How to Invest in Crypto like a Boglehead?

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JVT
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Re: How to Invest in Crypto like a Boglehead?

Post by JVT »

dru808 wrote: Mon Mar 01, 2021 8:29 pm
JVT wrote: Mon Mar 01, 2021 8:25 pm I am considering BTCC.U (USD version of a Canadian ETF - 1% aum), GBTC (Bitcoin - 2% aum), or GDLC (Bitcoin, Ethereum, Bitcoin Cash, and Litecoin - 2.5% aum) in my Roth IRA. Given that its in a tax advantaged account, my naïve understanding would be that the PFIC status of BTCC should not matter but that is one of the things I would want to clarify. My understanding is that for a number of reasons including that you cannot go to a market maker and exchange GBTC or GLDC to their underlying components and they have lockout periods for institutional investors, they have traded out of sync with the underlying assets (to the tune of 20-30%) which makes me question if they would serve their intended purpose.

I am considering, but am not set on, having a ~5% allocation due to the lower correlation with other asset classes. A lot of the arguments that can be made for REITs and Commodities benefits as uncorrelated assets can be made about crypto currencies. I don't think crypto will be an addition to the standard 3 fund portfolio, but by the time you are considering tilts I think it is not unreasonable to consider. For this purpose, a higher volatility is not necessarily a negative. I know that holding through a vehicle rather than directly adds risks (e.g. exchange hack) and is against the decentralized purists mantra, but it will more easily allow rebalancing for bonuses which I see as the biggest reason to look into crypto currencies.
Right now would be the time to get into gbtc if you’re worried about a premium, 0-negative the past few days.

5% was the allocation I decided to start with :sharebeer
I saw that, unless you are holding in taxable and there is an issue with a PFIC's what is the benefit of GBTC over BTCC? As far as I can tell its an extra 1% aum fee and the potential for tracking error with the premium (though it is now as you noted close to zero or negative, it has been large and positive). If I was going to go with Grayscale, the 'index' of several larger players is appealing. I just don't know if the inclusion of ETH, BCH, and LTC is worth the extra 1.5% aum.
wmvink
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Re: How to Invest in Crypto like a Boglehead?

Post by wmvink »

I've learned my lesson with PFICs and wouldn't touch a Canadian ETF with a ten foot pole. In taxable that is. I agree that in Roth/401(k) it probably doesn't matter.

That said, even outside of taxable, GBTC being the largest and US-based has advantages when a real BTC ETF inevitable secures SEC approval. It's highly likely that will put downward pressure on the TER.
dru808
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Re: How to Invest in Crypto like a Boglehead?

Post by dru808 »

JVT wrote: Mon Mar 01, 2021 10:17 pm
dru808 wrote: Mon Mar 01, 2021 8:29 pm
JVT wrote: Mon Mar 01, 2021 8:25 pm I am considering BTCC.U (USD version of a Canadian ETF - 1% aum), GBTC (Bitcoin - 2% aum), or GDLC (Bitcoin, Ethereum, Bitcoin Cash, and Litecoin - 2.5% aum) in my Roth IRA. Given that its in a tax advantaged account, my naïve understanding would be that the PFIC status of BTCC should not matter but that is one of the things I would want to clarify. My understanding is that for a number of reasons including that you cannot go to a market maker and exchange GBTC or GLDC to their underlying components and they have lockout periods for institutional investors, they have traded out of sync with the underlying assets (to the tune of 20-30%) which makes me question if they would serve their intended purpose.

I am considering, but am not set on, having a ~5% allocation due to the lower correlation with other asset classes. A lot of the arguments that can be made for REITs and Commodities benefits as uncorrelated assets can be made about crypto currencies. I don't think crypto will be an addition to the standard 3 fund portfolio, but by the time you are considering tilts I think it is not unreasonable to consider. For this purpose, a higher volatility is not necessarily a negative. I know that holding through a vehicle rather than directly adds risks (e.g. exchange hack) and is against the decentralized purists mantra, but it will more easily allow rebalancing for bonuses which I see as the biggest reason to look into crypto currencies.
Right now would be the time to get into gbtc if you’re worried about a premium, 0-negative the past few days.

5% was the allocation I decided to start with :sharebeer
I saw that, unless you are holding in taxable and there is an issue with a PFIC's what is the benefit of GBTC over BTCC? As far as I can tell its an extra 1% aum fee and the potential for tracking error with the premium (though it is now as you noted close to zero or negative, it has been large and positive). If I was going to go with Grayscale, the 'index' of several larger players is appealing. I just don't know if the inclusion of ETH, BCH, and LTC is worth the extra 1.5% aum.

Probably not, if anything buy gbtc & ethe both premiums are low and split 60/40 -80/20 would have a lower er than the large cap fund.

All of my gbtc is held in a tira and Roth. Taxable consists of actual btc/eth.
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waltman300
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Re: How to Invest in Crypto like a Boglehead?

Post by waltman300 »

Does anyone know if there is a way to use gemini abroad and getting account verified without a US SMS number? Im a US citizen but abroad almost all year and when i tried to create an account on gemini or get verified... forgot which one.. they wouldn't take my US sms number for verification. Coinbase has zero issues with this and then i use google authenticator or authy to log in each time with my coinbase account.


Can any gemini users tell me if a US SMS number is required to log into their account each time or its only required to verify an account? So could i use someone else's US sms number for verification for my gemini account or would i might run into issues later if say my account has issues? I assume gemini users use google authenticator or authy for two factor authorization right? But is the sms number you used required to log in each time? Wondering if i could use a friends US sms number who doesnt know anything about crypto for verification or would that be a program? I use a cell phone plan in the abroad country im located in and use it for that but use google voice number to call/text people in the US etc.


Anyone have opinion on this?
dru808
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Re: How to Invest in Crypto like a Boglehead?

Post by dru808 »

waltman300 wrote: Sat Mar 06, 2021 5:17 pm Does anyone know if there is a way to use gemini abroad and getting account verified without a US SMS number? Im a US citizen but abroad almost all year and when i tried to create an account on gemini or get verified... forgot which one.. they wouldn't take my US sms number for verification. Coinbase has zero issues with this and then i use google authenticator or authy to log in each time with my coinbase account.


Can any gemini users tell me if a US SMS number is required to log into their account each time or its only required to verify an account? So could i use someone else's US sms number for verification for my gemini account or would i might run into issues later if say my account has issues? I assume gemini users use google authenticator or authy for two factor authorization right? But is the sms number you used required to log in each time? Wondering if i could use a friends US sms number who doesnt know anything about crypto for verification or would that be a program? I use a cell phone plan in the abroad country im located in and use it for that but use google voice number to call/text people in the US etc.


Anyone have opinion on this?

Every time you log in on the Gemini web based exchange it requires 2fa, the app only requires pin or bio Id.
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waltman300
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Re: How to Invest in Crypto like a Boglehead?

Post by waltman300 »

dru808 wrote: Sat Mar 06, 2021 5:23 pm
waltman300 wrote: Sat Mar 06, 2021 5:17 pm Does anyone know if there is a way to use gemini abroad and getting account verified without a US SMS number? Im a US citizen but abroad almost all year and when i tried to create an account on gemini or get verified... forgot which one.. they wouldn't take my US sms number for verification. Coinbase has zero issues with this and then i use google authenticator or authy to log in each time with my coinbase account.


