Crypto is minting millionaires and wrecking people

Citizen Writ

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Entrepreneurship Handbook

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17 min read

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Apr 25, 2022

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I know someone who went from $50,000 to $600,000 in 9 months.

I know another who lost six figures.

Both were normal people and new to crypto.

Maybe crypto is new for you — it was for me a year ago.

Since that time, I’ve spent more than 1,000 hours learning about crypto. I’ve listened to hundreds of podcasts, read project documentation, studied the economics, written crypto profiles, and spent way too much time on Twitter.

Currently, I’m blessed that my portfolio is near all-time highs and I’m up 600% from my initial investment.

But it wasn’t always this way. During last year’s crash, my portfolio was thousands of dollars in the red.

Here’s the advice I wish someone told me when I started.

1. Understand the revolution

If you want to make money in crypto, you need to understand why crypto is so revolutionary.

If you don’t know why crypto is special, then you risk:

1. Buying bad stuff because you can’t tell gold from garbage.
2. Selling at a loss because you lack the conviction to hold through extreme volatility.
3. Selling good investments too early because you don’t realize what you’re holding.

Trust me — you don’t want to be the guy who sold 10,000 bitcoin to purchase two pizzas in 2010. Yikes — that bitcoin is worth $350+ million now!

So, why is crypto revolutionary?

It’s like this:

• The Internet Revolution ➡ instantly, openly, and cheaply send information all around the world.
• The Crypto Revolution ➡ instantly, openly, and cheaply send value all around the world.

That’s the summary. To learn more about this revolution, I recommend the following:

1. Watch Don Tapscott’s TED Talk on blockchain technology. This timeless talk explains how blockchain technology (i.e., the technology behind crypto) is powering a social, economic, political, philosophical, and technological revolution.
2. Read the whitepapers for Bitcoin and Ethereum. Bitcoin and Ethereum are the two household names in crypto. To put things bluntly, they dominate the crypto markets. But, how many people really understand their value propositions? In crypto, most assets are explained via whitepapers (i.e., essays that explain the asset). Bitcoin andEthereum were both launched with these essays that explain what they do. This is required reading for understanding the crypto industry.
3. Read the Terra whitepaper. Terra Money is one of the newest crypto networks that is also in the top ten by market cap. Although it’s not nearly as large as Bitcoin and Ethereum, reading the Terra whitepaper is a great way to understand one of the most explosive niches within crypto: stablecoins (i.e., tokens pegged to the value of something else, like 1 USD). Terra references the Bitcoin and Ethereum white papers in its preponderance of what other value blockchain technology can bring to the world.

TAKEAWAY: You need to understand why crypto is revolutionary: openly and easily send value all around the world. To better understand this societal revolution, start with this video about blockchain technology and then read the whitepapers for Bitcoin, Ethereum, and Terra.

PS — if the whitepapers are too difficult to read, forget it. Try just reading this DeFi Puma profile of Terra. It’s the best 0–1 reading for normal people to understand the value of crypto and Terra’s LUNA token.

“The internet allowed any two entities to exchange data in a frictionless way.. the blockchain [is] simply changing one word: any entity exchanging value with any other entities in a frictionless way”— Ken Seiff, Managing Partner at Blockchange Ventures on The Pomp Podcast

2. Follow trusted sources on Twitter

Martin Luther led the Protestant Reformation.

Gandhi led India’s campaign for independence.

George Washington and Benjamin Franklin led the American Revolution.

It’s the same with crypto.

All revolutions needed trusted leaders who help the common man jump onboard.

You need trusted sources to know what’s happening and make money. For better or worse (oh hi, Elon), the primary communication platform for crypto is Twitter (or “Crypto Twitter” as it’s often called).

