Investing In Cryptocurrency With A $100k Or More

Retail Vs Wholesale Thinking

Your first step to investing $100k or more successfully is to think like a wholesale investor because thinking like a retail crypto investor leads to many problems when dealing with large amounts of money. Here are the core differences between retail and wholesale investor thinking.

Retail Thinking (Invest in crypto yourself)

• Manage your own security of private keys through hot, cold and hardware wallet.
• Keep learning every day to stay up to date with crypto cyber security.
• Coordinate insurance if not provided on your account.
• Manage your own banking relationships for transfers.
• Do your own estate planning for private key transfer upon death.
• Do your own reporting for tax and government audits.
• Learn to trade so you can buy and sell through exchanges.
• You own your assets and control your account.

Wholesale Thinking: (Get it done for you)

• Open a managed account with institutional custody, security and insurance.
• Work with a trading desk with large liquidity to enter or exit the market.
• Use a platform with institutional banking permissions in the crypto market.
• Get tax reports provided for end-of-year financials and audits.
• Have your accounts transferable through for estate planning or death.
• You own your assets and control your account.

When you think wholesale, it frees up more time and leads to a better quality of life. But the only catch is economics. If you're investing in cryptocurrency, you must deposit enough funds to merit working with service providers who will help you.

There’s nothing wrong with doing it yourself because it comes down to knowing your strengths and how you want to spend your time. Wholesale investors generally prefer to focus on what they’re good at and let the experts do their work. Retail investors are usually more hands-on.

I wrote this article with the wholesale investor in mind. If you prefer to do it all yourself, there is no shortage of articles and content available on how to open a wallet and learn to trade.

With that in mind let's start with the biggest mistakes investors make when investing $100k or more.

The Most Expensive Mistakes People Make Investing In Cryptocurrency

1. Managing Your Own Security

The biggest mistake investors make is attempting to manage their security and banking. 

Your crypto investing journey starts by choosing between managing your own security, or having it done for you. Retail investors, or hands-on people, usually want to do it all themselves, which is ok if you're investing small sums of your money.

It’s no problem if you prefer to open a wallet or learn to trade on exchanges, or buy a hardware wallet to manage your private keys.

But if you’re an investor with a large portfolio, you simply cannot rely on your own ability to manage security because:

• It only takes 15 minutes to hack a hardware wallet and they’re meant to be the ‘safest’.
• Exchanges get hacked, which is why you don’t store assets on there. 
• Both hot and cold wallets using older technology are vulnerable to attacks. 
• When you die, your family can’t access your crypto portfolio unless you've given them access to your private keys.

The only serious solution for investors with large sums of money is institutional custody and security. Think about it. Do you think Elon Musk, who invested $1.5 billion into bitcoin, has the bitcoin stored on a hardware wallet in the drawer of his home office? He doesn't store it there, and neither should you.

2. Trapped By Banking Restrictions

The second biggest mistake investing in cryptocurrency with large sums is thinking you can just transfer large amounts of fiat money to and from a crypto account with no issues.

In reality, banks don’t like crypto companies because they must adhere to laws preventing money laundering. Large wire transfers create a massive red flag for money laundering and are treated as high risk until you provide evidence or sufficient reasons for your transfer.

As a result, if you suddenly transfer $100k or more from your bank to a retail crypto provider, it’s highly likely you will get flagged, get your account frozen, or in a worst case scenario, your account is closed. 

Retail exchanges also impose restrictions or transfer limits between $10k-500k. For example, if you look at Kraken’s exchange, you’ll notice you need to upgrade your account to get out $5,000 or more. This is a common approach by exchanges to navigate this problem of red tape.

Clearly, these restrictions are an issue if your portfolio is worth millions because you can't simply transfer your funds. The best solution is to open a managed account with institutional banking clearance for large wire transfers within the crypto industry

3. Getting Ripped Off On High Fees

No one likes high fees for no reason, so it stuns me to see people investing in cryptocurrency happy to pay huge fees on their retail accounts. I've found it's usually because they don't know about them so as a result, here’s a list of fees to watch out for. 

Deposit Fees

Some retail providers charge a 1 - 3% deposit fee. A managed account doesn’t charge deposit fees. If they do, it’s just enough to cover the bank transfer fees. You should not be paying deposit fees.

Withdrawal Fees

Retail providers charge up to 10% withdrawal fee. Imagine withdrawing $10 million from crypto gains, only to pay $1 million in a withdrawal fee... It’s highway robbery, yet there are a lot of investors who buy bitcoin and face this situation. You should not be paying a withdrawal fee. 

