Caring for your crypto is about more than checking your Blockfolio once a day to see how your altcoins are performing. After all, those gains remain unrealized until they are eventually cashed out and deductions including tax are taken into account. Taking care of your cryptocurrency portfolio calls for organizing, categorizing, and custodying your coins to save time and administration while maximizing your profits. Here are four steps to making that happen.
Choose a comprehensive portfolio tracker
When it comes to recording your crypto assets, which are typically scattered across CEXs, DEXs, desktop, mobile and hardware wallets, API beats manual entry. Having to update your portfolio whenever you make a trade is a waste of time and effort and is bound to introduce human error. There’s a lot of portfolio apps out there with nice UX but no API functionality for the purposes of connecting directly to exchanges and automatically rebalancing your portfolio to reflect new trades.
For individuals and crypto businesses that require enterprise-grade accountancy, tracking and managing software, meanwhile, Blox’s crypto accounting platform ticks all the right boxes. Cryptocurrency balances and analytics can be viewed via a real-time dashboard, while CPA tools make it easy to generate financial reports, classify assets and add notes to transactions.
Select the right custody option
Your cryptocurrency is probably the most valuable asset you own. As such, you want to treat it with the same care as you would a physical asset such as your house or car. With crypto, that means keeping your coins that aren’t actively required for trades offline and under lock and key. A hardware wallet such as the Nano X allows you to self-custody your coins, while still retaining easy access to them thanks to the built-in Bluetooth. For something a little flashier, the Corazon is a beautiful device if your budget will stretch to it. If you’re seeking a software wallet, the Binance-owned TrustWallet, available for mobile and desktop, comes highly recommended.
Perform a periodic digital sweep
Just as Binance will allow you to sweep your wallets for crypto dust, and to exchange those miscellaneous satoshis for BNB, you can do the same with your own wallets. Cryptocurrencies such as BTC that use a UTXO set are prone to accruing a significant number of unspent outputs in wallets from the “dust” left over after each transaction. During times when network fees are particularly low, some bitcoiners are known to sweep their wallets to aggregate this dust into a single address, which helps to lower fees on subsequent transactions, essentially saving money in the long-run.
There’s another reason why it may be desirable to periodically clean out the residue in your wallets: it removes trace amounts from showing up in your portfolio tracker, which can be an annoyance and a distraction. This is particularly true of Ethereum wallets, which are prone to receiving nominal amounts of spammy tokens, sent out for marketing purposes by gambling dApps and other crypto projects. If you’re tired of seeing these worthless tokens residing in your wallet, despatch them to a burn address such as Ethereum’s genesis address, from where they can never return.
2FA and back up everything
You’ll have already had the importance of using 2FA drummed into you. From exchanges accounts to desktop wallets, multi-factor authentication prevents you from getting hacked. But what happens if you lose the device containing your 2FA codes? Well, then you’re in trouble. That’s why you should make a note of the backup code you are provided when enabling 2FA for each service, and then storing it in a safe place, such as an encrypted thumb drive that is stored offline. If your back up plan is to avoid losing your phone, that’s no plan at all. Screens break, hardware fails and people fail harder. Keeping a second off-site copy of your recovery codes is insurance against the inevitable.
Take care of your crypto and your crypto will take care of you.