Answers to all cryptocurrency traders’ questions
-
- 0
- 856
- 0
Since launching cryptocurrencies on CentralCharts a lot of you contacted us privately to ask us various questions. Please remember that CentralCharts is a community site; do not hesitate to speak out on the forum, by opening a new discussion or by answering one of those already opened which relates to the subject of your question.
So I’m writing this post to answer all the questions we were asked. This page will be added to the cryptocurrency guide. Feel free to add your question if no topic already answers your question.
Question: Are cryptocurrencies risky?
Yes. Yes. Yes.
Do we have to say it one more time? Yes.
Cryptocurrencies are very volatile. This is why using leverage if you trade cryptocurrencies with a CFD is very dangerous.
Question: If certain cryptocurrencies function like company shares, do we receive a dividend?
There are different models of remuneration for investors holding cryptocurrencies. It is more generally referred to as "passive income" or "stacking". For example: NEO offers GAS to investors. As do NAVcoin, Komodo and Waves.
Some cryptocurrencies do not offer "passive income" but allow you to take advantage of free AirDrops. This was the case for Bitcoin, for example; all BTC holders received free Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, etc.
Question: My CFD broker has offered to trade Bitcoin. Is this reliable?
Firstly, you should check if your broker is well regulated. Are we talking about a Cypriot broker or a broker that today strictly respects all European regulations and national regulations? (with limited risk CFDs and guaranteed orders, etc.)
Secondly, it is important to distinguish between trading Bitcoin and cryptocurrency CFDs and investments in a cryptocurrency “wallet”. Two activities that have absolutely nothing to do with each other. I suggest that you look at this post: Cryptocurrencies in a wallet or CFDs?
Question: If I trade Bitcoin through a CFD account, will my capital gains be taxed as industrial and commercial profit (business profits)?
Cryptocurrencies purchased in a wallet are taxable as business profits (if it is "trading").
But trading cryptocurrencies via CFDs is taxed in the same way as all CFDs, with a possible carry forward of capital losses over 10 years, but no allowance. I suggest you read this post for more information: How are CFDs taxed in France?
Question: Does technical analysis work on cryptocurrencies?
Yes... But not very well yet... Let me explain...
Cryptocurrency charts have absolutely all the elements for technical analysis, provided they are sufficiently liquid. Some cryptocurrencies (as with shares) are technically impossible to analyse because their charts consist of flat candles. But this only concerns "small" cryptocurrencies with small capitalisations, and without any daily exchange.
The MAJOR problem currently recorded by cryptocurrencies is that they ALL replicate Bitcoin. King Bitcoin goes up, they all go up; King Bitcoin falls, they all fall. Finally, there is not a huge difference between altcoin charts and those of Bitcoin. If Bitcoin is showing a head and shoulders chart formation, strangely this presentation is the same for the majority of other cryptocurrencies.
We hope that the cryptocurrency market will be regulated quickly and mature so that the cryptocurrencies no longer blindly follow king Bitcoin like sheep.
Question: I receive calls from companies that offer Bitcoin investment or cryptocurrency account management, is this a scam?
Yes. Yes. Yes.
Avoid them! Hang up quickly before being fooled by these dream sellers who will tempt you with 3-digit capital gains!
Does investing or speculating in cryptocurrencies attract you? Then get to the heart of the matter via CFDs with limited risk or via wallet buying.
These are well conceived and more and more investment funds are diversifying their portfolios with cryptocurrencies.
Question: What is the best cryptocurrency purchasing platform?
I keep repeating myself, but there isn’t one. Each cryptocurrency has its best trading platform.
I talk about it in detail here: What is the best cryptocurrency trading platform?
Question: Is it complicated to participate in an ICO (Initial Coin Offering)?
Clearly not. Generally all that is required is making a transfer to another wallet which is communicated to you at the opening of the ICO, or carrying out this same operation via a "Participate in an ICO” form.
With cryptocurrencies, everything is done to simplify investment and participation in ICOs.
Having already participated in 6 ICOs, I can confirm that there is nothing "complicated". Example: Tutorial - How to participate in an ICO on a NEON wallet.
