A Comprehensive Crypto Beginner Guide To…… The 2020 Version Of Mr 15HWW

I know there is still 6 weeks to go but barring exceptional circumstances, 2021 is likely to be a very good year financially. Good income and good investment returns. Financial-wise, the best year in my life so far.

Affiliate income from this blog definitely helped and I have to thank you, the reader. Loyal readers will know the few products that I use and shilled heavily throughout the year. Lots of appreciation if you have signed up using any of my links.

So it’s time to give back to the 15HWW community.

I tend to forget/underestimate how much time I spend on crypto in the past year and how steep a learning curve it was for me. I will still reply emails one by one for this week but I think it’s probably more efficient in the long run if I have something more substantial to point to.

And since I am no crypto expert (still coping from no $ENS airdrop), what better way than to vomit out whatever I know to the Nov 2020 version of Mr 15HWW. Best of all, no need to be politically correct. The only person I would offend is myself in the past, no?

Big Big Caveat: None of the below is supposed to be financial advice. Crypto is very very volatile and more people will lose money as compared to those that make or “claim to make” life-changing money

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Ah, Mr 15HWW has been Having Fun Staying Poor (HFSP) from 2017 – 2020. He faded some of his blogging contemporaries and allocated $0 to crypto. But maybe, just maybe, he is still salvageable. After all, he did not short crypto and bankrupt himself. 

Yes, he will live to regret not benefiting from “Super Early Participant Reward Schemes” that would have scammed him to unimaginable riches. 

There is still some hope though. He is capitulating and growing curious by the weeks. Perhaps he can no longer 100x his networth. There is still chance of a 10x and knowing him, that might suffice.

With the help of Marvel superheroes, let me travel back in time to send him a message and flatten his learning curve. Handholding is probably too strong a word. And of course, reduce the odds of him getting rugged (losing money permanently). 

Refrain From Expensive Crypto Courses 

There is a temptation to outsource your learning or onboarding to so-called crypto experts. Not too different from relying on magical diet pills to get the figure you want.

Please refrain and save the few hundred dollars, my dear Mr 15HWW.  Why?

Firstly, crypto is a very new and dynamic, at least compared to much of traditional finance (tradfi) like stocks. Whatever you have learnt in the course might be outdated in a year. How do I know? Because I have invested in some so-called Decentralised Finance (DeFi) bluechips that are fast becoming obsolete. Within a short span of 8 months.

Honestly, compared to a one-time crypto course, you will likely get more value from a stock investment course.

Second, the very basics are actually really basic and easily available. If you want to be really passive and spend <7 hours a week being exposed to crypto, I will later share with you the best hands-off strategy that I can think of.

Third, you want to learn from the very best and those who are full-time on crypto. Unfortunately but actually it’s pretty logical, 99% of them would never conduct a crypto course. They either want to just get along with their life or shitpost for entertainment on Twitter.

If they have already 1000x their money and achieve an 8-9 figure networth, why would they care for your few hundred dollars, my dear naive Mr 15HWW.

Fourth, if these crypto experts earn good money on recurring subscription, they are likely to become more and more risk-averse in the crypto space. If you are earning 6 digits a month, you would just need to park it in stablecoins (crypto coins pegged to USD – very little pricing risk) and earn 10-20% returns a year. These experts will no longer have any skin in the game with you.

Learn to be more self-reliant.

What’s Your Goal In Crypto?

If you think I am here to tell you what coin to buy and when exactly to sell for a 10x or even 100x, you are Not Gonna Make It (NGMI).

Nobody can guarantee that you will make money. Like other financial markets, crypto will likely follow a pareto distribution. 20% of the participants earning >80% of the profits.

If you think you can 10x within a year just by buying Bitcoin ($BTC) or Ethereum ($ETH) in November 2021, I also think you are NGMI. (Would love to be proven wrong though)

Yes, yes, I know some geniuses bought $ETH at $100 on March 2020 and 40x their holdings in 1.5 years. However, the mainstream perception of the risk of holding $ETH then vs now is very very different.

If you really want alpha (higher returns than the whole crypto industry), you have to put in the hours and work. Read more, listen more and comprehend more. Probably take more risks too.

Otherwise, be satisfied with the beta (industry’s average returns).