Here are eleven top people to follow on crypto Twitter (listed alphabetically):

• Anthony “Pomp” Pompliano (@Apompliano): provides great content on bitcoin and interviews with innovative entrepreneurs (including ones outside of crypto!) on “The Best Business Show.”
• Bankless (@BanklessHQ): one of the older, well-respected crypto podcasts in existence. They are a little blind to their bias toward Ethereum; but have fantastic guests. You can also follow the co-founders Ryan Sean Adams (@RyanSAdams) & David Hoffman (@TrustlessState).
• Cobie (@Cobie): Cobie is the definition of a crypto native. He’s trusted enough among founders and crypto enthusiasts that he was even roped into acting as the escrow account for $22M in bets between Do Kwon & some critics.
• Do Kwon (@stablekwon): Terra Money co-founder and a core developer at Terra Form Labs.
• Dylan LeClair (@DylanLeClair_): Senior Analyst at digital asset fund UTXO Management and expert in on-chain (i.e., internal network) statistics for Bitcoin as well as the macro economic environment. The whole crypto markets generally follow Bitcoin’s price action and Dylan is one of the best at providing Bitcoin price analysis.
• José Maria Macedo (@ZeMariaMacedo): co-founder and Head of Delphi Labs at world-class crypto investing & incubating firm Delphi Digital (@Delphi_Digital).
• Kevin Rose (@kevinrose): partner at VC firm True Ventures, host of the Modern Finance and Proof podcasts. He’s way “down the rabbit hole” with NFTs and well-connected to innovators. Need proof? He’s one of the masterminds behind the recent launch of Moonbirds; a NFT collection that achieved $290+ million in trading volume four days after launching.
• Nathaniel “NLW” Wittemore (@nlw): host of The Breakdown, a daily podcast on “macro [economics], bitcoin, and the big-picture power shifts remaking our world.”
• Nic Carter (nic__carter): one of the smartest, well-connected, and articulate bitcoiners. He’s a must-follow for his ability to address complex issues; such as Bitcoin’s long-term security budget. You can view a lot of his high-quality interviews and content on his website as well.
• 6529 (@punk6529): this pseudonymous writer is one of the most prominent thinkers on Crypto Twitter. His recent thoughts on property rights is possibly my favorite tweet thread of all-time.

• Ryan Selkis (@twobitidiot): one of the longest tenured — and loudest — voices in crypto. Selkis is co-founder of industry-leading research/content firm Messari and he annually writes theses for the upcoming year (his “Crypto Theses for 2022” is a must-read).
• Saifedean Ammous (@saifedean): author of The Bitcoin Standard, Austrian economist, and one of the most devoted Bitcoin thinkers and writers.
• Vitalik Buterin (@VitalikButerin): co-founder and current leader of Ethereum developers. Vitalik is also a public intellectual & philosopher; he’s the voice of where Ethereum is going.

If you’re interested, I’ve put together a longer list of the best sources to follow on crypto Twitter along with their strengths and biases/blindspots.

Takeaway: You can’t know it all. So, find and follow trusted sources on Twitter and be aware of their biases/blindspots.

3. Setup an account with Kraken, Coinbase, or FTX

You need a way to convert your cash into crypto.

Unless you want to go to a Bitcoin ATM (yes, they exist , albeit with terrible fees often north of six percent… 700+ locations in USA!), you’ll need to go to an exchange.

So, what matters when you pick a crypto exchange?

1. Low fees
2. Lots of options
3. Trust
4. Usability

Based on these criteria, the best US crypto exchanges are arguably:

1. Kraken.com — best for security, never hacked. Kraken takes security so seriously that employees can’t tell people they work there. Kraken does list less tokens than FTX or Coinbase. But, Kraken lists all the major/important assets; including native (i.e., actual) LUNA and UST which are not present on Coinbase or FTX.
2. Coinbase.com — best for ease of use. Coinbase does a great job of simplifying things for users; but they’re known for listing way too many s***coins.
3. FTX.US — best for traders and those with financial backgrounds. FTX offers sophisticated asset price charts & order books. However, the interface is a bit less intuitive and US residents must use FTX.us (not FTX.com, which has more crypto asset options).

IMPORTANT: make sure you use the pro versions of these exchanges to save 50% or more on fees. For example, Coinbase doesn’t list standard trading fees but a $1,000 of BTC right now would incur a fee of $14.68 (~1.4%). However, Coinbase Pro does list standard fees and the fee for the same trade is currently $6 (or less, depending on trade type & volume). The difference between Kraken Pro fees and Kraken is even larger — 0.2% vs 1.5% instant buys on Kraken!

So, how do you use one of these pro apps?

1. setup an account via one of the normal exchange links listed above
2. download one of the pro apps to your phone
3. login using your already-created credentials
4. trade in the pro app

Here are the links to the pro apps:

• Kraken Pro — available via iOS or Android mobile app.
• Coinbase Pro — available via iOS or Android app or the web at https://pro.coinbase.com.
• FTX.US Pro — available via iOS or Android app or the web at https://ftx.us; just don’t use the normal FTX app.

