Binance & Coinbase sued. Ten actions you must take today to be a winner! #22

The SEC has sued two of the largest crypto exchanges in the world and the market was quick to crash as a result. Here's my guide to become a winner regardless of how this ends.

This is your wake up call. With Binance and Coinbase sued by the U.S. Securities and Exchange Commission (SEC), time is running out for the crypto wild west. In this newsletter I will give you ten actionable things you can do today to protect yourself.

I also share my views on Bitcoin’s latest price action at the end.

Here is a summary. Below I expand on each:

1. Move your coins out from Binance.US and Coinbase. NOW!

2. Embrace self-custody and transfer your coins to a hardware wallet

3. Learn how to use decentralized exchanges (DEX)

4. Swap between blockchains directly from your wallet using THORChain

5. Buy the winners - Bitcoin and (maybe) Ethereum

6. Adjust your portfolio vis-a-vis altcoins at the earliest opportunity

7. Open a bank account with a crypto friendly bank

8. Spend your crypto easily and avoid intrusive KYC service providers

9. Leave jurisdictions hostile to crypto. Hello El Salvador!

10. Become a sovereign individual to achieve financial independence

Disclaimer: Please use your own judgement and do your own research - this is not financial advice!

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1. Move your coins out from Binance.US and Coinbase. NOW!

Most altcoins were declared securities by the SEC which argued that the only altcoin you need is… the USD. If you are an American citizen, you need to stop buying & selling unregistered securities on such exchanges and move them out to a hardware wallet only you have access to (see point 2). Non-US citizens should also remove their coins from centralized exchanges and seek to use decentralized exchanges (see point 3). Otherwise, you may risk losing access to your crypto.

In the case of Binance, the biggest risk is if you are using their US exchange. Their international site should be fine so long they are solvent and there are no reason to think they are not. The SEC, after all, only has jurisdiction in the US. This is why Coinbase also decided to leave the US and open an international branch.

A good guide going forward is that if an altcoin is using the proof of stake (PoS) mechanism to validate transactions, then it is likely a security. If the token supply was “minted”, “air-dropped”, issued via an initial coin offering (ICO) or other similar means, then expect the same label. Only coins like Bitcoin, using a proof of work (PoW) consensus mechanism, have a good case to argue they are not securities. Other PoW coins include Litecoin, Vertcoin, Dogecoin, Monero, Bitcoin Cash, Ethereum Classic or Raven.

What about Ethereum?

The SEC has refused to answer that question. But based on the above, Ethereum may also be labeled as a security. When ETH was initially launched, the founders basically minted over 60 million tokens out of nothing. The reason the SEC can’t state it so plainly is because of conflict of interest. There is big money behind Ethereum and the SEC will face consequences if they do that. Time will tell.

If you are still unsure, here is a non-exhaustive list of altcoins designated as securities by the SEC. Note that only a judge can make such a designation final. Therefore, until a final decision is issued by a court, this is still up for debate.

Altcoins declared securities by the SEC: 

Ripple (XRP) Filecoin (FIL) Binance Coin (BNB) Binance USD (BUSD) Solana (SOL) Cardano (ADA) Polygon (MATIC) Cosmos (ATOM) Tron (TRX) BitTorrent (BTT) Terra USD (UST) Luna (LUNA) Internet Computer (ICP) Near (NEAR) Voyager Token (VGX) Nexo (NEXO) The Sandbox (SAND) Decentraland (MANA) Axie Infinity (AXS) Telegram’s Gram (TON) LBRY Credits (LBC) OmiseGo (OMG) DASH (DASH) Algorand (ALGO) Amp (AMP) EthereumMax (EMAX) Hydro (HYDRO) BitConnect (BCC) COTI (COTI) Paragon (PRG) Chiliz (CHZ) Flow (FLOW).

2. Embrace self-custody and transfer your coins to a hardware wallet

This is self-evident. If it is not, then understand that you need to have full custody and control of your crypto assets. Anything less and you expose yourself to the risks highlighted in point 1. This includes loss of access to your coins, them being locked out from reach for years, or simply stolen.

Most popular hardware wallets include: Ledger (with big caveats), BitBox2, Trezor or ColdCard among many others. Make sure you don’t make the mistake to use a hot wallet. A hot wallet lives on your phone or as an app on your browser or desktop. Avoid those as much as possible. Anything that connects to the internet is not safe. A simple click on a phishing site can leave your hot wallet empty.

Only keep the bare minimum on centralized exchanges for your transaction needs. The rest should be on your hardware wallet.

3. Learn how to use decentralized exchanges (DEX)

You need to start moving AWAY from centralized exchanges. One of crypto’s core pillars is decentralization. In this sense, buying and selling coins on Binance or Coinbase is antithetical. In time, such entities will be replaces by fully decentralized and non-custodian markets. We already have plenty of examples.

Uniswap, Sushiswap, Curve, Pancakeswap, TraderJoe, 1Inch, THORSwap, GMX, Kujira Fin

If you never used a DEX before, this is the time to start. Pick a network that is cheap, for example Arbitrum (built on top of Ethereum) and start swapping by connecting your hardware wallet to the various apps. Make sure you are on the correct website and only use official links and bookmarks.

4. Swap between blockchains directly from your wallet using THORChain

Using your hardware wallet you can swap between native coins on different networks using THORChain - another decentralized exchange. This is a huge advantage since you don’t have to use bridges and you always hold native coins. You can swap native BTC for native ETH with one click. In this sense, THORChain is unique.