Can any gemini users tell me if a US SMS number is required to log into their account each time or its only required to verify an account? So could i use someone else's US sms number for verification for my gemini account or would i might run into issues later if say my account has issues? I assume gemini users use google authenticator or authy for two factor authorization right? But is the sms number you used required to log in each time? Wondering if i could use a friends US sms number who doesnt know anything about crypto for verification or would that be a program? I use a cell phone plan in the abroad country im located in and use it for that but use google voice number to call/text people in the US etc.


Anyone have opinion on this?

Every time you log in on the Gemini web based exchange it requires 2fa, the app only requires pin or bio Id.

What is bio ID? Do you use gemini on your laptop or phone? I would prefer to do everything on a laptop as oppose to phone.


So you are saying i could use someone else's cell phone number to verify myself then? Then once that is done, i could use gemini abroad? Again my issue is when i send them my us sms number for verification, a while back i got message we don't allow VOIP numbers for verification. Coinbase never had an issue with it.


But if you are selling btc to your bank account, you say coinbase pro is better than gemini or about the same? With the fees... so binance.US is the cheapest.... and then coinbase pro? I can't use binance.US because im a resident of a restricted state. But someone else says kraken is actually cheaper with lower fees but they only allow wire deposit/withdraws so wouldnt that cost you more unless you are depositing/withdrawing big amounts? I also cant use kraken because of state restriction even though im outside the US.


Also, does anyone here use a vpn and use binance while in the US? I did hear they no longer allow US customers anymore but assuming you never did verification, couldn't you still use it? I ask this because what if you are abroad and never did verification. Couldnt an american citizen have no issue using binance abroad if they never did verification? Someone also mentioned FTX but isn't that not allowed for US citizens? Or as long as you use a vpn or don't disclose to them you are a US citizen, no issue? Because if you use those exchanges that don't allow US citizens even though you are abroad, wouldn't there possibly be issues on this? I read on twitter how some ppl said just use a vpn in the US if you want to use binance but isn't that breaking laws?
dru808
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Re: How to Invest in Crypto like a Boglehead?

Post by dru808 »

waltman300 wrote: Sat Mar 06, 2021 5:48 pm

What is bio ID?


So you are saying i could use someone else's cell phone number to verify myself then? Then once that is done, i could use gemini abroad?


Biometric identification.

I did not say that. Gemini on web/pc requires 2fa on every login
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DrChronzworth
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Re: How to Invest in Crypto like a Boglehead?

Post by DrChronzworth »

I have 90% of my portfolio in index funds and my YOLO money mostly is divided into $500 - $1000 investments in various Ethereum De-Fi projects. I figure if any of these projects 10x then that should make up for the losses from my other investments.

I use coinbase as my fiat on-ramp and use Uniswap and Gate.io for ETH token transactions. Gate for more established stuff because they have very low fees while Uniswap is only for really speculative stuff or projects that have just released their tokens and haven't been listed on any of the centralized exchanges. I use metamask for anything I don't keep on the exchange.

So far my best performer has been Chainlink, which I bought in 2019 and has 10x'd since I bought it. So far my investments in De-Fi haven't exceeded the value of my Chainlink investment - even if everything else went to zero I would break even since I could still sell my Chainlink. Perhaps not the most sophisticated risk-management system but it works for me.
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lusoman
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Re: How to Invest in Crypto like a Boglehead?

Post by lusoman »

Crypto are purely speculative assets. Like Gold, but with a small history behind.

As Mr Bogle said, i'm a investor, not a speculator.
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waltman300
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Re: How to Invest in Crypto like a Boglehead?

Post by waltman300 »

With btc sending fees so high, is it actually better if you hold btc in an exchange and sell it for litecoin or usdt/usdc and then send litecoin or usdt/usdc to coinbase or gemini and then sell for fiat and then cash out to your US bank account?



Now if you have the option to choose receiving btc or litecoin or any other altcoin, and your plan was to cash out directly to your US bank account, always do litecoin or a stablecoin like usdt/usdc since you save money on sending fees right? Like imagine you are receiving money in btc vs any other currency. Do people do this? Or some don't like it because you got to record another transaction since you are going from one crypto to another?
Gadget
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Re: How to Invest in Crypto like a Boglehead?

Post by Gadget »

waltman300 wrote: Sun Mar 07, 2021 4:47 pm With btc sending fees so high, is it actually better if you hold btc in an exchange and sell it for litecoin or usdt/usdc and then send litecoin or usdt/usdc to coinbase or gemini and then sell for fiat and then cash out to your US bank account?



Now if you have the option to choose receiving btc or litecoin or any other altcoin, and your plan was to cash out directly to your US bank account, always do litecoin or a stablecoin like usdt/usdc since you save money on sending fees right? Like imagine you are receiving money in btc vs any other currency. Do people do this? Or some don't like it because you got to record another transaction since you are going from one crypto to another?
This probably isn't a good plan in the US if you have any gains at all on the crypto. Crypto to crypto exchanges are all taxed.

If you have losses, then maybe your plan is viable. But I think people are overstating the network transfer fees. We're talking like 2-10 bucks for BTC, maybe 6-15 for ETH. It's the ETH smart contracts that cost a fortune and can be 40-150, so you have to be careful on those (not something a newbie will need to do).

But you can just look up the current recommended gas or transfer fee on each network, and multiply by the fiat price to get the total. If it's just a few dollars, I wouldn't go through the hassle of what you describe.
Valuethinker
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Re: How to Invest in Crypto like a Boglehead?

Post by Valuethinker »

wmvink wrote: Mon Mar 01, 2021 10:29 pm I've learned my lesson with PFICs and wouldn't touch a Canadian ETF with a ten foot pole. In taxable that is. I agree that in Roth/401(k) it probably doesn't matter.

That said, even outside of taxable, GBTC being the largest and US-based has advantages when a real BTC ETF inevitable secures SEC approval. It's highly likely that will put downward pressure on the TER.
Be very careful of Canadian securities.

Securities regulation in Canada is by province (state) not by the Fed. And there is a long and distinguished history of shareholder unfriendly activities, and outright fraud (Sino Forest), accounting misstatements (Valleant), earnings manipulation (and eventually bankruptcy) - Nortel. The Provincial regulators, even Ontario, just aren't up to the level of the SEC.

Invest in Canada?

- TSX main exchange *only*. None of the other exchanges, not the Venture exchange

- plain vanilla is good. The more stripped down, the better

- funds? US expense ratios are much much lower, anyways

Central Fund of Canada (gold holder) might be an exception - there have been discussions here about how a US person files for taxes on that
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MinnGuyInvesting
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Re: How to Invest in Crypto like a Boglehead?

Post by MinnGuyInvesting »

Just an interesting note, during this last NASDAQ downturn, bitcoin held value pretty well compared to last March when it tanked with the total market.

I guess the point is that it might be starting to hold it's value more independently of the stock market and more like a separate currency.
Index ETF's 45% |ARK Funds 30% | AAPL 5% | TSLA 4% | GOOGL 2% | AMZN 1.3% |Other stocks 4.5% | BTC/ETH 9% |
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queso
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Re: How to Invest in Crypto like a Boglehead?

Post by queso »

MinnGuyInvesting wrote: Tue Mar 09, 2021 9:56 am Just an interesting note, during this last NASDAQ downturn, bitcoin held value pretty well compared to last March when it tanked with the total market.