All three of these exchanges charge relatively low fees, offer solid options, are US-based, and easy to use.

Finally — it’s worth noting that Coinbase Pro charges higher fees than FTX.us Pro or Kraken Pro. But, the fees are all still between .08–.60% for all crypto deposits and withdrawals. If you’re interested, I’ve posted a full breakdown of the fees.

TLDR: create an account with a major, US-based crypto exchange to securely buy your first crypto. Kraken, Coinbase, and FTX.us are the best options. Use the pro version of the apps for the lowest fees.

4. Start with blue-chip assets

Ever visited an amusement park? It’s similar to crypto in that it’s a good idea to start with smoother, less scary rides for three reasons:

1. You get the upside of having fun.
2. You limit the downside risk of getting sick.
3. You learn about your risk tolerance.

Crypto works the same way. Don’t start with some crazy coin that’s solving climate change by decentralizing lithium mining in the Bolivian jungle (I also recommend avoiding universal pet income tokens.)

Instead, start with large, blue-chip assets. Your likelihood of a 90% price drop is far lower — but doubling your money within the next 18 months is still very possible.

More or less in the following order, the top blue-chip crypto assets are:

1. Bitcoin ($BTC)
2. Ethereum (ETH)
3. Terra (LUNA)
4. Solana (SOL)
5. Avalanche (AVAX)

All of these are:

1. Top 20 in market cap.
2. Offer compelling value propositions (for example, BTC is unmatched as a store of value).
3. Innovating in unique ways (check out Avalanche’s subnet architecture).
4. Rapidly growing in terms of users (Terra’s transaction volume is up roughly 10x from a year ago).

These assets let you start learning and ease you into crypto’s volatility; without getting you too sick or “rekt.”

TLDR: start with blue-chip assets that are less risky and volatile. You can invest in smaller projects later.

Bonus — if you can’t help yourself and want smaller projects with more possible upside, I’ve found two favorites:

1. Secret Network (SCRT): giving NFTs true property rights and solving the problems of user privacy and front-running (often called MEV in crypto).
2. THORchain (RUNE): a decentralized crypto exchange (i.e., a DEX) that is unlike any other.

5. Get off the exchange

I remember the first time I sent several thousand dollars off Coinbase to my own, self-custodial wallet.

No clunky banking portals, business hours, or three-day wait — just thousands of dollars transferred in seconds.

Magical.

Unfortunately, many people leave their assets in Coinbase and miss this magic. Don’t be like them. Take your crypto off exchanges so you can:

1. Invest in tokens earlier (ex: THORchain isn’t yet listed on any major US exchange).
2. Earn interest on your assets (ex: depositing UST stablecoins in Anchor Protocol and earning nearly 20% APY).
3. Interact directly with crypto projects (ex: buying an NFT on Opensea).

So, how do you take self-custody?

Start with an XDEFI wallet because it supports multiple crypto networks (Bitcoin, Ethereum, Terra, Avalanche, et al.).

Two final notes on self-custody:

1. Consider Keplr Wallet: this wallet is great for any Cosmos networks (e.g., Terra, Secret Network, Juno Network, and Osmosis). The Secret Code Podcast does a great walkthrough of the setup process.
2. Consider using a hardware wallet: if you’re planning to self-custody more than $1,000, I highly recommend using a Ledger hardware wallet for better security.

That’s it — you’re now free to explore the frontier of internet finance.

Takeaway: get off the exchanges and take self-custody. This lets you invest in projects earlier and better understand crypto as a user. XDEFI & Keplr are great starter wallets; consider using a Ledger hardware wallet if you’re investing $1,000+.

6. Play around in crypto

The best way to understand crypto is to start playing with it.

Let’s start with some basic definitions:

• Swaps: when you trade one crypto asset for another (ex: trading Uniswap (UNI) tokens for ETH tokens).
• Cross-chain Swaps: when you swap tokens that are native to different blockchain networks (ex: swapping BTC for ETH).
• NFT: stands for non-fungible token; basically means that the token is unique. For example, Cryptopunks are some of the most valuable NFTs in crypto right now. Each Cryptopunk NFT is part of the broader collection; yet unique in its specific characteristics. On the other hand, the ETH token is not a NFT because all ETH tokens are the same in terms of their characteristics.

