I openly admit that I am not cryptocurrency millionaire. I’m not even a thousandaire at this point. But I have been able to grow a modest amount of “play money” in to a larger, though still modest amount of “play money.” And in the process, I’m learning a lot about the so-called “cryptosphere,” which I have discovered to be an exciting amalgam of unapologetic swashbuckling profiteers, blockchain apologists and their thralls, and anti-government conspiracy theorists. In short, the crypto community could be the most interesting group of people you have never heard of.
Wait, what is cryptocurrency?
You have probably heard of Bitcoin, which gained popularity in the mainstream after the darknet trading site Silk Road was very publicly shut down. Bitcoin, from the moment of its inception just over 10 years ago, was always intended as a “Peer-to-Peer Electronic Cash System,” and it was this cash system that people used on Silk Road to pay for everything from drugs and stolen credit cards to much, much worse. Turns out that a cash system that is essentially untraceable and entirely independent of government control really does bring out the better angels of our nature, eh?
Anyway, while Bitcoin continues to be the juggernaut of the cryptocurrency market, it is by far not the only one. In the years since, a number of cryptocurrencies have been developed, from Litecoin and Stellar Lumens to Neo and Ethereum – not to mention thousands, literally thousands of other coins, that have been offered through ICOs (Initial Coin Offerings), often as crowdfunding certain blockchain tech projects or as incentives to distribute computing across a network.
I’m not sure I understand crypto but I want to make money.
Fun fact: you’re probably in good company. Though cryptocurrency exchanges have existed for quite some time (c.f. Mt. Gox clustercuss), much of the attention on exchanges since the Fall of 2017 – when Bitcoin and other cryptocurrencies ballooned to sometimes 500% of their mid-2017 values – has come from speculators. Sadly, 2018 proved brutal for the cryptosphere. Many currencies saw their value drop sometimes 90% from their peak. And of course, with so much of that money also went the blithe optimism and promise of gettin’ rich quick. To be fair, a few people actually made quite a bit of money. For a while, Twitter was populated with people showing off their new cars (a Lambo on at least one occasion) or their confirmations of student loan payoffs. However, in any financial market, if there are big winners, there are lots and lots of losers. Most people lost some of their money, some lost most of their money, and a few lost everything.
A lot of the buzz has died down in the last twelve months, but now there are some who are suggesting that the bottom is in, and that the market is going to be turning around soon. Indeed, the last few weeks in the cryptosphere have been exciting, with double-digit daily gains on some coins, even if the outlook is still shaky. Underpinning all of this speculation is the notion that the technology is still evolving, and that we are just beginning to understand what the blockchain can do for society. This is where the technology wonks get to shine. If profiteers are focused on the squiggly line and technical analysis (much more to come later), then blockchain enthusiasts are the fundamental analysts making judgments about investing in crypto projects on the basis of their technological merit.
Mixed in to all of this are a third group, which I can only describe as the pro/anti group. Some are pro-privacy, anti-corporate, digital survivalists while others are kind of anti-regulation libertarians. A few are outright conspiracy theorists. But one thing they all have in common is the believe that cryptocurrencies are part of a cohesive plan to survive an eventual government-corporate takeover – or meltdown, depending on who you are talking with. Like the blockchain fans mentioned above, in the crypto market, these tend to be “hodlers”( an Internet-age uplift of the Reddit-first mispelling of “hold”), whose investment in crypto is long term, and not based on the fiat (dollar, euro, yen, pound) value of cryptocurrency at any given time. Indeed, some among this group believe fiat will eventually be worthless, and that the future belongs to those who invested early in the new global currency.
OK, I think the blockchain is interesting, and I have my doubts about the global regulatory and corporate superstructure. But right now, fiat works for me and I want to make make more of it.
Whatever your motivation, trading in cryptocurrencies has never been more accessible. Here are the steps I took to get into cryptocurrency trading, with my particular opinion on each:
- Buy or receive crypto. Search “buy cryptocurrency” and you’ll find dozens and dozens of services that will take your money and give you cryptocurrency. Do your homework. I felt uncomfortable giving a lot of personal contact or financial information to a service that wasn’t registered in the US (and therefore, reasonably regulated), so my options were somewhat limited. Your results may vary, but as is often bandied around in the cryptosphere – “do your own research (DYOR).”
- Set up an account with an exchange. If there are dozens of services that convert fiat into cryptocurrencies, there are hundreds of exchanges. Again, DYOR, as exchanges are often targets for hacking, including DDoS attacks, security breaches, and currency theft. Big names in this area include binance.com, bitfinex.com, pro.coinbase.com (formerly GDAX), gemini.com, bitmex.com, etc, etc. Personally I like to have accounts in a couple places, so DYOR!
- Transfer crypto to your exchange wallet. Each cryptocurrency will use a unique wallet hash, so create a wallet through your exchange. Go back to your other wallet and send the funds to the exchange wallet. NOTE: I strongly recommend having a layer or two between your credit card or banking information and your exchange. Like I said, exchanges have been hacked in the past. Also, by keeping your cryptocurrency and fiat funding between exchanges and other services (and by extension, out of your bank account), you may be able to avoid paying hefty capital gains taxes before you are ready to cash out.
Thanks, man. Now I’m ready!
Well, I suppose so… if you’re ready to look at cryptocurrencies as fancy digital roulette, where your only bet is black or red (up or down, get it?), but that’s a great way to lose a lot of money. In upcoming posts, I’ll share some of the hard lessons I’ve learned around fundamental and technical analyses, taking profit and stopping losses, and leveraging my way into very small numbers. If you don’t want to have a similar experience, do a LOT of research into trading, or just stay tuned, as I really hope I’ll have something worthwhile to share soon!