How to Buy $100k+ Of Crypto and Store it Securely
Since leaving my position at Index Ventures to focus on crypto full time I am approached weekly by Angels, VCs and Family Offices with the same two questions:
“How can we gain exposure to the crypto markets?”
and
“What are the best Token Sales to invest in?”
To answer these two questions, I have decided to create some posts as a starting point for investors looking to take advantage of the cryptocurrency market.
This piece is the first in the series, and is the starting point for nearly all investors in the cryptocurrency market: how to buy and store cryptocurrency securely. Please read on and ask any questions in the comments.
Part 1: Buying Large Amounts of Bitcoin and Ethereum
For the last few years, it was fairly difficult to buy large amounts of crypto quickly, however as demand from institutional investors has increased dramatically (over 100 crypto hedge funds have been set up in the last year), exchanges and over-the-counter providers are catering for ever increasing quantities.
I have personally worked with many exchanges and OTC providers to buy cryptocurrency, and below are some companies to familiarise yourself with:
Coinbase
The market leader with $9 billion of crypto assets held via their platform, and a worldwide presence.
Usability: Easy
Limits: $50,000 per day for verified investors, up to $10,000,000 with a Coinbase Custody Account launching in early 2018.
Fees: 1% for USD transactions, more for EUR accounts.
Currencies available: Bitcoin, Ethereum and Litecoin
Gemini
A leading OTC provider of Bitcoin and Ethereum to investors and traders. Large amounts catered for in USD trades.
Usability: Intermediate level
Limits: In the tens of millions, the platform is designed primarily for institutional investors and traders
Fees: Fees are dependent on activity levels, full explanation here
Currencies available: Bitcoin and Ethereum
Kraken
One of the most popular exchanges, with a range of trading pairs, and some of the lowest fees.
Usability: Intermediate level
Limits: Daily volumes are over $300 million, and account limits are dependent on a tiered verification system, expect to wait for one to two weeks for higher verification tiers
Fees: Fees are dependent on trade type and explained in detail here
Currencies available: Bitcoin, Ethereum and select alt coins such as Ripple and ZCash
OTC Traders
Dependent on your current jurisdiction, it can be worthwhile to discuss trading options with OTC cryptocurrency sellers. They only are worth investigating if you are looking to trade $250,000 in a single transaction and can often offer better terms than those you would get on an exchange with slippage. You can reach out to me directly if you would like recommendations on OTC providers.
Part 2: How To Store Cryptocurrency Securely
As the cryptocurrency market grows, so do the amounts individuals and organizations hold. It is terrible to lose any amount of cryptocurrency due to hacking or negligence, and it should not be an option if security best practices are followed correctly.
There are a number of options for storing cryptocurrency securely, however there is no one definitive solution on the market. The general rule is to never store large amounts on an exchange, as the risk of loss or hacking is highest here.
You should also be more careful using the internet day to day, as hackers will be waiting for opportunities to set up phishing attacks, and socially engineer access to your accounts. Here is a guide on the day to day security precautions you should take.
Storing Online In ‘Hot Wallets’
Online wallets give convenience and should be used for everyday transactions, however, you should not store large amounts of cryptocurrency in them without the highest levels of security. You can increase the security of your cryptocurrencies by creating a multisig wallet that require the signatures of multiple people before the funds can be transferred.
If you are holding coins at exchanges, you should have 2-factor-authentication across access and withdrawals, and you can also set up multiple signatures on withdrawals, as another security layer.
Coinbase Vault is unique in that it can afford to offer users high levels of protection, however only for Bitcoin, Ethereum, and Litecoin. If you are looking to secure ERC20 tokens you will need to look further into offline storage. This could work at first but we still recommend an hardware wallet if you have large amounts of cryptocurrency.
Storing Offline In ‘Cold Wallets’
The best way to store cryptocurrency is securely offline in a hardware wallet such as the Ledger Nano or Trezor. Both wallets have hardware encryption, can be set up easily, and used store large amounts of crypto, which can be sent in smaller sums to Coinbase when they are needed.
Learn more about Ledger Nano here: https://www.ledgerwallet.com/
Learn more about Trezor here:https://trezor.io/
We also recommend to use Multi-Factor Authentication like YubiKey to prevent accesses to your computers and emails. A YubiKey is a small hardware device that requires you to physically insert it into your computer to log into your computer, and Google or Dropbox accounts.
Learn more about YubiKey here: https://www.yubico.com/
For any organization looking to hold large sums of cryptocurrency, it is essential to go through a security audit to understand potential risks. In addition, processes should be in place to ensure funds can be recovered in any circumstance.
If you are looking for more information on buying cryptocurrency, and setting up secure processes to ensure your funds are safe, please reach out to us at manu@block0.ch
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