• Staking: in crypto, staking refers to the practice of posting crypto assets as collateral in order to exercise protocol voting rights, validate transactions, and secure the network. Stakers (i.e., asset holders posting their crypto as collateral) are paid for this service via staking rewards (i.e., extra tokens and/or income from the network).

If you have questions about these terms or need other terms defined, CoinMarketCap.com keeps an amazing glossary of crypto terms.

Here’s a suggested bucket list to get you started:

NOTE: you can buy BTC instead of ETH to reduce transaction fees. However, BTC transactions take a little longer to settle (5–15 mins per transaction).

1. Self-custody ETH: buy some ETH on an exchange and send it to your XDEFI wallet. Make sure you buy $200+ so you have funds for transaction fees.
2. Make a cross-chain swap: go to THORSwap (a THORchain exchange) and then swap your ETH for LUNA — don’t swap all of it!
3. Buy an NFT: with the LUNA you just purchased, go to Terra’s NFT marketplace Luart and buy an NFT.
4. Swap tokens within an ecosystem: go to Astroport and swap some of your LUNA for a Terra’s USD stablecoin (UST).
5. Deposit into a crypto savings account: deposit some of your UST into Anchor Earn — you are now earning ~20% APY!
6. Stake LUNA: go to Terra Station, connect your wallet, click on the Staking tab, and delegate some of your LUNA to a validator securing the network. You’ll earn ~6.5% APY!
7. Send money to a friend: know someone with a Terra wallet? Send them some LUNA from your XDEFI wallet.

Takeaway: You need to use crypto to understand it. A great way to start using crypto is to buy ETH on Kraken Pro, send it to your XDEFI wallet, make a cross-chain swap for LUNA via THORswap, and then start playing in the Terra ecosystem on Luart, Astroport, Anchor Protocol, and Terra Station.

7. Watch out for scams

I know several people who collectively lost about $15,000 last year to a scam that occurred during the Aurory Project launch.

I was one of those people and I personally lost about $6,000.

In hindsight, it looked obvious. But, in the moment, I was new to NFTs and distracted by my day job.

Here’s what happened…

For starters, to clarify, Aurory Project is not a scam and the scam was not their fault. Aurory Project is actually an amazing gaming studio that’s building play-to-earn games (similar to Axie Infinity)and NFTs on the Solana blockchain.

However, when the Aurory Project launched, thousands of people were waiting together in a Discord channel. Unfortunately, there were scammers there as well. When the project went live, everyone rushed to buy an NFT before they sold out.

The scammer pounced by…

1. Making his Discord profile look like a moderator:

2. Telling people the Aurory site crashed due to heavy traffic.

3. Directing people to a “mirror site” where he said they could mint the NFTs.

4. Using a nefarious transaction to drain all the assets from user wallets.

It was well-executed: the scam website looked exactly like the real site. And the thief was very successful: the real Aurory Project only raised $1 million in NFT sales. But the scammer? Nearly $12 million!

Here are some takeaways for crypto safety:

1. Make sure anything you use in crypto is referenced by multiple, highly trusted sources.
2. Don’t keep lots of money in the self-custody wallet you use for everyday transactions. Instead, create two wallets: one for everyday transactions and the other for long-term storage.
3. Review all transactions before signing.
4. Never give your seed phrases to anyone — ever.
5. Find the correct URLs for apps and bookmark them.
6. Don’t go to websites posted by anyone in public Discord channels.

Takeaway: Crypto scams are common. I fell for a scam when I was new to NFTs. Make sure any app you use is referred by trusted sources, you’re on the correct website, not keeping lots of money in your everyday wallet, and never give your seed phrases to anyone.

8. Don’t use leverage (or hidden leverage)

Last May, the crypto markets dipped hard and fast.

In what was later called “The Crashening,” ETH dropped roughly 40% in only a few days. Smaller projects, like LUNA, saw their prices plummet even more.

Unfortunately, many new investors were using leverage — including one of my friends.

My friend was borrowing funds through Anchor Protocol and posted his LUNA as collateral. He wasn’t doing anything crazy risky — or so he thought.

When the crypto markets crashed, so did the price of LUNA. This meant that his loan was no longer sufficiently collateralized and Anchor Protocol liquidated his assets to pay back the loan on his behalf.

The result? He lost all of his 4,000 LUNA.

