A Guide to Buying and Safely Holding Your First Crypto

To piggyback off of last week's topic where we walked through setting up a soft wallet, this week we're going to dive into the best ways to invest in crypto and the different wallets that are best for different scenarios.

With Coinbase, TikTok, and Reddit beginning to make their way into the NFT space and the Bitcoin ETF launching last week, crypto is about to become a lot more popular.

With this, more people are becoming curious about how to invest and how to begin using crypto, so this newsletter is a quick guide on all the tools you need to get started.

We're going to break down a few different things:

  1. How to buy bitcoin and how to hold it
  2. How to buy ethereum, hold it, and transact with it

So to invest in crypto you generally need 3 things:

  1. An exchange - a place to buy crypto
  2. A soft wallet - to transact and buy things
  3. A hard wallet - to hold large amounts of crypto for long term

An exchange is just like a place where you can buy stocks - like Robinhood or TD Ameritrade.

Soft and hard wallets are like a combination between your bank account and an investment account. They hold your crypto and allow you to move it around to different places.

Let's walk through some example case studies:

Investing in bitcoin

Scenario: If you want to easily invest in bitcoin AND don't plan to invest a significant amount (under $500)

Exchange of choice (aka where to buy): Coinbase

Wallet type: Custodial

Why Coinbase? Moderate fees and lots of investment options

Other Exchanges: Gemini, Swan Bitcoin, Binance, FTX

How to purchase bitcoin: Open an account at Coinbase - or another exchange - just like how you would open an online bank account, link your bank, deposit money, choose your crypto and how much you'd like to invest, confirm the trade, and then you're invested 🎉

Now, the crypto you purchase is being held by Coinbase. You can sell your crypto just like you'd sell a stock and you'd receive US Dollars back.

But to truly own your crypto, and if you begin to build up your investments past a few hundred dollars, you need a hard wallet (below).

We've never had to take the step of "owning our money" before because it's never really been an option - there's always been a middleman of some sort whether it be banks or investment firms like Robinhood - but in crypto, it's essential to 'own your money' if it makes up a fairly significant part of your financial life.

Storing your bitcoin if you continue investing and accumulate an impactful amount (over $500-1,000):

Wallet type: Hard

Wallet of choice: Ledger Nano X (or S)

Why: Hard wallets are the most secure way to secure your digital assets. They exist offline and because of this, they're more secure than keeping funds at an exchange or in a soft wallet like MetaMask. I recommend waiting until you have $500-1,000 because it does take a little effort to set up and they cost anywhere from $50-$200 so might as well have more invested than the cost of the wallet before buying.

Other: Trezor

How to: To store crypto on your hard wallet, you'd first purchase crypto on an exchange, and then after setting up your hard wallet, you'd send the crypto from your custodial wallet at the exchange to your hard wallet address.

Investing in ETH

Where to buy ETH

Exchange of choice: Coinbase

Wallet type: Custodial (Coinbase Wallet - separate app - is non-custodial)

Why: Easy to use, friendly interface, easy transfers

Other exchanges: Gemini, Binance, Crypto.com, FTX

Holding and storing ETH (over $500-1,000)

Wallet type: Hard

Wallet of choice: Ledger Nano X (or S)

How to use: Same steps as the above example with bitcoin

Transacting with ETH

Wallet type: Soft

Wallet of choice: MetaMask

Other soft wallets: Rainbow, Argent

Use cases: With a soft wallet, you can go to websites like OpenSea, connect your wallet (which is just like signing into a portal but easier), and can then begin interacting with and transacting on the site.

So a common situation for new investors is that you want to invest in ETH and bitcoin, transact with your ETH, as well as hold long term.

For this scenario, you'd need 3 things:

  • An exchange to purchase the crypto - Coinbase, Binance, or Gemini account
  • Ethereum soft wallet to transact - MetaMask, Rainbow, or Argent
  • Hard wallet for long term, secure storage - Ledger Nano X

That's it.

With those few things, you're on your way to becoming your own little bank.

And I know it may seem a little confusing, but think about how confusing the traditional financial structure is.

There's a million different banks out there, different kinds of bank accounts, thousands of different credit cards to use and apply for, dozens of different investment accounts that all do different things and have different tax rules and documents needed to set up.

Not to mention all of the passwords to keep track of and the paperwork that has to be completed with every account 🤢

If the world was reversed and we grew up with crypto, only needing a couple wallets and one place to buy and invest in everything, trying to introduce the current financial system would feel archaic.

And that's because it is.

Once you get into crypto and buy your first currency and set up your first wallet, everything starts to make more sense.

Reading through blogs and articles about how to do things is great, but the best learning takes place when you take action.

After going through the process of setting up a wallet and interacting with the crypto environment, you also begin to understand the problems and inefficiencies with the current system.

And if you're curious about crypto and want to learn more or need help with any of this, don't hesitate to reach out to me on Twitter.

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