Trading Commissions

Broker platforms charge between 1-5% in trading commissions. It’s highway robbery. A managed account solution with trading desk access would usually pay less than 1% depending on the market.

4. Not Using a Trading Desk

When you use an Over The Counter (OTC) or professional trading desk to invest in bitcoin, you receive several benefits. First, you deal with experienced traders. They execute large trades privately between two institutions and not publicly in the open market. They’re also professionals. It’s unlikely they’re going to get emotional watching price charts.

If you have a $5 million block of crypto to convert into fiat, you’re likely to achieve a more efficient price through an OTC desk than on a public exchange. If you save just 1%, wouldn’t that be worth it?

The more money you invest in crypto, the more critical it is to get a professional team working with you to do the job because you free up your time, and they're better at doing the job.

5. Not Doing Any Tax Planning For Crypto Investing

If you’re normal, you probably don’t find tax a fun subject. The inventor of bitcoin created the currency as an alternative to fiat money. Central banks and governments cannot print bitcoin. However, we all know governments will soon regulate the crypto market and claim a wealth tax on successful crypto investors. 

Bitcoin was invented to spend as a currency. Investing in cryptocurrency as a store of value is only a modern phenomenon. As a result, governments never cared about crypto until it became valuable. Now they’re moving fast to create new rules to tax successful crypto investors. 

Each country has different capital gains or tax rules. But if you’re not prepared for a future wealth audit by the government, then you’re going to be at risk. There are ways to minimise your tax burden legally. Now is the time to start planning for this if you haven’t already. The best way to do this is to speak with a specialist tax advisor in crypto, overseas residence and international company structures. 

6. Not Receiving Dividends

If you're going to own bitcoin, you might as well get paid a dividend on top for almost no extra risk. This lets you compound your returns over time. Investing in cryptocurrency with dividends is a proven way to create maximum growth. 

Dividends also cover the fees for custody, trading and management. Who doesn't want their fees covered... 

7. No Diversification

Buying Bitcoin is fine, but it means you’re capturing one currency's movement, which increases your volatility. Buying 70 % Bitcoin and 30% Ethereum produces higher returns for less risk and less volatility.

This is proven by several thousands of iterations of using a monte carlo analysis on both assets. Who doesn’t want higher returns for less risk? Note: Don’t buy a bunch of altcoins unless you really know what you’re doing.

How To Pick A Managed Account For Cryptocurrency Investing

The growth of the crypto industry is staggering. You’ll see a boom in managed account service providers as technology advances in the next 5 years and you'll need to learn to choose an account provider, just like choosing a stock broker or wealth manager. How you evaluate them will be the key to your success.

A managed account's practical parts are very similar to how you open a stock investing account and work with a stockbroker. You own the account, but get their help to do execution. Simple.

There are several benefits of a managed account including:

• You own your assets.
• Fees are lower than a managed fund.
• You don’t have to learn to trade.
• You’ve got control and 24/7 access.

Here are some questions to help you choose a provider. 

Does Your Personal Investment Style Match Their Service?

When choosing a broker, account manager, or service provider, the best thing to do is to match what you prioritise and use the most in your personal investing style to the services they provide. 

For example, if you only want great execution prices and someone to talk on the phone, that differs from a research house with 20 analysts and 1 trader. The strength of the firm should match your priorities.

Is Their Core Business Sound?

When you know the core business of a provider, it’s easy to decide to use them or not.

Let's take, for example, a stockbroker. Assume you've opened an Etrade or Interactive Brokers trading account, but it’s your stockbroker who places the trades and does the investment analysis.

Question: What is the core business of your stockbroker?Answer: Investment analysis, relationships management, and trade execution

Question: What is the core business of the Etrade or Interactive Brokers account?Answer: Execution, custody, security, clearing, and settlement.

Imagine how bad it would be if the broker tried to be an expert in the technology required to run your broker account?

You can evaluate a service provider in the crypto market the same way. As a result, you’ll know if they’ve got resources to deliver what you need or not. Companies with 90% of their team as software developers who focus on technology development probably won’t have a strong in-house relationship management team. However, they probably deliver a very strong do-it-yourself solution.

For a successfully managed account provider in the crypto space, you need to look for a balance of investment professionals and relationship staff who use a technology platform built and managed by specialists. This way, they can curate solutions for you, and all you need to do is pick up the phone and speak with them.

What Security Platform Do They Use?

I recommend firms using the Fireblocks infrastructure platform because it is currently the best institutional grade security available on the market. For instance, Fireblocks manage the protection of billions in digital assets and use Multi-Party Computation (MPC) technology, which is serious tech for protecting your assets. There are other platforms and custodians available on the market and you would need to do research on them if you choose them.