I guess the point is that it might be starting to hold it's value more independently of the stock market and more like a separate currency.
I noticed that as well. While my ARK was sinking my crypto was actually gaining and saved me from some of the Cathie effect. :happy
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MinnGuyInvesting
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Re: How to Invest in Crypto like a Boglehead?

Post by MinnGuyInvesting »

queso wrote: Tue Mar 09, 2021 10:00 am
MinnGuyInvesting wrote: Tue Mar 09, 2021 9:56 am Just an interesting note, during this last NASDAQ downturn, bitcoin held value pretty well compared to last March when it tanked with the total market.

I guess the point is that it might be starting to hold it's value more independently of the stock market and more like a separate currency.
I noticed that as well. While my ARK was sinking my crypto was actually gaining and saved me from some of the Cathie effect. :happy
Yes, it's the only thing that kept me out of depression the last few weeks.
:D
Index ETF's 45% |ARK Funds 30% | AAPL 5% | TSLA 4% | GOOGL 2% | AMZN 1.3% |Other stocks 4.5% | BTC/ETH 9% |
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queso
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Re: How to Invest in Crypto like a Boglehead?

Post by queso »

MinnGuyInvesting wrote: Tue Mar 09, 2021 10:06 am
queso wrote: Tue Mar 09, 2021 10:00 am
MinnGuyInvesting wrote: Tue Mar 09, 2021 9:56 am Just an interesting note, during this last NASDAQ downturn, bitcoin held value pretty well compared to last March when it tanked with the total market.

I guess the point is that it might be starting to hold it's value more independently of the stock market and more like a separate currency.
I noticed that as well. While my ARK was sinking my crypto was actually gaining and saved me from some of the Cathie effect. :happy
Yes, it's the only thing that kept me out of depression the last few weeks.
:D
You have way more ARK than I do I'm sure so I can only imagine. Let's hope it roars back.
waltman300
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Re: How to Invest in Crypto like a Boglehead?

Post by waltman300 »

Cerulean wrote: Sun Feb 28, 2021 7:47 pm
Gadget wrote: Sun Feb 28, 2021 6:25 am
waltman300 wrote: Sat Feb 27, 2021 4:31 pm Is coinbase pro still the best place to sell btc for money to your US bank account. Im abroad most of the year.
I don't understand all the hate towards Coinbase Pro on crypto forums. In my experience, it seems to work the best and is the easiest to use for my normal use cases.

I signed up to all the exchanges. Coinbase verified instantly and quickly. It transfers via ACH to my bank, and seems the safest to use. Their fees of .5% aren't outrageous compared to others, and at least they are straightforward.

Binance.us took about 4 months to verify me. Then when it did, it had a $1k ACH cap. It seems to have the highest transfer fees, even though their maker/taker fees are smaller than Coinbase.

Kraken annoys me because it only takes wire transfers. I don't understand the love for it. Wire transfers are a pain, and they cost money. Are the users of Kraken making huge transfers every time?

I signed up for Gemini, and honestly can't remember why I didn't like it as much as Coinbase Pro. It seemed like it had higher spreads and maybe the fees weren't as straight forward, but I can't quite remember.

Blockfi is great for keeping crypto and earning interest, but they seem to have really poor spreads compared to Coinbase Pro. I think they're getting their fees out of you whether you realize it or not when purchasing there. The extra fees might be worth it if you plan on moving your crypto to Blockfi anyway, but not sure.

I don't have Cash app, but I've seen friends purchase there. It seems like a good option for buying small amounts, so you may want to look into that. For larger amounts, I'm pretty sure Coinbase Pro is cheaper. I'm not exactly sure where the cutoff amount is.
I use Kraken, Coinbase Pro, and FTX (ftx.us). I completely agree that CB/CBP is the easiest to use and it's what I started off with. Then I discovered FTX. They have lower exchange fees (.1% maker vs .5% for CBP), support ACH (free deposits) and provide free crypto withdrawals (i.e. they cover network/gas fees) for non-ERC20 tokens. The main drawback to FTX is that they don't support a wide variety of coins. There is also no way to stake assets directly on the platform (unlike CB and Kraken).

Cue Kraken. For me, Kraken sits right in the sweet spot. Lower fees (.16% maker) than CBP, easy staking, and access to a wide variety of coins not accessible on other platforms. But - as you pointed out - Kraken only supports expensive wire transfers for USD deposits, and there's no way I'm going to pay a $20-$30 wire transfer fee on a $1k deposit.

So I use a workaround. If you make an ACH deposit into another exchange, convert your USD into stablecoins, and then withdraw these stablecoins into Kraken, you can effectively deposit USD into your Kraken account very affordably. The cheapest I've been able to do this is $2.55 per $1k. Not as good as a direct ACH would be, but better than paying for the wire transfer. I find it to be a much more sustainable funding method for smaller deposits (<~$10,000) and implementing a DCA strategy.

I recently published a blog post with step-by-step instructions on how to do this in case anyone is interested: https://medium.com/@cerulean-/kraken-bi ... 8fe128b22a

More complicated? Yes. More affordable? Yes. For me, it makes the most sense.


Does FTX allow US customers? I assume you are us based? What if you are us citizen but abroad all year? Can you use ftx? So there is two ftx? One US and one Non US based?


Do they support ACH withdraws or only deposits? Because i want to know what is the cheapest way to cash out btc to a us bank account like bank of america. Someone said it was binance.us and then coinbase pro. So they are incorrect with this? I can't use binance.US because im from a state that they don't allow customers.
rmga
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Re: How to Invest in Crypto like a Boglehead?

Post by rmga »

ccf wrote: Fri Feb 19, 2021 6:59 am Reporting back on my experience "indexing" with PieDAO so far 🥧
  1. Added an Ethereum wallet to my browser (Metamask)
  2. Bought ether on an exchange
  3. Sent the ether from the exchange to my new wallet. This cost me ~$15 in gas / transaction fees.
  4. Deposited in the DeFi++ oven, which waits for deposits and then buys all 13 of the underlying assets for N people at once to reduce the total transaction costs. You don't have to buy this way but the alternative is extremely expensive because it is 1 transaction per underlying asset. This cost another $15 in gas.
  5. 36 hours later, once enough was in the oven, the transactions were completed and my deposit was ready to withdraw. Withdrawing my DeFi++ back to my wallet cost me $15 in gas.
Note that the transaction costs are not relative to the size of the transaction, so they can seem cheap or expensive depending on how much money you are moving around.
Thanks for posting this. I ended up given this a try to dip my toe into crypto a bit deeper than just holding coins. I used a small amount of money since I was treating it as a learning process. The fees were absurd due to that and I also made some mistakes (like using Coinbase vs Coinbase PRO). But none the less it all went smoothly if not slowly. I went for BCP. I've also placed some coins in Celsius. 5% apr on ETH and 10.5% GUSD. I am currently mining ETH into my Celsius wallet.

I am really fascinated by DeFi and super excited to see where it will go. Including mining gear, I'm 1.5% of total portfolio into crypto so not a major investment and in my skeptical mind, I expect to wake up one morning and find it all zero'ed out. But in the meantime, it is keeping my mind busy and it's fun feeling like you are on the frontier of something huge.
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ccf
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Re: How to Invest in Crypto like a Boglehead?

