If you’re new to the world of cryptocurrency, you may be wondering how crypto conversion works, or, perhaps, even what it is. This complete beginners guide explains what cryptocurrency conversion is, why it is useful, and how to perform it. Once you have got to grips with the terminology and the process, converting crypto becomes rather simple.
It can be daunting to do anything for the first time. Still, don’t be put off from trying. Once you have done the conversion for the first time, you will be able to do it again without hesitation. This could lead to much higher profits on your portfolio.
What is Cryptocurrency Conversion?
Put simply, cryptocurrency conversion is the process of exchanging one crypto token to another. Let’s take ETH to BTC conversion as an example. In this case, you might have a pot of Ethereum (Ether) that you wish to swap for Bitcoin.
A conversion would give you the amount of Bitcoin (BTC) that is equivalent to the amount of Ether that you hold. On the most basic level, that is what crypto conversion is. Still, there are fees and a couple of other things to bear in mind before you do it.
You will meet such terms as currency pairs or trading pairs. This simply means the two currencies in the crypto conversion. Some cryptocurrencies can only be traded using other tokens, so you will find some trading pairs more prevalent than others. Bitcoin and Ethereum frequently feature in trading pairs because of this.
Why is Cryptocurrency Conversion Useful?
There are three main reasons why cryptocurrency conversion is useful. They are:
- It allows you to trade for the desired currency. For example, if you have Bitcoin but want Ripple instead.
- It allows you to exchange your current currency for one that will enable you to buy your desired currency. For example, if you have Ripple, but need Ether to buy Enjin.
- It allows you to take advantage of a currency that is stronger than another one and, therefore, make a profit. For example, if Ether is strong against Bitcoin.
Whilst this shortlist isn’t exhaustive, these are the most popular reasons for converting cryptocurrency.
How to Convert Cryptocurrency
You can convert cryptocurrency in 5 easy steps. These are:
- Pick your desired cryptocurrency and choose which of your existing cryptocurrencies you want to trade for it.
- Ensure you have a wallet that supports both cryptocurrencies or make sure you have a wallet that supports the currency you’re exchanging for (assuming the crypto that you hold is already stored in a wallet).
- Use a cryptocurrency conversion tool. Good crypto tools will display the amount you will receive into your crypto wallet with fewer transaction fees. To be on the safe side, it is worth checking if fees apply.
- Once you’re happy with the amount you’re getting and understand what fees apply, process the transaction by proceeding. You will need to supply your public wallet keys for the system to debit and credit the right accounts. A good conversion platform will do the rest for you.
- You will likely have a short wait while the platform processes the transaction and both blockchains are updated. Don’t worry, this is normal and your currency will be updated in your wallet shortly.
That’s it. You should make sure you’re using reputable exchanges and stay safe at all times. The final bit of advice is that if you are trading in middling to large amounts of crypto, it is advisable to purchase a hardware wallet. These storages are much safer than their software alternatives. Follow this guide to become a pro in no time at all.