The Cryptocurrency Thread 2

[joesxm3]

Say I want to invest $100,000 in BTC today. I wire the funds to Coinbase (or any place that handles this stuff). How much does it cost to get my position on the Blockchain with my private key and how soon would that be done? Not interested in new and upcoming things, so today.

The main expense of doing that would be buying a hardware wallet device and paying the Coinbase trading fee. Moving the bitcoin from Coinbase to the blockchain would only cost a dollar or two.

The hardware wallets range from $50 to $200. If you were to buy the bitcoin using Coinbase Pro rather than Coinbase, the fee is something like 0.50%. So, say $600 to $700 or so. The main Coinbase charges 3% or so to the newbie customers.

I am not sure about the time to get onto the block chain. If you had the bitcoin on Coinbase the transfer would take 10 minutes for the first block to be made, then usually it is considered to wait for 6 more blocks to be sure everything is all settled. So, say an hour.

However, I think Coinbase will put a hold on your deposit for some number of days before they allow you to remove the bitcoin from your account. They should allow you to buy it as soon as your wire transfer arrives. Maybe with wire transfer they have less of a time limit than ACH, but I don't know about that.

Ordering a hardware wallet from the manufacturing company would take a week or so, depending on shipping and supply chain issues. If you were willing to risk a software wallet, setting it up would be same day.

You would also have to set up your account and do the know your customer stuff. I have heard that Coinbase is pretty quick, but have seen people complaining of some other exchanges taking weeks to approve due to staffing shortages.

Also, with that amount of money, it would be prudent to spend some time learning and practicing with your hardware wallet to make sure you don't have an issue doing the transfer.

 

[target2019]

I met up with a nephew (40) at a family wedding on Saturday. He brought up the topic and asked me how involved I was in Crypto, etc. I mentioned my minor mining involvement as an educational experience to keep me busier. He was surprised to hear that the subject of Crypto is a contentious one on the forums I visit. Let him know that my investing view is very long and conservative. This contrasted with his frequent trades of game NFTs. He's aware of the taxes, and pays, and knows that it is very risky. In his words, it's something to do as corporations take 6 months to process and review candidates for jobs. He spends a lot of time on Discord, researching the early releases and getting in for a quick strike and sell.

To make this somewhat broader, here is an article that discusses findings about differences in generational thinking on the subject.
https://markets.businessinsider.com...her-dogecoin-cryptocurrency-investing-2021-11

Nearly two-thirds — 59% — of Gen Z respondents to the survey believe they could become wealthy by investing in cryptocurrencies.
"This generation has a greater acceptance and comfort with all things digital, so not surprising that would be more comfortable with crypto," Kathy Sheehan, SVP at Cassandra, a division of Engine, told Insider. "This generation has a lot of concerns about debt and finances."

That brings me to my wife's young cousin (25) and her school loans. She is a music graduate of local Uni, and now working in an inner city high school. We've had serious talks about her private and public loans. She has significant concerns about what happens when the loans get turned back on. The payback and duration are anchors around her neck. I did not get the complete details, but this sounds like the last sentence in the quote above.

So there's a wide gulf between generations, as if I needed to confirm that again. The opinions about investing and finance, and assoicated behaviors are something that is quite interesting to me. YMMV.

 

[captain3d]

Say I want to invest $100,000 in BTC today. I wire the funds to Coinbase (or any place that handles this stuff). How much does it cost to get my position on the Blockchain with my private key and how soon would that be done? Not interested in new and upcoming things, so today.

It may take some time to verify a new account at Coinbase pro before you can transfer in the money

$100k trades are 0.2% or 0.15% depending if it is a market or limit order.

 

[joesxm3]

I just had a thought.

Investing only 1% in bitcoin is not likely to have a huge effect on you unless it really goes hyperinflation level exponential.

But everyone investing 1% in bitcoin will really help those with a lot of it . . .

 

[target2019]

Another interesting experiment would be to open a legacy wallet, and put $10,000 crypto in that. Leave it alone and bequeath to heirs. If it does well, they'll open envelope A and read that you always knew it was a fantastic idea. If it does poorly, they open envelope B and read that you always knew it was a loser's bet, but wanted them to see this valuable investing lesson.

 

[joesxm3]

Another interesting experiment would be to open a legacy wallet, and put $10,000 crypto in that. Leave it alone and bequeath to heirs. If it does well, they'll open envelope A and read that you always knew it was a fantastic idea. If it does poorly, they open envelope B and read that you always knew it was a loser's bet, but wanted them to see this valuable investing lesson.

That makes a lot of sense. I wanted to respond on another thread where a guy said that he was heavy in cash and would be moving into equities with a 30 year time frame because it was destined for his kids to inherit. I would have suggested, why not buy one bitcoin for each kid. Put the money on red and spin the wheel.

