Advice to a friend starting on crypto journey

I used this as a great conversation started with people of different experience levels and I thought you might find this useful. It’s for you if:

  1. you own some crypto and it sits on an exchange (like Coinbase or Binance or Kraken) and you think about doing something more with it AND;
  2. you are interested in DeFi and crypto investing (rather then just trading) but unsure where to start.

It’s a conversation we had over WhatsApp after a chat over coffee. Just edited for clarity:

Me:

Hey, as promised, I’m dropping here a few pointers about crypto which I would find useful when I was starting out.

I think you wrote down that you need a crypto wallet (digital one) and I'd recommend Metamask. It works on different chains, is very widely used, hence you won't need worry about compatibility for some time.

Right at the beginning when you have your Metamask, go and connect it to Zapper.fi.
Zapper can be your first playground to test staking, pools, farming etc. and it will monitor for you, where have you “put” your money. Keeping track can become an issue if you are enthusiastic tester. Zapper also works on different chains now so you are covered for Ethereum, Binance Smart Chain, Polygon.


Next step - I remember you have some crypto from regular dollar averaging purchases from years ago. That means you might want to (and you should) think carefully about taxes as a law abiding US citizen. The thing is, once you sell your crypto and make profit, it legally creates taxable event. Hence better option for you might be to just take your crypto and borrow against it. Then you work with the borrowed money. This works well if you have more $$$ in one of the main coins like ETH or BTC. Why it’s great, well, that way you don't loose your crypto because it may/will go up in value, you don't create taxable events and you have crypto/cash to work with…so win-win-win.

Interesting newer places to look for borrowing against your ETH might be Alchemix.fi (self repaying loans) and Liquity.fi (zero interest - it's a rising star of DeFi now), or just use AAVE which has number of coins. To add one super boring old-school world Nexo.io, which I consider “old school banking approach painted in pink-crypto colours”. But they have super simple app (also on iOS), low interests on borrow and low rewards on stake but their token is still alive so it’s easy to check and see how the DeFi logic of lending & borrowing and receiving interest in different tokens work.
I suggest you check them all and then let's talk. I’m curious to hear which one you like and why.

Places where you can learn more are obviously Twitter, Telegram and Discord channels of different projects. Just careful on scammers, don't believe anyone offering anything for free and never give them your wallet address.

Some sites with regular research and newsletters around crypto are good when you want to expand new horizons. It maybe for later, but check out - TokenMetrics, BanklessHQ and baserank.io.

Protocols with real life use-cases which I mentioned in our conversation:

  • GET Protocol (ticketing NFTs) https://www.get-protocol.io/
    – AUDIUS - music streaming https://audius.co/ - love the “Spotify like” concept.Good idea is also to connect your hardware wallet (I think you said Ledger) to your Metamask - it works via Ledger suite and it's a good safetynet for accidents because you need to confirm every Metamask action with your hardware wallet.

My friend:

Ok, I like the idea of borrowing and have enough to do so. Do you mean borrow and remain in crypto, or borrow and have more money for trading options?

Me:

yeah, when I say borrow, I mean borrow inside the crypto world - go to Maker, AAVE, Liquity or Alchemix and put your ETH into collateral and borrow against it - typically you'll get 50% of your collateral in some stablecoin which you can then use for whatever you want, including buying new MacBook - but you want to use most of it inside the crypto world for your first test plays....idea here is - no taxable event, you still own asset which will grow in value (assumption) and you have cash to play around with for other things

It’s really just a conversation we had over WhatsApp, so many loose points but feel free to ask if you have any questions.

Left for next article:

Where to start if you don’t own any crypto and you are curious to try it and see for yourself.