How To Crypto?
Now that you are equipped with the basic risk rewards of crypto, you might be wondering:
“Ser, how do I enter? HOW TO ALL IN?”
In this article, I’ll mainly be talking about the ways to on-ramp (convert fiat AKA USD, SGD to crypto) and how to off-ramp mainly through exchanges (for those familiar with stocks, similar to brokerages) and also places to store your coins in.
Crypto Exchanges
In the crypto space, there are a plethora of exchanges to choose from depending on your likes and preferences. Coinmarketcap provides a list of exchanges and also the Exchange Score. Personally, I would use Binance or FTX to exchange fiat for crypto. The reason for using them is because of the fees as well as the number of coins that are listed on the exchange, specifically Binance. Although not the most number of coins, it lists coins like Shiba Inu, Dogecoin or what people would term alternative coins (altcoins).
To me, some factors to consider when choosing an exchange are security, fees and crypto selection.
Security
I shall link my previous article on risk rewards here on the example of the Bitfinex hack. When choosing an exchange, be sure to check reviews on the exchange security first. Some examples could include checking if they have a history of being hacked. If they were hacked, what were the procedures they take to further enhance their security after the hack? Other than that, also the 24-hour volume on the exchange. This is because a large amount of volume is susceptible to being hacked. I mean who doesn’t want to steal US$1 billion of volume right?
Fees
On exchanges, fees are charged when you trade, withdraw, and leverage on cryptos. Some fees that you might be charged with are maker/taker fees. Maker (usually limit orders) are fees charged when you become a market maker. Taker (usually market order) are fees charged when you take liquidity off the market. More can be read on Kraken
Usually depositing fiat/cryptos on exchanges are free. The fees usually are charged when you choose to withdraw cryptos off the exchange. On Binance, there is a variable fee that is charged depending on the network that you are withdrawing to. I’ll discuss later on how to transfer in crypto.
The amount that you see is in terms of BTC hence it’ll need to be converted to USD to determine the amount of fees you’re paying in fiat. There are some exchanges that offer free withdrawals like FTX for networks, not under ERC-20 or Gemini offers 10 free withdrawals per month. If you’re not an active trader, Gemini would be able to fulfil your needs with free withdrawals.
Crypto Selection
You might hear the next doggy coin being launched and want to jump on the bandwagon to buy it but realise your exchange has not listed the coin for purchase. This can be a problem when your exchange does not offer a wide variety of coins to purchase.
What you can do is either, find an exchange that offers a wide variety of selections or create multiple exchanges that offer you the flexibility to transfer your funds around.
To determine the exchange to use, you could filter under #coins on Coinmarketcap. Some popular exchanges can be KuCoin, Gate.io.
Of course, there are many other options to consider which can be found here.
Some exchanges like Crypto.com offer services like a crypto debit card to pay your purchases using your coins online.
Whether it proves to be a gimmick is yet to be known. There are people who find it a good way to reap your profits from crypto, others find it a good way to earn cashback in crypto.
So, now you’ve selected an exchange to on-ramp your cryptos for example Crypto.com, there are various options to bring fiat AKA USD onto the exchange. Some ways include credit cards, wire transfers. For Singaporean users, Crypto.com allows you to transfer SGD via StraitsX into the fiat wallet. Other exchanges like Binance and Kucoin, allow you to transfer fiat via Peer 2 Peer transfer. Some factors to consider when thinking of the type of way to transfer money on-ramp: what is the exchange rate to USD and costs to transfer to exchange.
Yield
Apart from buying and selling on crypto exchanges, you would be pleased to know that you can earn interest from your cryptos on the exchange by lending out your cryptos or by “staking”. For example, you’ll be able to lend out your cryptos at a variable interest rate on FTX earning about 10% on your cryptos over a year. That’s much higher than what the bank is paying for interest on your money with them!
Other than that, places like Crypto.com allow you to “earn” from your crypto by “staking” on their platform. You could earn rates of up to 8.5% per year off BTC or ETH which is a pretty good deal considering that you’ll be able to benefit from capital appreciation of ETH and also the 8.5% yield. In the case of Crypto.com, there is a period of time you would need to lock up your funds with the exchange. However, there are other places like FTX Earn (previously known as Blockfolio) where they offer you 8% on your cryptos with the flexibility to withdraw anytime.
