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Will crypto be the Super Bowl's biggest winner? This week's top cryptocurrency news
Will crypto be the Super Bowl's biggest winner? This week's top cryptocurrency news
Welcome to Nonfungible Tidbits, a weekly roundup of cryptocurrency, NFTs and their related realms.
Our lead story is Sunday's Super Bowl and all the crypto ads viewers will see. And, while we're on the topic of crypto and pro sports, the Washington Nationals baseball team also partnered with a decentralized autonomous organization. We'll cover the Nats' sponsorship deal and what a DAO is.
This week's roundup also features the Justice Department's biggest bust in history, as well as a new coalition of crypto companies that aims to fight market manipulation.
In other news, the World Wildlife Fund decided to shutter its NFT project after a backlash due to the tokens' potential environmental impact.
Here's what caught our eyes this week. Stay tuned for more next week.
Crypto firms gear up for the big game
Brittany Murray via Getty Images
No fewer than five crypto ads are reportedly scheduled to air at Sunday's Super Bowl, where the Los Angeles Rams face off against the Cincinnati Bengals. According to multiple media reports, FTX, Coinbase, eToro and Crypto.com are expected to have ads during the big game's US broadcast, while Toronto-based Bitbuy reportedly purchased an ad for the Canadian broadcast.
Advertising during the Super Bowl, one of the most watched television events of the year, is eternally expensive. This year, a 30-second spot is going for about $6 million -- a new record and a small fortune for some businesses.
Tech companies have long used the Super Bowl to enhance brand recognition. During the dot-com bubble of the late 1990s and early 2000s, a host of fledgling firms advertised during the big game. Perhaps the most memorable was a 2000 commercial by Pets.com, an early e-commerce company that went bust just a few months later.
An expected 117 million Americans will tune in to the match this Sunday. With crypto going mainstream -- 16% of Americans have invested or used cryptocurrency, according to Pew Research Center -- the Super Bowl may prove an effective way to reach an even broader audience.
Washington Nationals team up with a DAO. What's a DAO again?
G Flume via Getty Images
It looks like baseball is trying to keep up with football's crypto enthusiasm. With spring training right around the corner, the Washington Nationals baseball team announced a partnership with Terra, a cryptocurrency enterprise. Fans will be able to use Terra's UST stablecoin at the team's ballpark, which will feature prominent Terra promotions near home plate.
Terra is a DAO, or a decentralized autonomous organization that makes decisions via a consensus vote using digital tokens on a blockchain. The Terra DAO voted on the sponsorship, and the organization paid the Nats nearly $40 million.
The Nats-Terra deal follows last November's deal between LA Angels star Shohei Ohtani and FTX, a cryptocurrency exchange. Ohtani, who made history last season as the first player ever selected as both an All-Star pitcher and hitter in the All-Star game, signed on to be FTX's global ambassador and took a stake in the company.
Last year, FTX also became Major League Baseball's official cryptocurrency exchange -- the first deal of its kind between an American pro sports league and a crypto exchange.
A $3.6B bitcoin seizure is Justice Department's biggest bust ever
Bill Clark
The Justice Department seized $3.6B in bitcoin from a digital wallet held by a couple living in Manhattan, the department said on Tuesday. The suspects, who allegedly were trying to launder the crypto loot, are a husband and wife team, one of whom was an aspiring rapper on YouTube. The seized bitcoin has been linked to the 2016 hack of Bitfinex, when hackers spirited almost 120,000 bitcoin from the cryptocurrency exchange. The bust is the largest in the department's history.
Read CNET's full story on it here.
Canada accounting giant buys bitcoin and ether
Mark Garlick, Science Photo Library via Getty Images
KPMG Canada, the Canadian division of the Big Four accounting firm, said Monday it had added cryptocurrency to its holdings. KPMG Canada didn't specify the amount of crypto it had purchased but said it had also bought carbon-offset credits to "maintain a net-zero carbon transaction." Carbon offsetting refers to the practice of buying credits from another company or organization that's engaged in greenhouse gas reduction, with the credits representing a kind of commoditized carbon reduction.
Crypto firms form coalition
Getty Images
Coinbase, Circle, and 15 other crypto companies founded a new coalition, according to an announcement this week. The Crypto Market Integrity Coalition aims to address the issues raised by New York Attorney General Letitia James, SEC Chair Gary Gensler and other officials, who worry the industry is plagued by market manipulation. The coalition requires members to sign a written pledge, and according to the coalition's website, more than 350 organizations have already joined.