Post by ccf »

rmga wrote: Sun Mar 14, 2021 2:42 pm

I am really fascinated by DeFi and super excited to see where it will go. Including mining gear, I'm 1.5% of total portfolio into crypto so not a major investment and in my skeptical mind, I expect to wake up one morning and find it all zero'ed out. But in the meantime, it is keeping my mind busy and it's fun feeling like you are on the frontier of something huge.
it's the same for me :) Bitcoin is boring, and I don't like the mining/electricity use situation, while the Ethereum ecosystem is very exciting and fun and will be leaving proof of work mining behind.
rmga
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Re: How to Invest in Crypto like a Boglehead?

Post by rmga »

ccf wrote: Mon Mar 15, 2021 6:02 am
rmga wrote: Sun Mar 14, 2021 2:42 pm

I am really fascinated by DeFi and super excited to see where it will go. Including mining gear, I'm 1.5% of total portfolio into crypto so not a major investment and in my skeptical mind, I expect to wake up one morning and find it all zero'ed out. But in the meantime, it is keeping my mind busy and it's fun feeling like you are on the frontier of something huge.
it's the same for me :) Bitcoin is boring, and I don't like the mining/electricity use situation, while the Ethereum ecosystem is very exciting and fun and will be leaving proof of work mining behind.
I justify the mining since I already had a bit of gear being a lifelong gamer and due to covid leaving me with both extra space and unused solar. It also keeps me warm in an otherwise chilly office! With eip 1559 coming and vaccinations more widespread I calibrated my "business plan" to wind down the mining operation during the summer. With whatever I mine up till then and the liquidation of the equipment I think it's likely I'll break even. If ETH price rises, then I'll be doing well.

It sounds like we are on the verge of fees being reduced with L2. Even an incremental improvement in fees I think would really increase the activity in trading and smart contracts.
waltman300
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Re: How to Invest in Crypto like a Boglehead?

Post by waltman300 »

Does anyone here use usdt or usdc? If so, do you trust it?
waltman300
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Re: How to Invest in Crypto like a Boglehead?

Post by waltman300 »

What is the cheapest method to withdraw crypto to your us bank account right now? Such as say sending it to coinbase and selling it for fiat to your US bank account.


I have some funds i need to withdraw from a gambling site and I previously withdrew btc many times. But now with how much the btc fees are and how slow the network is... is that a bad option? They do allow you to withdraw other crypto like litecoin, ripple, eth and a bunch of other coins. So wouldn't litecoin be the best since once you receive it... sending it to coinbase would be fast and very cheap?


I also have the option to withdraw usdt (tether). Has anyone here have experience with it? What confuses me is when you receive usdt, do you need to give that site any other information? Asking this because i heard usdt could be in different networks such as ETH or TRON. Can someone explain this? But if i want to receive USDT, that shouldn't be anything? Its only if im sending USDT myself... is when i need to know if the USDT address on coinbase is ETH or TRON or something else? What about me receiving the USDT though? Like what if someone wants to receive USDT in their hardware wallet or say an online wallet like bitcoin core etc?
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Re: How to Invest in Crypto like a Boglehead?

Post by lucha »

waltman300 wrote: Mon Mar 15, 2021 10:44 pm Does anyone here use usdt or usdc? If so, do you trust it?
What's keeping me from holding stable coins for the interest is the fact that I'd have to hold them on exchanges that I don't trust and have no recourse in case of loss or theft. I suppose it's the same for the ETH I hold on Coinbase (they are only FDIC insured for the USD you hold in your Coinbase account) but the reputation and longevity is so much better that it's the only place I want to store my crypto short of getting a cold storage device (which poses other inconveniences that I don't care to deal with).
ohboy!
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Re: How to Invest in Crypto like a Boglehead?

Post by ohboy! »

waltman300 wrote: Mon Mar 15, 2021 10:44 pm Does anyone here use usdt or usdc? If so, do you trust it?
USDT, no way. USDC, definitely. I have 1/3 of my fixed income allocation in USDC. I’m all but certain that it will become incredibly more common by the end of the year. Even if Coinbase only paid 2% on USDC it would be huge. While the average current return is over 8%. Coinbase currently pays 2% on DAI (decentralized stable coin) interestingly enough. But it costs too much to get in and out of it. It’s free to get in and out of USDC.
Kitkat76
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Re: How to Invest in Crypto like a Boglehead?

Post by Kitkat76 »

My honest opinion on “How to Invest in Crypto like a Boglehead”- Buy BTC and don’t look at it for 30 years. That is all.
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HanSolo
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Re: How to Invest in Crypto like a Boglehead?

Post by HanSolo »

HyperCat wrote: Mon Feb 15, 2021 6:17 pm Your comment about extravagant fees made me chuckle. Clearly you've never tried to buy/sell physical metals.
I bought physical gold at Hang Seng bank in Hong Kong. Tight spreads, no fees.
windaar wrote: Mon Feb 15, 2021 6:29 pm I have grad degrees but I can't understand blockchain cryptocurrency.
Bitcoin is like owning gold without the gold.
Pu239 wrote: Tue Feb 16, 2021 3:56 pm The current crypto exuberance is testing even the strongest Bogleheads.
Not really. I still find crypto uninteresting.
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ccf
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Re: How to Invest in Crypto like a Boglehead?

Post by ccf »

I'm 6 weeks in to trying to invest in crypto "like a boglehead" using the limited options that are currently available.

I wanted to share Balancer: https://balancer.finance

If you have a portfolio that you want to keep in balance without paying transaction fees and taxes every rebalance, you can try Balancer. It's basically a bunch of liquidity pools and an intelligent order router that performs exchanges via these pools. "Balancer turns the concept of an index fund on its head: instead of a paying fees to portfolio managers to rebalance your portfolio, you collect fees from traders, who rebalance your portfolio by following arbitrage opportunities."

More info: https://medium.com/balancer-protocol/ba ... f1678003f7
wmvink
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Re: How to Invest in Crypto like a Boglehead?

Post by wmvink »

ccf wrote: Tue Mar 30, 2021 8:38 am I'm 6 weeks in to trying to invest in crypto "like a boglehead" using the limited options that are currently available.

I wanted to share Balancer: https://balancer.finance

If you have a portfolio that you want to keep in balance without paying transaction fees and taxes every rebalance, you can try Balancer. It's basically a bunch of liquidity pools and an intelligent order router that performs exchanges via these pools. "Balancer turns the concept of an index fund on its head: instead of a paying fees to portfolio managers to rebalance your portfolio, you collect fees from traders, who rebalance your portfolio by following arbitrage opportunities."

More info: https://medium.com/balancer-protocol/ba ... f1678003f7
How have your returns been so far? I'm trying something similar with a different DeFi project and while on paper the returns are great (ignoring the huge swings in dollar value), the gas fees are eating up all my profits and then some.
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Re: How to Invest in Crypto like a Boglehead?

Post by SlowMovingInvestor »

ccf wrote: Tue Mar 30, 2021 8:38 am I'm 6 weeks in to trying to invest in crypto "like a boglehead" using the limited options that are currently available.

I wanted to share Balancer: https://balancer.finance

If you have a portfolio that you want to keep in balance without paying transaction fees and taxes every rebalance, you can try Balancer. It's basically a bunch of liquidity pools and an intelligent order router that performs exchanges via these pools. "Balancer turns the concept of an index fund on its head: instead of a paying fees to portfolio managers to rebalance your portfolio, you collect fees from traders, who rebalance your portfolio by following arbitrage opportunities."

