The Logical Levels Of Risk In #Crypto #Investing – (Chris Coney) WCSS:038

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July 23, 2023


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Start your formal crypto education for free and earn tokens at — I thought it was about time I addressed this concept directly. I’ve referred to the concept a number of times but haven’t actually dealt with it on it’s own. So this is essentially a model that is a work in progress, as most of crypto is. The model is based upon my thesis that, the “further away” you go from base assets like Bitcoin and Ethereum, the more your risk profile increases. While the risk level might go up in lock step, the reward may not always be a perfect reflection of the risk level. The “sweet spot” as I’ve previously referred to it, is when there is a risk to reward ratio that is more heavily weighted on the reward end. So let’s get into the model and my proposed levels. I’ve created a very basic illustration using the model to help explain it. I’m suggesting that there are 4 logical levels of risk. We know that crypto investing is already a high risk asset class, but I’m not coming from the perspective of a general investor here. I’m starting (and staying within) the realm of crypto. I’d say that Bitcoin is the reserve asset in crypto. You personally may measure your returns from dollars to dollars, but many seasoned crypto investors measure their returns from Bitcoin to Bitcoin. This is based on the premise that Bitcoin will expand from being the crypto reserve asset to being the global reserve asset. So from that point of view, it makes more sense to accumulate BTC than USD. But that is a personal preference. If we say that Bitcoin is the reserve asset, that effectively makes it “cash” putting it at the risk level of 0. No gains, no loss, just preservation of purchasing power due to Bitcoin’s limited supply. If you own 210,000 BTC, you will always have 1% of the BTC supply. Not so with a fiat currency because it’s elastic money. Your share of the whole changes all the time. Now let’s say we want to invest to make more Bitcoin.
We then progress to risk level 1 which, in my illustration are some base layer smart contract platforms such as Ethereum and Cosmos. When I say base layer, they are networks that you can build apps on, but they are also networks that you can build other networks on. Before we go there though, let’s make sure we establish risk level 1.
I have zero risk if I sit in Bitcoin as cash and as I trade some of that in for a level 1 asset like Ethereum or Cosmos the risk that I am taking is that I get less BTC back when I sell. The intention however is to get back more BTC than I invested. I’ll say this again. The reason many crypto investors choose to measure their wealth in BTC is because it’s the only objective measurement. Unless you have something that is absolutely scarce, how do you know if you are accumulating or losing wealth? That’s why when I give examples I say things like “if you owned 1% of the Bitcoin supply, you would always own 1% of the Bitcoin supply”. That is a totally objective measure. If you go from 1% of the Bitcoin supply to 1.1% then you know your wealth has increased. By contrast, if you own 1% of the dollar supply and increase that to 1.1%, that doesn’t tell you much. You need to do another calculation to figure out if your net purchasing power has increased or not. So back to the model then. I left off saying that Ethereum and Cosmos were base layer networks that can be used as a platform to build apps, or as a platform upon which to build other networks. Let’s take Cosmos as an example. ThorChain and the Terra Luna blockchains are networks that are built on Cosmos. Cosmos has its own ATOM token, so in my model here, the ATOM token would be on risk level 1. It’s one “step” away from bitcoin. Then we have ThorChain with its native token RUNE and Terra with its native token LUNA. Since these are built on a network that is already at risk level 1, I consider these risk level 2 since they are 2 “steps” away from Bitcoin. The same goes for Polygon. I consider this also to be a level 2 since it’s built on a level 1 asset like Ethereum. I’ll come back to Uniswap in a moment. Expanding beyond Polygon then we have specific apps built on that platform like QuickSwap or Sunflower Farmz. They get labelled risk level 3 since they are built on top of a risk level 2. And then finally, I’m considering a risk level 4, which would be anything built on a risk level 3. If Sunflower Farmz is a level 3 then in-game NFT items are even further out and I’d consider those risk level 4. It would be no surprise that the age and the market cap of an asset has a lot to do with it moving through the logical levels of risk. Almost all crypto assets start out as micro-caps, like Sunflower Farmz. Tiny, tiny market cap. I was going to say, as they grow they go down the risk levels but I’m not sure that is the case. The Cryptoverse features reading the news from various sources. Each episode lasts approximately 15 minutes and includes my moral, ethical and philosophical interpretation of current events. If you’d like to be kept up to date on Bitcoin, cryptocurrencies and blockchains by someone who believes in the free market, equality of opportunity and the value of education then subscribe to The Cryptoverse today. Video Source

Crypto Currency Resources & Recommended Products

The following lists are tools and resources that I put together to help anyone that is interested in crypto get a head start. It can be quite daunting when you first get into cryptocurrencies. There is some much information out there and some much uncertainty.