On a practical note, if you were to do something like that, I have read forum comments from people with a hardware wallet that they let sit for seven or eight years and had trouble now trying to use it because it had missed so many firmware updates that it was out of whack.

From what I have read, these hardware wallets give you a set of 24 words that can be used to restore to a new wallet. I would think the best way to leave it for the heirs would be to punch the 24 words into a metal plate and leave instructions for them to restore the private key to a new model wallet when the time comes. I would imagine that the process of restoring the key from the 24 words would survive and the metal plate would probably survive better than the hardware wallet that might wake up in a world with no more USB ports or even desktop computers.

The other possible worry is that I have read that quantum computing in ten or so years might be able to break the current bitcoin encryption. The articles I have read on this seem to think that there are already quantum-resistant encryption algorithms that are not yet in use. They felt that when it was close to having a 256 q-bit quantum computer there would be an update to the bitcoin protocol to make a new type of private key. People would have the option of sending their bitcoin to a new address secured by the new quantum-proof key.

Drifting a bit off topic - if they get quantum computing working it would seem that someone could crack the keys for the 4 million or so lost or not moved for years bitcoin, since no one would update there key encryption.

 

[captain3d]

1% invested in quantum computing then [emoji3]

 

[Chuckanut]

I just had a thought.

Investing only 1% in bitcoin is not likely to have a huge effect on you unless it really goes hyperinflation level exponential.

How would bitcoin or any crypto help a person if we get into a hyperinflation?

 

[jim584672]

I'm puzzling on why you would need a hard wallet at all. You are protecting a digital string. So logically you could encrypt that string and store it on the cloud, in your backyard, or even in a message on the Internet. AES256 is considered to be quantum safe. Just don't lose the key!

 

[Markola]

Storage choices is almost a Hatfields vs. McCoys level argument, so I’m not trying to convince anyone that cold storage on a centralized exchange is better than a personal custody hardware wallet. Truth is, I don’t know. But I am attracted to the idea that a major, deep-pocketed, publicly-traded, regulated, US-domiciled company custodying (?) many billions worth of their customers’ digital assets that are parked offline and at least partially insured, will be constantly upgrading its security, including being the first to implement a quantum computer-proof encryption. For my skill and interest level, I prefer to not deal with firmware upgrades or metal plates. By the way, who stamps the metal plates and is that person a security risk?

Regardless, digital asset security is evolving rapidly and the whole landscape will look differently 5 years from now and will, hopefully, be a lot simpler.

 

[jim584672]

Unless I don't understand something, once you are on the Blockchain the private data that allows you to transfer to a new user becomes your responsibility and the exchange has nothing to do with it anymore. Insured / regulated is a moot point once you have the private key.

 

[Markola]

So, here’s a worry. I just heard Canadian investor Kevin O’Leary, of Shark Tank fame, on a podcast. https://www.thewolfofallstreets.io/podcast/

He described the worldview of a lot of institutional investors who are keenly interested to invest in Bitcoin but are awaiting a Bitcoin spot ETF to make it simple. Such institutions (he cited BlackRock, as an example) have ESG (Environment, Social, Governance) committees, which approve or deny all investments. BlackRock money managers who want to invest in Bitcoin cannot, at present, because some blocks are being awarded from miners using coal and in some countries with horrible human rights records. This impediment to institutional adoption is creating a demand for ESG certification in Bitcoin. It’s probably not possible to determine the cleanliness of each block produced to date. However, institutions can invest in the shares of green miners, ie carbon-neutral solar, hydro and nuclear-powered miners in democratic countries who stack their Bitcoin and never sell it, becoming green Bitcoin holding companies as well as miners. This is one way a BlackRock could invest in Bitcoin and satisfy its ESG requirements.

The problem for the rest of us is, green-certified Bitcoin, and its derivatives, could be priced at a premium to regular Bitcoin. Yeesh, what a world we are in now! [emoji43]

 

[jim584672]

Wouldn't they just say the existence of such a non-green product endangers the environment just by existing and the whole thing should be avoided?

 

[joesxm3]

I'm puzzling on why you would need a hard wallet at all. You are protecting a digital string. So logically you could encrypt that string and store it on the cloud, in your backyard, or even in a message on the Internet. AES256 is considered to be quantum safe. Just don't lose the key!

I think you are correct. I am just learning about this stuff, but I guess if you were to be able to obtain the 256-bit private key itself you could store it somehow and then restore it later. From what I have read about the wallets, they don't seem to allow the 256-bit private key to be exported, they just operate on some standard of 24 or 12 words that are used to recreate the key.

