How To Get Started In Crypto (And A Reference For The Rest Of Us)
Level 2 - Value Investor
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The recent institutional commitment to crypto combined with excellent price performance in 2023 has brought attention back to the industry and…sudden growth in subscribers to DeFi Education.
If you’re joining us for the first time, this post is for you.
Even if you’re more experienced, there’s value in reviewing the fundamentals.
Why We’re All (Still) Here
Why has the DeFi Team - with previous careers in Wall St. and software - gone “all in” to work and invest full time in crypto? And why did we stick with it through a long bear market? If you’re wondering whether you’re too late, or fear getting involved after the market has moved so much, let’s zoom out and consider the opportunity.
Crypto is currently a trillion-dollar industry.
DeFi has the potential to grow to a multi-trillion dollar industry.
We are convinced DeFi in the future will be bigger than all of crypto is today. Why?
The largest asset managers in the world are now competing to offer financial products linked to crypto. This means pension funds, sovereign wealth funds, sophisticated institutions and private investors will soon have access to Bitcoin, Ethereum, and later DeFi.
Value proposition of DeFi? Replace expensive, slow, and error prone banking processes with efficient software code. This cuts down on overhead (offices, workers).
This isn’t a new concept - we’ve been keen supporters of DeFi since soon after it was invented - our backgrounds in finance and tech gave us conviction for the long term.
It’s time to reflect on the big picture. You’re answering a simple question: is DeFi likely to grow significantly in the coming years?
We think so, which means *right now* is the best time for most people to get involved.
Why?
The technology has been proven and governments have capitulated to letting it exist as a legitimate segment of the financial sector. Neither was true until very recently.
After invention, it wasn’t clear whether DeFi would even be allowed to exist. Before DeFi, when the main use case for Bitcoin was buying drugs online, crypto seemed at risk of being banned. Despite a reputation for insecurity and billions of dollars lost to hacks, DeFi works. There are core protocols in the decentralized financial infrastructure which have functioned as expected, protecting billions of dollars of customer funds 24/7/365 for years.
We are now witnessing the long-predicted merger of traditional and digital finance.
This isn’t just traditional finance investing in DeFi. Successful DeFi projects are investing billions of dollars in traditional financial products.
The DeFi industry as a whole is lending hundreds of billions of dollars to the US government (via stablecoins)!
Stablecoins: a financial primitive which enables anyone with an Ethereum account to access an interest-bearing USD bank account, in the form of tokens which are designed to be worth approximately $1 supported by collateral and contractual claims
To recap on the opportunity:
large Total Addressable Market - anyone who uses money anywhere in the world
proven technology - after 3+ years with hundreds of billions of dollars Total Value Locked this is no longer an experiment
resilience - DeFi has survived regulation attempts, global government sanctions programs, and the insolvency of multiple large cryptocurrency companies
legitimate - crypto has government and institutional support around the world
timing - we’re immediately prior to mainstream adoption
Why Read DeFi Education?
You are in the Wild West. If anyone says it will be an easy road, they are lying. If anyone says they never miss, they are also lying. Mark Cuban got rugged with TITAN. Every single wealthy DeFi investor has gotten rugged. There is just no way to learn something without making mistakes. The best you can do is learn as much as possible and stay on top of all the changes. And. That is exactly why we’re here!
Unlike the newest social media gurus who will spring up like mushrooms after rain as soon as crypto becomes popular again, we’ve a proven track record. Anyone can review our hundreds of timestamped newsletters over the last 2.5 years to see how we’ve performed: what we’ve got right, and some things we could have done better.
Here’s some highlights from the last twelve months
we shared with our paid subscribers that we had turned bullish on crypto at the end of last November; resuming purchases of Bitcoin and Ethereum. Both assets have returned more than 100% since we resumed buying.
our regulatory coverage has been on point, and our familiarity with law and financial regulation allowed us to correctly predict that the market was overly pessimistic about the legal problems faced by Coinbase. We were buyers of COIN in May (around $50) and November (around $72). Coinbase now trades above $150.
We’re focusing on trade ideas because the outcomes are easily measurable, but our regulatory and technology posts also added value.
And here’s how we help you reduce risk.
Security Best Practices: one of our team has a cybersecurity background and we’ve applied this knowledge to creating checklists and crypto security best practices. Our defense in depth approach significantly reduces the odds of you losing your funds to increasingly sophisticated scammers. We’ve advised leading DeFi protocols and even customized our software to maximize security.
Financial Industry Background: which projects could be financially viable and which have subtle but fundamental flaws? With our background in investment banking and private equity, we have intimate experience of how the financial system works and the challenges and opportunities of building in DeFi. Now that crypto is being driven by institutional interest, you get an inside track on how key decision makers will approach this new industry.
DeFi Education is your gateway to everything crypto. We explain the technology, guide you on how to invest and use DeFi products, and can help you launch a career in this fast-growing and lucrative industry.
