Crypto

If a term feels confusing in the chapters, come back here. This is the lookup.

Crypto isn't a stock. You don't own a piece of a company. There's no CEO, no earnings report, no board of directors. You own a digital asset on a public ledger. That asset has value because enough people agree it does — and only because of that.

1.1What You're Actually Buying

When you buy Bitcoin, you don't buy a share of a company called "Bitcoin." You buy a slot in a public database (the blockchain) that says "this address controls 0.5 BTC." That's it.

The value comes from:

• Scarcity — Bitcoin has a hard cap of 21 million. Most cryptos have fixed or capped supplies.
• Network effect — more users using a blockchain makes it more valuable.
• Utility — what you can actually do with it (smart contracts on Ethereum, payments on Bitcoin).
• Speculation — people betting it'll be worth more later. Often the biggest driver.

1.2Bitcoin vs Ethereum vs Everything Else

The reserve asset of crypto. Most institutional money sits here. Slow, simple, secure. Treated as digital gold by most investors.

The largest smart contract platform. Most DeFi, NFTs, and apps run on it (or on chains compatible with it). More volatile than Bitcoin. More upside potential, more downside.

Everything else. Solana, Avalanche, BNB, thousands more. Higher risk, higher potential. Most go to zero over time. The ones that survive can return many multiples.

USDT, USDC, DAI. Pegged to $1 USD. Used to park capital between trades without converting to fiat. Treated as cash in the crypto economy.

DOGE, SHIB, PEPE, and thousands of others. Built around jokes. Can pump 100x. Can rug overnight. Pure speculation — not investments.

1.3How You Actually Hold Crypto

Two options. Both have trade-offs.

Binance, Bybit, Kraken, and others (Coinbase exists but has issues — see Section 1.5). You see your balance, you can trade, you can withdraw. Easy. But the exchange controls your keys — if they get hacked, fail, or freeze withdrawals, you lose access.

"Not your keys, not your coins." Old saying. Still true.

A non-custodial wallet (MetaMask, Phantom, Rabby for hot — Ledger, Trezor for cold). You hold the keys. Full control. Full responsibility — lose your seed phrase and your crypto is gone forever.

For long-term holds, move funds off exchanges into a cold wallet. For active trading, exchange is fine.

1.4Markets Never Close

This is the single biggest difference from stocks. Crypto trades 24/7/365. No bell, no premarket, no holidays.

Implications:

• Big moves happen overnight while you sleep
• Weekends are real trading days (and often where volatility hides)
• You can't really "step away" — positions are live around the clock
• Liquidity varies dramatically by time of day and day of week

This is part of why position sizing is so much tighter in crypto. You can't watch every move. Build positions assuming you might wake up to a 20% drop.

1.5Where Should You Actually Trade Crypto?

• Fees are crushing — Coinbase Simple takes up to 3.99% per trade. Even Coinbase Advanced (lower-fee tier) charges 0.4-0.6%. Compared to Binance at 0.1%, you pay 4-40x more.
• Spread markup — Coinbase also widens the spread between buy and sell prices. You lose more than the listed fee.
• Limited features — no advanced order types, no real perp support, restricted altcoin selection.
• Slow on/off-ramps — withdrawals take days. Bank deposits hold for a week.

The only reason to use Coinbase: you're brand new, you're putting in $50 to learn, and you want the most polished beginner UI. For anything past that, switch.

• Fees: 0.1% standard, lower with BNB or higher volume
• Liquidity: the deepest book in crypto. Lowest slippage on big orders.
• Selection: hundreds of trading pairs, perpetual futures, options
• Tools: proper charting, advanced order types, copy trading

Note: Binance restrictions vary by region. Some Canadian and US users can't access full Binance. Bybit is the next-best alternative — similar liquidity, similar fees, fewer restrictions.

A DEX (decentralized exchange) lets you trade crypto without giving up custody of your coins. No company holds your funds. No KYC. No withdrawal limits. No regulator can freeze your account.

• Your wallet connects directly to a smart contract on the blockchain
• You swap one token for another in a single on-chain transaction
• The smart contract handles the trade — no middleman, no exchange holding your funds
• You hold the keys to your wallet the entire time

• Hyperliquid — the leading perp DEX. Deep liquidity, transparent order book, trustless. Most serious perp traders prefer it over centralized exchanges.
• Uniswap — the original spot DEX on Ethereum. Used for buying smaller altcoins not listed on centralized exchanges.
• Jupiter — aggregator DEX on Solana. Best prices across the Solana ecosystem.
• PancakeSwap — DEX on BNB Chain. Cheaper transactions than Ethereum DEXs.