More info: https://medium.com/balancer-protocol/ba ... f1678003f7
I'm not sure what to make of that statement. You don't pay a portfolio manager to rebalance your portfolio except on those occasions when stocks enter or leave the index. Certainly changes in market cap don't lead to rebalancing especially in total market index funds/ETFs. [ In indexes that focus on particular capitalizations, it could happen eventually, but only after several months, if the index provider removes a stock because it's too large or too small]

The statement is poorly phrased and somewhat ignorant (to be clear, I'm blaming the author on medium, not ccf). And it annoys me enough that it makes me less inclined to invest in/with Balancer.

Worth adding too, that the fees for most index funds/ETFs are miniscule these days at the major providers. There are even free MFs like the Fido funds. Also, weighting by market cap is qualitatively very different from weighting based on short term arbitrage opportunities ! I see that as very un-Boglehead.

And, I wonder whether the SEC would view this token as a security and whether the IRS would consider this as some form of MF or PFIC (so you don't pay taxes only on sale of the Balancer token, but also on any interim fees collected).
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Re: How to Invest in Crypto like a Boglehead?

Post by ccf »

SlowMovingInvestor wrote: Tue Mar 30, 2021 7:05 pm
Worth adding too, that the fees for most index funds/ETFs are miniscule these days at the major providers. There are even free MFs like the Fido funds. Also, weighting by market cap is qualitatively very different from weighting based on short term arbitrage opportunities ! I see that as very un-Boglehead.

Weights are by market cap. The language about arbitrage doesn't have anything to do with investors using the pools, it's related to how the pools earn money from fees. I don't think that "turns the concept of an index fund on its head" is a very good marketing statement either. What does it even mean?

Here is how it works in practice:

* I deposit liquidity into a balancer pool and that has the weights that I want or make a pool with my own weights. Say 50% Ethereum and 25% Bitcoin (WBTC) and 25% something else.
* When other people exchange currencies, the exchange may be routed through my pools. The fees generated from these exchanges are paid to me in the form of Balancer tokens which I can claim and trade in the market at any time. I'm getting about $200 a week at the moment but that just a bonus. The balancing is what I am after.
* I don't rebalance manually which saves me on gas and taxes and means I can forget about these holdings.

I have been experimenting with this as a way to make some of my individual holdings into set and forget baskets. Unfortunately the crypto "index fund" space is still very new so it is hard to invest in the ecosystem/sector without having individual holdings.


This isn't a great solution if you are moving liquidity in and out because of gas costs, but I am lumping in some holdings.
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Re: How to Invest in Crypto like a Boglehead?

Post by SlowMovingInvestor »

ccf wrote: Wed Mar 31, 2021 1:09 pm
Weights are by market cap. The language about arbitrage doesn't have anything to do with investors using the pools, it's related to how the pools earn money from fees. I don't think that "turns the concept of an index fund on its head" is a very good marketing statement either. What does it even mean?

Here is how it works in practice:

* I deposit liquidity into a balancer pool and that has the weights that I want or make a pool with my own weights. Say 50% Ethereum and 25% Bitcoin (WBTC) and 25% something else.
* When other people exchange currencies, the exchange may be routed through my pools. The fees generated from these exchanges are paid to me in the form of Balancer tokens which I can claim and trade in the market at any time. I'm getting about $200 a week at the moment but that just a bonus. The balancing is what I am after.
* I don't rebalance manually which saves me on gas and taxes and means I can forget about these holdings.

I have been experimenting with this as a way to make some of my individual holdings into set and forget baskets. Unfortunately the crypto "index fund" space is still very new so it is hard to invest in the ecosystem/sector without having individual holdings.


This isn't a great solution if you are moving liquidity in and out because of gas costs, but I am lumping in some holdings.
OK, so it seems like you set a particular ratio for your holdings and the 'pool' maintains it. It's not like an index fund (as the original article mistakenly said), but more like say M1 Balance, in that it maintains a ratio of assets that you set.

But I but I don't see how you save on taxes. I don't avoid paying taxes in a taxable account if I ask M1 Finance or one of the other asset allocation services to maintain a particular asset ratio for me with their automated services. When they buy and sell, taxes are incurred and pass through to me.

I realize the crypto space is new, but a pool (especially if it's a pool you setup by yourself), might be considered a disregarded entity, which means the pool owner (or owners) are liable for taxes it incurs. A pool shared with others might be considered a partnership or even an ETF, which again should pass on profits and losses to you. Even if there's no explicit IRS reporting of 1099s.

[And if a shared pool is considered non US, there would be even more tax reporting (PFIC or foreign partnership forms). ]


ADDED:
Following up on my previous comment about taxes

https://thedefiant.substack.com/p/-a-ha ... -taxes-4bf

The actual article is long, but it seems another approach is to recognize gains when the tokens are put into the pool and exchanged for a balancer token and when they're removed, not on interim transactions (which may be better for newly acquired tokens, so no large tax gains). Either way, it seems like the area needs some IRS clarifications and the tax implications could be significant depending on the approach the IRS takes.
Last edited by SlowMovingInvestor on Wed Mar 31, 2021 3:03 pm, edited 3 times in total.
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Re: How to Invest in Crypto like a Boglehead?

Post by SlowMovingInvestor »

From Balancer's web site

https://balancer.finance/whitepaper/

Index funds guarantee investors a constant and controlled exposure to a portfolio. If one of its assets out- or under-performs, it is respectively sold or bought to keep its value share of the total portfolio constant.

Uh, no. Except the equal weight index funds, which account for a very small portion of index funds. It doesn't give me great confidence in these guys -- they either don't understand index funds or are being intentionally misleading.
Last edited by SlowMovingInvestor on Wed Mar 31, 2021 4:25 pm, edited 1 time in total.
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Re: How to Invest in Crypto like a Boglehead?

Post by ccf »

I have been in and out of crypto for years and I feel like it is finally easy for me to stop speculating on possible winners and jumping from one thing to the other. I am trying to invest in the whole market as best I can. I'm pretty heavy on the Ethereum ecosystem because I don't know much about everything else.

If anyone else who is trying to invest in the crypto market as a whole has any suggestions I am all ears. Even though everything feels expensive, I personally think that the industry is mature enough to invest in for the long term although it can be hard to avoid picking individual assets.

Some things that I have taken advantage of:

PieDAO DeFi+L portfolio (8 tokens), paired with ETH and generating DOUGH and BAL at Balancer
PieDAO DeFi+S portfolio (6 tokens), paired with ETH and generating DOUGH and BAL at Balancer
Harvest.finance stablecoin yield farming
WBTC/ETH staked at Sushiswap


Zapper.fi is indispensable for seeing all of your Ethereum assets at once.
List of DeFi "indexes" https://app.zerion.io/invest/defi-indexes

I don't know of any great ways to invest in the market outside of Ethereum land. The Invictus Crypto20 fund is all that I've seen. I wish for passive indexes that use something other than market cap weighting.
Last edited by ccf on Wed Mar 31, 2021 3:32 pm, edited 2 times in total.
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Re: How to Invest in Crypto like a Boglehead?

