I have a close friend who is interested in getting started with crypto investment, and he asked me to put together notes on my experiences and observations. What I am sharing below is the markdown version of those notes.
If you have been at this for more than a few months, then what follows probably won't be helpful. But this sub seems to be adding new users at a remarkable rate, so hopefully this will be seen by a few new eyes.
NB: I have injected several of my (strong) opinions into the notes, especially in the "Coin opinions" section. If you feel I was overly harsh about one of your favorite exchanges or favorite coins, then apologies; it's nothing personal. (And it's OK to disagree.)
Cryptocurrency notes for my amigo
Exchanges
The most secure, reputable exchanges are Kraken and Coinbase: * https://www.kraken.com/ * https://www.coinbase.com/ (and https://pro.coinbase.com/)
When trading on Kraken, always using the Trade tab, and never the Buy/Sell button; the Trade tab trading fees are much lower.
When signing up with Coinbase, an account is automatically created on both their main site and on their Coinbase Pro (https://pro.coinbase.com/) site. Always use Coinbase Pro instead of regular Coinbase; the Pro trading fees are much lower.
Security
- Prefer the big two exchanges: Kraken or Coinbase Pro
- Use a strong password that is not used for any other account or website
- Use Google Auth 2FA rather than SMS
- Back up your Google Auth (using its export feature) to a separate device
- If using ACH, tell your bank to create a new checking account only for crypto
- For short term crypto holding, using the exchange (custodial wallet) is fine
- For long term crypto holding, consider transferring to a hardware wallet
Available coins
The selection of crypto available to trade differs on the two exchanges. There is overlap, but also many unique coins on each. Both exchanges have BTC, ETH, XLM, ADA, COMP and other major cryptocurrencies.
Depositing and withdrawing fiat
For fiat deposits and withdrawals: * Kraken supports wire transfers * Coinbase Pro supports wire transfers and ACH transfers
Wire transfers normally have a fee paid to the bank, but there is no fee paid to Kraken or Coinbase Pro. ACH transfers have no fee.
Deposit using either wire or ACH; never use a credit card for deposits, as the fees are very high.
Strategy
Basic attitude
- Only invest what you can afford to totally lose
- Crypto is young and super volatile (more than +/- 30% in a day can happen)
- Assume that a bear market might last multiple years
- Dollar cost averaging (DCA) is a reasonable approach
- Trading crypto for fiat, or crypto for crypto, incurs fees and taxes
Capital gains
Trading (i.e. selling) or spending crypto is a taxable event: * IRS virtual currency FAQ
Coin opinions
- BTC is digital gold
- ETH is the original smart contracts implementation
- COMP, AAVE, and YFI are reputable DeFi projects
- XLM is highly useful for transferring between exchanges
- ALGO technology may be promising
- ADA may be overhyped
- BCH and LTC seem to be stagnant
- DOGE is a meme
- ETC should be avoided
The safest portfolio (i.e. "safest" among crypto, keeping in mind that even this portfolio will be super volatile) is likely around 80% BTC and 20% ETH.
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