3. Skin in the game

(If you're ready/want to...no rush)

We know what you’re thinking…you subscribed to Crypto Pulse to learn about crypto and how to buy it (if you choose). Enough with the biographies!

We respect that, and we aim to please at Crypto Pulse. Our goal is to build your fundamental knowledge of Bitcoin and crypto so you can make the best decisions for yourself moving forward. In order to achieve that we have to move somewhat slowly, but trust us, we’ll get there! It’s a long journey!

The reason is, if you truly understand what you’re buying and WHY you’re buying it, the volatility is way easier to stomach. In crypto, you want “diamond hands”, not “paper hands”. We promote HODLing (Hold On for Dear Life) behavior…aka long term asset holding.

However, I (Chris) am most motivated to learn something when I have skin in the game. I saw this post on Twitter the other day and it really resonated with me.

I answered “no” btw. The reason is two-fold. First, if I’m just reading about something and I have no investment in it, I really don’t care if it goes to zero. But when I put my own hard earned money (aka time) into it, I start to care deeply and really want to learn about it.

Second, the light didn’t click for me until I actually used the Bitcoin network.

Transferring value utilizing a global, open, immutable, permissionless, censorship resistant, novel technology with no banks or middlemen was really eye-opening, and most importantly, it worked! I immediately thought, “wow, this is gonna be massive.” However, I didn’t know jack about Bitcoin when I first bought it. I was really nervous and thought it was going to vanish in front of my eyes after I hit “buy”. I thought it would be zero dollars the next day. I checked the chart every hour for like 3 days. I thought someone would steal it immediately from my account. That was in regard to a few hundred dollars worth mind you. Yea…I’m psycho.

But it forced me to dig deep and learn what I bought and actually use it (the Bitcoin blockchain). I couldn’t own something that I didn’t understand, so I read and read and read and read. As you can guess, I’m still reading daily! This was the approach to Bitcoin and crypto that I took (doesn’t make it right), so I wanted to make sure to offer you the same at least.

The problem is that maybe you feel having some skin in the game would help you understand more, but you don’t know where to buy Bitcoin (or other cryptocurrencies) and are scared to make a mistake. There are lots of options out there for sure, all competing for your business, all with different trade offs. We’ve made those mistakes (trust us) and we’re here to help you if we can.

Thus, we’ve put together a table of centralized exchanges where you can buy and sell Bitcoin/crypto. This is not a 100% comprehensive list and is focused on centralized exchanges that you’re familiar with. You buy crypto from a company and they hold it for you. It’s the traditional model. In subsequent newsletters, we’ll talk about decentralized exchanges (an example is Uniswap) where it’s really just math and code - not a company - that operates the exchange. You are your own bank in that example and it’s where the world is moving to. But not quite yet…

Each of these options in the table has trade-offs as stated before. There are differences in the crypto assets you can buy, buy/sell fees, withdrawal fees, withdrawal ability, state restrictions (sorry NY), user interfaces/simplicity, ability to earn interest, etc.

They all require KYC (Know Your Customer) information (SSN, address, etc.), just like any other trading account (Fidelity, Robinhood, etc.). If you buy (and then sell )you will get a tax bill from them at the end of the year.

Also, my buddy had a problem with his bank allowing him to deposit funds into some of these exchanges. THAT’S MESSED UP, IT’S HIS MONEY. I can’t guarantee your bank will do the same, but if it does you can take your business elsewhere if you so desire. It’s a free market. Just be aware of that potential issue you may face.

I can tell you now we have used ALMOST All OF THEM (except two). We have made mistakes and learned so that you can benefit. At Crypto Pulse, we’re not going to offer up anything we haven’t tried firsthand (and if we haven’t we’ll disclose that). We do stuff just to check it out and see how it works to report back to you. We can’t tell you exactly what to do, but we can lay out some options that we think would make sense for a busy professional and you can make the executive decision based on your preferences. Cool?

Most importantly - we are comfortable personally with the security of these platforms. That doesn’t mean it will stay that way, but we think that the chances of losing all our investments on these platforms are very very small. Again, you need to decide your own risk tolerance, but Noah and I use these platforms actively with no issues thus far. Always do your own research first. That also doesn’t take into account you being smart with passwords, using 2 factor authentication, setting up extra protection for your account, etc.

WE CAN’T OVERSTATE THIS. YOU MUST TAKE SECURITY SERIOUSLY.