• Pros: no custody risk, no KYC, no withdrawal freezes, access to coins exchanges won't list, full control
• Cons: gas fees (especially on Ethereum), slippage on illiquid pairs, more technical to use, you must safeguard your seed phrase yourself

Most experienced crypto traders run:

• Binance or Bybit for spot buys, perps, and on-ramping from fiat
• Hyperliquid for serious perp trading with self-custody
• Uniswap or Jupiter for buying small altcoins that aren't on centralized exchanges
• Hardware wallet for long-term spot holds — Ledger or Trezor

Avoid Coinbase outside of small beginner deposits. Avoid bank-style "easy" buy-crypto apps (Cash App, PayPal crypto) — same fee problem, even worse selection.

If you trade stocks and assume crypto follows the same rules, you'll get hurt. Crypto markets are younger, less regulated, more retail-driven, and operate around the clock. Every one of those facts creates a different risk profile.

2.1Exchange Risk

Crypto exchanges have failed. Spectacularly. FTX, Mt. Gox, Celsius, Voyager, BlockFi — billions of dollars lost. In every case, users lost their funds because the exchange controlled the keys.

• Don't keep more on any exchange than you'd be willing to lose
• Move long-term holds to a hardware wallet (Ledger, Trezor)
• Spread funds across multiple exchanges if you trade large size
• Withdraw to your own wallet regularly to confirm the exchange still processes

2.2Volatility

Crypto moves like nothing else. Bitcoin can drop 20% in a day. Altcoins can drop 50% in a day. Memecoins can lose 90% in an hour.

• Position sizing has to assume drawdowns of 30-50% are normal
• Stop losses get blown through during fast moves — slippage is real
• Leverage amplifies all of this. A 5% move with 10x leverage = liquidation

2.3Rug Pulls

Specific to crypto. A project launches a token, builds hype, lets people buy. The developers hold most of the supply. They dump it on holders and disappear. The token goes to zero in minutes.

How to avoid:

• Stick to established projects with proven teams
• Check token distribution — if devs hold >30% of supply, that's a red flag
• Avoid brand-new coins until they survive 6+ months
• Be suspicious of any project promising guaranteed returns

2.4Honeypots and Scams

Honeypots are tokens you can buy but can't sell — the contract is rigged. Common on new chains with low-quality tokens.

Other scams to watch for:

• Fake airdrops — sites that promise free tokens but steal your keys
• Phishing wallets — fake versions of MetaMask, Phantom, etc.
• "Pump groups" — coordinated pump-and-dumps. You're the exit liquidity.
• Influencer shills — paid promotions on Twitter/Telegram disguised as opinion

2.5Liquidity Risk

Most crypto liquidity sits in the top 20-30 coins. Everything else trades thin.

• Bid/ask spreads on small coins can be 5-10%
• Trying to exit a large position can move the market against you
• During panics, liquidity vanishes — you can't get filled at any reasonable price

2.6Regulatory Risk

Governments are still figuring out crypto. Rules can change fast.

• Exchanges can get blocked in your country with little notice
• Specific tokens can be classified as securities, killing liquidity overnight
• Tax rules are still evolving — keep records of every trade

For Canadian traders specifically: the CRA treats crypto as property. Every trade is a taxable event. See Exchanges for the tax breakdown.

The biggest mistake people make moving from stocks to crypto is using the same sizing rules. They use 10% per name in stocks and try the same in crypto. The volatility eats them alive.

3.1The Total Crypto Allocation

Before talking about per-coin sizing, decide how much of your total portfolio crypto gets.

• Conservative: 2-5% of total portfolio in crypto
• Standard: 5-10% of total portfolio in crypto
• Aggressive: 10-20% of total portfolio in crypto
• Crypto-native: 20%+ — most of your wealth is in crypto. Different game entirely.

Most members fit in the 2-10% range. Crypto is satellite exposure on top of a stock-heavy portfolio.

3.2Per-Coin Sizing

Within your crypto allocation, split across multiple coins. Don't put 100% into one altcoin.

• 50-70% Bitcoin — the reserve asset, lowest volatility, most institutional
• 20-30% Ethereum — the second-largest, more growth potential, more risk
• 10-20% altcoins — split across 3-5 names you actually believe in
• 5% or less — speculation, memecoins, experiments

This isn't a rule. It's a starting framework. Adjust based on your conviction and risk tolerance.

3.3Perps and Leverage

Perpetual futures let you trade with leverage. Most exchanges allow 10x, 20x, even 50x or higher.

• 5x leverage — a 20% adverse move liquidates you
• 10x leverage — a 10% adverse move liquidates you
• 20x leverage — a 5% adverse move liquidates you

Bitcoin can move 5% in an hour. 20x leverage means you can be perfectly right on direction and still get liquidated by the move that happens before the bigger move.

Practical leverage rule: if you're new, don't use leverage at all. If you must, cap it at 2-3x. Real traders mostly stay between 1-5x.

3.4The Copy Trading Approach

For most members who aren't full-time crypto traders, copy trading is the right way to play it. Pick experienced traders to follow, allocate a small percentage of your crypto bucket, and let them trade for you.

