How to Invest in Crypto

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22 Jan 2024

A comprehensive beginners guide to getting started on your crypto journey. (Part 1)
In much the same way as travelling to the new world or braving the wild west hundreds of years ago, crypto is not for the faint of heart. Most of mankind’s innovations were bread of a desire to pursue freedom and prosperity, and the chance at a better life. Crypto is the latest manifestation of that age-old pursuit. It is a pioneering innovation that is the modern day equivalent of the Oregon trail or the crossing the Atlantic ocean in search of what would eventually be known as the American Dream. It will change the way the financial world functions, and make successful early adopters rich beyond their wildest dreams.
Many did not make it in the wild west, or the Atlantic crossing. They became victims to the myriad distractions, prey for the criminals and scammers, casualties of the elements and natural risks that are inherent to the life of a pioneer.
Crypto is no different. It is very much the modern wild west, fraught with scams and hacks and nascent infrastructure ripe for the picking. Amongst the pirates and tricksters and bank robbers, however, there lies the promise of a life of true prosperity that is becoming increasingly scarce in modern society. We are rats in the rat race, rigged from the start to favour those with connections and wealth, and dooming the rest of us to a comfortable life of Fiat slavery.
Until now. We are still early, and crypto is the most asymmetrical bet in generations.

Crypto Basics: What you need to know to get started.

What is Cryptocurrency

In simple terms, cryptocurrency is a digital currency housed on a distributed ledger using blockchain technology. The top cryptos like Bitcoin and Ethereum are truly decentralized cryptocurrencies that embody the ethos of crypto … decentralized, permissionless, pseudonymous, borderless, censorship resistant with sound money principles.
The real value of crypto, and the main reason it has such a revolutionary implication to our financial system, is the fact that it is not controlled by a third party. Instead, cryptocurrencies are governed by distributed software housed on tens of thousands of nodes around the world, and protected by cryptography. The monetary rules are written in and governed by code rather than by a government. No single party can alter the rules.
In today’s debt-ridden economy, where money printing is rampant, a currency that is beyond the control of the government counterfeiters (um, printers) is extremely important. Crypto will continue to subsume ever larger portions of the world’s wealth as people seek shelter from the fiscal ineptitude and gluttonous mismanagement by the world’s governments.

Types of Cryptocurrency

This is a more complex discussion, but for the purposes of getting started, we can discuss the four main types of cryptocurrencies from an investment perspective.

Bitcoin

Bitcoin is the first successful cryptocurrency, based on Proof of Work consensus, and with the largest market cap and global liquidity. It is a simply structured digital currency that trades complex functionality for extremely robust decentralization and security.
Bitcoin is effectively just a distributed ledger housed on tens of thousand of nodes (computers) around the world, which does nothing more than track the balances of addresses on the network. You can send and receive Bitcoin, send messages (including inscriptions) and store your Bitcoin.
From an investment perspective, Bitcoin is better suited to store and protect your wealth than to make it in the first place. That said, as it approaches true mass adoption in the coming years, it will certainly amplify any wealth stored within it. If history is any indication, Bitcoin is still likely to see 3X multiples from previous highs, if not more.
Notable features: has a 21M Bitcoin supply cap, rewards miners with BTC for propagating the network, has a Halving every 4 years that reduces miner rewards by 50%.
2. Smart Contract Blockchains “Layer 1s” (eg. Ethereum and Solana)
Smart contract blockchains are a 2nd generation cryptocurrency. They expand beyond the functionality of Bitcoin by adding a native virtual computer that is housed on the blockchain, and capable of executing code called smart contracts.
Ethereum was the first smart contract platform, and functions with what is called the Ethereum Virtual Machine (EVM), a sort of protocol that exists on thousands of computers around the world and follows a strict set of rules. Ether (ETH) is the native currency of the network, which is based on Proof of Stake consensus rather than proof of work like Bitcoin.
Whereas Bitcoin allows a user to send, receive and store their BTC, Ethereum enables complex financial transactions without the need for any third party. Together, Bitcoin, Ethereum and the myriad of other blockchains that have come to market empower users to take full custody and control of their own wealth and use it in a growing set of use cases.
Notable ETH features: Can create tokens, smart contracts, has no supply cap but is deflationary when use is high, open source, open to all users and builders (devs)
3. Altcoins:
“Altcoins” is a very all-encompassing term. They can be thought of as anything apart from BTC and ETH. They come in a variety of forms, but all are generally early stage pioneering protocols that are high risk and high reward. Altcoins are where you will find the 10X, 50X and 100X returns in a bull market, but also where most of the tokens will trend to zero against BTC and ETH over the long term.
Altcoins can be grouped into three main categories. Large caps (blue chips), mid caps (speculative but with some adoption), and small/micro caps (super speculative).
4. Stablecoins:
Stablecoins are simply tokens on a blockchain that are pegged to, and redeemable for, a Fiat currency (eg. Dollars, Euro, etc). The good ones are backed and audited, and the largest market cap (and liquidity) stablecoins are USDT (Tether) and USDC (Circle).
The decentralized stablecoin market is still very nascent, but tokens like DAI (Dao Maker) have reasonable integration and liquidity.

