How to Buy and Store Altcoins

This guide is part of the “Guide to Altcoins” series.

Buying altcoins can feel overwhelming, especially when you first enter the crypto market. With so many projects, exchanges, and wallet types to choose from, it is very easy to get lost. This guide is designed with beginners in mind, to cut through the marketing and show you a safe, easy to follow process. 

Research and analysis are the first steps in preparation, followed by purchasing and storing. You will be able to handle altcoins with greater confidence and be able to protect your assets if you follow the steps we outline below.

Altcoins were created because not all cryptocurrencies aim to accomplish the same thing. Bitcoin is regarded as digital gold because there is a limited amount of them, but stablecoins allowed value to be stored in digital dollars at parity and Ethereum introduced smart contracts. Understanding these differences will immediately make you a more savvy investor.

3 essential steps before you buy

Step 1: Do your own research (DYOR)

This may seem obvious, but you would be surprised how many people don’t do this. The first rule of altcoin investing is never buy just because someone online told you to do so. Social media shilling and hype are designed to make you act fast, not weigh your options. Instead, slow down and study the fundamentals, we’ll teach you how.

Start with the project’s whitepaper, this is the document that shows you what the coin is supposed to do. For example, Ethereum’s whitepaper described its systems as programmable money which operates through smart contracts. 

Next, look at the team. Does the project have experienced developers or is it completely anonymous? You want to see teams with a track record, like the people behind Polygon. When you see a strong dev team it will usually inspire more confidence in the market than anonymous developers with no history.

Then, look at the tokenomics. This simply means the economics of the token. How many tokens exist? Is there a cap, like Bitcoin’s 21 million limit, or is the supply infinite, like Dogecoin? Who holds the majority of tokens? Is it insiders, early investors, or the community? These questions will help you judge if the token has any long term potential or is it more of a short term gamble.

Finally, check the community. A strong and engaged community constantly posting on Reddit, Discord, and Telegram can keep a project alive, while an inactive one is a big red flag.

Step 2: Understand the volatility and risks

Altcoins are much more volatile than Bitcoin. It is common to see price swings of 20% or more in a single day. Some coins rise quickly, then collapse just as fast. Traders see this as an opportunity while investors tend to lack the dexterity to move quickly in and out of trades.

A famous example was the Terra/LUNA crash of 2022. The algorithm used by the system allowed users to burn UST and mint LUNA in order to raise it back up if it ever fell below $1, and vice versa. This worked for a while, LUNA became one of the top 10 cryptocurrencies by market capitalization, and UST increased to over $18 billion in circulation.

Early in May 2022, UST lost its peg to the dollar, which sparked the crash. It continued to fall rather than rise. In an attempt to defend UST, the algorithm produced enormous amounts of LUNA, which led to an explosion in LUNA’s supply and a collapse in its price. LUNA dropped from $80 to fractions of a cent in just one week. The stablecoin UST fell below 10 cents.

Because of stories like this, you should only invest money you can afford to lose. Treat altcoins as high-risk, high-reward digital assets, not as a safe haven for savings. If you plan to hold them, balance your exposure with more stable options like Bitcoin or stablecoins which directly track the US dollar, rather than algorithmic systems like UST/LUNA.

Step 3: Secure your digital identity

Before you buy anything, secure your online accounts. Start with a strong and unique email address dedicated only to crypto. Use a password manager to create long, random passwords for your exchange logins.

The next step is enabling Two-Factor Authentication (2FA). Always use an authenticator app like Google Authenticator or Authy, not just SMS, which can be hijacked through SIM swaps. These extra layers of protection will dramatically improve your cryptocurrency security before you even purchase your first coin.

How to buy altcoins

Centralized vs decentralized exchanges

For beginners, a centralized crypto exchange (CEX) is usually the best place to start. Platforms like vTrader, Binance, or Coinbase are beginner-friendly, regulated, and provide simple fiat buy options.

When choosing a CEX, pay attention to:

• Reputation – Has there ever been a hack or legal issues with the platform?
  
• Fees – Your profits are impacted by both trading and withdrawal fees. Did you compare fees between platforms?
  
• Coins available – While some exchanges list hundreds of tokens, others only list a handful.
  
• Security – Are customer funds insured by the exchange? Does it implement robust login security?

Then, on the opposite side of the spectrum, a decentralized exchange (DEX) like Uniswap or PancakeSwap gives you more control because you trade directly from your wallet. However, using a DEX means you must already own a base cryptocurrency such as ETH or BNB, you must also understand blockchain networks, and be comfortable with paying gas fees (ETH).

A common beginner mistake is falling for fake tokens on a DEX, as it is usually an easier entry point for new projects. On Ethereum, thousands of scam coins are launched daily. If you do not carefully check the official token contract and whitepaper, you might buy something worthless. DEXs are powerful but less forgiving than CEXs. A CEX will review a project thoroughly before allowing it on their platform so many newcomers start with a centralized exchange and only then move to experiment with DEXs.

How to buy on a CEX

This is the most straightforward way to buy tokens.

