Sam and my Crypto Trading Trek
RIP the trading floor
Commodities are traded electronically today. The raucous floor is gone, replaced by quiet humming and blinking computers. This is not a lament over that loss, which is the general theme of this blog, rather it’s a personal examination and test of the new market paradigm. My foray into options trading gave me a taste of the markets. I got hungry again and thought it would be interesting to do this on the market’s cutting edge — electronically trading an electronic commodity, crypto currency.
Perhaps you’ve heard of crypto. It is money, but it’s not tangible. Unlike U.S. dollars and cents that you can fold and put in your wallet or jingle in your pocket, crypto is bits and bytes. Your currency is kept in a global computer ledger. So, theoretically it could not be stolen. There’s no government treasury supporting this medium of exchange. It’s backed by the full faith and credit of block-chain computing.
The incoming Presidential administration is a big crypto supporter. They’re all about shaking up the establishment, including the global payment system.
If this new method of exchange takes catches on, governments might get out of the business of printing and issuing currency. Minus this function it would be challenging to value the economic viability of a country.
Call me an establishmentarian, I believe in the green back, Washington quarter, Roosevelt dime, Jefferson nickle and Lincoln penny. Yet, it's clear change is afoot. Money is increasingly abstract. I rarely pull dollars out of my pocket to pay for a dinner out or tools at the hardware store. Loose change is tossed into the bottom drawer of my bed stand. When enough builds up, it gets dumped into a Coinstar machine.
Banks and retailers don’t want to deal with it or the widely accepted substitute, checks. Target stores stopped honoring checks over the summer, according to the January 2025 AARP Magazine. The U.S. Federal Reserve Bank processed a mere 3.1 billion checks in 2023, down from 19 billion in 1993.
Today, more often than not, purchases are made by waving a chip card or my phone over some point-of-purchase sale device. If I travel out of country, I’m using the same chip cards never worrying about making currency conversions. In all but name I live in a global economy lubricated with electronic currency. My faith is in the debit card stored on my Apple iPhone. Crypto is in many ways a logical extension.
It seemed important to learn something about this new method of exchange that’s on the cusp of taking over. Fortunately I had some help. I was prompted to try trading crypto by Sam Cappetta. We became friends when we were probationary members joining the College Park Volunteer Fire Department in January 1983. We were students attending the University of Maryland.
After college we went our separate ways. Sam became a professional firefighter with the Prince George’s County Fire Department. I chose a career as an itinerant journalist, a path that eventually took me to Chicago’s trading floors.
Almost a decade ago I reconnected with Sam and some of our college fire department buddies. Once a year, we have a reunion weekend, where most of us pretended to fish while we drank beer and told stories of the good old days fighting fires in Prince George’s County, Maryland.
At one of these gatherings, Sam, who is retired, started talking about investing and trading the cryptocurrency market. I was skeptical. To me, if Chicago’s commodity markets seemed like high-stakes casino gambling, the crypto markets were a no-limit, no-holds-barred poker game. What rules exist are constantly in flux and the guy with the biggest six-shooter can often dictate the play.
Sam explained he was always a gambler. “I like the action” playing craps at the casino, he said. Trading crypto was in his risk-taking milieu.
His interest was piqued while watching an Ellen DeGeneres Show YouTube clip. ”I’m a fan of Ellen,” he confessed.
Her guest was Hollywood star Ashton Kutcher, who was making a multi-million dollar donation to her gorilla reserve. He gave her the donation in XRP, a crypto currency.
Most people have heard of Bitcoin, the cryptocurrency that passed $100,000 in value in early December. There are many other flavors of crypto: Dogecoin, Cardano, Tether, Binance coin, etc. XRP is a cryptocurrency used on the Ripple digital payment network. The currency is used in international money transfers. At the time Sam and I started our conversation XRP was a little-known, inexpensive cryptocurrency.
“I started doing a little checking. Ashton has a history of making good investments in ground breaking ideas,” Sam explained. He decided to jump on the bandwagon.