There are scammers everywhere trying to get your passwords and hack your account and get you to click on links and reveal too much information. We’ll dedicate an article on security measures, but when you sign up for an exchange, go the extra mile to secure your account as much as possible (strong passwords, etc). Basically, trust no one. Your phone is becoming your bank - treat it that way from a security perspective. In addition, at some point, you’ll want to take your tokens OFF the exchanges and withdrawal them to your own wallet so you have extra security. We’ll get to that as well if you are interested in doing that in the future. That’s more graduate level stuff, not crypto 101.

Important - you can buy tiny fractions of Bitcoin/crypto tokens. You don’t have to buy a whole token, you can buy $1 worth if desired.

Favorites - Fold/Blockfi for debit or credit card (Voyager soon). Swan is great for buying BTC only and long term holding. Coinbase, Gemini and Voyager all have pros and cons but are solid. Binance.US is sneaky good and not that complicated really - but you can’t earn interest there. However, you CAN transfer tokens out of Binance.US into Voyager, Gemini, etc. and earn interest. Lots of strategies we can discuss more in another article.

**stock market** - you can buy Bitcoin “miner” stocks (we’ll talk about what that means in subsequent newsletters) like Mara, Riot, BITF, Hut8, etc. These are not tokens but companies that are actually mining bitcoins. You can get indirect Bitcoin exposure this way. I own equity in the first three. There are also companies like MSTR, Square, Twitter, and a few others that have Bitcoin on their balance sheet/treasury so that’s another way to get indirect exposure. I have equity in these as well. There are also new Bitcoin ETFs like BITO. These are Bitcoin futures markets and are NOT a true Bitcoin ETF where you own the actual asset (likely coming at some point though). Be aware of this. Noah will do an article in the future discussing options strategies utilizing this ETF. Finally, you can also get exposure to Bitcoin and other cryptocurrencies through Grayscale trusts which trade OTC (over the counter) and are harder to get access to, but you can. These are funds like GBTC, ETHE, etc. They take a cut with fees and you pay for the convenience of them holding the asset. You also CAN’T take personal ownership of the asset and withdrawal it to your own wallet (unlike when you buy directly from the exchanges). DYOR here. In some instances, this may make sense (I own some GBTC in my Health Savings Account (HSA)). Overall, there are pros and cons, it just depends on what you’re comfortable with. Again, the light didn’t click for me until I actually bought some BTC from an exchange and held it and moved it on the blockchain. You can’t do that with GBTC stock.

To be clear, this asset class (crypto) is incredibly young, volatile, and risky. You are so early to the game that you MUST be able to withstand ups and downs. We’re talking like sometimes 80-90% declines in value. For reference, when a stock loses >20% people lose their minds. In our opinion, if you understand the fundamentals of crypto and whatever you’re invested in, you are more likely to withstand those peaks and valleys and have a long-term mindset that will benefit you in the end. Bitcoin and crypto adoption is accelerating fast, but likely is still years to a decade away from complete mainstream adoption like the mobile phone/internet. You have to be patient and recognize that. However, it also pays to be early…if you’re right. Importantly though, it’s not all about the money. Crypto is going to change the world for the better. I’ll go down fighting for that. The ability to exchange value and sound money, not just information, in a trustless, open, transparent and decentralized way is going to reshape human history as we know it. Our advice…stick around for the long term. You ain’t seen nuttin’ yet.

Next week we’ll get into a primer on the madness that is the modern day financial system which forms the basis of WHY Bitcoin (and other crypto) are so important. Once you understand WHY you’re holding what you’re holding it makes much more sense. Then we’ll dive into exactly WHAT Bitcoin and other cryptocurrencies are and how they work so it completes the puzzle. Sound good? Hope so!

Thanks for reading.

Be humble, stay hungry, stay foolish.

THIS is Crypto Pulse

@cryptofordocs

@noahkaufmanmd

PS - If you want to wait a few weeks/months/years (or maybe never!) until you feel more comfortable with crypto before you buy anything, that’s totally cool! This is just an option for those that may be already further down the rabbit hole and/or want some skin in the game as they start out.

I (Chris) started out buying very small amounts of Bitcoin and going from there. Dipped my toes in the water so to speak. Maybe you want to buy something other than Bitcoin - no one is going to stop you. You do you, just be smart about it, be careful, DYOR, understand the risks. Talk to your financial advisor if you have one. Just for reference, I will NEVER buy a “dog” token (you know what I’m referring to). I don’t care if it goes to the moon (up in price), it’s not for me. If I don’t think it can change the world for the better or solve a modern-day problem - hard pass! But that’s just me!