NB: the only ICO on the Ethereum blockchain in which I participated, I simply had to make a transfer.
ICOs are not "complicated", but they are a nest for scams:
1/ Watch out for spammers who spoil social networks such as Telegram at the opening of the ICO, by publishing a false address to which to transfer your funds to participate in the ICO.
2 / Watch out for sites that identically replicate the cryptocurrency’s official site, then send you a nice little email 5 minutes before the ICO’s opening that guides you to a scam address to which you transfer your funds.
Question: Do you always receive new tokens from an ICO immediately after the ICO?
No. On some ICOs the tokens are only delivered to investors at the end of the ICO.
But I strongly recommend that you favour immediate delivery ICOs to make sure you get your precious tokens.
Good to know: with some ICOs, if the fund raising is not complete, the company issuing the new token reserves the right not to reimburse investors. Suffice to say that it is better to avoid this kind of ICO. That's clearly stealing!
Question: I made a transfer to the wrong Bitcoin address, can I cancel this transfer?
No. Once validated, the transaction leaves on the blockchain. If the wrong address is used, the Bitcoins stay on the blockchain and nobody can get them back. There is no point complaining to your cryptocurrency purchasing or trading platform, they can do nothing for you.
Using the wrong address is a FATAL error that is part of the beginner’s mistakes not to make on cryptocurrencies.
Question: 2018 is for the moment a crash year for cryptocurrencies. Do you think at $7,000 a Bitcoin it's time to re-invest?
CentralCharts does not provide investment advice in any case. It is important to remember that any information on the site is only general information and is not personal advice or a solicitation to buy or sell any financial instrument. Any opinions expressed on the site are opinions of the authors only and each investor must make their own judgement making any transactions on financial products depending on their own analysis and their own financial, fiscal and legal situation.
Generally speaking, cryptocurrencies seem to be bearish right now and its better to wait for a bullish signal before buying.The investor or trader who always thinks he can buy at the low end and sell at the high end has his head in the sand.
Since all cryptocurrencies follow the Bitcoin, we will keep an eye on Bitcoin. The end of the crash could be announced by the daily chart. Any analyses on smaller time units would only be taken into account by scalpers and short to medium term swing traders.
Technically, two elements are expected to confirm when the decline is complete:
1/ A bearish channel exit.
2/ A bullish break in the neck line of the old head and shoulders chart.
My daily analysis is here: Daily Bitcoin Analysis.
Question: I'd like to go into cryptocurrency mining but I don't know anything about it. What can I do? Is this activity accessible to everyone?
Cryptocurrency mining is an activity in its own right. I've long thought about getting into this business, but at the end of the day I prefer to stay with what I know how to do, which is to invest and speculate.
To answer the question, I suggest that you first consult this post Embarking on cryptocurrency mining. You will then likely conclude three things about mining:
1/ that mining cryptocurrencies with a RIG is perhaps a little too complex for you.
2/ that mining cryptocurrencies via another solution might not be profitable at all.
3/ that as a computer novice, and without free electricity/internet, it will be hard for you to be profitable
In conclusion, either:
1/ you are a good computer scientist and you can start a RIG and profitability calculations; or
2/ you do not have a free computer, a free internet connection, and free electricity, etc. (See: an employee of a company who wrongfully exploits his work computer), and you can't mine online.
NB: it is easy to get caught if you mine cryptocurrencies at work. Internet bandwidth and power consumption are not very complicated for a company to monitor.
Question: Do you think that cryptocurrencies will be banned in France?
For use, no. But for promotion, it is hard to see how this could be done because the problem is much more complex than with Forex. To suggest paying in Bitcoin is promoting Bitcoin. So banning Bitcoin promotion is banning its use.
France would clearly have no interest in banning cryptocurrencies. On the other hand, and for the good of cryptocurrencies, international regulation would not be a bad move.
Question: I transferred my cryptocurrencies to another platform, but they haven’t arrived . What can I do?
Bad transfer. Error in the address indicated during the transfer. Or a platform that has scammed you.
I'd rather lean towards a simple transfer error.