Post by txhill »

ccf wrote: Wed Mar 31, 2021 3:18 pm My crypto ship came in this month when a gamble from 2017 paid off and I decided to stop speculating, full stop, and invest in the whole market as best I can. I'm pretty heavy on the Ethereum ecosystem because I don't know much about everything else.

If anyone else who is trying to invest in the crypto market as a whole has any suggestions I am all ears. I personally think that the industry is mature enough to invest in for the long term although it can feel like individual stock picking, which I do not like.

Some things that I have taken advantage of:

PieDAO DeFi+L portfolio (8 tokens), paired with ETH and generating DOUGH and BAL at Balancer
PieDAO DeFi+S portfolio (6 tokens), paired with ETH and generating DOUGH and BAL at Balancer
Harvest.finance stablecoin yield farming
WBTC/ETH staked at Sushiswap

Zapper.fi is indispensable for seeing all of your Ethereum assets at once.
I've been watching this thread with some fascination as I find it quite odd to try to invest in cryptocurrencies "like a Boglehead"--at least at this time while the cryptocurrency space in general is quite new. Please note that I am bullish on BTC and ETH, which currently are about 12% and 3% of my liquid portfolio, respectfully, and I am just buying and holding them with a long term view: Bitcoin because I believe it to be a great store of value and Ethereum because it seems like it will be the most likely launching pad for whatever the next big things are.

But I would caution against trying to invest in effectively a Total Stock Market approach to cryptocurrencies until the market matures. The crypto space is very immature, and many of the newest microcap coins do not have clearly defined purposes or differentiating features. I am reminded a lot of the late 1990s when there was a huge flurry of activity around the early internet. I think it would have been a bad idea to invest in all of the dot coms broadly at that time, although a broad tech approach would have been smart after the dot com bust. Similarly here, I think eventually a Total Crypto ETF would be a very interesting investment idea once the space has started to become better defined. I think the better approach is to make targeted selections of the projects that seem to you to have the most potential, but to limit your overall exposure to a reasonable level based on your personal risk tolerance.

Additionally, I also would advise caution with the Balancer. It seems like a very interesting idea but quite experimental, and I would not commit all of your resources to it until it is fully fleshed out. It is not a well regulated or insured space at this time.
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Re: How to Invest in Crypto like a Boglehead?

Post by ccf »

txhill wrote: Wed Mar 31, 2021 3:31 pm But I would caution against trying to invest in effectively a Total Stock Market approach to cryptocurrencies until the market matures.=
I think that this is good advice. I am comfortable and happy with the DeFi companies that I am holding in indexes but if I scroll through the coins (outside of Ethereum land) on coinmarketcap, there is a lot of... questionable stuff. I don't want to be in other coins that I don't know anything about just because they are in the top 20 or 100 or 500 by market cap.

If you look at my portfolio right now, it's 80% betting on the success of the Ethereum ecosystem via eth and tokens from projects that are currently key Ethereum infrastructure, 15% Bitcoin, and 5% other. I should amend my previous statement about market maturity to focus on Ethereum. I am okay with the risk that Ethereum's fortunes decline and I feel that the DeFi market is mature enough for me to invest in.
Last edited by ccf on Wed Mar 31, 2021 3:48 pm, edited 4 times in total.
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Re: How to Invest in Crypto like a Boglehead?

Post by watchnerd »

HanSolo wrote: Tue Mar 16, 2021 2:22 am Not really. I still find crypto uninteresting.
Ditto.

I find wine speculation more interesting.

And I can drink my store of value.
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sociologydude76
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Re: How to Invest in Crypto like a Boglehead?

Post by sociologydude76 »

Really interesting thread!

Some great advice here.

For me, I try to:

1) Stick to established exchanges with high security and insurance. I will get a hardware wallet if I ever have a lot of $$ in crypto.

2) Minimize fees by using coinbase pro and blockfi.

3) DCA as crypto is super volatile.

4) I try to hold roughly 20% BTC, 50% ETH, and 30% alt coins with high market caps. This creates a rough "index" but I understand it could change so I monitor it. Purely basing it off market cap is not always great since you would end up investing in things like Doge coin.

5) I also gain interest on all of my crypto (4-6%). This is also helpful as I plan to hold for at least 10 years.

6) Keep total crypto to 10% or less of entire portfolio to minimize risk.

Crypto is a speculative asset, but the tech appears to be here to stay. When Bogle was around, crypto was far less adopted and had far less utility. I wonder if he would change his mind now.
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Re: How to Invest in Crypto like a Boglehead?

Post by watchnerd »

sociologydude76 wrote: Fri Apr 23, 2021 12:57 pm I wonder if he would change his mind now.
I doubt it.

He wasn't big on speculation.

Crypto does not meet the criteria for investment as it has no IRR.
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Re: How to Invest in Crypto like a Boglehead?

Post by hyperon »

SlowMovingInvestor wrote: Wed Mar 31, 2021 2:36 pm From Balancer's web site

https://balancer.finance/whitepaper/

Index funds guarantee investors a constant and controlled exposure to a portfolio. If one of its assets out- or under-performs, it is respectively sold or bought to keep its value share of the total portfolio constant.

Uh, no. Except the equal weight index funds, which account for a very small portion of index funds. It doesn't give me great confidence in these guys -- they either don't understand index funds or are being intentionally misleading.
+1
usnaron
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Re: How to Invest in Crypto like a Boglehead?

Post by usnaron »

Impatience wrote: Mon Feb 15, 2021 5:46 pm Hello, my first topic here! This thread is not to debate the pros and cons of crypto but rather, assuming I've already decided that some % of my asset allocation should consist of cryptocurrency, how can I invest in crypto like a Boglehead? By "like a Boglehead" I mean:

1. Minimize costs as much as is reasonably possible (trading spreads, transaction or withdrawal fees, taxes, etc.).
2. Manage my investments in a way that is mostly passive. I don't want to read crypto news every day or have to study new blockchain developments.
3. Diversify my investments so that the majority of my gains or losses come from overall crypto market movements rather than the individual risks of a particular coin.

I've come up with some ideas on my own of how to achieve these goals, and have a few more questions I haven't answered yet. I hope you'll evaluate my plan and give me your own input.

Minimizing Costs

Fees in crypto can be extravagantly high. The lowest cost, reputable platforms I've found are Coinbase Pro and Binance US. Coinbase is the most widely known mainstream crypto platform and their "Pro" trading platform currently charges 0.5% per buy. That's not bad considering that you can then hold your coins there indefinitely for no additional charges, but Binance is even cheaper, at 0.1% per trade. This can be reduced further by holding their proprietary "Binance Coin" (BNB). Binance is the clear winner here, though it turns out that they charge 0.5% if you use automated buys, which I would like to set up to reduce my time commitment. That takes away the Binance edge in transaction fees.

The other consideration is fees to withdraw to an outside wallet. It appears that Coinbase Pro only charges you an amount equal to the transaction fee on the given blockchain. Binance on the other hand charges a fee that depends on the coin in question. Currently their bitcoin (BTC) fee is 0.0005 BTC, a little under $25. Ouch! Leaning toward Coinbase Pro on this one.