Master The Technology
Fundamentals Demystified: Smart contracts, oracles, bridges, layer 2 scaling solutions, zero-knowledge…we break down these complex concepts and show how each component fits into the whole system. You can’t trust what you don’t understand.
Practical Guides for Safe Navigation: We provide step-by-step guides on managing funds securely in DeFi. Discover the safest wallets, learn to avoid hacks, and identify scams with ease.
On The Cutting Edge: Our team are plugged into crypto around the clock. We analyze and distill the most significant developments to help you differentiate innovation from marketing hype.
Invest In And Use DeFi Products
If you’re going to invest in crypto, you should use DeFi to store and swap your assets.
Centralized brokerages and exchanges are dangerous. They demand personally identifiable information, including copies of sensitive documents, and have a terrible track record at keeping data safe. They associate your on-chain activity with your real world identity forever. They’re an obvious target for criminals. “Regulators hate them.”
You never know which centralized exchange (CEX) will be the next to halt withdrawals, be hacked, become insolvent or be charged with a serious crime. What if the exchange was laundering money for terrorists and the government sweeps in and seizes everything? It could take years to get your money back.
Just ask anyone who had money on FTX (or Mt. Gox. Or Quadriga)
FTX customers missed out on the doubling of crypto’s market cap in 1 year because their claims were converted to USD value at market prices on the bankruptcy date.
Even if they are “made whole” in USD, customers are down in crypto.
The services you can access depend on your nationality or country of residence. One day you may be permitted to access a financial service, the next day not. We’ve even seen ridiculous cases where customers are allowed to buy some spot crypto assets, but not others. This was based on the coin listing date, because the exchange had agreed “not to offer new products” to customers. You want to buy some Celestia (TIA)? Denied (based on region). But you can buy SHIB. Makes zero sense.
And there’s a question of ethics.
Fundamental to the ethos of crypto are freedom, privacy, and self-sovereignty.
DeFi can bring access to financial services to all humans worldwide, without discriminating on the basis of race, ethnicity, or proxies for these such as citizenship or residence. We don’t think basic financial transactions - remittance, saving, and investment - should be blocked for any law abiding person anywhere in the world.
The Internet is a global public utility to allow humans to communicate freely. Software code is just another language. Programmable money is speech. It seems illogical to accept the “money is speech” argument for the purposes of political campaign finance laws, but then treat publishing a financial smart contract or sending a crypto transaction as something other than a protected exercise of speech.
Criminals and even terrorists will make use of crypto in much the same way as they make use of the banking system. We’ve argued before that traditional financial service providers are very bad at preventing criminal activity. Transparent public blockchains make it easier for law enforcement to detect and prosecute financial crimes.
We’re here to make the case that CEX are just profit seeking corporations. They’re amoral by charter. Their goal is to make peace with regulators in order to fulfill their legal obligations to maximize shareholder value. If you’re an owner of the business, that’s great. If you’re a user of the new financial system, you deserve better.
If you live in the United States, Canada, or Europe you’re probably going to have a bad experience with CEX. Good news: DeFi is on the cusp of solving this.
But. Which protocols are reliable and safe to trust with your money? There isn’t a single answer, rather its a question of understanding the strengths and weaknesses of the various offerings. Some have a proven track record of reliability, but don’t have a wide range of assets to trade. Others have hidden costs. Confused? This is where our deep dives for paid subscribers come in. New DeFi products launch every week - we spotlight the good quality products built by serious teams which show strong security practices - in short, the platforms we trust with our own money.
We’ve recently covered the perp DEX sector in detail, including proven and secure solutions like dYdX v3, Synthetix Perps v2, and some up and coming platforms (new versions of the aforementioned plus AEVO, formerly Ribbon). Spot DEX based on AMMs are expensive and inefficient and so only suitable for swapping between major coins e.g. ETH and USDC. For altcoin trading, leveraged/margin trading, and selling short, DeFi investors need derivatives.
Kickstart Your Career In Crypto
DeFi Education is tailored to people who want to learn the technology and invest in and use DeFi products. The knowledge contained in the newsletter is also useful for people who are serious about starting a career in crypto, either as a second job or a full time role. We provide insight into the specific skill sets required and showcase success stories from people who have successfully switched careers into crypto.
Getting Started
For those just joining us (and for readers who want a structured refresher), here’s what we’d consider a solid syllabus for learning crypto if you’re starting today.
Don’t miss the best of DeFi Education’s “evergreen” free posts which demonstrate the breadth of our coverage.
Paid subscribers also benefit from market views, trade ideas (we’ve a solid track record), security alerts (including which wallets are safe/dangerous), deep dives on tokens and protocols, and advanced content like how to protect yourself from hacks.
Coming up for paid subs we have 2023 in review and coverage of DeFi on Solana.
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.
We now have a full course on crypto that will get you up to speed (Click Here)
Security: Our official views on how to store Crypto correctly (Click Here)
It looks like the link under “solid syllabus for learning crypto if you’re starting today” is broken?
Are there plans for a 2024 Security/VPN/Wallet update(s)?