Dear Mr 15HWW, you generally like your work as a tutor and you are not trying to escape the life of a wage cucker. Life-changing money is not as much as you think and you need to learn to be more zen when you miss out on some 5x. A 2x is already pretty incredible for you and take smart bets with Positive Expected Value (+EV).

Some Basic 101s

What’s the Value Proposition Of Crypto?

• It disrupts both the traditional banking/finance models and Web2 (most of the current tech monopolies). It also aims to cut out most middlemen taking commissions from creators.
• How well crypto succeeds in the above is the hundred trillion dollar question.
• Imagine banks with 10% of their current workforce and without a need to pay for the rental of office space. How much more dividends can they pay out?
• Imagine Zuckerberg with only 10% of his current networth. And then the rest of his company’s shares are given out to Facebook and Instagram users. After all, the users are the product, no?
• Imagine video/music creators being able to bypass media agencies, marketing agencies and social media giants and directly sell their content to users. How much more value would accrue to content creators?

Is Crypto Bad For The Environment?

• Honestly, I have no idea but I am skeptical of certain media outlets painting a very ugly picture. I mean, if 50% of middlemen jobs are eliminated, would that be a net benefit to the environment?
• Consuming more electricity and using a washing machine to wash our clothes is probably a net negative for the environment. But that does not stop any of us, does it?

Will It Change And Make The World Better?

• I am a realist. I do not believe in the empowerment of the masses.
• What has always occurred throughout history is the replacement of the elite class with another group of people
• Hopefully, there is some positive change since most of the crypto elite were middle class or even poor as recent as 5 years ago. They just might be able to understand and empathise with the masses better.
• No prizes for guessing which group I am rooting for and my bet is if a new group comes into power, Universal Basic Income (UBI) gains traction.
• What’s more pertaining is whether crypto can increase my and your net worth. Same same but different?

What is The Difference Between $BTC and $ETH?

• Basically just different coins and different blockchains. There are tons of coins that exist on different blockchains out there.
• Most of the code that exists in the crypto industry is open source. So it can be easily copied. But that does not mean they will lose value easily. For example, if you start a new social media company today that is being run as a non-profit, would it gain traction? Network effect matters more than ever.
• Articles explaining the difference between coins and blockchains are everywhere on the net. But just like you do not need to understand perfectly how electricity works to be a user of it, you can invest/buy crypto coins with just very rudimentary understanding.
• For example, I buy index funds without knowing much about most of the stocks in an index.

What Are Stablecoins?

• Most people buy high and sell low. As human beings, we are psychologically primed to do that. It’s just more comfortable.
• Volatility is the price of admission in most of the traditional financial markets.  However, interestingly, crypto has enabled the masses to get a good return without taking on price risk/volatility.
• Enter Stablecoins which are pegged to the US dollar. There are many types with different mechanisms/tokenomics. Knowing the differences well probably constitutes a thesis topic.
• The most common and centralised ones are $USDT (issued by Tether) and $USDC (issued by Circle) and the latest trend is going towards decentralised stablecoins like $UST and $MIM.
• One could easily earn 10% returns from lending out these coins. Probably 10x of what you can get in a fixed deposit with a bank.

Crypto Strategy For The Apathetic

Dear Mr 15HWW, if you ever decide to stop blogging and spend <1 hour a day reading up on finance/crypto, the below strategy might be suitable. Basically, if you just want to be passive and not move further out the risk curve.

I am going out on a limb here and expect $BTC and $ETH to be the top 2 crypto coins in both the short and medium term. Most crypto whales are also likely to rotate their gains in other coins back into $BTC and $ETH.

1. Sign up for a Gemini Account (Buying Crypto with SGD)

You can refer to a step-by-step guide by Heartland Boy below.

This is akin to signing up for a bank account. You will need to provide your personal details and wait for approval. Gemini will be the custodian of your coins just like how a bank is the custodian of your savings.

Note that using Active Trader mode on Gemini (lower fees) means you can only use SGD to buy either $BTC or $ETH for now. There are also 10 free withdrawals a month on Gemini.

Review of Gemini: My First Cryptocurrency Exchange Experience Trading In Singapore Dollars

2. Lend out Your Crypto Coins With Hodlnaut

You can refer to a comprehensive guide by Turtle Investor. Link below:

https://www.turtleinvestor.net/hodlnaut-review-10-percent-interest-stablecoins/

There are other more established centralised crypto lending platforms like BlockFI and Celsius. However, many Singapore bloggers mention Hodlnaut as it is a Singaporean team, has the highest rates in the market and offers a very attractive referral plan.

