92. The Top 5 Common Misunderstandings In Crypto That You Need To Understand To Win In Investing

This blew my mind when I found out your coins and your tokens, your crypto assets, are not stored in your wallet. They are stored on the blockchain. They're not inside your hardware wallet. They're not in your metamask. They are on the blockchain. That is where they originated. That is where they will always be. They will be there long after you die.

You don't have to buy a whole bitcoin. So a lot of people that come across the crypto think that just because bitcoins are $30,000, they need $30,000 to buy bitcoin. It's not how it works. Welcome back to another episode of the Ben and Bergs Podcast. I'm Ben, your favorite high school dropout and CEO of Collective Shift, alongside me as Bergs, your favorite MBA and COO of Collective Shift, Australia's leading crypto portfolio insights company, providing professional analysis and portfolio strategies for crypto investors like you. We're a unique blend of the established and the self made. And we're here to break down crypto business and personal growth. But we don't just talk shit. We give you the insights you need to make better investments, better build successful businesses and level up your life. And today we're talking about the top five misunderstandings in crypto that you need to understand to succeed. Five cracking things. We actually had a longer list in this. There's a lot of misunderstandings, but these are the top five that if you turn and actually understand, could change the game for your crypto investing career. How are you folks?

Mate? I'm going really well. We did a member Q and A yesterday and the questions that were coming in were amazing. And it made me realize that out there there's still so many misunderstandings. Here are the top five. Let's just launch straight into it. Some of these are a bit, they might blow your mind, but you know, we've got to reinforce them and that's what we're here to do, right? Number one, this blew my mind when I found out your coins and your tokens, your crypto assets are not stored in your wallet. They are stored on the blockchain. They're not inside your hardware wallet, they're not in your metamask. They are on the blockchain. That is where they originated, that is where they will always be. They will be there long after you die. And the way it works is within your hardware wallet or your little metamask soft wallet. Inside there, what you actually have, it stores your cryptographic keys. Those keys give you the permission to move your tokens around on a blockchain. And that is absolutely it. And this is why we always say keep your seed phrase, because your tokens aren't inside your little ledger or your trezor. Your seed phrase allows you to access those keys and move those tokens. So if you lose your hardware wallet or your software wallet, you can get those keys, you can put them into another one, Bob's your uncle, you've got access back to those coins. Isn't that wild?

Yeah, I mean, a lot of people would think is you get the USB or the ledger, that you're actually physically moving the asset. But the assets, yeah, they store on the blockchain, they're on the cloud, we'll never touch them, never build them. And that's also a benefit because like people think about, well, what happens if you lose your ledger? Well, it's your crypto's not on your ledger, it's just your password. So if you have your password saved elsewhere, I. E. Your seed phrase, you can reload them up on another ledger.

And isn't it wild that you never actually own the tokens? Like you don't actually hold them or take them off the blockchain, you just move them around until you die and then someone else gets them. How weird is that?

Yeah, so it's really important to know that. All right, let's get on to number two. Hardware wallets are safer, but do not keep you 100% safe. So let's do a quick difference when a quick definitions. So when we talk about hardware wallets, also known as cold wallets, cold storage, that is a little device, a ledger or a trezor. Soft wallets or hot wallets are software wallets. They're generally on your desktop, in your browser or on your phone. Hardware wallets have a higher level of security because you have to approve each transaction on the device, which is really, really good. And that keeps you a lot safer. But it's not a hundred percent safe because you may get a malicious transaction or there might be a website asking you to set an approval and you sign that contract. If you sign it, it gives that contract permission to do things on your behalf. So the key here is if someone's or if a website or something you're interacting with asks you to sign something, you need to know what it is. If you're not sure, do not sign it. If a contract address pops up, copy that contract address and either Google it or look up on Etherscan or the product's website, for example. Let's say you're approving something from veefriends, make sure it's the legitimate website. Make sure the contract address is the Veefriends contract address and the approval level. If it's just read only or if you're setting approvals, are the approvals for that entire address or just the tokens within it? Because you can still a lot of people have been fished where they'll get a seemingly.

Legitimate email or even a legitimate website and they'll connect their device, they'll set an approval and someone can take all of your tokens from there. And as a part of this, you want to practice good digital hygiene. So right now, and I know you're all NFT junkies, you did wild stuff, you're in discords. You were connecting your wallet to bots and websites. Head to Revoke Cash or Etherscan IO token approval checker. Go in there, you just need to paste your address in and see what approvals you have. Now the key here is you would have sent heaps of approvals. Gas fees are very cheap. So you want to go through and you want to remove any approvals you have set that are no longer relevant. Now there's a trick here. You also want to see if there's an approval there that you don't remember doing and you don't know what it is, do not interact with it. And there's more instructions on those two websites. But for example, me, I've gone through, I've been in a discord, I've been part of communities, I'm not really in them anymore. I know what they are, I know what they did. I set the approvals, I don't want it anymore. I'll then remove those from the addresses. So the other thing you can also do is if you're concerned, you could just move your assets from that address, put it into another one that doesn't have the approvals and you're suite.