Checking is simple: just follow the transfer on the blockchain. Example: if it is a Bitcoin transfer, you go to the Bitcoin block explorer, then you enter your public address. You will then see the details of the last transfer and you can then see if an address error has occurred.
Question: I have been asked for my private key to participate in an ICO. Is there risk of a scam?
Telling anyone your cryptocurrency wallet’s private key is a beginner's mistake.
We repeat it (once more, it is never too much): NEVER GIVE OUT YOUR PRIVATE ADDRESS. No one should EVER ask you for it. Otherwise it's a scam!
The private key must be hidden, not on your computer, not on your Gmail, but on a piece of paper at the back of your garden! Because it is the only key that allows anyone to access your wallet!
Question: Is converting a cryptocurrency to Tether the same thing as transferring to dollars? Is it possible to re-convert cryptocurrencies directly into euros?
Theoretically, and on paper, yes. The Tether replicates the US dollar. But if the Tether fails, the Tethers in your wallet may potentially be worthless. I also suggest that you read this post: Cryptocurrencies and fiduciary currencies
On the other hand I do not know of any cryptocurrencies replicating the euro. Some cryptocurrencies claim to do so. Others claim to replicate the pound sterling or the rouble. These are dangerous. When the cryptocurrency market is better regulated, cryptocurrencies replicating a proper fiduciary currency will emerge, and they will be offered as a basis on exchange platforms. In the meantime, you may consider the Tether only. Or returning to euro fiduciary money through your purchasing platform.
Question: How much does it cost to invest in cryptocurrencies?
There is no minimum amount. Well yes, €10. The minimum deposit specified by the cryptocurrency purchasing platform you have chosen.
The right question to ask yourself would be: how much are you willing to risk on cryptocurrencies? If you might lose it all tomorrow, how much wouldn't bother you to lose?
Question: I'd like to buy NEO cryptocurrency.What is the fastest way please? Given that I don't have any cryptocurrency accounts right now.
The NEO Cryptocurrency is only available on cryptocurrency trading platforms. Not on the purchasing platforms (where you are able to deposit euros).
Therefore, you will need to open an account on a platform to purchase cryptocurrencies. You can deposit your euros there and convert your euros into Bitcoins/Litecoins/Bitcoin Cash, etc. (as available). You can then transfer this cryptocurrency to a cryptocurrency trading platform and finally buy NEOs.
NB: on your trading platform, if the NEO is only available for the Bitcoin, with the NEO/BTC pair, it is then preferable to buy Bitcoins on the purchasing platform. If not, you will have to resell your first cryptocurrency (bought on the purchasing platform) for Bitcoins.
Question: I have lost my mobile phone and I can no longer connect to my Two-Factor Authentication (2FA) protected cryptocurrency account. What can I do?
When you secured your cryptocurrency account with a 2FA code, you were given a recovery code. This code is to be kept secretly as a private key. Without this code, access cannot be regained.
The ultimate solution is to ask for help from the platform that hosts your cryptocurrency account. But I'm not sure that they can do much. The funds are there, on your account, but you would never have access to them again.
Question: Can a private key be hacked?
Yes. A key is 52 characters. It is very hard to hack but not necessarily "impossible" if hackers use a "brute force" solution.
For information: a private key is a combination of 52 characters including lower case (from a to z), upper case (from A to Z) and numbers (from 0 to 9). That's 1.6x10^96 combinations. It's THE safest key in the world.
I invite you to try a private key at random. You'll never find one that works.
For your information: your chance of winning the lottery is 1.9x10^7.
Well, despite all these wonderful calculations and the theory of its infallibility, I prefer to secure my cryptocurrencies on a Ledger. At least with a Ledger the key is re-generated every minute. That's enough to give hackers a little more trouble!
Question: I would like to diversify my portfolio with cryptocurrencies. Do you think that's a good idea?
As noted above, some investment funds do this. Well, why not? It's up to you. I don't want to be held responsible for a decision that's yours to you make. Please remember that CentralCharts can not provide investment advice and read our disclaimer about this at the bottom of the website.
Do you also have a simple question for me about cryptocurrencies?
Feel free to ask it following this discussion. I'll try to get back to you as soon as possible.