Thanks for reading. We'll be back with plenty more next week. In the meantime, check out this story on what quantum hackers could mean for bitcoin by CNET's Monisha Ravisetti.
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Best Crypto Exchanges for August 2022: Buy and Sell Bitcoin, Ether and More
Best Crypto Exchanges for August 2022: Buy and Sell Bitcoin, Ether and More
Despite price crashes in the first half of 2022, buying and selling cryptocurrency continues to steam forward as the "crypto winter" shows signs of thawing. While governments have increased their efforts to regulate crypto markets, scans continue to plague crypto investors, and it's more important than ever to find a trusted platform for buying and selling crypto.
Crypto exchanges are where most crypto traders buy and sell bitcoin, ether, dogecoin and other types of cryptocurrency. In its rawest and most decentralized form, cryptocurrency is relatively unfriendly to obtain and use. Crypto exchanges make it fairly simple to trade all sorts of crypto tokens and coins.
The best crypto exchanges will hold your crypto securely, provide you with unfettered control over your assets and make buying, selling, sending, receiving and trading crypto simple and affordable.
Some investors may desire more advanced features from crypto exchanges, including the ability to earn interest, access more esoteric forms of crypto or buy, store and display NFTs. (It's worth noting that the safest place to hold your crypto is in a cold storage wallet that you control exclusively.)
Here, we'll focus on the basics, highlighting the exchanges that make it easy to sign up, get started and carry out transactions without getting fleeced on fees. As with any investment, high fees can erode returns over time, and some exchanges offer more competitive fees than others.
Whether you're a beginner looking for an easy on-ramp to crypto, or you're a high-volume trader looking for the lowest "maker" and "taker" fees, we've got the info you need to choose the best crypto exchange for you.
Note: Crypto exchanges add and delist crypto tokens on a regular basis. Our "number of supported tokens" data is based on data from each exchange's website as of July 25, 2022.
Best crypto exchanges
James Martin/CNET
US availability: All states except Hawaii
Number of supported tokens: 207
Spot trading fees: $0.99 to $2.99, or 1.49% for trades over $200
Credit/debit card fee: 3.99%
Straightforward and simple, Coinbase provides an intuitive and streamlined experience that makes it easy to buy, sell, trade and send bitcoin, ether and a variety of other cryptocurrencies. As a public company, it's among the most established, well-capitalized and popular players -- but you'll pay for the privilege, with trading fees that are higher and somewhat more complicated than other exchanges. We think the platform's ease of use and simplicity are worth the higher fees, only if you plan to make infrequent and relatively modest transactions.
Coinbase says it keeps 98% of its crypto assets in cold storage -- a method for holding crypto tokens offline -- and says that it has never lost any user funds. Balances of US dollars held in Coinbase accounts are insured by the FDIC, and Coinbase maintains a private insurance policy worth $320 million overall for crypto assets it holds. Coinbase's first-quarter earnings report raised eyebrows with a new disclaimer stating that custodially held crypto could be used to pay creditors in the case of the company going bankrupt.
Unlike most crypto exchanges, Coinbase offers live phone support in addition to email support -- which may bring new crypto investors an additional modicum of comfort – and there's a well-written and helpful library of content for novices. Coinbase is available to residents of all US states except Hawaii.
For real-time crypto transactions (referred to as "spot trades"), Coinbase charges between $0.99 and $2.99 for trades up to $200; for transactions above $200, it's a flat 1.49% fee. Coinbase also adds a 0.5% "spread" fee on top of that.
And purchasing crypto with a debit card adds a significant 3.99% fee. Funding your Coinbase account with an electronic ACH transfer is free, however. A wire transfer deposit costs $10.
The platform's advancedPro version, which runs on a separate app and website, charges lower fees but features a less user-friendly interface that's not suited for beginners.
Sarah Tew/CNET
US availability: All states except Hawaii, New York or Washington
Number of supported tokens: 191
Trading fees: 0.0 to 0.2% maker; 0.0 to 0.5% taker; 1.5% instant buy
Credit/debit card fee: No credit/debit card purchases in US
One of the oldest cryptocurrency exchanges, and in business since 2013, Kraken's low fees make it particularly attractive to high-volume traders. Kraken also offers riskier and more advanced trading features -- such as margin trading and on-chain staking, with biweekly payouts.
The exchange supports transactions for about 130 crypto assets for purchase or trade in the US. It also supports more than 100 crypto pairs -- two crypto tokens that can be exchanged for each other.