Nice. Good work Burgs. We had the guy last night actually that was saying about how one of his assets we're going to use drain from his metamask. That's really important that you either just go to revoke and revoke those contracts or just get a new wallet. Like if your wallet's getting drained, I probably wouldn't recommend keeping that wallet. Probably not buying anyone.

Exactly. And with that particular example, we didn't know whether he signed and because when you have one wallet has multiple addresses. So we didn't know whether that one wallet address was compromised. We didn't get to it on the call, but we will sort him out later. Where that one wall address was compromised with an approval, or if he's typed in his seed phrase somewhere and his entire wallet is compromised. And if you don't know and you can't figure that out, the best thing to do, as Ben said, get another wallet and just move your assets across. It'll cost you a couple of bucks in fees, but at least everything is safe.

Yeah, very cool. Okay, next one. You don't have to buy a whole bitcoin. So a lot of people that come across the crypto think that just because bitcoins are $30,000, they need $30,000 to buy bitcoin. It's not how it works. Unlike buying a share, you can split up each of the tokens into as many decimal places as you basically want. That's, that's a light. I think it's up to six or seven. But regardless, you can buy a very, very small percentage of bitcoin. You can buy $10 of Bitcoin. And yeah, a lot of people also think about crypto when they come in investors, is that unit cost bias, which is thinking about the price of a token, like how much it costs to get one. Now, when people think that just because bitcoins are 30,000, it's too expensive, that's not how it works if you have an asset. Actually, if you think about a company, right, let's create a.

Corner store. Mom and dad shop. We create that corner store and let's say that company's worth a million dollars. Well, let's make it easy. $100,000. We can split up that company into different shares, right? Maybe, you know, in one example, you can split that corner shop into 10 shares, right? So if the company is worth 10, $100,000, and it's 10 shares, each share is going to be worth $10,000. Or you could create 100. Is that right? I fucked up that analogy. Let's get back.

All right, Georgio, we'll do the analogy again, mate. Chop this in, chop that in.

Fucked up the math there. We've also got this thing called unit cost bias with a lot of people think about when they're coming into crypto or even the stock market. Just because something is priced in as a, as a share or token higher than others doesn't mean it's. It's more expensive. What you need to look at is the market cap, which is the value of the company itself or the value of the project. So, for example, if you Have a corner store that's worth, for example, the corner store is worth a hundred thousand dollars and you have a hundred tokens or 100 shares of that, then each individual share is going to be worth a thousand dollars, right? So you got 100 shares times a thousand that the company's worth $100,000. Or you could have 10 shares of that, a hundred thousand dollar company and then each share is worth $10,000. Right? But the company's still worth the same, it's still the same value. Just the amount of shares that are in circulation, that's the same in crypto. So just because something's priced higher than others doesn't mean it's more or less expensive. You gotta look at the market cap. And that's why you can buy small pieces of bitcoin or small pieces of other cryptocurrencies. You don't need a full one.

And I used to think this way as well, where I'm like, oh, it's only a dollar. It's much easier for it to double from a dollar to two dollars. And but you think about what is this supply? The whole supply has to like the, the value has to double. And is that more likely to happen in an asset like bitcoin or bitcoin cash, you know, and people go, oh, we'll just get the other bitcoin. But they're not the same thing. They fundamentally serve different purposes. They exist for different reasons. They have different developed per communities, they have different circulating supplies. And, and all of this plays in. And also with bitcoin, like a bitcoin, there's, there's another little trick here as well. Where one bitcoin is, we say there's 21 million supply is 100 million satoshis. So the unit in bitcoin is satoshi. Think of it as like dollars and cents. Satoshis are 100 million of them. And the reason they did this is because when bitcoin was invented, it was worth like 0.00001 cent, right? So you're not going to say I got 10 satoshis and you like 10 to the power of minus a million, whatever it is, they're like no, we'll take a hundred million of them and my bitcoin is worth 10 cents. And that's the reason that they did it. So you hear people talking about stacking sats, that's stacking satoshi. It's just constantly getting a little bit more, a little bit more. You don't have to own a whole bitcoin you may never get to a whole bitcoin, but you will still own an awesome asset.

Yeah, spot on. And another example here is like Apple. For example, Apple share price is US$200 at the time of recording, but the market cap, it's trillion dollars. So for Apple to go to $400, theoretically the company needs to go to $6 trillion.

Right.

It's not just adding another $200 the price, it needs to add another $3 trillion in value.

And you need to think what has to happen in the world for Apple to add $3 trillion worth of value. And this gets us onto our next point, Ben, that tokenomics matter. And with this you need to look at the supply of tokens and you can also be diluted or there could be a burn where they're reduced. So the amount of outstanding tokens or in a company would be equity. How much is that worth compared to the total?