Pro-tip: Open 2 accounts. The 2nd account should be opened using the referral link of your first account. 

Both the Gemini and Hodlnaut accounts will have specific addresses for the various crypto coins you support. So transfer the $BTC and $ETH to Hodlnaut to earn higher returns on your coins.

You can also make use of the swap feature on Hodlnaut to change your $BTC/$ETH to stablecoins if you simply cannot stomach the volatility and just want a stable 12% return.

Downsides:

• The two platforms mentioned above are not as safe as parking money in a local bank.
• My personal take is that some DBS accounts can provide you with a 1% return with a 0.0001% chance that the platform will collapse.
• Centralised crypto platforms might provide a 10% return with a 0.01% chance of rugging.
• Of course, your assessment can be different and even with the same assessment of the odds, you might pick a different choice
• Obviously, do not put all your savings/capital into one platform. Never do that in crypto.

The setup above is also obviously not the most efficient method. If you are willing to take on additional hassle and buy crypto with USD, do check out the FTX exchange. Link below:

https://chaindebrief.com/dbs-overseas-transfer-to-ftx-account/

FTX offers both lower fees and better spreads and you can directly transfer USDC/USDT directly to Hodlnaut for instance.

Generally good to have at least a few accounts in various exchanges in place just in case MAS bans them. A ban also does not mean you lose your money and coins. There will always be a few weeks to a few months of lead time for you to sell or transfer them.

If you are afraid that you are buying at a high, spread your entries and dollar cost average. Maybe if you plan to deploy $5,000, spread it out over 10 weeks. Buy $500 for 10 Mondays in a row.

Unless you have at least a few months of experience here, I would never recommend to delve into the next section: Decentralised Finance.

Not So Basic 202s On Decentralised Finance

What is Decentralised Finance (DeFi)?

• Number 1 question I receive. Basically, the whole of traditional finance is centralised. You save money in a centralised bank. You buy stocks with a centralised broker. Your spending on a credit card goes through a centralised credit card company. They have all your information. If anything goes wrong, you can seek redress.
• In decentralised finance, you are like your own bank. You just need to set up your own Metamask account (without revealing any personal information about yourself) and you can then interact with decentralised finance apps on the Ethereum blockchain.
• You can provide collateral (your $BTC/$ETH)  and borrow some stablecoins. You can then send the stablecoin to your centralised crypto exchange (Gemini/FTX) and turn it to cash. This way, your crypto coins are more productive than precious metals like gold.
• You can also provide liquidity for a pair of coins and earn part of the fees and spread. Like a money exchanger.
• You can send coins to another address without permission from a centralised authority/organisation
• The most obvious downside is that there is little recourse if you made an erroneous transaction.

How Can The Returns Be That High?

• DeFi is where you hear about >10,000% returns and think of ponzinomics
• Let me try my best to explain using an analogy. Let’s say there is a $15HWW coin priced at $1 each. If you park $100 with me, I will issue you 100 $15HWW coins and I promise a yearly return of 100%. So at the end of the year, your 100 coins will grow to 200.
• Obviously, there is no cost on my part since I can keep issuing the coins, unless my code states that there is a maximum supply.
• But if I am in this game long-term, I will try to build and add value. For example, maybe holders of 100 $15HWW coins will receive a monthly newsletter or receive a bento lunch daily. If enough value accrues, there could be good secondary market demand for my coin. Maybe even with the high emission schedule, each $15HWW coin can trade at $2 instead after a year.
• Basically, value accrual needs to outpace token emissions if the coin is to maintain or even increase in price.
• If that does not happen (most of the time), it’s a game of musical chairs and the last person holds the valueless coins/bags.
• Of course, if you get it right, you can 10x or even 100x your capital.

What Is Impermanent Loss?