Do They Have Banking Restrictions?

Check if your service provider has registered with a financial regulator and is approved for large transactions. If so, you won't experience issues. Viva’s custodian is registered with Austrac which monitors transfers for money laundering. Different countries employ use different rules, therefore, you'll need to look your country's regulatory body. 

This registration means there's unlikely going to be issues with large deposits or withdrawals you make in the future. Without it, you'll need to jump through many hoops just to get access to your money.

How To Use a Trading Desk To Buy Bitcoin Or Invest In Crypto

When you use an OTC trading desk to place your trades you'll gain many advantages compared to doing it yourself on a broker platform. Here's a comparison:

Trade Desk

• Completely done for you so you save time.
• Access to large pools of liquidity so you can do big trades with little slippage.
• Better algorithms to enter the market over time in block orders.
• They’re professionals who trade every day, so there’s less human error.

Do It Yourself Trading

• What you see is what you get in price.
• You pay high slippage costs on big orders.
• Retail commissions are high, especially when you make mistakes.
• Pay high interest if you’re borrowing.

Traders built trading desks to deal with large transactions and not frequent transactions. So, if you're looking to day trade, then a OTC desk isn’t suitable for you. 

How To Place A Trade

Placing a trade is simple, just like using a stockbroker.

1. Open an account and deposit funds.

You’ll get a bank account to fund your account after it’s opened. 

2. Place your order with the Desk.

You instruct the team via phone, email, chat, to place the orders you want. The trading desk will confirm your order before placing it, then make the trade.

3. Get a receipt.

Once the trade is complete, you will get a receipt of the transaction. You’ll usually see this in your account portal where you check your balance. 

How To Transfer To An Account Provider If You Already Own Crypto

If you already own an enormous amount of crypto, but you know longer want to manage it yourself, you can transfer your assets to your managed account as crypto, without converting them to cash. In other words, you do a regular crypto transfer. To do this, you just need to ask your provider for your managed account's wallet address.

Choosing A Portfolio Of Crypto To Invest In

Usually you’ll find a managed account provider has already built an optimal portfolio for you to invest in because that's part of their job. However, if you are doing your research, you can obviously build your own portfolio and get their help with execution. I don’t recommend this. But if you are building your own portfolio, here are some tips.

Stick With A Proven Strategy

A proven portfolio is the best way to start. After you've defined your risk and objectives, you then decide if the portfolio fits your objectives. If you prefer to trade, speculate or trade yourself, that is fine. But don’t expect the same from a managed account or trading desk.

Dividend Reinvestment Plans For Investing In Cryptocurrency

Dividend Reinvestment is the ultimate long-term compound growth plan used by Warren Buffett and many long-term investors. It’s by far the best approach because you don’t try and time the market. You simply reinvest cash dividends when they’re available, no matter the market price. This takes advantage of dollar-cost averaging your position so you maximise your gains long term.

Value Investing

If you track the market every day, you’ll be able to know if a coin is trading less than its fundamental value. If it is, you can buy and wait for it to come back to value. However, in the crypto space, this is quite hard because it’s all very new.

Global Macro

If you are a specialist in technology or in the blockchain space, you may use intricate knowledge others cannot, which means you can review different sectors for growth and make smart investment decisions.

What To Expect From Your Relationship

Professional

The most startling difference between a professional service and what you see with retail providers is the business's attitude. For instance, professionals speak with very little hype and they’re direct. Retail providers love to speculate. 

Holistic

There’s are no pressure sales. Professionals will ask questions to help you identify your portfolio objectives and if the investment you’re considering is a good fit or not to achieve them. In other words, they only work with what's in your best interest. 

Reports

The best part of getting everything done for you is you can sit back and take a broad view of the markets. You’ll get monthly reports of your investment results and likely get real-time reporting through a wealth portal or members’ login area. 

Conclusion

Using a managed account provider is the safest approach to invest a 100k or more in crypto. You must think wholesale (done for you), not retail (do it yourself) to enjoy a successful portfolio. You can also open Crypto IRA or Crypto SMSF to invest with your retirement account in the USA or Australia.

Security and banking are the two biggest considerations you must evaluate so you can get your money in and out without problems.

Using a professional trading desk will lower your fees and also give you access to the best prices available to enter the market. The best investment strategies are evergreen, like dividend reinvestment. If you've got $100k or more to invest, getting it done for you is better than doing it yourself.

If you want the safest way for investing in cryptocurrency without opening wallets, learning to trade, or wanting to manage your own security, then we can help you with the Digital Asset Dividend Account.