New people enter the crypto space every day. Most of them leave their funds on an exchange waiting for the price to go up. Completely ignoring the long-standing statement “Not your keys, not your crypto”. If you’re one of those people, I highly recommend buying a hardware wallet for the crypto you plan on holding for the long term.
I know some of you prefer not to have a hardware wallet because you don’t own much crypto or don’t trust yourself enough to handle security for your crypto. This is perfectly fine as long as you know the risks you’re taking by doing so.
In this article, I am going to help you reduce that risk while taking advantage of platforms offering interest on your crypto. So you can make gains for holding and not risking it all trying to day trade for gains. This strategy will be perfect for those that like to buy and hold.
Buying Crypto: Average Your Cost
Some people like to say “Dollar Cost Average” or “Euro Cost Average” into your portfolio depending on which country you’re in. The easiest way to do this is to set up a recurring purchase of crypto every week in small amounts. If you don’t already buy crypto, here are a few options for you but know there are more exchanges available; Binance, Cex, Coinbase, and Crypto.com.
Spread The Custody Of Your Crypto
Now that you have some crypto. This is where I would recommend sending it to your hardware wallet and don’t touch it. However, this article is about making gains while keeping the risk of losing our funds to a minimum. So I will say keep most of your crypto in your hardware wallet. Now for those of you that prefer not to have a hardware wallet because you believe companies can do a better job at keeping your funds safe. Let’s get into the fun part of this article.
If you’re going to leave your funds in the hands of a 3rd party. Make sure you’re making money from it. There are enough companies offering interest on your crypto. Let’s use bitcoin for example. In this example, let’s say you have 6 bitcoin, and you want to earn interest. Sure we can pick 1 company and trust they will forever be in business. However, if something happens and you can’t access your bitcoin. They won’t let you withdraw then all your funds gone.
Reducing 3rd Party Risks
How do we reduce the risk while earning interest? Spread the custody of your bitcoin with many different companies. I’m not telling you which services to use. I am going to use these companies as examples since I use them and I will provide a link to them if you want to check them out yourself. Back to the strategy.
In our example, we have 6 bitcoin and only want to risk 1 bitcoin with each company so we always have a backup plan. After buying our 6 bitcoin, we send 1 to Binance, 1 to Blockfi, 1 to Celsius, 1 to Crypto.com, 1 to Nexo, and 1 to Stakecube. Yes, I put them in alphabetical order. Each company has its own interest rates, requirements, and set times they pay the interest. Some are daily while others are weekly. Using this example, if one company stops withdrawals. You still have funds available to you.
Now for those of you who prefer keeping your funds in a hardware wallet but you want some interest on your bitcoin as well. I would say your split would be a bit different. Keep an amount of bitcoin in your wallet that would allow you to sleep at night while spreading the bitcoin you’re willing to use.
For example, let’s say out of the 6 bitcoin, you’re only willing to risk half. 0.5btc goes to each service while keeping 3 bitcoin in your wallet. I would say once a month or 3 months, withdraw the interest you’ve gain to your wallet. Sooner or later, you will have 6 bitcoin in your wallet again while still having a balance in each service.
I personally believe this is the safest way to invest crypto.