One Last Word on Crypto Before Everything Explodes
Including a simple 6-step guide to start owning your own decentralized money
“Behold, I have engraved you on the palms of my hands.”
—Isaiah 49:16
*NOT FINANCIAL ADVICE*
Lots of things to write about this week, including a shocking story on leaked New Zealand vaccination data and a whistleblower arrest. However! As many face economic headwinds and data shows a less than stellar financial future for most of us, I feel it necessary to give one final word (for now) on cryptocurrency — potentially the most important financial technological development of this generation.
Several things prompt me to write about it.
Notable uptick in value and volume over the past month or so
Consolidation of on-ramps and assets
Experiential testimony
Bitcoin — and by extension the rest of the cryptocurrency market — goes up and down in identifiable cycles. The most notable bull cycles took place around 2017/18, 2020/21, and now, it appears, 2023/24. Nothing is ever set in stone in crypto, so the recent uptick in the crypto-wide market cap could be a red herring, or a bull trap if you fancy the lingo, but I think the writing is on the wall. We go up from here.
One of the important reasons for this is of course the likely upcoming approval of a Bitcoin ETF. The ETF is a blessing and a curse. On the one hand, if you own crypto you will likely see a nice bump in the value of your assets. On the other hand, if you believe in the purpose of crypto, you may not look at an ETF with much amusement. It would require the large firms who gain ETF approval to gobble up a bunch of Bitcoin and hold it on behalf of investors who buy the ETF, meaning investors in the ETF don’t actually own and keep the crypto themselves and thus cannot use it as currency.
This is diametrically opposed to the purpose of cryptocurrency. The point is decentralization. An ETF drags it in the direction of centralization. No good.
Nevertheless, it could help take the long-dismissed idea of owning something like Bitcoin mainstream and encourage its purchase on a greater scale than ever before, sending the value of such an asset to the moon, to use a crypto colloquialism. I will never pretend to give you financial advice as I am not a financial advisor. All I can say is that I put my money where my mouth is on these kinds of things, so make of that what you will.
We’ve also seen a consolidation of places you can actually get crypto. Exchanges shut down all the time. Sometimes due to their own mismanagement, sometimes because they’re no longer welcome by the U.S. government’s various agencies. This means it’s getting more difficult to exchange your dollars for crypto. And, on the platforms where you can purchase, count on some degree of a KYC process where you divulge all your information. They are eager to make what is supposed to be an anonymous financial system completely transparent to the IRS and other prying eyes.
I actually don’t blame them for this. Nor do I advocate avoiding taxes. Render unto Uncle Caesar what is his. I am concerned, however, for the unpopular people who will get the business end of state-sponsored financial crackdowns in the future. The government will track every purchase they ever make in Bitcoin or any other cryptocurrency. At least they will still be able to make the purchase instead of getting their account frozen, but the surveillance power is still chilling.
Ultimately this consolidation of on-ramps, unhelpful third party custody of crypto (ETFs), and likely rise in value in the near and long-term future makes it more important than ever to own and self-custody some crypto as soon as possible.
Thus, the real point of this substack: Onboarding to crypto reveals the unmatched utility of crypto.
These days, potential restrictions on the purchase of crypto have made it more difficult for future-minded people to get and retain crypto themselves. For fear of bank account freezes by unfriendly banks who catch you buying crypto from this or that exchange or service, it’s now preferred — for the more paranoid of us — to open a buffer bank account.
This means that to get to Bitcoin, you must open a crypto exchange-friendly bank account, link it up to your original bank account, transfer whatever amount you want to use in purchasing crypto, wait for it to settle, KYC on a somewhat reputable exchange, link your new exchange profile to your new buffer bank account, transfer money, purchase crypto, and just when you’re ready to send purchased crypto to your own digital wallet — BOOM! “Hold on withdrawal.”
What this waiting game of a process and constant hiccups reveal is the extraordinarily cumbersome banking system that you mostly believed was simple enough. Your father’s generation may have been just fine with all of this, but the coming generations born and nurtured in the lightning fast digital age of instant purchases and same-day shipping, the current process is absolutely prohibitive and infuriating.
Of course, once you get crypto into your own wallet, you can transfer it to anyone in a heartbeat, no restrictions, no questions asked. The process of acquiring crypto reveals the unparalleled and downright impressive utility of crypto. Instead of a bunch of private banks or a central bank keeping the ledger on what you own and complying only on a bank day (or after several bank days) to approve your transaction, the crypto system never sleeps and will process your transaction any time any day. The ledger is distributed, and miners are incentivized to process your transaction whenever you want them to. Crypto beats banks.
If you take nothing from what I’ve ever written on crypto, let it be that. I’ll say it one more time: CRYPTO BEATS BANKS.
If you’re reading this and understanding even a modicum of it, you’re already wayyyyy ahead of the game. So, I’ll leave you with a simple process of owning and keeping crypto yourself. This isn’t financial advice; it is simply a hypothetical way that Joe Schmo could get in on the financial system of the future…today!
First things first…
Get a hardware “wallet” — Trezor or Ledger — and always buy it off of the company’s official website for security reasons, no matter what kind of deal you can find on Amazon. Follow the instructions about seed phrases, etc. to get everything set up. NEVER SHARE YOUR SEED PHRASE OR KEEP IT TYPED IN A DOCUMENT OR ANYWHERE ON A COMPUTER. JUST WRITE IT DOWN AND HIDE IT.
Best possible way to get crypto…
PLAN A: Find someone who owns crypto. If you want to buy $100 of Bitcoin, give them a Benjamin and have them send $100 worth of Bitcoin to your wallet. Tada!
But that’s not so realistic right now, considering the relatively small amount of crypto owners, so instead…
PLAN B: Open up an account on a centralized exchange like Kraken or Coinbase
Open up a crypto-friendly bank account to prevent any future freezes on your account. It may not seem like a big risk right now, but better safe than sorry to have a buffer between the bank you use for everyday commerce and the one you’re using to transfer money to a crypto exchange.
Send funds from original bank account to new bank account to crypto exchange account
BUY CRYPTO!
Withdraw crypto to your hardware wallet and you are now the proud self-custody owner of cryptocurrency! Congratulations.
P.S. You will run into all kinds of fees. Fees to buy. Fees to sell. Fees to transfer. Sadly, it’s the nature of the beast. Not everyone is willing to eat those costs for the sake of hypothetical money. I get it. One should carefully weigh one’s confidence in something like crypto against the fees, the volatility, and other unknowns about a new technology like crypto. Crypto is about thinking for yourself — something you will have to do a lot of if you decide to jump in.
Good luck out there, kid!