LUNA’s price has since recovered. After hitting low points under $4 last summer, LUNA recently reached an all-time high of $119. If my friend hadn’t used leverage, his LUNA would be worth about $400,000 right now.

A few key takeaways on leverage:

1. Crypto is volatile: even when you think you’re safely overcollateralized, things can change fast.
2. Borrowing costs are often higher than you think: for example, the cost of borrowing through Anchor Protocol is around 0-2% APR. However, this is because Anchor Protocol is taking your LUNA and staking it. So, the real cost of borrowing should include the opportunity cost of staking the LUNA yourself — and it is much higher.
3. Tax obligations are like hidden leverage: I know someone who sold his business for $10 million in 2008. He took all his money and put it in the stock market. Early the next year, the stock market tanked and his portfolio lost 80% of its value. But he still owed $4+ million in taxes for the previous year. Don’t make the same mistake with your crypto investment; set aside money for taxes.

“If you remain confident [in the markets]… unwind leverage early, cash out tax obligations when incurred, but for the love of god, do not try to time the top.” — Ryan Selkis, CEO of Messari in Crypto Theses for 2022

Takeaway: using leverage is typically riskier & costlier than you think. Make sure you have money set aside for taxes.

Bonus —It’s possible that you, like many other investors, are paying too much in taxes because you aren’t properly discounting your gains with your losses. However, taxes in crypto are a pain. This is not tax advice and you may want to consult with professionals like CryptoTrader.Tax.

9. Sell into strength, buy into weakness

Last May, I successfully used MVRV & NUPL ratios to note that ETH was hitting a cautious stage in the bull run. ETH crashed a few days later.

Does this mean we can time the markets?

No, we can’t perfectly time the market. But we can approximate broad market trends.

For example, one of the ratios I use is called Net Unrealized Profit/Loss (NUPL). This metric gives you the average profit/loss ratio of every coin if it was sold right now at the current price. For example, if ETH’s current NUPL ratio is .70, then investors would, on average, realize a 70% profit if they sold their ETH at the current price.

To summarize, NUPL essentially tells us the average profit/loss status across millions of investors in realtime. Historically, a NUPL ratio of 0.75 or higher is is followed by a sizable correction in the following weeks.

So, why do broad market trends and NUPL matter?

Here’s why: if you can approximate the broad market trends, then you can approximate the timing of your buying and selling.

In other word, you can gradually sell into market strength and gradually buy into market weakness.

Speaking on The Pomp Podcast, bitcoin analyst Will Clemente put it like this:

“[The whales] don’t perfectly time the tops or bottoms — they don’t perfectly buy the bottom of the bear market and they don’t perfectly time the top of the bull market. They kind of scale into the bear market and scale out of the bull market.”

Takeaway: you can’t perfectly time the markets but you can approximate broad trends with metrics like NUPL and MVRV. These metrics gauge the current profit-taking pressure on the psyche of investors at-large. It’s best to sell into strength and buy into weakness.

PS — Glassnode is the best place to find tons of charts and on-chain data for BTC, ETH, and other major crypto assets. You can signup here.

Recap

Crypto is “rekting” people and minting millionaires. If you’re new to making money in crypto, here are ten steps to get you started:

1. Understand the revolution.
2. Follow trusted sources on Twitter.
3. Set up an account on either Kraken, Coinbase, or FTX US.
4. Start with buying blue-chip assets like BTC, ETH, and LUNA.
5. Get off the exchanges and take self-custody with XDEFI wallet.
6. Play around in crypto in crypto on apps like THORswap, Luart, and Anchor Protocol.
7. Watch out for scams!
8. Don’t use leverage (or hidden leverage).
9. Sell into strength, buy into weakness with market metrics like NUPL.

A little over one year ago, I was new to crypto. Now, I’ve made more money my last annual salary and I absolutely love the crypto revolution.

With that said, exercise caution. As Ryan Sean Adams says at the end of every Bankless show:

“Of course, none of this is financial advice — crypto is risky, you could lose what you invest… it’s not for everyone. But we are headed west.”

Ready to start your journey into the crypto frontier?

Finally — as they say in crypto Twitter: “Welcome fren.”

If this content interests you, please follow me on Twitter and subscribe to my content on DeFiPuma.com.

And of course, make sure you subscribe to Entrepreneur’s Handbook for their amazing stories from business and crypto. Cheers.