Step 1. Make an account and confirm it. Know Your Customer (KYC) verification is required for the majority of exchanges. An ID and occasionally proof of address will be required. Regulators have demanded this verification in order to stop money laundering.

Step 2. Add money to your account. Exchanges typically accept deposits made with a credit or debit card, a bank transfer, or sometimes even with PayPal. 

Step 3. Find and buy your desired altcoin. Look for the trading pair you want, like SOL/USD, after your account has been funded. If you put in a market order, it will execute immediately at the current price. Limit orders are used by more experienced traders to determine their own entry price.

The altcoin will show up in your exchange wallet after you purchase it. Although you are technically the owner at this point, it is not the best idea to keep it there for an extended period of time. Remember exchanges are only good for making purchases, not for storage.

How to buy on a DEX

The procedures are somewhat different if you would rather purchase through a DEX. You first link the platform to your wallet. After that, you exchange a base token, such as ETH, for your selected altcoin. You must pay the transfer fees in the native token of the blockchain and validate the transaction on your hardware wallet or wallet app.

For example, gas fees must be paid in ETH if you use Uniswap. Fees on the Binance Smart Chain will be paid in BNB. Because fees vary greatly, choosing the correct blockchain is very important. Ethereum can cost you $20 for a single swap during periods of high traffic, whereas Polygon might cost only a few cents.

While this process avoids intermediaries, it requires careful attention to the token addresses. For beginners, using a CEX and later transferring to a wallet is the most straightforward path.

How to store altcoins

Why you shouldn’t keep crypto on exchanges

Many novices simply leave their coins on the exchange after making a purchase. This is dangerous. Regulations can change and can cause exchanges to be shut down, they freeze withdrawals for your country, or even get hacked. Even big platforms can fail, as demonstrated by FTX’s 2022 collapse.

Moving your coins into your own wallet as soon as possible is therefore the golden rule.

Hot wallets vs cold wallets

To understand crypto wallet types, you first need to compare hot wallets and cold wallets.

• Hot wallets, such as desktop applications, browser extensions, and mobile apps, are constantly online. They are more vulnerable to online attacks, but are practical for speedy transfers and trading.
  
• Cold wallets are offline solutions, such as paper wallets or hardware wallets like Trezor and Ledger. These are far safer for long-term storage and keep your private keys safe from hackers. 

Most serious investors use a mix of a hot wallet for small, frequent transactions and a cold wallet for the bulk of their holdings.

Custodial & non-custodial wallets

Using a custodial or non-custodial wallet is another option you will be faced with.

• Custodial wallet. Your private keys are held by a third party in custodial wallets. Consider it similar to renting an apartment, you live there, but the landlord still has the master key.
  
• Non-custodial. You have complete control with non-custodial wallets. You must keep your seed phrase safe and your private keys in your possession. It’s similar to having your own home and being the only one with the keys. Both the freedom and the responsibility belong to you.
  

As the saying goes, “not your keys, not your coins.”

Setting up your wallet

When setting up a new wallet follow these 4 simple steps to increase your security:

1. Download the official app or connect your hardware device.
   
2. Write down your seed phrase. This is the set of 12 or 24 words that serves as your ultimate backup. Keep it offline and never share it with anyone.
   
3. Add extra security features such as a PIN or biometric login if available.
   
4. Test the wallet with a small transfer before moving larger amounts.
   

A common mistake is storing the seed phrase in a screenshot or cloud storage. If hackers gain access, they can drain your funds instantly. Always write it down on paper or even engrave it on a metal backup plate for fire and water resistance.

How to transfer coins from exchange to wallet

To transfer coins, copy the address from your wallet and enter it in the exchange’s withdrawal field. Make sure the blockchain networks match every time. If you send USDT on Ethereum to a Binance Smart Chain address, you will lose those funds forever.

Keep in mind that transfer fees change depending on network congestion. 

Best security practices

Cyber security is a continuous process rather than a one time event. These are the habits you should stick to:

• Make your storage more varied. Don’t keep all of your money in one wallet. Distribute holdings among various hardware devices and wallet types.
  
• Watch out for phishing scams. Even seasoned investors have been duped by phony Ledger update emails and MetaMask pop-ups. Never click on dubious links, use bookmarks, and always double check the website’s address.
  
• Update your software. To fix security flaws, update the operating system, hardware firmware, and wallet apps. For this reason, Trezor and Ledger regularly release updates.
  

If you follow these simple measures you can dramatically improve your cryptocurrency security.

Taking control of your altcoins

Although purchasing altcoins is simple, doing it correctly can take time to learn. Research projects are the first step in the process, after which you buy your tokens on a trustworthy exchange and move your funds to a safe wallet where you alone have the private keys.

Protecting your seed phrase is the single most important security habit. If you lose it, you lose your coins.

By their very nature, altcoins present both opportunities and risks. By following proper preparation and storage precautions, you can save your capital and put yourself in a position to profit.

Are you prepared to begin? On vTrader, you can find altcoins that have already been assessed. You can create your first wallet and securely store cryptocurrency on this reliable and regulated exchange.