NB: if your question requires significant explanation followed by a discussion, please open another thread, so that subjects are not mixed up and so that there is some discussion devoted to this subject only.
So I’m writing this post to answer all the questions we were asked. This page will be added to the cryptocurrency guide. Feel free to add your question if no topic already answers your question.
Question: Are cryptocurrencies risky?
Yes. Yes. Yes.
Do we have to say it one more time? Yes.
Cryptocurrencies are very volatile. This is why using leverage if you trade cryptocurrencies with a CFD is very dangerous.
Question: If certain cryptocurrencies function like company shares, do we receive a dividend?
There are different models of remuneration for investors holding cryptocurrencies. It is more generally referred to as "passive income" or "stacking". For example: NEO offers GAS to investors. As do NAVcoin, Komodo and Waves.
Some cryptocurrencies do not offer "passive income" but allow you to take advantage of free AirDrops. This was the case for Bitcoin, for example; all BTC holders received free Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, etc.
Question: My CFD broker has offered to trade Bitcoin. Is this reliable?
Firstly, you should check if your broker is well regulated. Are we talking about a Cypriot broker or a broker that today strictly respects all European regulations and national regulations? (with limited risk CFDs and guaranteed orders, etc.)
Secondly, it is important to distinguish between trading Bitcoin and cryptocurrency CFDs and investments in a cryptocurrency “wallet”. Two activities that have absolutely nothing to do with each other. I suggest that you look at this post: Cryptocurrencies in a wallet or CFDs?
Question: If I trade Bitcoin through a CFD account, will my capital gains be taxed as industrial and commercial profit (business profits)?
Cryptocurrencies purchased in a wallet are taxable as business profits (if it is "trading").
But trading cryptocurrencies via CFDs is taxed in the same way as all CFDs, with a possible carry forward of capital losses over 10 years, but no allowance. I suggest you read this post for more information: How are CFDs taxed in France?
Question: Does technical analysis work on cryptocurrencies?
Yes... But not very well yet... Let me explain...
Cryptocurrency charts have absolutely all the elements for technical analysis, provided they are sufficiently liquid. Some cryptocurrencies (as with shares) are technically impossible to analyse because their charts consist of flat candles. But this only concerns "small" cryptocurrencies with small capitalisations, and without any daily exchange.
The MAJOR problem currently recorded by cryptocurrencies is that they ALL replicate Bitcoin. King Bitcoin goes up, they all go up; King Bitcoin falls, they all fall. Finally, there is not a huge difference between altcoin charts and those of Bitcoin. If Bitcoin is showing a head and shoulders chart formation, strangely this presentation is the same for the majority of other cryptocurrencies.
We hope that the cryptocurrency market will be regulated quickly and mature so that the cryptocurrencies no longer blindly follow king Bitcoin like sheep.
Question: I receive calls from companies that offer Bitcoin investment or cryptocurrency account management, is this a scam?
Yes. Yes. Yes.
Avoid them! Hang up quickly before being fooled by these dream sellers who will tempt you with 3-digit capital gains!
Does investing or speculating in cryptocurrencies attract you? Then get to the heart of the matter via CFDs with limited risk or via wallet buying.
These are well conceived and more and more investment funds are diversifying their portfolios with cryptocurrencies.
Question: What is the best cryptocurrency purchasing platform?
I keep repeating myself, but there isn’t one. Each cryptocurrency has its best trading platform.
I talk about it in detail here: What is the best cryptocurrency trading platform?
Question: Is it complicated to participate in an ICO (Initial Coin Offering)?
Clearly not. Generally all that is required is making a transfer to another wallet which is communicated to you at the opening of the ICO, or carrying out this same operation via a "Participate in an ICO” form.
With cryptocurrencies, everything is done to simplify investment and participation in ICOs.
Having already participated in 6 ICOs, I can confirm that there is nothing "complicated". Example: Tutorial - How to participate in an ICO on a NEON wallet.
NB: the only ICO on the Ethereum blockchain in which I participated, I simply had to make a transfer.