Disclaimer This new crypto movement is an economic revolution. While it may be an exciting time to get started with crypto currencies, this digital gold rush has a plethora of bad information out there. The recommended products below are based on my own experience with my own personal use of these products.

Disclaimer: I am not a finical advisory. I do earn a small commission if you choose to purchase any of the recommended products below. Please make sure that you do your research before you purchase any Cryptocurrencies related products or services.


Crypto Currency Wallet & Coin Exchange

Coinbase is one of the worlds leading cryptocurrency wallets. It also gives people the option to purchase and trade digital currencies like that of Bitcoin, Bitcoin Cash, Ethereum Classic, Ethereum and Litecoin.

Coinbase popularity stems from its ease of entry and exit from the cryptocurrency world. It's pretty quick to get set up and start investing in digital currencies. Get $10 FREE Bitcoin {BTC} when you spend $100 with our referral link.

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Cryptocurrency Exchange

Binance is one of the worlds fastest growing cryptocurrency exchanges. Because of its trading volume and the number of altcoins it trades it will be one of the worlds biggest crypto exchanges in the world.

While Coinbase is still the easiest way to get into cryptocurrencies, Binance trades a lot more Altcoins compared to that of Coinbase. If you want to purchase Altcoins like Cardano ADA, Ripple XRP, Steller Lumens, TRON, Dash and Monero then Binance is your first port of call. 

In order to trade here, you must hold some cryptocurrencies first. So it's best to purchase some Ether or Litecoin from Coinbase and transfer it too Binance.

Click Here Watch A Tutorial Guide On How To Use Binance.



Cryptocurrency Hardware Wallets

One of the most popular Hardware Cryptocurrency wallets is that of

Ledger Nano S. The Ledger hardware wallet provides a secure offline solution for cryptocurrency traders to store their digital data. 

Commonly knowns private keys the Ledger hardware wallet gives users a multi cryptocurrency offline storage solution. Because of essential, these hardware wallets are similar to that of a USB key, it provides security by hosting the private keys offline making them difficult for hackers to access your cryptocurrencies.

It hosts some of the more common crypto coins but also some fewer know Altcoins Bitcoin Gold, Ark, Bitcoin, Bitcoin Cash, Digibyte, Dash Dogecoin and Ether.

Watch A Video Guide On How To Use The Ledger Nano S 


Digital Crypto Currency Wallet 

The Exodus Wallet is desktop cryptocurrency storage solution. It can be used with Mac and PC which has compatibility with a popular cryptocurrency exchange called Shapeshit. Which gives the user the ability to trade cryptocurrency with in the Exodus Wallet.  This feature alone makes the Exodus wallet a very popular choice with beginner crypto traders.

The interface is very intuitive making it very easy to understand and use for anyone that's starting out with investing in cryptocurrencies. The Exodus Wallet is one of the most popular lite wallets, even with a number of crypto storage assets, it doesn't require your system to download the complete blockchain.

While the Exodus Wallet is free to download and a very secure piece of software, please note that it does take between 1-3% fee with the exchange of cryptocurrencies. Click Here To Watch Walk Through Video On The Exodus Wallet.


Cryptocurrency Browser

The Brave Browser is just like most web browsers, it allows you to surf the web, find videos, websites and allows you to download content from the web. But with a few difference with it's set up compared to that of Google Chrome. It was set up by the same creators as that of Mozilla, basing their software on open source code similar to that of Google Chrome.

Brave has in built ad blocking technology to stop intrusive ads. It also integrates with the cryptocurrency Basic Attention Token {BAT} to pay users for their attention for displaying less intrusive ads.

Brave keeps 15% of the less intrusive ads, giving content publishers 55% per cent which is good for bloggers and vloggers, last but not lease even users of the Brave browser will receive 15% off the revenue. It also gives users the option to donate BAT to content creators or sites they love.

One of the striking features of the Brave Browsers is that it removes a ton of tracking pixels which cause websites to load slower. This gives you a much faster experience when visiting websites online


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