, hold them on the exchange or move them to Private wallets
  • If you want to sell your coins, but at global price and not on your exchange’s price, transfer your cryptocurrency to a different exchange where the price are higher and sell it there.
  • Has your exchange revealed other plans like a P2P Exchange? Wait for it to be released before panic selling.

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9. I bought when Bitcoin was at Rs. 14 lakhs (19000 USD), now what?

There are multiple options

  • If you believe the prices will be back to the level of 19000 USD, hold it and wait for it.
  • You need money? Sell it for a loss. Next time be careful.
  • If you want to bring down your cost of purchase, buy more at lower rates now so you can average out.
    • If you bought 1 BTC at 20000 USD and you buy 1 BTC at 6000 USD. The total 2 BTC are purchased for 26000 USD at a price of 13000 USD /BTC
  • Invest the Bitcoin into other cryptocurrencies on Crypto-Crypto exchanges like Binance. Diversify your investments.

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10. I think the prices will Never go up.

Sell your positions and invest in crypto again when you feel ready. Why go against your gut?

Ideally, you can sell half your positions and keep the rest and forget about it. If the prices go up, you will be rewarded. If prices go down you can be happy you got half the money out. But this is strictly my opinion. You can choose to do whatever you want.

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Bonus Question – Some Terminologies used by the crypto-community

  • Altcoin – Any Cryptocurrency other than Bitcoin
  • FIAT – Physical paper currency like USD, INR, EUR, etc
  • Bagholder – Investor holding on to a cryptocurrency that has dropped in price
  • Hard Fork – Alteration of the underlying block structure of the cryptocurrency (Software upgrade)
  • DAPP – Decentralised Applications
  • FOMO – Fear of missing Out
  • FUD – Fear, Uncertainty and doubt
  • HODL – A word used instead of hold on context of holding your positions
  • REKT – Trader or investor who is utterly ruined and destroyed with losses
  • MOON – Crypto’s upward momentum as it keeps climbing in price
  • BTFD – Buy the fucking dip (buy when prices have fallen)
  • DUMP – To sell off a coin
  • PUMP – Upward momentum in Crypto price
  • DYOR – Do your own research
  • ATH – All time high Price of a crypto

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More questions? – Join our telegram group to ask, you’ll be warmly welcomed with CruncherOne, our welcome bot.

We hope that the knowledge helps you make an informed decision the next time you decide to buy or sell a cryptocurrency.

Disclaimer: This is not a trading advice. Coin Crunch cannot be held liable for your losses. Do your own research before investing. 

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