• I cannot explain this very well technically even after reading many articles and watching countless videos. However, I do appreciate the concept and gist.
• Centralised exchanges make use of order books. You can see the buys and sell queues. In decentralised exchanges, buy and sell orders based off automated money makers (AMMs) which relies on liquidity pools.
• These liquidity pools are provided by users of the AMMs like me. For example, I can provide $500 of $BTC and $500 of $ETH and put them in the BTC-ETH pool. This is what most people call farming. You enter into smart-contracts and bear the risk.
• When the price of one asset fluctuates, the pool will become unbalanced and arbitrageurs will come into the pool to correct it.
• In the end, if you withdraw your capital from the pool, you will almost definitely be worse off compared to just hodling the $500 of $BTC and $500 of $ETH. This is what I understand as Impermanent Loss
• That’s why one will always be compensated with yields and farming rewards.
• You win when Farming Rewards > Impermanent Loss

Is DeFi For You?

• If you have been a victim of scams before, stay clear.
• Like I mentioned previously, there is no customer service or hotdesk to call when things go wrong.
• In Defi, for every “account”, there is a public and private address. The public address is public and is used to send and receive coins. Transactions are also recorded and available as data.
• The private address is a 12 or 24-word seed phrase. Never ever give your seed phrase away to strangers or acquaintances. This seed phrase can be used to restore your “account” on any device and grant a person access to it.

What Is A Hardware Wallet And How To Buy Them?

• Dear Mr 15HWW, I know you are a cheapskate and will risk $1,000 to save on 10% (the cost of a hardware wallet). It’s also so much easier to start DeFi with a “hot wallet” like a Metamask web extension. So I can empathise.
• But once you hit 5 digits, it is really mandatory to get a hardware wallet like a Trezor and Ledger. I have both of them currently. The UX is not great for both but they get the job done when paired with Metamask.
• The hardware wallet can also be restored using the seed phrase but since it is offline most of the time, it is less vulnerable to hacks and attacks.

Detailed DeFi Crypto Strategy On Avax

The first coin transfer to your Metamask or hardware wallet will be quite a nervous experience as you wait for the coin to arrive. But like all things in life, once you perform it more often, it becomes somewhat second nature.

Please test with a small amount at first and do not risk more than a few months of your salary if you are still finding your feet in DeFi. 

Right now in Nov 2021, Ethereum blockchain is literally unusable for retail farming. I reckon each position needs to be at least 6 digit to make sense paying the high transaction/gas fees, which will price out all newbies.

What I would recommend is to try out the Avalanche blockchain which is EVM-compatible (which means the chain accepts coins like $ETH, $USDT, $USDC and other ERC-20 tokens). Moreover, it has the most user-friendly bridge that will not instil panic attacks.

1. Download and set up Metamask (https://metamask.io/faqs)
2. Add the Avalanche Network on Metamask. (https://support.avax.network/en/articles/4626956-how-do-i-set-up-metamask-on-avalanche)
3. Withdraw $ETH/$USDT/$USDC from your exchange to the Ethereum Network. Use the address on your Metamask. You must already have some $ETH since transaction fees are denominated in $ETH on the Ethereum network.
4. Bridge the tokens to the Avalanche network using the Avalanche bridge.  (https://bridge.avax.network/)

You can refer to the FAQs for bridging here: (https://docs.avax.network/learn/avalanche-bridge-faq)

I would advise each transaction to be at least USD3,000 in value to keep the bridging fees to about 1% of the capital. Yes, a simple bridging without complex transactions will cost close to USD30 worth of $ETH.

Once the bridging is complete (15 to 30 minutes), change the network to Avalanche, add the token address manually and you should be able to see the tokens on your account/address.

You can then explore protocols like Aave, Curve or TraderJoe on the Avalanche Ecosystem to swap coins, provide collateral and borrow or provide liquidity pooling.

Dear Mr 15HWW, this is probably the furthest I would go as I do not want to recommend specific pools to you. I do not want to feel personally responsible if a defi protocol/platform rugs. Never ever go all-in and put all your crypto assets on one platform. Please diversify.

In the end, you have to do some research on your own if you want to move down the rabbit hole and out of the risk curve in search of higher returns.

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This guide to myself is updated as at 11 November 2021 and there are no affiliate links of my own. It is also not financial advice. Crypto is volatile and dangerous and please do your own due diligence if you are investing with your hard-earned money.

Salesman Pitch: I am still on the lookout for a crypto tribe to join, contribute and learn from. I have interacted with Ethereum, Terra, Polygon, Avax and Fantom ecosystems in the past 6 months to a year. If any crypto OGs like what they have read and willing to throw me a bone, I will be eternally grateful. 

Thanks for reading.