Crypto Newbie Questions
Discussion
Very good at Business but I have a bad history with new Tech (said that I wouldn't need a website because the new-fangled internet wouldn't catch on, and declined to buy Bitcoin when they were at $400 because my mate who assured me it would breach $1000 is a Flat Earther).
I tried to understand it, and looked at the PH threads but TLDR and full of terms I haven't heard of before.
So, can anyone share their experiences of what to do and not do, for a complete Numpty like me please?
I tried to understand it, and looked at the PH threads but TLDR and full of terms I haven't heard of before.
So, can anyone share their experiences of what to do and not do, for a complete Numpty like me please?
Problem is everyone approaches it differently.
Firstly if you want to invest find a good platform you can trust (to a degree) with fees you are happy with.
Secondly set strict parameters for how much and what kind of thing you want to invest it.
Treat it all as high risk if your going into it, its the only way and attitude to take towards it. Only put in what you can afford to lose IMHO.
Plenty coin tracking sites out there if you want to dabble. I use coinbase and shove in £10 a week into random coins that attract me then watch what happens.
Some however put in bigger sums - I used to be got to realise it was too addictive for me and bailed when I started getting a bit lairy with shorting.
Firstly if you want to invest find a good platform you can trust (to a degree) with fees you are happy with.
Secondly set strict parameters for how much and what kind of thing you want to invest it.
Treat it all as high risk if your going into it, its the only way and attitude to take towards it. Only put in what you can afford to lose IMHO.
Plenty coin tracking sites out there if you want to dabble. I use coinbase and shove in £10 a week into random coins that attract me then watch what happens.
Some however put in bigger sums - I used to be got to realise it was too addictive for me and bailed when I started getting a bit lairy with shorting.
True Believers will tell you that crypto is going to take over the world, and that governments & central banks are quaking in their boots at the coming of the New World Order.
In reality, at the moment decentralised blockchain is a solution in search of a problem (with some pretty hefty and fundamental technical issues, to boot) and there are no real-world applications worth a damn.
Nobody invests in crypto, as there is no underlying asset or value to invest into, and no reliable indicators that might tell you the way that a market is going. Lots of people (me included) gamble on various coins though and there is no doubt it can be very lucrative indeed. But make no mistake, you are gambling and you have to be comfortable with the idea that your "investment" can easily lose 50% in a few days. If you can handle that kind of uncertainty though I'd say that a small & long holding in a few of the more established coins (Bitcoin / Ethereum) is a no-brainer. Short-term trading of coins, especially the less-known ones, is fraught with risk and largely just a matter of luck in your timing. You could, potentially, earn sky-high returns. More likely is a small-to-middling loss (as said, there is no underlying asset or value and so the only way anybody gets the sky-high returns is by taking profits from people who have made a loss). But even then, crypto shows no real sign of slowing down or a long-term correction, so by all means get yourself a small position that you feel comfortable with and have a go.
In reality, at the moment decentralised blockchain is a solution in search of a problem (with some pretty hefty and fundamental technical issues, to boot) and there are no real-world applications worth a damn.
Nobody invests in crypto, as there is no underlying asset or value to invest into, and no reliable indicators that might tell you the way that a market is going. Lots of people (me included) gamble on various coins though and there is no doubt it can be very lucrative indeed. But make no mistake, you are gambling and you have to be comfortable with the idea that your "investment" can easily lose 50% in a few days. If you can handle that kind of uncertainty though I'd say that a small & long holding in a few of the more established coins (Bitcoin / Ethereum) is a no-brainer. Short-term trading of coins, especially the less-known ones, is fraught with risk and largely just a matter of luck in your timing. You could, potentially, earn sky-high returns. More likely is a small-to-middling loss (as said, there is no underlying asset or value and so the only way anybody gets the sky-high returns is by taking profits from people who have made a loss). But even then, crypto shows no real sign of slowing down or a long-term correction, so by all means get yourself a small position that you feel comfortable with and have a go.
deckster said:
...In reality, at the moment decentralised blockchain is a solution in search of a problem (with some pretty hefty and fundamental technical issues, to boot) and there are no real-world applications worth a damn...
I recommend that you undertake some more research!Off of the top of my head:
XTZ: McLaren F1 NFT merchandise - it's advertised on the side of their F1 car: https://www.mclaren.com/racing/partners/tezos/
VXV: working with CERN: https://www.prnewswire.com/news-releases/vectorspa...
QNT: Oracle are relying on it for interoperability for enterprise blockchain. Their head architect explained in a recent meeting. It's also posturing to be the API for CBDCs https://www.quant.network/use-cases
There are many more.
Blockchain is the foundation of web3 - the internet of value and trust. It's significant.