ICOs are not "complicated", but they are a nest for scams:
1/ Watch out for spammers who spoil social networks such as Telegram at the opening of the ICO, by publishing a false address to which to transfer your funds to participate in the ICO.
2 / Watch out for sites that identically replicate the cryptocurrency’s official site, then send you a nice little email 5 minutes before the ICO’s opening that guides you to a scam address to which you transfer your funds.
Question: Do you always receive new tokens from an ICO immediately after the ICO?
No. On some ICOs the tokens are only delivered to investors at the end of the ICO.
But I strongly recommend that you favour immediate delivery ICOs to make sure you get your precious tokens.
Good to know: with some ICOs, if the fund raising is not complete, the company issuing the new token reserves the right not to reimburse investors. Suffice to say that it is better to avoid this kind of ICO. That's clearly stealing!
Question: I made a transfer to the wrong Bitcoin address, can I cancel this transfer?
No. Once validated, the transaction leaves on the blockchain. If the wrong address is used, the Bitcoins stay on the blockchain and nobody can get them back. There is no point complaining to your cryptocurrency purchasing or trading platform, they can do nothing for you.
Using the wrong address is a FATAL error that is part of the beginner’s mistakes not to make on cryptocurrencies.
Question: 2018 is for the moment a crash year for cryptocurrencies. Do you think at $7,000 a Bitcoin it's time to re-invest?
CentralCharts does not provide investment advice in any case. It is important to remember that any information on the site is only general information and is not personal advice or a solicitation to buy or sell any financial instrument. Any opinions expressed on the site are opinions of the authors only and each investor must make their own judgement making any transactions on financial products depending on their own analysis and their own financial, fiscal and legal situation.
Generally speaking, cryptocurrencies seem to be bearish right now and its better to wait for a bullish signal before buying.The investor or trader who always thinks he can buy at the low end and sell at the high end has his head in the sand.
Since all cryptocurrencies follow the Bitcoin, we will keep an eye on Bitcoin. The end of the crash could be announced by the daily chart. Any analyses on smaller time units would only be taken into account by scalpers and short to medium term swing traders.
Technically, two elements are expected to confirm when the decline is complete:
1/ A bearish channel exit.
2/ A bullish break in the neck line of the old head and shoulders chart.
My daily analysis is here: Daily Bitcoin Analysis.
Question: I'd like to go into cryptocurrency mining but I don't know anything about it. What can I do? Is this activity accessible to everyone?
Cryptocurrency mining is an activity in its own right. I've long thought about getting into this business, but at the end of the day I prefer to stay with what I know how to do, which is to invest and speculate.
To answer the question, I suggest that you first consult this post Embarking on cryptocurrency mining. You will then likely conclude three things about mining:
1/ that mining cryptocurrencies with a RIG is perhaps a little too complex for you.
2/ that mining cryptocurrencies via another solution might not be profitable at all.
3/ that as a computer novice, and without free electricity/internet, it will be hard for you to be profitable
In conclusion, either:
1/ you are a good computer scientist and you can start a RIG and profitability calculations; or
2/ you do not have a free computer, a free internet connection, and free electricity, etc. (See: an employee of a company who wrongfully exploits his work computer), and you can't mine online.
NB: it is easy to get caught if you mine cryptocurrencies at work. Internet bandwidth and power consumption are not very complicated for a company to monitor.
Question: Do you think that cryptocurrencies will be banned in France?
For use, no. But for promotion, it is hard to see how this could be done because the problem is much more complex than with Forex. To suggest paying in Bitcoin is promoting Bitcoin. So banning Bitcoin promotion is banning its use.
France would clearly have no interest in banning cryptocurrencies. On the other hand, and for the good of cryptocurrencies, international regulation would not be a bad move.
Question: I transferred my cryptocurrencies to another platform, but they haven’t arrived . What can I do?
Bad transfer. Error in the address indicated during the transfer. Or a platform that has scammed you.
I'd rather lean towards a simple transfer error.
Checking is simple: just follow the transfer on the blockchain. Example: if it is a Bitcoin transfer, you go to the Bitcoin block explorer, then you enter your public address. You will then see the details of the last transfer and you can then see if an address error has occurred.
