Should you HODL your cryptocurrency?

And so we come to the end of this occasional series on Bitcoin etc were we looked at cryptocurrencies, blockchains, tangles, bubbles and other interesting concepts like mining, forks and paper wallets.

What is HODLing?  Someone made a typo in the title of a post in December 2013 and the word has taken on a life of its own with a “bacronym” fitted to the word so that it now stands for Hold On for Dear Life.  Should you HODL your cryptocurrency?  That is a personal decision based on whether you think there is a future for the blockchain and cryptocurrencies, or alt-coins, as they are also known.

Hold On for Dear Life

So, how do you get into this whole alt-coin ecosystem?  First you have to exchange “ordinary” money for cryptocurrency, usually online and usually for Bitcoin.  There are sites where only Bitcoin are bought and sold such as Localbitcoin and others where other alt-coins can be purchased without first buying Bitcoin. Some will allow purchase via credit card, others will not. Localbitcoin will connect you with traders all around the world so if you have GBP or USD to spend you can buy with those as well as NZD. There is a New Zealand based exchange Cryptopia and there are other exchanges around such as Bitfinex where you can then exchange your Bitcoin for some other alt-coin.  Not all exchanges transact all coins so you need to research the alt-coin you are wanting to buy to ensure that the exchange you sign up with will transact it.  Clearly all exchanges will trade all the major alt-coins but if you hanker for something more esoteric then check first.

Let’s walk through a transaction from NZD to Ethereum using some example providers – there are many other combinations out there.

Sign up with Localbitcoin – the system will give you a wallet.

Sign up with Bitfinex – their system will also give you a wallet.

Login to Localbitcoin and buy your Bitcoin and pay the seller electronically.

The Bitcoin are released to your Localbitcoin wallet.

When they arrive (remember Bitcoin transactions are not that rapid) transfer your Bitcoin (less a fee) to your Bitfinex wallet.

Login to Bitfinex and use their exchange to buy Ethereum using the Bitcoin in your wallet.

When that transaction has completed you will have an Ethereum wallet with a quantity in it.

Create a paper wallet for your Ethereum and transfer your newly acquired holding (less a fee) into the paper wallet. Remember, you do not want to leave your alt-coins in someone else’s care on an exchange.  Store the keys to your paper wallet securely.

Once the Ethereum is in your paper wallet, you can check it is there with various online tools.

Then HODL your purchase.

Complex? Daunting? Yes it is, and that is why the whole cryptocurrency world has a lot of work to do before the general population gets involved.

There are simpler methods such as a new service which will (again for a fee) allow you to purchase an amount of any of the top ten alt-coins. Once paid for, in NZD, the creation of paper wallets and the transfer of your alt-coins to the paper wallets is done for you.  At which point an encrypted portfolio of your entire holding is digitally transmitted to you to be unlocked with a passphrase that only you know.  This digital portfolio can then be securely stored giving you peace of mind.  (Note: The operators of that site are personally known to the writer.)

Remember …

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Disclaimers:

  1. Neither the author nor WhaleOil are Registered or Authorised Financial Advisors and nothing written here should be construed as advice to buy or sell anything.  
  2.  The author owns a few cryptocurrencies, so is likely to be biased.

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WH is a pale, stale, male who does not believe all the doom and gloom climate nonsense so enjoys generating CO2 that the plants need to grow by driving his MG.

To read my previous articles click on my name in blue.

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