Coinbase is the easiest to use. It's a publicly listed company and therefore regulated. It's very easy to setup, send money, buy bitcoin etc. The fees are high, the spread is high, and the number of cryptocurrencies to choose from is limited (though sufficient for a beginner, think FTSE 100). You can also login to coinbasepro, which has much lower fees but it's more of a 'trading platform'.
Binance comes second. Much lower fees and a wider selection of cryptocurrencies. This is my favourite, but getting money in and out is a challenge (you need a third party, I use coinbase). You can also 'stake' what you buy and earn interest.
There are lots of others, but these are probably the main ones. If you're planning on buying some (£1k+) and leaving it for a long time, I'd suggest just buying via coinbase as the fees become less offensive the more you buy (single transaction)
Binance comes second. Much lower fees and a wider selection of cryptocurrencies. This is my favourite, but getting money in and out is a challenge (you need a third party, I use coinbase). You can also 'stake' what you buy and earn interest.
There are lots of others, but these are probably the main ones. If you're planning on buying some (£1k+) and leaving it for a long time, I'd suggest just buying via coinbase as the fees become less offensive the more you buy (single transaction)
Just invest and hope it goes up, because that's what it's mostly done before. That is the extent of the 'strategy' 99.9% of 'crypto investors' employ, regardless of what they may tell you, or believe themselves, IMO. Obviously helps to have some learned YouTube conspiracy/single currency/blah blah bulls
t up your sleeve if questioned.
/flame suit
t up your sleeve if questioned./flame suit
mwstewart said:
deckster said:
...In reality, at the moment decentralised blockchain is a solution in search of a problem (with some pretty hefty and fundamental technical issues, to boot) and there are no real-world applications worth a damn...
I recommend that you undertake some more research!Off of the top of my head:
XTZ: McLaren F1 NFT merchandise - it's advertised on the side of their F1 car: https://www.mclaren.com/racing/partners/tezos/
VXV: working with CERN: https://www.prnewswire.com/news-releases/vectorspa...
QNT: Oracle are relying on it for interoperability for enterprise blockchain. Their head architect explained in a recent meeting. It's also posturing to be the API for CBDCs https://www.quant.network/use-cases
There are many more.
Blockchain is the foundation of web3 - the internet of value and trust. It's significant.
deckster said:
In reality, at the moment decentralised blockchain is a solution in search of a problem (with some pretty hefty and fundamental technical issues, to boot) and there are no real-world applications worth a damn.
Remember the dot com boom. This is where we are at right now with crypto. Most of the crap won't survive. Some of the big stuff will and the ones with the most utility will survive and thrive. And I'm not sure what you consider a 'real world' application but I think you'll find that millions of people are now using decentralised apps and DeFi protocols for decentralised borrowing and saving. Just Ethereum alone has about 3000 dapps associated with its blockchain. Smart contract utility is in its infancy but imagine someone without traditional finance availability being able to secure insurance on their property that will pay out automatically should there be a hurricane or typhoon that wipes it out.
RichTT said:
And I'm not sure what you consider a 'real world' application but I think you'll find that millions of people are now using decentralised apps and DeFi protocols for decentralised borrowing and saving.
I can understand why you would want to be a borrower in this trade, but who wants to lend their money into a blind pool where they have no ability to underwrite the credit risk they are taking on? The incredibly high rates of interest available on 'staking', and what the borrowers are doing to be able to pay those rates of interest (whilst not having access to cheaper credit) mystifies me.NickCQ said:
I can understand why you would want to be a borrower in this trade, but who wants to lend their money into a blind pool where they have no ability to underwrite the credit risk they are taking on? The incredibly high rates of interest available on 'staking', and what the borrowers are doing to be able to pay those rates of interest (whilst not having access to cheaper credit) mystifies me.
I am absolutely not an expert on the DeFi subject. But as far as I understand it, all DeFi pools for the sake of borrowing are over collateralised. You aren't borrowing for free, you are borrowing against your crypto assets. Say I have BTC in a DeFI platform and earn interest on it. Someone can borrow BTC from the pool without question, but in order to do so they have to put a larger amount of another asset in to a smart contract to do so. So the borrow from the BTC pool, pay interest to do so, and the owners of that crypto all gain a fraction of that interest. I could also borrow Fiat or another crypto against my BTC but only to a ratio set by the DeFi platform.
So there is risk in that there are some ways to manipulate the system (flash loan market manipulation etc) but as long as the platform is secure then your pooled assets aren't at risk.
Edited by RichTT on Monday 1st November 13:09
RichTT said:
Say I have BTC in a DeFI platform and earn interest on it. Someone can borrow BTC from the pool without question, but in order to do so they have to put a larger amount of another asset in to a smart contract to do so. So the borrow from the BTC pool, pay interest to do so, and the owners of that crypto all gain a fraction of that interest. I could also borrow Fiat or another crypto against my BTC but only to a ratio set by the DeFi platform.