• You get exposure without the screen time
• You spread risk across multiple traders
• You learn by watching their entries and exits
• You don't have to be awake at 3 AM when something moves

The trade-off: you pay a profit share or fee. Worth it for most people who aren't doing this full-time.

If you've read the Stocks Read-an-Alert chapter, this will feel familiar. The format is similar. The differences are the round-the-clock timing, the use of perps with leverage, and the need to size much smaller.

4.1The Format

Sample crypto alert from the trades channel:

4.2Breaking It Down

BTC/USDT = trading Bitcoin priced in USDT (a stablecoin pegged to $1).

Same as stocks. Where to buy, where to exit if wrong, where to exit if right.

Percentage of your crypto allocation, not your total portfolio. If your crypto bucket is 5% of $100k = $5k, then 3% of crypto allocation = $150.

Sizing in crypto is small. Even on a high-conviction trade. The volatility is the leverage.

If perps are being used. Most alerts will specify 1x (spot), 2x, or 3x. Higher leverage means tighter stops because liquidation risk goes up.

Long perp = leveraged bullish bet. Spot = buying the actual coin. Short perp = leveraged bearish bet.

4.3Crypto-Specific Things to Check

If you're going long a perp, check the funding rate. Positive funding = longs pay shorts every 8 hours. Negative funding = shorts pay longs. High positive funding (over 0.05% per 8h) means longs are crowded — the trade can squeeze.

Crypto moves around the world. Asian session, European session, US session each have their own character. A breakout at 3 AM UTC might fail when European traders wake up.

Saturdays and Sundays have thinner books. Moves can be more violent because there's less depth absorbing them.

4.4What to Do After You Enter

1. Set your stop immediately on the exchange. Don't rely on alerts. Crypto moves too fast.
2. Don't average down on a falling perp. Theta-style decay isn't the issue — liquidation is. Adding to a loser brings liquidation closer.
3. Watch for trim alerts. Crypto moves fast. By the time you check the chat, the move might be over.
4. Move profits to spot or stablecoin. Locked-in gains in stablecoin can't be liquidated.

4.5Common Mistakes

• Using stock-sized positions for crypto trades
• Using high leverage to "make up for" small position size
• Ignoring funding rates on multi-day perp holds
• Treating altcoin alerts the same as Bitcoin alerts (altcoins move 2-5x harder)
• Holding perps through the weekend without checking liquidity

Crypto has more strategy variety than stocks because the market structure allows it — 24/7 trading, deep perp leverage, on-chain data, prediction markets, yield products. For most members, two or three strategies cover everything they need.

5.1Dollar-Cost Averaging (DCA)

The simplest strategy. Buy a fixed dollar amount every week or month regardless of price. Over time, you average into the asset.

Best for: long-term Bitcoin and Ethereum exposure

Why it works: removes timing pressure. You're not trying to call the bottom.

The trade-off: in strong bull runs, you pay higher prices over time. But you also avoid catastrophic top-buys.

5.2Long-Term Holding (Spot)

Buy and hold the major coins through cycles. Move them to cold storage. Don't touch them.

• Bitcoin as the core — most institutional flow, most predictable cycles
• Ethereum as growth — higher volatility, more upside in DeFi cycles
• 1-2 large altcoins at most — high-conviction names only

This is the lowest-effort, highest-success crypto strategy historically.

5.3Swing Trading the Cycles

Crypto moves in 3-4 year cycles. Bull market, peak, crash, bear market, accumulation, bull market again.

• Accumulate in bear markets and accumulation phases
• Hold through the first half of the bull market
• Start trimming as euphoria builds and altcoins go vertical
• Sell aggressively at signs of cycle top

Easier said than done — most people sell too early in the bull and buy too late in the bear. But the cycle framework helps avoid the worst mistakes.

5.4Perp Trading

Active trading on perpetual futures. Short-term setups with leverage. Highest skill ceiling, highest risk.

Best for: experienced traders with time to watch screens

The mechanics:

• Pick a setup (breakout, retest, range bounce)
• Use 2-3x leverage max
• Set stops tight — perps liquidate fast
• Take profits in chunks, not all at once

5.5Copy Trading

Pick experienced traders and copy their positions automatically. Most major perp exchanges support this.

• You get active trading exposure without doing the work
• Spread across multiple traders to diversify
• Cap each trader at a small portion of your crypto allocation
• Check performance weekly — drop traders who are losing

This is how most casual crypto traders should approach active trading. Doing it yourself is a full-time job.

5.6What Most Members Should Do

For 90% of members, the right crypto mix is:

• DCA into Bitcoin and Ethereum on a fixed schedule
• Cold storage for long-term holds
• A small active allocation for swing trades or copy trading
• Skip leverage until you've traded crypto for 6+ months
• Skip memecoins until you can afford to lose 100% without flinching