So, if you did not care about manipulating the bitcoin for years, you would not need a wallet. Like you said, just preserve the seed words or the key for eventual use.

 

[joesxm3]

Wouldn't they just say the existence of such a non-green product endangers the environment just by existing and the whole thing should be avoided?

Apparently there was some mining group meeting this week that announced that bitcoin mining at this point is over 55% using clean energy. I think China kicking the miners out helped to get a lot of them off of coal.

Ironically, the clean energy proponents don't seem to make the same argument against electric vehicles. As I understand it, most of the electricity used by these vehicles comes from coal-fired power plants.

 

[Markola]

^^^^ If you were CFO of an insurance company, pension fund, hedge fund or university endowment facing an investment landscape of 5% inflation, flat gold, stratospheric P/Es and .2% bond yields, would you be receptive to having more diverse investment choices? In a world of credit default swaps, mortgage backed securities, vast derivatives, SPACS, and unregulated hedge funds, we’ve seen institutional capital flow to many risky, exotic things in search of yield.

 

[jim584672]

Institutions may be limited to certain types of investments, like equities or debentures of recognized companies on regulated exchanges. Crypto isn't a class that is recognized as a valid option.

 

[Markola]

Institutions may be limited to certain types of investments, like equities or debentures of recognized companies on regulated exchanges. Crypto isn't a a class that is recognized as a valid option.

You say that as fact but you are incorrect. Since 2014, Bitcoin has been recognized by the IRS as property. That’s why MicroStrategy (MSTR) a publicly-traded legacy software company, has so far bought $5.9 billion worth of Bitcoin, converting its entire balance sheet to Bitcoin, all fully legally. It’s some 80% of the value of the company. They were very careful in bringing their shareholders along on the idea and buying out those who wouldn’t go along.

More companies aren’t doing it yet, mostly because the FASB rules don’t treat Bitcoin price volatility kindly, so managements don’t want to deal with shareholder blowback. But some managements have seen the MSTR stock price quintuple in the last 18 months and are, no doubt, thinking “Hmmm.”

 

[jim584672]

A company owing property is a lot different than an Investment Company as far as regulation goes. But I am not an expert on the Investment Company Act of 1940.

 

[MichaelB]

Some thoughts about institutional investors.

1. Institutional investing in an asset or asset class does not mean it is either safe or appropriate for individual retail investors.

2. When we read news about institutions investing in something, we are not privy to how the investment is structured. There may be (and probably are) features to minimize the risk or downside.

3. The objectives of institutional investors are different from our objectives as individuals, and our risk is much higher. This is a critical difference.

4. It’s not at all clear if there is a significant move toward crypto assets by institutional portfolios. A lot of the noise and media could be or is generated by the portfolio managers and holders of these risky assets, who gain from the action and are talking their book.

5. We retail investors need a compelling reason to leave the world of simple passive and index investments. Warren Buffet showed that simple index investing produced superior results over an index of hedge funds.

Do we, as individual retail investors, need crypto assets in our portfolios? Will our portfolios suffer in some way due to lack of crypto? That case has not yet been made and until it is, it pays to be careful.

 

[teachme]

Do we, as individual retail investors, need crypto assets in our portfolios? Will our portfolios suffer in some way due to lack of crypto? That case has not yet been made and until it is, it pays to be careful.

What is the criteria/measures for making a viable case? If you've stated previously and I missed it let me know and please pardon my ignorance.

 

[Markola]

I can’t speak for individual investors but here is my criteria: My core is a seven figure, globally-diversified portfolio of Vanguard Index funds with a 50/50 allocation. I’m not sure to whom I’d turn to tell me it’s “appropriate” to add some additional risk with an amount of extra money that I could afford to lose altogether.

 

[captain3d]

Unless I don't understand something, once you are on the Blockchain the private data that allows you to transfer to a new user becomes your responsibility and the exchange has nothing to do with it anymore. Insured / regulated is a moot point once you have the private key.

You do not have a private key while your Bitcoin/Crypto remains at the wallet address of the exchange. The Exchange holds the private key to that wallet.

Once you transfer it to your own wallet address then that is the place where your private key has domain over your Bitcoin/Crypto.

 

[jim584672]

You do not have a private key while your Bitcoin/Crypto remains at the wallet address of the exchange. The Exchange holds the private key to that wallet.

Once you transfer it to your own wallet address then that is the place where your private key has domain over your Bitcoin/Crypto.

Once that gets done (residing in your own wallet) if the exchange ceased to exist it wouldn't have any impact on you?

 

[captain3d]

Once that gets done (residing in your own wallet) if the exchange ceased to exist it wouldn't have any impact on you?

Correct. And the public ledger would show the transfer between the two addresses.