You are presumably taking on quite a lot of price risk on the non-BTC stcoin they are pledging as collateral. How do you avoid this pool being a way for bad actors to transform pumped coins into BTC / FIAT and leave the stakers as the bagholders?NickCQ said:
You are presumably taking on quite a lot of price risk on the non-BTC stcoin they are pledging as collateral. How do you avoid this pool being a way for bad actors to transform pumped coins into BTC / FIAT and leave the stakers as the bagholders?
No, this is the beauty of smart contracts and DeFi. tcoin they are pledging as collateral. How do you avoid this pool being a way for bad actors to transform pumped coins into BTC / FIAT and leave the stakers as the bagholders?Say you want to borrow $100 of BTC, you have to collateralise $150 worth of whatever coin you might have. Once the value of the asset you've borrowed against drops below that $150 then it becomes subject to a liquidisation penalty. This is all written into the automatically executing smart contract the moment you borrow against your asset.
RichTT said:
No, this is the beauty of smart contracts and DeFi.
Say you want to borrow $100 of BTC, you have to collateralise $150 worth of whatever coin you might have. Once the value of the asset you've borrowed against drops below that $150 then it becomes subject to a liquidisation penalty. This is all written into the automatically executing smart contract the moment you borrow against your asset.
You are still exposed to the market price of the asset that makes up the $150, so if your counterparty fails to make a margin call you are now trying to liquidate that collateral in what could be a thin / volatile market. Plus the whole structure is on a public ledger so the rest of the market knows you need to dump.Say you want to borrow $100 of BTC, you have to collateralise $150 worth of whatever coin you might have. Once the value of the asset you've borrowed against drops below that $150 then it becomes subject to a liquidisation penalty. This is all written into the automatically executing smart contract the moment you borrow against your asset.
If I'm understanding it correctly, this is just margin lending and the structure has existed in "TradFi" for at least 500 years.
RichTT said:
NickCQ said:
You are presumably taking on quite a lot of price risk on the non-BTC stcoin they are pledging as collateral. How do you avoid this pool being a way for bad actors to transform pumped coins into BTC / FIAT and leave the stakers as the bagholders?
No, this is the beauty of smart contracts and DeFi. tcoin they are pledging as collateral. How do you avoid this pool being a way for bad actors to transform pumped coins into BTC / FIAT and leave the stakers as the bagholders?Say you want to borrow $100 of BTC, you have to collateralise $150 worth of whatever coin you might have. Once the value of the asset you've borrowed against drops below that $150 then it becomes subject to a liquidisation penalty. This is all written into the automatically executing smart contract the moment you borrow against your asset.
It sounds like you are asking to borrow £10 off me and giving me a £20 to hold
NickCQ said:
You are still exposed to the market price of the asset that makes up the $150, so if your counterparty fails to make a margin call you are now trying to liquidate that collateral in what could be a thin / volatile market. Plus the whole structure is on a public ledger so the rest of the market knows you need to dump.
If I'm understanding it correctly, this is just margin lending and the structure has existed in "TradFi" for at least 500 years.
Yes it could be a thin and volatile market, yes it's open to manipulation as we can see. This is why the more mainstream DeFi lenders don't touch just any old crappy coin someone might have several trillion of and stick to lower volatility coins. If I'm understanding it correctly, this is just margin lending and the structure has existed in "TradFi" for at least 500 years.
It's only in the depths of the decentralised P2P DeFi lending that you see the proper crap coins getting traded as collateral.
And the risk is averaged, which is why we discus lending pools. For the majority of the DeFi space this is not p2p lending. You do not have a direct contract with the person borrowing. That's between them and the DeFi lender.
And yes, it's margin lending by another name, on a massive decentralised scale. It's also almost instant, with an immutable record keeping system and contracts that can't be broken.
boyse7en said:
I might be being incredibly dim, but why would you want to borrow $100 of bitcoins if you have to stump up $150 of coin collateral? It's not like using an asset like a house or car to borrow against where you can still utilise the asset while it acts as the collateral.
It sounds like you are asking to borrow £10 off me and giving me a £20 to hold
The idea is to gear up your portfolio and magnify the impact of positive / negative market moves.It sounds like you are asking to borrow £10 off me and giving me a £20 to hold
If you start with £100 and put it in BTC, you win/lose 1:1 with the price of BTC.
If you stake £100 of BTC and borrow another £66 to invest in BTC, you win/lose 1.66:1.
Gassing Station | Finance | Top of Page | What's New | My Stuff