Question: I have been asked for my private key to participate in an ICO. Is there risk of a scam?
Telling anyone your cryptocurrency wallet’s private key is a beginner's mistake.
We repeat it (once more, it is never too much): NEVER GIVE OUT YOUR PRIVATE ADDRESS. No one should EVER ask you for it. Otherwise it's a scam!
The private key must be hidden, not on your computer, not on your Gmail, but on a piece of paper at the back of your garden! Because it is the only key that allows anyone to access your wallet!
Question: Is converting a cryptocurrency to Tether the same thing as transferring to dollars? Is it possible to re-convert cryptocurrencies directly into euros?
Theoretically, and on paper, yes. The Tether replicates the US dollar. But if the Tether fails, the Tethers in your wallet may potentially be worthless. I also suggest that you read this post: Cryptocurrencies and fiduciary currencies
On the other hand I do not know of any cryptocurrencies replicating the euro. Some cryptocurrencies claim to do so. Others claim to replicate the pound sterling or the rouble. These are dangerous. When the cryptocurrency market is better regulated, cryptocurrencies replicating a proper fiduciary currency will emerge, and they will be offered as a basis on exchange platforms. In the meantime, you may consider the Tether only. Or returning to euro fiduciary money through your purchasing platform.
Question: How much does it cost to invest in cryptocurrencies?
There is no minimum amount. Well yes, €10. The minimum deposit specified by the cryptocurrency purchasing platform you have chosen.
The right question to ask yourself would be: how much are you willing to risk on cryptocurrencies? If you might lose it all tomorrow, how much wouldn't bother you to lose?
Question: I'd like to buy NEO cryptocurrency.What is the fastest way please? Given that I don't have any cryptocurrency accounts right now.
The NEO Cryptocurrency is only available on cryptocurrency trading platforms. Not on the purchasing platforms (where you are able to deposit euros).
Therefore, you will need to open an account on a platform to purchase cryptocurrencies. You can deposit your euros there and convert your euros into Bitcoins/Litecoins/Bitcoin Cash, etc. (as available). You can then transfer this cryptocurrency to a cryptocurrency trading platform and finally buy NEOs.
NB: on your trading platform, if the NEO is only available for the Bitcoin, with the NEO/BTC pair, it is then preferable to buy Bitcoins on the purchasing platform. If not, you will have to resell your first cryptocurrency (bought on the purchasing platform) for Bitcoins.
Question: I have lost my mobile phone and I can no longer connect to my Two-Factor Authentication (2FA) protected cryptocurrency account. What can I do?
When you secured your cryptocurrency account with a 2FA code, you were given a recovery code. This code is to be kept secretly as a private key. Without this code, access cannot be regained.
The ultimate solution is to ask for help from the platform that hosts your cryptocurrency account. But I'm not sure that they can do much. The funds are there, on your account, but you would never have access to them again.
Question: Can a private key be hacked?
Yes. A key is 52 characters. It is very hard to hack but not necessarily "impossible" if hackers use a "brute force" solution.
For information: a private key is a combination of 52 characters including lower case (from a to z), upper case (from A to Z) and numbers (from 0 to 9). That's 1.6x10^96 combinations. It's THE safest key in the world.
I invite you to try a private key at random. You'll never find one that works.
For your information: your chance of winning the lottery is 1.9x10^7.
Well, despite all these wonderful calculations and the theory of its infallibility, I prefer to secure my cryptocurrencies on a Ledger. At least with a Ledger the key is re-generated every minute. That's enough to give hackers a little more trouble!
Question: I would like to diversify my portfolio with cryptocurrencies. Do you think that's a good idea?
As noted above, some investment funds do this. Well, why not? It's up to you. I don't want to be held responsible for a decision that's yours to you make. Please remember that CentralCharts can not provide investment advice and read our disclaimer about this at the bottom of the website.
Do you also have a simple question for me about cryptocurrencies?
Feel free to ask it following this discussion. I'll try to get back to you as soon as possible.
NB: if your question requires significant explanation followed by a discussion, please open another thread, so that subjects are not mixed up and so that there is some discussion devoted to this subject only.