On Uniswap, you can only swap between tokens on the same network, say Ethereum, and must use bridges or a centralized exchange if you want to move crypto between networks. This is not ideal. Therefore, THORChain should be one of the to-go tools in your winning strategy.

5. Buy the winners - Bitcoin and (maybe) Ethereum

The latest crash in altcoins only reinforced the validity of the above statement. Whenever you buy an altcoin you are taking more risk. Think of buying Bitcoin like buying Apple stock. It’s reliable, it delivers and it’s a market leader. Instead of wasting money on a new shinny meme coin that may disappoint you, buying the winners can transform you into a winner over a long time horizon.

Bitcoin is the obvious choice. However, Ethereum is not as obvious. This is because of regulatory uncertainty as indicated above. Simply put, Ethereum continues to be a work-in-progress blockchain. It’s never a finished product. Bitcoin is. With ETH, you are taking more risk, but as the king of altcoins it gives plenty of reason why it is also a winner. Therefore, BTC and (maybe) ETH should always be part of your portfolio. The percentage of each is up to you.

Simplicity (BTC) > Complexity (ETH). You decide.

6. Adjust your portfolio vis-a-vis altcoins at the earliest opportunity

The SEC lawsuits saw BTC fall by 3% while altcoins fell by 20-30% in a few hours. We’re now dealing with two different markets. Altcoins are being singled out and especially PoS ones. Their appeal is now questionable.

Hit a follow on Twitter - spot the odd one out (Vertcoin - PoW)

The upside potential of PoS altcoins has been reduced significantly with the latest actions from the SEC. Instead of providing an “asymmetric” advantage they are turning into liabilities in your portfolio. For this reason, I suggest you re-balance your portfolio at the next opportunity to account for this and reduce your exposure to altcoins. That moment could very well be the next bull market if your bags are heavy right now.

Altcoins will not go anywhere, but their value proposition is no longer as strong as it was before last week. Going all-in into coins such as Ethereum or Cardano means you are taking all the risks with possibly little return to show for later on. Bitcoin and PoW coins that innovate (not just a copy paste of BTC) suddenly have more appeal and could be a better bet long term.

7. Open a bank account with a crypto friendly bank

Australia’s biggest bank recently decided to restrict payments to crypto exchanges with a limit of $10,000 / month or hold such payments for a given period of time. This is part of Operation Choke Point 2.0 and it may get worse in the future and expand to other countries.

This is why you need to start scouting for crypto-friendly banks. One of them is Xapo Bank, a private crypto bank in Gibraltar. You can have accounts in USD or Bitcoin insured up to EUR 100,000 and a global credit card tied to your BTC.

8. Spend your crypto easily and avoid intrusive KYC service providers

You need to start disconnecting yourself from the traditional financial system. You should be able to spend your crypto easily and buy & sell it as needed without the need to provide detailed Know Your Customer (KYC) data to third parties. Think of it like using cash, just that you’re using crypto instead. Here are just two examples on how you can do that:

• Holyheld Crypto Card - non-custodial card (only you control it), be paid in crypto, top up your card, spend your crypto (1% cashback) or send money to your bank account. EU only (company based in Lithuania).

• Mt Pelerin - This Swiss based company allows you to buy or sell crypto without KYC (with some limits).

9. Leave jurisdictions hostile to crypto. Hello El Salvador!

The most significant action you can take to protect yourself is to relocate to a crypto-friendly country. One of those is El Salvador and many others will appear in the future. In El Salvador, Bitcoin is a legal tender and there are no taxes on crypto.

Vested interests that have a monopoly over the fiat money world will do everything they can to stop you. Why? Because you are their asset creating DEMAND for their worthless paper money. They need you more than you need them. Hence, expect to see them become very present in your life if you try to escape their control (see points 1 & 7).

10. Become a sovereign individual to achieve financial independence

Start by reading the book with the same name that predicted Bitcoin in 1997 (The Sovereign Individual), then build on the points highlighted above. More so, realize that wealth is not created by trading your time for money because you only have so many hours in a day.

Financial independence is achieved by providing value to society, at scale.

I recommend you read The Almanck of Naval Ravikant (free book) for important insights into that. Wealth is created by holding productive assets or parts of businesses that generate income while you sleep. An employee will always be paid the minimum possible to keep them in that job and get the job done. Nothing more.

To achieve financial independence and become a sovereign individual, you need to make use of a low time preference (e.g. Bitcoin), compounding effects (e.g. reputation) and scale (i.e. exponential growth). A good example is building your knowledge in a certain field or niche over time (low time preference), being recognized (compounding effects) and then using social media to reach millions at no cost (scale). Naval is a great example of that and there are many others.

The exact path is up to you.

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Bitcoin Price Action - My views

The weekly MACD has done a bearish cross in early June. This is significant and any bull narrative may have to wait until at least the end of this summer.

The momentum shifted bearish since the end of April when BTC failed to move above 30k. Now, the price is at the 25k support. If buyers can’t defend this key level, then expect the price to go towards 20k next.

If BTC drops below 25k, altcoins will likely fall even more. It’s not pretty, but this is what the chart says right now. Pray 25k holds. We had plenty of warning when BTC was at 30k as highlighted below.

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