I’m not sure I’d have been as confident about putting money on the recommendation of an A-list Hollywood star. But, here I was giving it a try. While not confident in Ashton, I was confident in Sam.
Let’s pause for a moment to refer to last month’s post about trading rules.
The Third Law Regarding Advice: If you get in on “Jones’ tip, get out on Jones’ tip. Stated another way, if you are riding another person’s idea, ride it all the way. And . . . make sure to find out when they exit a trade, otherwise you may be left holding the bag.
I was not getting in on Ashton’s tip. I was getting in on Sam’s tip. Our chats revealed he had done a lot of research. He had a solid base of knowledge about crypto and XRP. He checked the price and news on the currency every day.
Even if Sam’s tip was the inspiration, I was trading on my own. He had gotten in when it was cheap, about 10 cents per dollar. When we started talking in 2022, it was 50 cents. Market conditions had changed since he bought in.
I did some of my own digging. I looked at the XRP price chart and did my own news search. Hmph!
The currency was also the subject of a lawsuit by the federal government. Sam gave me the background on the case. At issue was the question whether XRP was a security and therefore subject to government regulation. The outcome of the lawsuit might determine the viability of XRP.
Despite this uncertainty, I decided to plunge ahead.
Decades ago, opening an options trading account took effort. Exchange-traded options are regulated by the U.S. Securities and Exchange Commission (SEC). Filling out the account paperwork required the death of many trees to generate all the boilerplate documents that had to be signed, dated and countersigned.
Sam told me none of that would be required to open a crypto account. I could do it from my home computer. All I needed was a credit card or bank routing and account numbers.
He did recommend buying a nano on which I could store my crypto. The reason to buy a nano is because the exchanges, which will hold the currency (for a fee), were not paragons of financial responsibility. Sam worried about their viability and was keeping his electronic currency close to home. It seemed logical to do the same: buy XRP and hold it on the nano.
Amazon sells them, he told me. A nano looks like a $9.99 Walgreens thumb drive. It’s not. It has encryption which will keep my electronic money safe after I shove it to the back of my desk drawer. In December 2022, I shelled out $80 to buy the doodad.
In the meantime, the market was waiting for the U.S. courts to rule on XRP. It was trading under 50 cents. Even though that seemed like a good price, I hemmed and hawed and didn’t get into gear. In the meantime a Bahamas-based crypto currency exchange called FTX imploded in November 2022. The SEC started cracking down on the crypto currency business in the U.S.
The XRP court ruling came down on July 13, 2023 and sure enough, the crypto’s value popped. It rose above 60 cents. I had done nothing to set up an account. Drat, that was a missed an opportunity for a quick buck.
I got fired up again in September. My fire department friends were planning a reunion in October and my currency trading buddy was planning to come. I had to get moving and have some crypto by the time we met. Besides, a nano is no good if you don’t have a trading account. Finally, I started investigating exchanges.
Opening an account was harder than advertised. By this time, the crypto market’s reputation was close to that of toxic waste. A key player, Sam Brinkman Fried (SBF), was under investigation by the SEC. The Feds were also looking into the exchanges where crypto was traded. This included SBF’s FTX exchange and Binance, another exchange. The Feds eventually convicted SBF of fraud.
Meanwhile many exchanges decided that the U.S. was not a place to do business. Sam had given me some recommendations: Binance or Bitstamp. I first tried Binance. They were supposed to have some of the best fees. Nope, they didn’t want my American money. They are an overseas company with no interest in dealing with SEC regulations.
Bitstamp, a Luxemborg-based exchange? No again.
I called Sam. “I can’t open an account!” I whined over the phone. He suggested Coinbase. They were a publicly traded U.S. company. They had higher fees AND were willing to take my American money. In short order I set up an account.
On Oct. 15, 2023, I became the proud owner of XRP.
Next time, the experience of being a crypto owner and the final tally on the trade.
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This blog is about more than my experiences. It is intended to be a collective experience of working on the commodity markets physical trading floor. If you or someone you know has a story please let me know I’d like to include it in this ongoing chronicle. I can be reached at linton122(at)gmail.com
© Clifton Linton 2024