Let's say you didn't quite grasp how crypto works in last month's newsletter. Does that mean you shouldn't use it? Let me ask a different question. Do you know how the federal reserve's actions on interest rates impact your dollars? My guess is probably not. You don't need a comprehensive understanding of crypto in order to use it, either. The crypto space is a little more wild-westy though since it's still new, so be extra careful.
Wallets are how crypto - bitcoins, NFTs, Ethereum - is stored. Software wallets are free. A wallet can be:
- cloud-based, where your wallet and crypto live with a custodian like Coinbase (see my coinbase bitcoin wallet screenshot below)
- software-based, where you install a desktop app or browser extension, and your crypto lives on your local computer
- hardware-based, where your crypto lives on a USB flash drive, or similar portable device
Similar to regular IT security, super-intense people use hardware-based devices. There's a saying, "not your keys, not your crypto," which means that unless you have direct ownership of your crypto, you aren't truly the owner. That thinking is a little extreme with the crypto industry out of its infancy. All of my personal cryptos are held by 3rd party companies such as Coinbase in cloud-based wallets. Some people think that is still risky, but I do not.
Buying and selling crypto is extremely easy and, in most cases, is just like buying and selling a stock, including any capital gains taxes. You click to buy, you click sell. There's nothing to it.
Transferring crypto from one place to another is a different story entirely. Since each cryptocurrency may have a different software architecture, transfers between wallets may differ slightly from one to another. Bitcoin is the biggest, so I'll focus on that. To transfer, you'll need the 'wallet address' where you want to send the Bitcoin. A wallet address is akin to a bank account number. The transfer could be to another wallet of yours at a different company or to any random person with their own wallet. My Coinbase Bitcoin wallet address of 3EygE2GJCkDB87SmdDSHjtGCn2Ry2BXG6N is shown in the screenshot below. That address only is for my Coinbase Bitcoin wallet - my accounts at other companies have a different Bitcoin wallet address. Anyone with my wallet address can send me Bitcoin (and only Bitcoin), but no one can withdraw anything from my address. So um...feel free to send me Bitcoin.
An Extremely Important Gotcha
If you send crypto to the wrong address, for example, sending Bitcoin to an Ethereum wallet address, your crypto will be lost forever with no way to recover it. So be 100% sure the wallet address is correct! Personally, if I'm transferring a considerable amount, I will first send a small amount (~$10) to ensure the addresses are correct. Once that transaction is confirmed, the send-to-wallet address usually gets saved in whatever account I'm using, and I can transfer the remainder with 100% confidence.
I'll soon cover 'getting your feet wet' in crypto, but if you're ready to jump in now, most Americans' first step is to open a Coinbase account here.
- Nick bought 4 shares of PayPal for about $470.
- Lindsay, Chloe, Antonio, and Garrett are still sitting on the additional $1000 in cash. Now is a great time to buy something! The market dipped!
Please remember to update the google sheet detail tab when you buy/sell something. I look at the revision history each month so I can include your trade in this newsletter. The summary tab is at the bottom of this email as a picture and the live link to it is here.