Kraken does not include any insurance on crypto deposits held in hot wallets, but it does claim to keep 95% of digital assets offline with enough liquidity to allow users to withdraw at any time. No hacks of the Kraken crypto exchange have ever been reported.
While Kraken is available to most US crypto investors, it's not licensed for crypto services in New York, Washington state or Hawaii.
Sarah Tew/CNET
US availability: All 50 states
Number of supported tokens: 101
Trading fees: Spot trading fees: $0.99 to $2.99, or 1.49% for trades over $200
Credit/debit card fee: 3.49%
Gemini features competitive trading fees and support for almost 100 currencies and 20 crypto pairs, but the exchange's educational resources are what may be most appealing to novices. It's also one of the few exchanges operating in all 50 US states -- and the only exchange on this list that does.
This crypto exchange offers strong security features, including FDIC insurance for US dollar deposits, private insurance for hot wallets -- on the blockchain -- crypto assets and support for U2F hardware keys. Its ActiveTrader platform for high-volume traders offers charting, multiple order types, auctions and block trading. Having acquired the NFT marketplace Nifty Gateway in 2019, Gemini also lets users buy and sell crypto collectibles and digital art.
Gemini's educational resources are the best we found on any crypto exchange. Its Cryptopedia section provides deep knowledge about cryptocurrencies and the technology behind them. Cryptopedia contains a bounty of articles on a wide range of crypto subjects, from basic explainers on bitcoin and blockchain to more advanced topics like real-world uses for smart contracts, the NFT marketplace model for music and decentralized cloud storage.
James Martin/CNET
US availability: All states except New York
Number of supported tokens: 333
Trading fees: 0.04% to 0.4% maker; 0.1% to 0.4% taker
Credit/debit card fee: 2.99%
Featuring transactional support for more than 300 cryptocurrencies, Crypto.com offers the widest range of cryptocurrencies of any exchange on this list. It also lists support for more than 80 trading pairs.
Crypto.com claims that 100% of all user cryptocurrencies are held offline in cold storage and that it has secured $750 million in crypto insurance. The exchange also says that all online funds in its custodial wallets are generated by the company itself to fund user withdrawals, meaning customer crypto assets are safe offline. US dollar balances in Crypto.com accounts are held by the Metropolitan Commercial Bank and insured by the FDIC.
Crypto.com uses multifactor authentication -- including password, biometric, email, phone and authenticator verification -- for all crypto transactions. Crypto.com also requires whitelisting of all external addresses via email verification. That means you'll need to explicitly authorize any crypto wallets or bank accounts for withdrawal, which helps protect your crypto assets from accidental or manipulated withdrawals.
Along with Gemini and bitFlyer, Crypto.com is one of only 15 exchanges allowed to operate in Hawaii. Residents of every US state except for New York can use Crypto.com.
Sarah Tew/CNET
US availability: All states except West Virginia and Nevada
Number of supported tokens: 15
Trading fees: 0.03% to 0.1% maker/taker fee
Credit/debit card fee: 1.95%
BitFlyer is a private company that launched its crypto exchange first in Japan in 2014 and later expanded into the US in 2017. Though bitFlyer has much lower trading volume than the big exchanges, it ranks in the top 20 for average liquidity, per CoinMarketCap, and it supports 11 different cryptocurrencies, including bitcoin, ether, litecoin and Stellar Lumens (XLM).
BitFlyer offers the lowest trading fees of any exchange on this list. There are two ways to buy and sell crypto on bitFlyer -- through the instant buy/sell platform and transactions on bitFlyer's Lightning Network.
Once you've verified your identity and funded your account, maker and taker fees on the bitFlyer Lightning Network max out at 0.1% for transactions less than $50,000. That's even lower than Kraken's baseline 0.2% fee for makers and 0.5% for takers -- and far more affordable than Coinbase Pro's 0.4% for makers and 0.6% for takers.
BitFlyer's instant buy and sell platform doesn't charge any transaction fees at all, which makes it a tempting proposition, but watch out for the wild range of spread fees, from 0.1% to 6%. BitFlyer will show you the spread fee for any transaction before you make it. Its 1.95% fee for credit card and debit card purchases is also the lowest on this list.
Its interface is more primitive than other exchanges, and we encountered a few minor hiccups -- unexplained error messages and missing 2FA codes -- during the sign-up process. It's worth noting that the lower volume of transactions on the bitFlyer exchange may impact your ability to complete trades at the prices you want.