Sources:

https://help.coinbase.com/en/pro/tradin ... -fees/fees

https://www.binance.us/en/fee/schedule

Passive Management and Diversification

What I want is to emulate sort of crypto index fund. Though such products do exist already they come with huge management fees or require you to be an accredited investor or non-US person or have other weaknesses such as their coin selections. Here's an example of one such fund: a 2.5% expense ratio! LOL

https://www.bitwiseinvestments.com/funds/Bitwise-10

Not for me. Instead I'm going to simply go to https://coinmarketcap.com/ and choose from among the top 10-20 coins by market cap. I don't know or care what most of these things do so I'm going to trust the market on this one with a few exceptions. I don't like the sound of Bitcoin Cash, Ethereum Classic, or XRP, for various reasons, so I'm inclined to skip over them, though it feels like I'm kind of betraying my above concern for passivity. I'll also ignore stablecoins such as tether, USDC, and dai.

I'm torn between market cap weighting and equal weighting right now. If I go with market cap weighting I'll be mostly buying bitcoin and ether, which would be wise based on their longevity and prior performance, but frankly it sounds like a lot more work to calculate and rebalance the weighting that way. I think I'll do a very rough market cap weighting: for example buy $100 of bitcoin, $20 of ether, and $5 of everything else underneath up to rank 20 or 25 depending on how many I skip.

I'll be doing this on a biweekly basis. If I do end up going with automated buys on binance I'll go well down the list but if I decide on manual buys to reduce fees I may just pick from the top 10 to reduce the effort involved.

I won't be actively trading any of these things. Just buy, buy, buy. I will consider selling any that plummet off the CoinMarketCap rankings at the end of the year to reap some tax benefits and reinvest whatever was left into other coins.

Oh and it turns out many of those coins aren't even on Coinbase. Maybe I'll end up splitting my holdings between the two. Thoughts?

One other concern I have:

Security

Crypto enthusiasts are vehemently against keeping one's holdings on an exchange. This is based on the many occurrences of exchanges being hacked in the past but also seems to largely be a philosophical issue. They hate centralized anything and want to know they have final custody of their assets. I don't really care about any of that. I plan on keeping my assets on exchange but if they get quite large (like >$50k) I'll consider purchasing a hardware wallet and moving whatever has the largest balance onto there (for example, just BTC). I really don't want to worry about losing my hardware wallet or its recovery key.

Alright so this thread is very rambling and covers a lot of things, so please feel free to comment on my plan or let me know what you're doing yourself. I'm sure I've missed out on some methods of making this adventure easier.
Crypto is an excellent way to capitalize on the stupidity of the herd.
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Re: How to Invest in Crypto like a Boglehead?

Post by ThankYouJack »

Saelina wrote: Tue Feb 16, 2021 7:48 am
nisiprius wrote: Mon Feb 15, 2021 6:15 pm
2) If you are going to invest in crypto like a Boglehead, the first thing you need to do is get past John C. Bogle's statement made on 11/28/2017:
Well, bitcoin is a currency. Bitcoin has no underlying rate of return. Bonds have an interest coupon, stocks have earnings and dividends. Gold has nothing, and bitcoin has nothing. There is nothing that supports the bitcoin except the hope that you will sell it to someone for more than you paid for it. I think that's a factually correct statement. How much of bitcoin is criminal, people that want to hide their transactions? Some people say it's large, some people say it's small, I don't really know the answer to that question.
There are now exchanges offering interest on bitcoin, and a much higher interest on USD than you can find in traditional banks. Here's an example

https://blockfi.com/

Interview with the founder about their service, security of assets etc.
https://youtu.be/CpnN6S_DvjQ
I didn't get a chance to watch the video, but is BlockFi insured?

From a security standpoint what if an exchange gets hacked or your account gets hacked and bitcoins are stolen. I assume you're out of luck?
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Re: How to Invest in Crypto like a Boglehead?

Post by txhill »

ThankYouJack wrote: Sat Apr 24, 2021 8:24 am
Saelina wrote: Tue Feb 16, 2021 7:48 am
nisiprius wrote: Mon Feb 15, 2021 6:15 pm
2) If you are going to invest in crypto like a Boglehead, the first thing you need to do is get past John C. Bogle's statement made on 11/28/2017:
Well, bitcoin is a currency. Bitcoin has no underlying rate of return. Bonds have an interest coupon, stocks have earnings and dividends. Gold has nothing, and bitcoin has nothing. There is nothing that supports the bitcoin except the hope that you will sell it to someone for more than you paid for it. I think that's a factually correct statement. How much of bitcoin is criminal, people that want to hide their transactions? Some people say it's large, some people say it's small, I don't really know the answer to that question.
There are now exchanges offering interest on bitcoin, and a much higher interest on USD than you can find in traditional banks. Here's an example

https://blockfi.com/

Interview with the founder about their service, security of assets etc.
https://youtu.be/CpnN6S_DvjQ
I didn't get a chance to watch the video, but is BlockFi insured?

From a security standpoint what if an exchange gets hacked or your account gets hacked and bitcoins are stolen. I assume you're out of luck?
There is some level of insurance but it’s not FDIC insured. BlockFi uses Gemini for most of their custody, and Gemini puts 95% of their crypto in secure cold storage. That is not insured but it is more heavily secured. The other 5% is kept in a hot wallet for easy access for trading and lending etc. That 5%, which is more susceptible to theft, is insured. Whether that gives you enough confidence to invest is up to you; I’ve put a moderate amount in there myself, but I would not put all my eggs in that basket (or any single basket for that matter).
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Re: How to Invest in Crypto like a Boglehead?

Post by GoneOnTilt »

Crypto is nothing but fairy dust - a pump and dump scam. It's ones and zeros, nothing more.

Avoid it at all cost. Don't be the last guy caught holding the bag.
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Re: How to Invest in Crypto like a Boglehead?

Post by ThankYouJack »

txhill wrote: Sat Apr 24, 2021 8:31 am
ThankYouJack wrote: Sat Apr 24, 2021 8:24 am
Saelina wrote: Tue Feb 16, 2021 7:48 am
nisiprius wrote: Mon Feb 15, 2021 6:15 pm
2) If you are going to invest in crypto like a Boglehead, the first thing you need to do is get past John C. Bogle's statement made on 11/28/2017:
Well, bitcoin is a currency. Bitcoin has no underlying rate of return. Bonds have an interest coupon, stocks have earnings and dividends. Gold has nothing, and bitcoin has nothing. There is nothing that supports the bitcoin except the hope that you will sell it to someone for more than you paid for it. I think that's a factually correct statement. How much of bitcoin is criminal, people that want to hide their transactions? Some people say it's large, some people say it's small, I don't really know the answer to that question.
There are now exchanges offering interest on bitcoin, and a much higher interest on USD than you can find in traditional banks. Here's an example

https://blockfi.com/

Interview with the founder about their service, security of assets etc.
https://youtu.be/CpnN6S_DvjQ
I didn't get a chance to watch the video, but is BlockFi insured?

From a security standpoint what if an exchange gets hacked or your account gets hacked and bitcoins are stolen. I assume you're out of luck?
There is some level of insurance but it’s not FDIC insured. BlockFi uses Gemini for most of their custody, and Gemini puts 95% of their crypto in secure cold storage. That is not insured but it is more heavily secured. The other 5% is kept in a hot wallet for easy access for trading and lending etc. That 5%, which is more susceptible to theft, is insured. Whether that gives you enough confidence to invest is up to you; I’ve put a moderate amount in there myself, but I would not put all my eggs in that basket (or any single basket for that matter).
Thanks. Personally I'd want to read the fine print of the insurance (I tried searching quickly but didn't see their policy - https://help.blockfi.com/hc/en-us/searc ... =insurance). I also think I'd feel better holding crypto in a wallet (of course that can get lost / stolen too). For me, I can't justify the additional complexity and risk of theft. I still may buy some to learn (and my spouse is much more bullish on it), but the other issue I have with it is energy consumption.
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Re: How to Invest in Crypto like a Boglehead?

