- Cooper Turley is an investor and advisor who was on Fortune’s 50 most influential people in NFTs list.
- When trading cryptocurrency, he recommends ‘buying the rumor, selling the hype.’
- Turley says it’s okay to sell tokens when you’re up big even if it goes against your plan.
If you’re new to crypto, it’s hard to know where to start.
Whether it’s an overwhelming amount of information, an inability to find credible sources, or a general feeling of being lost — this guide looks to help you avoid some of the pitfalls I went through when I got started 5 years ago.
Since then, I’ve been lucky enough to find success in crypto. I co-founded a project called Friends with Benefits — a tokenized community which recently raised $10M led by a16z. I’m a venture partner for a seed-stage investment fund called Variant. I’ve helped launch a dozen plus successful tokens, including ENS ($ENS), SuperRare ($RARE), Gitcoin ($GTC) and Audius ($AUDIO) — all of which in aggregate are worth more than $10 billion at today’s prices.
But, before all that I was a trader. I’ve traded hundreds of tokens — and learned about the trials and tribulations of everything from Coinbase to Uniswap and OpenSea.
Through my journey, I’ve found that the best way to learn is through action. While these tips will get you halfway there, expect to put a meaningful amount of time, effort and energy into becoming a part of the crypto community before you find any significant success.
Detailed below are a series of ways to better allocate your capital in web3 — or the growing ecosystem of crypto-based products, services and protocols. These are tactics I learned throughout many years as a trader, contributor, collector and investor.
If you find them helpful, follow me on Twitter to keep up with the latest and greatest projects in web3.
1. Make convicted bets
The single biggest problem I had when trading was holding too many tokens.
Tokens are digital assets. Each crypto project has its own token, allowing you to invest in its upside.
In a world where there are thousands of tokens that exist, and hundreds launching every week — it's easy to get spread thin.
As a good rule of thumb, never hold any tokens that consist of less than 5% of your total crypto portfolio. For example, if you have a $10,000 portfolio, and you hold $100 of a token (representing 1% of your holdings), that token will need to go up 10,000% to meaningfully impact your investment.
Instead, having conviction by only allocating positions with over 5% of your portfolio gives you a much higher likelihood of that token making a substantial difference.
Ask yourself whether you see yourself holding this token 5 years from now. If the answer is no, don't buy it. For most new traders, the best portfolio is as simple as holding BTC, ETH, and one other token of choice.
2. Avoid token influencers
When learning about crypto, most people (myself included) will first see videos or tweets from those who are the loudest on media platforms like YouTube and Twitter.
It's best not to allocate mindshare to anyone whose sole job is to share new tokens. Most of these people are full of shit, and chances are you will lose money more times than you make it.
In the current market, most tokens are going up. This does not make your favorite influencer a savant, it's more likely that they already took a position or are being paid to talk about it.
To the degree you can, look to avoid content which recommends that you buy any specific token, and instead rely on your own intuition and general community sentiment to make informed decisions on your purchases. Here's my list of who to follow in web3.
3. Don't chase the pump
It's easy to follow the crowd.
With crypto, tokens appreciate faster than anything you've ever seen. A 100%+ gain in a day is pretty common, but for most new investors it can be shocking.
If you find yourself watching a token which has appreciated by more than 300% in a week, be very careful about what you're entering into. While there may be short-term profits to be had, most waves in crypto last a few days max.
This means that if you buy a token by the time everyone is already talking about it, chances are you're on the tail end of the upside opportunity.
As a good rule of thumb — buy the rumor, sell the hype.
4. Use the tech
To get the most out of investing in crypto, you'll need to learn to use web3 tools.
Non-custodial wallets like Metmask and Rainbow allow you to interact directly with decentralized exchanges (DEXs) like Uniswap — which is commonly the first place that new tokens can be purchased after launch.
While exchanges like Coinbase are getting better at listing — all of the tokens supported on the platform have been around for quite some time. They've likely already seen huge upswings and by the time it's listed on a popular exchange, most people already know about it.
To this end, learn how to interact directly with web3 products and protocols. Whether it's Uniswap for fungible tokens, or OpenSea for NFTs, get comfortable with making on-chain transactions as soon as possible.
The best way to learn how to use these products is a site called Rabbithole. Rabbithole allows you to earn XP for tasks like making a trade on Uniswap or buying an NFT on OpenSea. When they release new quests, you can even earn tokens!
Pro-Tip: Always adjust the gas fee (or the cost of executing the transaction) to "High" when trading on Ethereum. While the costs are going to be brutal to start out, spending a couple more dollars to make sure your trades are executed faster are well worth it.
5. Clearing a stuck transaction
Assuming you have taken the time to set up a wallet, it's likely that there will be a point where a transaction gets stuck.