Yeah, so token economics, you need to understand this is really important. Token economics is just the economic design of a crypto asset. It's quite a big topic. But if you get the basics right, you can really understand, you know, the value and you can start to assess different assets. So basically, you know, in terms of tokenomics, it's basically the supply and demand of the amount of tokens that that that coin has. And the supply is a big one. So for example, Bitcoin has a limited supply, right? Bitcoin only has 21 million bitcoin ever be created. In contrast to that, something like Dogecoin for example, has unlimited supply. In fact, it creates 14 million Dogecoins every day. That's 5.1 billion new coins per year. Which is insane. Right? So if you have a massive supply of a token like Dogecoin, it's increasing the circulation that's coming out, which basically is lowering the value of those tokens or it's making it more difficult for the token value to go up because of the amount of tokens that are coming into circulation. Another one recently covered was Worldcoin. That's also got pretty, you know, pretty poor token economics for investors. So just because you're buying something at a particular price, you need to understand about more tokens coming into the, into the market. And they also need to think, understand things like, you know, maximum supply, circulating supply, total value locked. Also when they burn tokens, there's a, there's a number of different things that these projects do to increase the price of their token.

And there's some really poor token economics out there. Like a lot of the meme coins.

Exactly right. And you have to think about supply side and demand side. So supply side will be what does their token pie chart look like? And if you go to a website like CoinMarketCap, you'll see it on there. And how much is allocated to the team? Is it. Is it like less than 5%? Is it 10%? Is it 20%? How much is allocated to investors? How much is allocated to early adopters? How much is just in the market for the general public? How many of these tokens have actually been released? And in the coming years, will they release more? Do they plan to claw back any of those tokens and burn unused tokens? And then on the demand side, you need to think, hey, okay, right, I understand the supply, but why would someone buy this? Where is the demand for this token? Are they using it in their platform?

Great.

Are people actually using the platform? So there's demand inherent to buy it to utilize their platform. What is the demand function here? And really, you're balancing that equation, trying to gauge price action from there.

Yeah, good callbergs. And then last but not least is all bets are off in a bull market. So, you know, crypto is very heavily driven on narratives and sentiment. And that's why we get these massive bull markets, is because of how euphoric markets get and how excited people get to fomo the chase, the exhilaration of prices going up. And that's why in bull markets, we kind of say the fundamentals are out. Fundamentals will get a project to a bull market and then sentiment and narrative takes over. So when you're trying to come up with sell strategies and trying to understand what price to sell your assets at, it does need to be some sort of adjusting strategy. You don't want it to be an emotional adjusting strategy. You just want to understand that we don't know how big these next bull markets will get. So as we go into these markets, what I've done in the past is adjust them as the bull market sort of getting started to get a bit of a sense of where I think, you know, it's going to get a point where it's getting kind of ridiculous. It needs to be your sell targets, need to kind of be beyond normal, but below ludicrous, somewhere in the middle. And that's usually where you sort of land in the bull market.

That's right. And we had this question, our member Q and A last night for Collective Shift. And it really highlighted to me that you need a plan. And Ben went through his plan well, that actually that will be coming out or it may already be out, how he's actually what price targets he has and how he's going to ladder out of those, which you absolutely need. And when that day comes and you hit your price target and you execute, let's say just with bitcoin, it might be going up $1,000 a day. And if it's two, three days and that's happening and the market is absolutely crazy, that's new information. A lot of things have changed and you need to adjust your strategy because you can be leaving a lot of money on the table or if it's absolutely ludicrous, you may want to accelerate that laddering out to be like, hey, things are getting way overheated. There's a lot of money there. I'm going to take it off the table. And just remember that no one ever went broke from taking profits.

Yes. Yeah. And no one ever got rich by not selling.

That's exactly right, mate. There are top five misunderstandings in crypto. I'll just sum them up. Your coins are not stored in your wallet. They are stored on the blockchain hardware. Wallets are safer, but don't keep you 100% safe. You don't have to buy a whole bitcoin token. Tokenomics absolutely matter. And all bets are off during a bull market.

Amazing. That's. That's top. Top five. We have some more, but hopefully those are going to hit the most common misunderstandings. Would love if you did enjoy this episode for you to share this with a friend. If someone else has these misunderstandings really helps us grow the podcast. We've been doing this two times a week now for the last year and it's the way we grow the podcast by you sharing with your friends and family that you think need help in crypto. So we'd love for you to share it across if you enjoyed this episode. And as always, you can find us on Twitter baby Back berg for bergs and at BenSimpsonau and you can find at Ben and Bergs on Twitter if you want to follow the podcast. But thank you Bergs. We'll see you next time.

Thanks, mate. Thanks champions. Thanks for listening.