Crypto Academy Week 11 - Homework Post for @alphafx
Professor @alphafx posted a new lecture on Trading vs Hodling crypto. As part of studying process, I want to submit my homework in this post.
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Part 1: Where to store your crypto
The key difference between Traders and Hodler is how long they hold their crypto. A true hodler believes in a long term success of crypto. He buys coins/tokens to hold them for a long time from a few months to up to several years. Traders buy for a short tem from just a few hours up to several weeks. What is common for both is that they have to hold their crypto somewhere. The choice of the wallet is highly important. Unfortunately, there is no *“best way”* to store you funds. This choice is always personal. I consider the following factors when I chose where to store my crypto.
How much crypto do you hold?
This is the most important question you should ask yourself. The key point is that moving your funds has a cost and it is hard to predict it. On an average day gas fees are reasonable. In case of any major market moves, blockchains can be overwhelmed by the number of transactions. This is especially true for Bitcoin and Ehtereum network. If you have an ERC-20 token with equivalent USD value around $100-200, storing it outside a centralized exchange doesn’t have much sense. You can easily waste $50 on gas fees when you move it to an exchange or trigger smart contract on a DEX. Buying a hardware wallet to store a small amount of crypto is also too costly. On the other hand, if you have invested a large sum of money into crypto, storing it on a new place where you don’t hold actual keys is way too risky.
How long are going to hold your crypto?
If you are a day trader moving crypto out of place you bought it doesn’t make any sense. The chance a centralized exchange will be hacked or perform exit scam in the same day you bought/sold you crypto is tiny. Yet if you plan to hold you crypto for a few years, you need to make sure you don’t compromise on safety. A cold storage like a paper wallet or hardware wallet will be the best option.
Where do you live?
If you live in a democratic country, you are safe and may ignore this. The government will never try to take away your property if you don’t violate laws. If you live in an autocracy, none knows what happens next. Government can block access to centralized wallets like exchanges. You will need to use VPN to get your funds and there is no guarantee it will work. Hardware wallets are cryptographic devices and some countries may have a customs barrier to buy one.
I personally use a mix of self-made hardware wallet and centralized exchanges. It is easy to create a hardware wallet. You buy a USD flash drive, put you keys on it and encrypt the drive. It can’t compete in usability with real hardware wallets, but it still close to the same level of safety. I like it better than paper wallets as it is easy to damage a paper one. Pure some coffee on it and your funds are lost. It also allows you to just copy-paste your keys instead of typing them manually.
Part 2: Am I hodler or a trader?
For me the choice of being a hodler or a trader depends on just two factors: time and skills. A hodler does research once and then just waits for a certain gains. A hodler still needs to check the news and market conditions, yet it is not that critical. Trader must spend much time on trading. The crypto market moves insanely fast. In just a few hours the price can drop or pump with two digit % values. If you want to catch the market move, you have to spend time on it. In addition to the time you need to have proper skills. A hodler needs to know how to buy, sell and store crypto. Trader needs to know everything he can about crypto: fundamentals for many projects, how to work with multiple market indicators, know interface of a several exchanges, be skilled in technical analysis and etc. In other words, trading is an actual profession and you have to be a skilled professional to succeed. With any market move some take profit and some take loses. You need to be good to stay in the first group often.
Source: https://pixabay.com/
I’m a newbie in trading. I try to make trades to get some experience when I have time. But these are usually small traders. What I do good is hodl! I’m not afraid of market moves. I have strong hands and I don’t panic sell when I see market in red. I have a certain plan and I stick to it. I will remain a hodler until I get enough experience in trading. Hodling also helps you to become a trader by teaching you to control emotions. Both hodlers and traders need to think logically and never act on emotions. A hodler who learned to stay calm on market deeps and to sell his favorite tokens near the market top can become a good trader one day.
Part 3: An example of spot trade for hodler
As a final part of my homework, I will show you how to make a trade as a hodler. I will use Binance exchange. I hold some amount of SAND tokens. NFT hype is dying out in the end of April, but SAND tokens some good retracement from recent lows.
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Yet I don’t think SAND is strong enough to brake the resistance level around $0.70. I expect price to move as I marked on the chart above. I still think in a long term, SAND price will go above $1. To catch this move I will set a limit order to sell some SAND tokens at $0.70. When this order will be completed (in a week according to my prediction) I will set another order to buy SAND back at $0.60.
This is it. Our order is now placed and will wait for its time to fill. You can always check it by looking at active orders:
I can’t predict if the price will actually bounce off. The price can go up beyond $0.70 and I will be out of this market. However, as a holder I bought SAND for a cheaper price. In any case I will stay in profit.
Disclaimer
I’m not a financial of any kind. I encourage you to check all information yourself and make decision only based on your own opinion. All articles are created for solely entertainment purpose.
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