Crypto is pumping – How do you get invovled
With crypto pumping in price again it starts to gain mind share of the average to brand new crypto fans.
You know these people, they were the ones who bought a couple bucks of BTC or ETH when prices were surging in 2021. They also are the same people who lost a few bucks, did not understand why they even bought it, and then say it was all a scam anyways.
The brand new entrants are those that stayed out of that 2021 wave and now that crypto is pumping again think maybe it is time they get involved, even in a small way (disclaimer I was this type of person in 2021 after thinking the the surge in price in 2017 made no sense to me why anyone would buy BTC).
The logical move is for someone to buy “BTC” or “ETH” on something like Robinhood or WeBull for ease of use. I use quotations because there is no proof you actually own BTC/ETH when you buy on something like this, all you know is that price is reflected in your account but the custody of the token is with the centralized entity.
Ok so what is the next logical spot to turn to buy some crypto? CEX (centralize exchanges) such as Coinbase and Binance (two of the biggest ones out there now that FTX has collapsed). CEX are counter intuitive to everything that Satoshi was preaching against when creating BTC but they are a necessary evil for those that do not know how to run a node to help secure a network (plus at this point, at least in BTC, you are competing against million dollar operations that help process BTC transactions).
Let me explain why though they are necessary evil (but pose similar risks to things like Robinhood and Webull). CEX operate the same way as those apps do, you “buy” some crypto and your account reflects the dollar value of said crypto in that given moment. You do not truly own the crypto, it is on a order book somewhere housed in a data center that holds an IOU of your purchase. Should there be a run on the bank (or CEX) and the CEX does not have enough BTC on hand to help redeem everyone then it collapses (think Enron or most recently this is a short version of what happened with FTX).
My recommendation is always to buy crypto on a CEX, then instantly transfer it to your non-custodial wallet (think Metamask or Ledger products for cold storage wallet). I will not go in depth on custodial versus non-custodial other than to say it boils down to who manages the private key of the wallet. CEX control the keys to your wallet, in non-custodial only you know the key to the wallet (those in crypto know the phrase “not your keys not your crypto”, well this is what it is referring to).
Ok so that is some of the bad of CEX (yes there is more, another time), but I did say it is necessary so let me explain. For almost everyone now you need to convert your fiat (dollars) into crypto, and this can only be done through CEX (sadly). It is the onramp to the crypto space and all the benefits of a decentralized ecosystem. But again, once you buy it, get it into a non-custodial wallet so you can truly own your crypto.
Great, you have now bought crypto, using fiat, on a CEX and want to be smart and get it off there. So what would be the next steps?
One of, if not the, most popular non-custodial wallet is MetaMask. This is considered a hot wallet (meaning the private keys that are generated for the wallet are created while connected to the internet, which does present some risk of being hacked). Anyone can set up a MetaMask provided they have an internet connection and the ability to write down/save your secret recovery phrase (OGs will remember this as a seed phrase but the verbage has changed to allow for easier understanding). This is a randomly generated password of 12 words in a specific order that gives access to the wallet. Should anyone in the world get access to this they can hijack your wallet and take all of the contents of it (NFTs, crypto, etc).
Alright, the hot wallet is set up, the secret recovery phrase has been saved (on paper or more preferably a steel wallet, NEVER EVER save your phrase onto your computer in any way), and you are now ready to take full custody of your crypto.
You go back to your CEX of choice (I will use Coinbase in this example as that is my preferred CEX) and you look to “Send” your crypto you bought to your hot wallet. Within the send function it will ask you where you want to send it, and in this case it is our wallet address.
What is your wallet address? Same as your home address or email, it is the input anyone would use should they want to send you something. Below is a screen show of a wallet address, within MetaMask, in which you can simply click the copy button and then paste it into the “to” feature on coinbase. You would click continue and from their Coinbase will send the crypto and you are now in full control of your crypto
Congrats, you are now a proud owner of your crypto and when someone says “not your keys not your crypto” you can smile because you have nothing to worry about as you own it all.
TL;DR
Buy crypto on a centralized exchange (CEX) like coinbase or Binance
Set up a non-custodial wallet like MetaMask
Send purchased crypto from CEX to non-custodial wallet
Feel secure knowing “your keys, your crypto”