So you’ve bought your first coin… Now what?
I’ve always been a procrastinator. For the longest of times I’ve dragged my feet at doing tasks which I feel are overly mundane, cumbersome or will in some way lead to a bottleneck. I would say this is a common trait for people out there in the world, however, personally I need to really force myself to do things I know I need to do but require some mental perspiration to achieve. So even though I know i need to take action on something right now – i’ll do a task that is either easier to complete, or sometimes worse – completely unwork related.
This has been particularly troublesome in crypto. Generally speaking, it is easy to get your cash into an exchange and then purchase your first bitcoin…but then moving that bitcoin around and purchasing alt-coins gets more complicated. Taking profits on those becomes much more complex, especially when you have 20 or more coins. So the situation we all face is; we have multiple coins, some operate on the same blockchain (mostly Ethereum) and many that operate on other chains (EOS, WAV, XLM); their own chain (BTC, LTC, BCH); or aren’t even on a blockchain (XRP) making this problem quite difficult to manage. Personally there was a time when I couldn’t tell you what I owned on one of the 13 exchange accounts I owned.
Last week we talked about how to start trading crypto in a very oversimplified way – so now, let’s look at what you do with your crypto once you have it.
The first thing we need to look at is ownership. This is one of the major benefits of cryptocurrency – it’s something that you own that if stored correctly, no one can take away from you. So although the value of that asset can fluctuate wildly, it will be yours as long as you keep it secure.
There are two real types of ownership in crypto – Personal and Custodial.
Personal ownership is where you personally control the keys to your wallets. This can be via paper or hardware wallets where you are solely responsible for holding seed phrases and keys. For example, nano and ledger wallets can be classified as personal ownership. Although the hardware and software is provided by a third party, the seed phrases are entered by you, the user, when you generate your keys.
Custodial ownership is where the true control of the crypto wallet rests with a third party – that is, some wallet providers and the majority of exchanges. Exchanges need control of your crypto to facilitate transfers between buyers and sellers; however users should be always cautious when leaving crypto on exchanges long-term. If an exchange closes or goes out of business – as was the case with New Zealand based exchange Cryptopia – users will lose their assets, or have them held up for a long period of time with liquidators. Third party wallet providers have similar risks, but they take the hassle away from users from managing multiple wallet addresses and keys and will store them in a relatively secure environment. As there are multiple
cryptocurrencies operating across multiple blockchains, it can be difficult to secure and manage your keys. This puts them at risk as when complexity increases, so does laziness.
So you’ve bought your crypto on an exchange, and you have a few options ahead of you as to what you do. You can choose to keep it on the exchange if you choose to sell it in the short term; you can transfer it to a hardware, paper or another type of personal wallet for secure storage; or use it for staking or some other type of function of that currency. You’ve decided to shift the crypto you want to hold/stake off-exchange and you have secured your passwords/keys. Can you sit back and relax? Not really. Now you need to manage this stuff – like I said in my previous article, respect your capital. If it took you time to earn, you need to put in time to manage it.
Always have a plan for each purchase and stick to it – is it a short term trade, long term hold or something in-between, this should be at least basically documented somewhere and you need to stick to your plan – I think it’s the one thing I reiterate in everything i put out.
Now we need a tool to track the price movements of our crypto and if possible where it’s stored. Many wallets have this functionality built-in, however generally functionality of these services is fairly basic, there are a number of mobile apps and web/desktop applications that can help with this *cough* Fortifex *cough*. It’s important to have a way in which you can manage your portfolio and track price movements – either manually via spreadsheets or by using a third party application.
More advanced applications will allow users to integrate wallet addresses, exchange accounts and allow users to view all their assets from one screen *cough* and others attempt to allow users to transact across multiple exchanges from one User Interface. Depending on which application really needs to fit into your own personal needs and security concerns, a system that allows you to trade, transact and transfer your crypto around is only one hack away from you losing anything; where as a read-only system doesn’t put your crypto at risk.
By finding a system, or collection of systems that work for you will allow you to make better decisions, and hopefully allow you to take action when needed. It also helps to have an idea of the path you will need to go through to sell any coins, as sometimes it may require you to path through multiple exchanges in order to get your alt-coin sold into BTC then BTC into your home currency.
As the market matures, and as exchanges expand their offerings this will reduce the severity of this problem as you wont need to go to as many different exchanges to buy and sell the coins and tokens that you want. Still bear in mind that if you want to safely store, stake and earn from your crypto you will still need to be able to track where your digital assets are stored and what they are valued at.
So to summarise you need to take not of 3 key issues when managing your crypto – Where is your crypto stored and is it personal or custodial ownership; understanding the paths you need to take to buy various cryptos and then liquidate; and finally work out a system that will work for you to help you manage the process.