Starting On Crypto

The crypto market is very hot right now, and it has been getting traction, gaining popularity and has an increasing total market cap over the years. This article will explain the basics of crypto, in as a layman term as possible. Of course the explanation for some of the terms may be simplified, and a hardcore crypto fan may argue the technicalities of it. But for a layman, I believe my explanation is sufficient and accurate enough for them.

Bitcoin is the first crypto currency, created by Nakamoto Satoshi, whose identity remains unknown till today. What makes this identity (since we do not know if he is an individual, a team or an organisation) so famous is that he pioneered the blockchain technology, which would later be adopted widely across industries in different fields, and on which Governments of the world research and improve on it. Note that there is no contradiction in Governments of the world adopting blockchain technology and clamping down on crypto currency.

Bitcoin will later become the biggest crypto currency as we know now, at least as of today’s date. Crypto currency originally attempts to solve payment methods by cutting down the middle man, and at the same time prevent cheating such as unauthorised duplicating of Bitcoins by making all the transactions public and quite near impossible to hack. However as time goes by, more coins started to pop up, attempting to solve issues beyond payment. Some focuses purely on payment only (Litecoin, Nano), some concentrates on data sharing (BitTorrent) or decentralised data storage (Filecoin), some serves as oracle functions (Chainlink), some are gaming coins (Sweet Love Potion), and there are those which are created only as a joke (Dogecoin), etc. There are many more.

To link it to our real world, you can consider the crypto market much like our stock or forex market. In simplified terms, you can consider:
1. USDT, USDC, PAX, BUSD as the stablecoins
2. Bitcoin to be the gold standard of the crypto world.
3. Ethereum to be the silver of the crypto market.

Among the stable coins, USDT is the most popular among them, simply because it is the largest and the most widely accepted. Not every platform accepts BUSD or USDC, which are issued by different companies. While USDT does have its own controversy, it still does not stop people from trading with it. USDT is like the USD of the crypto world. And Tether company, which mints USDT, has pegged the value of 1 USDT to 1 USD. You can say that 1 USDT = 1 USD. We therefore have, in decreasing order, most people conducting their trades using USDT, Bitcoin and Ethereum as a base.

Just like we have many types of stocks in the stock market, the crypto market also has many different coins. While the crypto market is known for its speculative trades, its insane volatility and 24/7 open market, the basics of stock trading should still apply. As mentioned earlier, every coin claims to serve one or more purposes. Some of them are doing good work and have an active project team, some of which are half-hearted and some of which are outright abandoned. Choose a coin just like how you would choose a stock to either day trade, swing trade or invest. The concept should be the same. Of course, there are also the outlier meme coins like Dogecoin and Shiba Inu coin, which although serves no practical function, has mulitplied in value and gained a lot of followers. Just remember that for every shitcoin that succeeds, hundreds more has failed.

Just like there are blue chip stocks (decent coins like ADA), there are also penny stocks (shit coins). Of course we sometimes have the ridiculous coins like Dogecoin and Shiba Inu making it to the top 10 coins, much like how Gamestop and AMC actually caused a stir. As mentioned earlier, if you are a serious trader, I would not recommend you putting in serious money into these shitcoins. Put some for fun as gambling money, no issues. If you think you are going to get financial freedom from putting in your life savings into these, think again. Sure, there are people who profits insanely from Gamestop and Dogecoin, but anybody who is smart enough would know that the risk to reward ratio is simply not worth it.

With any currency in the world, when you have the money, you can put in savings or fixed deposits with the bank. Similarly, with the crypto coins that you hold, you are able to put in flexible savings (able to take out any time) or staking (treat it as fixed deposits). There are different interest rates for different types of staking for different coins. Generally when I am not holding any other coins for trading, I prefer to keep USDT if the interest rate is good. These few days the interest rates for USDT flexible savings has been in the 10% to 20% range, which I think is pretty decent. Even if you are holding other coins, you can also put them in the various staking or savings plan to earn interests. Then when you want to sell, you simply withdraw. I have known people who are not interested in trading crypto currencies, but convert a portion of their money into USDT to put in the high interests savings. For crypto savings, I would recommend Celsius.

To trade crypto currency, the easiest way is to sign up for an account with a crypto exchange. There are many around for you to choose from, but whatever you choose, choose one of the top few exchanges. Reason being they are big enough to have the financial and technology muscle to protect you. Hacking happens in the crypto world all the time, and these exchanges are the target of many hackers everyday. With enough tech power, they are able to defend their exchanges well. In the rare occurrence that the hackers succeeded, they would also have the financial strength to absorb the cost rather than pass it to their precious customers. Afterall, nobody would trust an exchange which does not take care of its customers. Binance is the biggest platform around, and to be honest I like it a lot. Unfortunately, Binance has been clamped down by many Governments around the world. I would not choose a platform that is a constant target of various Governments. Currently I am using OKEx. While it is not as good as Binance, it is still decent with its low trading fees.

To start trading right away, the fastest way is to get some USDT. This can be bought using a variety of methods:
1. Using credit card to buy USDT from the crypto exchange itself (about 4% fee in total).
2. Getting it via P2P platforms. Most crypto exchanges have that function. There are also standalone P2P platforms. You are trading with strangers. There are many scammers, so do be careful.
3. Buying from anyone in your personal network.

While all crypto coins have risks, they also range from low to high risks. If you just want to earn steady savings and not be involved in the volatile world of crypto trading, you can convert some of your money to USDT or USDC (if you are worried about the controversies of USDT) and put in the savings plan. If you want higher rewards, consider the ‘blue chips’ of the crypto world. Bitcoin of course is the safest bet, followed by Ethereum at this point in time. There are also many others for you to choose from. Whatever it is, even if it is USDT or USDC, always be prepared to lose everything. Do not put your whole life savings into it thinking all is safe. Nothing is 100% safe. What we can do is to manage our risks, such that in the event of failure, we can absorb the shock.

Personally, I see crypto as one of the many tools which we can use to earn some money. To depend on crypto alone to achieve financial freedom is unlikely. But as my posts always say, strive to open more sources of income and reduce outlets of spending (開源節流). Opening up another source of income via crypto currency is certainly a viable option. But do remember to control your greed and emotions. Always do your homework well.