Post by txhill »

ThankYouJack wrote: Sat Apr 24, 2021 12:08 pm
txhill wrote: Sat Apr 24, 2021 8:31 am
ThankYouJack wrote: Sat Apr 24, 2021 8:24 am
Saelina wrote: Tue Feb 16, 2021 7:48 am
nisiprius wrote: Mon Feb 15, 2021 6:15 pm
2) If you are going to invest in crypto like a Boglehead, the first thing you need to do is get past John C. Bogle's statement made on 11/28/2017:
There are now exchanges offering interest on bitcoin, and a much higher interest on USD than you can find in traditional banks. Here's an example

https://blockfi.com/

Interview with the founder about their service, security of assets etc.
https://youtu.be/CpnN6S_DvjQ
I didn't get a chance to watch the video, but is BlockFi insured?

From a security standpoint what if an exchange gets hacked or your account gets hacked and bitcoins are stolen. I assume you're out of luck?
There is some level of insurance but it’s not FDIC insured. BlockFi uses Gemini for most of their custody, and Gemini puts 95% of their crypto in secure cold storage. That is not insured but it is more heavily secured. The other 5% is kept in a hot wallet for easy access for trading and lending etc. That 5%, which is more susceptible to theft, is insured. Whether that gives you enough confidence to invest is up to you; I’ve put a moderate amount in there myself, but I would not put all my eggs in that basket (or any single basket for that matter).
Thanks. Personally I'd want to read the fine print of the insurance (I tried searching quickly but didn't see their policy - https://help.blockfi.com/hc/en-us/searc ... =insurance). I also think I'd feel better holding crypto in a wallet (of course that can get lost / stolen too). For me, I can't justify the additional complexity and risk of theft. I still may buy some to learn (and my spouse is much more bullish on it), but the other issue I have with it is energy consumption.
Energy consumption and carbon output are a major problem with Bitcoin. It seems that Bitcoin mining is driving green energy development though, because renewables are cheaper than fossil fuels. So hopefully it is pushing us in the right direction, especially if it leads to a reduction in gold mining or energy use by other financial infrastructure. And something like ETH, which is moving toward proof of stake instead of proof of work (which incentivizes use of computational energy), will require far less energy in the future. But I think climate impact is a problem currently.

Regarding Blockfi, totally fair. They don’t provide much detail on custody and other policies so it is a bit opaque how it all works.
SlowMovingInvestor
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Re: How to Invest in Crypto like a Boglehead?

Post by SlowMovingInvestor »

txhill wrote: Sat Apr 24, 2021 8:31 am
There is some level of insurance but it’s not FDIC insured. BlockFi uses Gemini for most of their custody, and Gemini puts 95% of their crypto in secure cold storage. That is not insured but it is more heavily secured. The other 5% is kept in a hot wallet for easy access for trading and lending etc. That 5%, which is more susceptible to theft, is insured. Whether that gives you enough confidence to invest is up to you; I’ve put a moderate amount in there myself, but I would not put all my eggs in that basket (or any single basket for that matter).
If you're depositing crypto (even GUSD) at BlockFi then it's likely at being lent out, and it's not in their custody. No way 95% of deposited crypto is in custody.

I think a lot of BlockFi's loans are the equivalent of margin loans, only instead of being collateralized by stocks, they're collateralized by crypto. They did a fair amount of liquidation during the downturn in March 2020.

So if they get some collateral for the loan that is also crypto, then it might be in custody.

Also, in some cases, I'm sure they're relying on VC funding to offer higher rates and attract customers.
txhill
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Re: How to Invest in Crypto like a Boglehead?

Post by txhill »

SlowMovingInvestor wrote: Sat Apr 24, 2021 1:55 pm
txhill wrote: Sat Apr 24, 2021 8:31 am
There is some level of insurance but it’s not FDIC insured. BlockFi uses Gemini for most of their custody, and Gemini puts 95% of their crypto in secure cold storage. That is not insured but it is more heavily secured. The other 5% is kept in a hot wallet for easy access for trading and lending etc. That 5%, which is more susceptible to theft, is insured. Whether that gives you enough confidence to invest is up to you; I’ve put a moderate amount in there myself, but I would not put all my eggs in that basket (or any single basket for that matter).
If you're depositing crypto (even GUSD) at BlockFi then it's likely at being lent out, and it's not in their custody. No way 95% of deposited crypto is in custody.

I think a lot of BlockFi's loans are the equivalent of margin loans, only instead of being collateralized by stocks, they're collateralized by crypto. They did a fair amount of liquidation during the downturn in March 2020.

So if they get some collateral for the loan that is also crypto, then it might be in custody.

Also, in some cases, I'm sure they're relying on VC funding to offer higher rates and attract customers.
I understand that they require overcollateralization for loans from most borrowers, and less collateral from their larger institutional clients (market makers and the like) based on their assessment of credit risk. Obviously to earn interest on your deposits they have to lend it out, so the 95%/5% figures I mentioned isn't in direct reference to deposited amounts but rather the total amounts in BlockFi's liquidity pool essentially. As they're privately held it's hard to get a ton of detail on how exactly it works, but I got comfortable with them because they survived the post-2017 bear market as well as the March 2020 crash without having liquidity issues as far as I can tell.
acegolfer
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Re: How to Invest in Crypto like a Boglehead?

Post by acegolfer »

Impatience wrote: Mon Feb 15, 2021 5:46 pm
Security

Crypto enthusiasts are vehemently against keeping one's holdings on an exchange. This is based on the many occurrences of exchanges being hacked in the past but also seems to largely be a philosophical issue. They hate centralized anything and want to know they have final custody of their assets. I don't really care about any of that. I plan on keeping my assets on exchange but if they get quite large (like >$50k) I'll consider purchasing a hardware wallet and moving whatever has the largest balance onto there (for example, just BTC). I really don't want to worry about losing my hardware wallet or its recovery key.

Alright so this thread is very rambling and covers a lot of things, so please feel free to comment on my plan or let me know what you're doing yourself. I'm sure I've missed out on some methods of making this adventure easier.
There are 2 reasons why it's better to not use exchange's wallet. First, as you stated the custody issue. Second, they charge more to send coins. If you don't want to invest in hard wallet, at least consider a soft wallet. There are many so vet them first.
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Cheez-It Guy
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Re: How to Invest in Crypto like a Boglehead?

Post by Cheez-It Guy »

I'll tell you how this Boglehead invests in Crypto. . .
fingoals
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Re: How to Invest in Crypto like a Boglehead?

Post by fingoals »

bck63 wrote: Sat Apr 24, 2021 9:49 am Crypto is nothing but fairy dust - a pump and dump scam. It's ones and zeros, nothing more.

Avoid it at all cost. Don't be the last guy caught holding the bag.
All software is ones and zeros. But somehow the relevant market size just for enterprise software is more than 500 billion dollars ...
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