This "pending" transaction will likely not go through, or may be stuck processing for hours (if not days) on end. The best way to fix this is by learning how to replace a nonce.
A nonce is the number a transaction is ordered in. In order for transaction #5 to go through, transaction #4 must go through first.
If you're finding that your transactions are not going through, chances are that one of your transactions is stuck.
Please follow this guide to learn how to unclog your wallet.
TLDR: You will submit a new transaction to yourself with the same nonce as the pending transaction. This will replace your old, stuck transaction with a new, faster transaction. Once the new transaction clears, you're back off to the races!
6. Protect your seed phrase
While it's never happened to me personally, I know tons of colleagues who have lost hard-earned money by exposing their seed phrase.
Your seed phrase, or the 12-16 word code you get when you set up your crypto wallet, is your master key. Just as you would never give someone the password to your LastPass, never give someone your seed phrase (also known as your private key).
No one will EVER need your seed phrase to do anything in crypto. This means any DM, giveaway, airdrop or offer that asks you to enter in your seed phrase is a scam.
Be religious about never sharing your seed phrase and making sure that no one else has the ability to set you back to square one.
7. Word of mouth is king
The best investments come through word of mouth from friends and colleagues.
Rather than investing on the back of videos or charts, make a meaningful effort to build a community of other web3 natives. This group is your best bet at finding new opportunities faster than everyone else, and will often result in your biggest returns.
When looking for clarity around what to invest in, look for signals from those around you. The best investments are often made on nothing more than it being a good vibe.
Make it a challenge to find 5-10 people in your life that you talk about crypto with every single day. There's a high likelihood that you will start to see overlap in the individuals and projects you're following. From here, you can start to feel more confident in your decisions and you'll no longer go at it alone but with a trusting group of friends who are making similar decisions and investments.
When building this friend group, don't be afraid to share investments together. Sometimes, the best trust building exercise is to buy an NFT together. Making a group purchase for everyone to have shared ownership over a higher stakes investment is a great way to feel like you have meaningful skin in the game while being part of a sound community. Here are my favorite starter DAOs.
8. Take profits
After you've had a few wins, always remember to take profits.
My single greatest mistake from early on was not selling tokens when I was up big. Instead, I was confident my plays would pan out and come back to where they were.
To keep up with how your tokens are performing, use Zerion — a portfolio management tracker.
I was wrong. It's ok to sell tokens when they are up. It's ok to sell ETH to USD and it's ok to put money back into our bank account.
The great development since the last bull market has been the invention of stablecoins and DeFi yield farming.
If you've landed a couple good trades, make sure you exchange some of those tokens back to a stablecoin like USDC and test out lending platforms like Aave and Compound to earn a passive return on your liquidity.
DeFi lending platforms are crypto-native savings accounts. They allow you to deposit idle stablecoins, and earn a passive yield. In the case of Aave or Compound, you can expect to earn anywhere from 1-5% interest on your tokens. Given that there are now billions of dollars sitting in these protocols, it's safe to assume the risk is relatively low (but not zero).
As a general rule of thumb, the higher the supposed return is on lending tokens, the riskier the product or protocol is.
9. Invest with time
You don't need to invest money to earn tokens. In fact, the best tokens can often be earned through time and skill.
If you're looking for a good way to catch your first win, look at the projects around you and take note of where they need help. The earlier you can get involved with a project, the more likely you are to earn ownership in the form of tokens.
These ownership opportunities will give you tokens at the earliest stage of a project, and often will act as the biggest wealth creation opportunity of your life.
Don't let capital be a constraint to investing in web3. Where you're short on money, invest with time.
I would recommend reading 'The Ownership Economy: Crypto & The Next Frontier of Consumer Software,' by Jesse Walden.
This guide should equip you with what you need to be productive as a web3 trader.
You'll soon find that speculation is just the tip of the iceberg when it comes to crypto, and a couple well-placed bets can set you on a trajectory to spend your life working on whatever you find interesting and exciting.
As you start to navigate the market, please keep in mind that crypto has had an extreme run-up in the past year. This means that the vast majority of market opportunities in this specific cycle have probably already happened. There is still opportunity to be had, but keep in mind that what goes up, must come down.
If you're reading this, be conscious of how much exposure you are putting on the line. It's my belief that the crypto bull market will extend into the very early months of 2022, after which point it will become very choppy. To this end, expect to make most of your gains throughout December and into early January — and be conscious to take profits leading into February and March.
For those with longer time horizons, start to build ownership positions in the projects and companies that are building with a 10 year trajectory. It's here that you'll start to learn what it means to be a part of the ownership economy.
Until then, good luck, godspeed, and gm.
Cooper Turley works with DAOs like Friends with Benefits and in advisory for Audius, a decentralized music-streaming platform, and the Variant Fund, a crypto investment firm started by an ex-Andreessen Horowitz partner.