Types of Crypto Investments (Stocks, ETFs, Crypto)

When venturing into the world of crypto, an investor needs to consider how involved they want to be in the curation of their investments. There are really three main vehicles for investing in crypto:

Stocks and ETF’s (Level 1 — Simple): This form of investment abstracts away all the complexities and a great deal of the risks associated with crypto investing. Conversely, in exchange for that security and simplicity, it also trades away the more explosive potential of investing directly on chain in Altcoins. Great for ease of access and management, but lower potential returns. Some great options for crypto stocks and ETF’s are Coinbase ($COIN), MicroStrategy ($MSTR), Purpose Bitcoin and Ether ETFs (BTCC.B & ETHH.B), Grayscale Bitcoin Trust (GBTC) and the myriad BTC mining stocks
Crypto Exchanges (Level 2 — Intermediate): Trading on an exchange comes with some added risks, but some added benefits as well.

Risks: On/Off ramps (getting funds on and off the exchange), exchange has custody of your funds, fees can vary widely.
Benefits: Access to reasonable selection of Altcoins, simple to use, robust features (loans, yield, etc)

On-Chain (Level 3 — Advanced): This is where the real profits can be made, and where knowledge and experience are a pre-requisite. This is where you will find Altcoins before they reach exchanges, and before the retail masses inflate their prices. The risks involved in on-chain trading are certainly higher, as coins are held in your own self-custody wallets, and the responsibility for security is yours alone. This is where the 100X returns are found, and where the 0X returns are founds as well.

Check out my collection of articles in the list below for more in-depth and specific crypto education.

https://medium.com/@SovereignCrypto/list/crypto-education-5fb6b3f78782

A Step-by-Step Guide to START Investing in Crypto:

1) Open an Account with a Crypto Exchange (exchange reviews here)

The first step to begin your crypto journey is opening an exchange account. The process is simple and generally straight forward, much like opening a brokerage account, but typically with less paperwork.
My preferred exchanges from 4 years of testing the majority of them are Swissborg (non-us) and Kraken(all), both of which have a great set of features and safety profiles. For on and off ramps, Kraken is simpler. For fees and simplicity, Swissborg is better.

KYC (ID and info verification)
Fund account (credit card, bank transfer, etc)
Purchase crypto (see step 2)
Send to self custody wallet (optional but recommended — see Part 2 of this article)

2) How to Choose a Crypto to Buy

Start with the blue chip large cap altcoins. If you are looking to make life-changing gains, you will have to go out the risk curve from BTC and ETH to achieve it. Have a look at my recent portfolio breakdown here for a place to start your research.
Research the top 10–20 coins on Coingecko, an altcoin listings website. When you first begin investing in Altcoins, I would recommend starting with the more established large caps before venturing too deep into the altcoin forest. (examples: LINK, SOL, AVAX, IMX)

3) On-Chain Trading (The Real Alpha)

On-chain trading is a topic all on its own, and requires a real in-depth discussion. Part 2 of this article will dive deeper into the steps involved to trade altcoins on-chain, invest in Decentralized Finance (DeFi) and set yourself up for a massive bull run. The following is primer of the steps needed to venture into the on-chain world, an overview of what to expect in the Part 2 deep dive.

Download a crypto wallet (Metamask, Trustwallet, Zerion). Be very careful with the websites, as there are always spoof sites that are scams. Double check all URLS.
Fund the wallet from your exchange account or directly with a credit card.
Store your seed phrase on paper, and DO NOT show it to anyone at any time for any reason.

Make sure to read up on how wallets work (article here), what block chain gas fees are, and get ready for a masterclass on on-chain investing in Part 2 of this article. In the meanwhile, your best bet is to get familiar with some of the crypto resources and learn about the top coins on Coingecko to get a basic understanding of the types of projects out there and how they are valued.

Crypto Resources:

Coin listings:

Coingecko
CoinMarketCap
Dextools (altcoin micro caps)

Crypto News:

Twitter is the best resource for crypto news. Start with some of the bigger accounts like CoinTelegraph, Altcoin Daily, Crypto Banter, IvanOnTech, MilesDeutscher and then tailor to your preferences. Keep in mind, half of what you hear is nonsense, be careful to weed out the noise and focus on the alpha.

Top Centralized Exchanges (CEX):

Coinbase (high fees, safe, good on/off ramp options, low altcoin options, reasonable suire of features)
Kraken (mid fees, safe, good on/off ramp options, low altcoin options, low features)
Swissborg (low fees, low on/off options, med altcoin options, great UI, high features)
Crypto.com (mid fees, good on/off option, lots of alts, slow but reasonable UI, high features)

Top Decentralized Exchanges (DEX) (More on this in Part 2)

Uniswap (most altcoins, highest volume)
PancakeSwap (cheaper fees, mainly BSC, high volume)
1 INCH Exchange DEX Aggregator (combines all dex’s in one website)

NFT Marketplaces:

Opensea.io (largest and most volume)
Blur.io (2nd largest)

YouTube Channels to Follow:

IvanOnTech
CryptoBanter
CoinBureau
Miles Deutscher
Virtual Bacon
InvestAnswers

Portfolio Trackers & Wallets:

Zerion.io (best wallet and tracker)
Metamask.io (most compatible wallet)
Trustwallet (simple wallet, in-wallet swaps, solid integrations)

Conclusion:

Investing in crypto is one of the best decisions you can make on your journey for financial freedom. It is a means of opting out of the Fiat rat race we are all born into.
Like anything of value, the journey has no shortcuts, and requires a great deal of time an effort to learn. But the value returned on that investment will far surpass any other opportunity in the markets since the early days of the internet.
It it not for everyone, but those who do take on the journey are making the leap for true financial and ideological freedom. Good luck on your journey, and stay tuned for Part 2: A Deep dive into Altcoin Investing.
Good luck out there, and see you on the next one!
Sovereign Crypto
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