Storage
So, now that you’ve bought your first coin through a crypto exchange it would be wise to transfer your coins to a wallet for security reasons. I mean, you wouldn’t want someone to steal your money right?
There are two types of wallets, hot and cold wallets.
Hot Wallet
Web-based wallets, mobile wallets, and desktop wallets are all typically hot wallets. Among them, web wallets are the least secure, though all crypto hot wallets are vulnerable to online attacks. Some examples include Metamask, Trustwallet, Coinbase wallet, Binance Chain wallet. A list of them can be found here:
Reasons to use hot wallets is because of the ease of use. Generally, hot wallets operate online making it easy to approve transactions. For example, many people use mobile hot wallets to trade or make purchases with cryptocurrency. To do so with a cold wallet would be inconvenient. You would need to find a device (typically a computer) in which to plug your cold wallet, then move the requisite amount of cryptocurrency to a hot wallet, and then make your purchase. Although ease of use is its unique selling point, hot wallets pale in comparison to the security cold wallets provide.
Cold Wallet
Cold wallets or hardware wallets usually operate by having physical possession of the cold wallet and plugging it into the computer, as well as a PIN to unlock the device, similar to Apple ID.
Some examples include Ledger, Trezor, Safepal. A list of them can be found here:
Hardware wallets are designed to be immune to hacking. Even when a hardware wallet is plugged into your computer or connected via Bluetooth, depending on the storage method, the funds stored on the drive cannot be stolen. While technically connected to the internet, the signing of transactions is done “in-device,” and only subsequently broadcast to the network via your computer’s internet connection. This “signature” allows you to assign ownership to the recipient of a cryptocurrency transaction. Because your private keys never leave the device, however, even if a devious malware on your computer tried to steal your funds by maliciously “signing” a transaction initiated in your hardware wallet it would not be the correct signature so the transaction would not go through.
So when to use what? Personally, most of my funds are in my cold wallet because of the security it provides, some of my funds are on crypto exchange to buy the dip or sell the peak and some are in a hot wallet, or what some would call burner wallet. Like what people usually say, “not your keys, not your coins”.
Withdrawal
To transfer your coin out from the exchange you’ll need to check that the exchange supports the coin on its native chain or whatever chain you wish you transfer to. Take USDC for example, Binance.com allows withdrawal of USDC on AVAX, BSC, ETH, MATIC, SOL, TRX networks. Hence you’ll need to ensure that the network you want to transfer to is supported.
Next, you’ll need the wallet address of the wallet you are transferring to. To find the address, you’ll probably need to click under RECEIVE or DEPOSIT in your wallet and a string of unreadable letters would appear. Make sure you COPY and PASTE the address on your exchange withdrawal page. DO NOT type it out as any wrong letter would be a wrong address. On the blockchain, whatever is sent/transacted cannot be refunded/corrected. The only refund counter is self-refund.
Once you’re done, all you have to do is wait … for the wallet to receive your coins.
All in all, there is a wide array of options in crypto, whether be in crypto exchanges or storage solutions, but one thing I would like to warn you is to ALWAYS do your due diligence on the product you are using. There are many scammers in the crypto community and if something is too good to be true, it most probably is. So make sure you do research, especially on the security element of the product you’re using, such that it is secure to use. It ain’t a good thing if your savings are all gone within a day because of a security breach.
With that said, this article seems to cover just the centralised aspect of crypto. Next week I’ll aim to cover decentralised exchanges if your worry is the use of a centralised entity.
In the meantime do remember to follow me to keep up to date with my recent posts and leave a comment so that I know how I can better provide information to you!
Disclaimer: Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
In the meantime, if you would like to support me do use my referral links down below:
FTX: https://ftx.com/referrals#a=34586046
Binance: https://accounts.binance.com/en/register?ref=86634135
Crypto.com: https://crypto.com/exch/jz2pxbaezw
Blockfolio: https://link.blockfolio.com/9dzp/e81537cc
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