BitFlyer is available to all US residents except for those living in the states of West Virginia and Nevada.
Best crypto exchanges, compared
Coinbase
Kraken
Gemini
Crypto.com
bitFlyer
Best for
Beginners
Advanced trading
Educational resources
Altcoins
Low fees
Currencies
207
191
101
333
15
Fees
$0.99-2.99, or 1.49% for trades over $200
0.0-0.2% maker; 0.0-0.5% taker; 1.5% instant buy
$0.99-2.99, or 1.49% for trades over $200
0.04-0.4% maker; 0.1-0.4% taker
0.03%-0.1% maker/taker
Excluded states
Hawaii
Hawaii, New York, Washington
None
New York
Nevada, West Virginia
Year founded
2012
2013
2014
2016
2014
What about Binance and Binance.US?
Binance is the largest cryptocurrency exchange in the world, per CoinMarketCap. The exchange launched in China in 2017 and moved its servers and operations to Japan a few months later, in advance of the Chinese ban on cryptocurrency.
In 2019, due to increased enforcement of regulations, Binance was banned in the US. The existing crypto exchange eventually spun off Binance.US as a separate company that now operates in 45 states. Binance and Binance.US are sister companies with distinct ownership structures.
Binance.US features a very similar interface and experience to Binance and also boasts some of the lowest fees of the major crypto exchanges. However, the company has a rocky past and uncertain future.
In May 2021, Bloomberg reported that the Justice Department and IRS were investigating Binance's operation for possible links to money laundering and tax evasion. Bloomberg followed up in September with news that the Commodity Futures Trading Commission was probing Binance's connections to insider trading and market manipulation.
In April, Reuters reported evidence that Binance had turned over data to the Russian Federal Security Service, or FSB, about crypto donations to Alexei Navalny, a political opponent of Russian President Vladimir Putin.
Most recently, Binance has come under investigation by the Securities and Exchange Commission for possibly violating US law when it began selling its native token BNB in 2017 to fund its global exchange, per Bloomberg. And a special report from Reuters indicates that, between 2017 and 2021, Binance processed $2.35 billion in crypto that originated from "hacks, investment frauds and illegal drug sales."
Binance itself was hacked in 2019, with thieves getting away with 7,000 bitcoin worth about $40 million, though the exchange refunded users who lost money using its Secure Asset Fund for Users. Several investors who were locked out of trading in 2021 and suffered major losses are planning a class-action lawsuit against Binance.
Although Binance.US provides a quality experience on mobile and desktop and features low trading fees, we would not recommend using the crypto exchange until the legal investigations have been completed and Binance.US provides more transparency on its practices to regulators and users.
FAQs
What is a crypto exchange?
A crypto exchange is a platform that allows users to buy and sell digital assets and cryptocurrencies such as bitcoin and ether. Some may also support the buying, selling and trading of NFTs.
Crypto exchanges generally let users deposit and withdraw funds in either fiat (such as US dollars) or cryptocurrencies, buy crypto with US dollars or another currency, trade one crypto for another, send crypto to another individual (or business) and sell crypto for US dollars.
What's the difference between a crypto exchange and a crypto brokerage?
A crypto exchange provides a platform for individual buyers and sellers to trade crypto -- or exchange tokens and fiat currency, like US dollars. Exchange rates are ostensibly based on market prices.
Similarly, a crypto brokerage serves as an intermediary for buyers and sellers, but the broker sets the prices. Brokerages often support fewer cryptocurrencies yet charge lower fees than exchanges. Robinhood, for example, supports only seven cryptocurrencies -- bitcoin, ethereum, dogecoin, litecoin, ethereum classic, bitcoin cash and bitcoin SV -- but charges no transaction fees.
How much does it cost to trade cryptocurrency?
As with any investment, it's important to consider the cost of buying, selling and trading cryptocurrency -- high fees can erode returns over time. Exchange fees are typically based on how you buy, sell or trade.
"Spot" trades, also known as "instant" transactions, involve buying from or selling to an exchange in real-time for a set price. These trades are simple to make, and most exchanges charge a relatively high fee to make them, often approximately 1.5% of the transaction value.
A more sophisticated type of trade -- using "buy" and "sell" orders -- is more convoluted and less user-friendly, especially for beginners. But these trades are also considerably less expensive, with "maker" and "taker" fees costing between 0.1% to 0.5% of the transaction value. With this approach, you choose the price you wish to buy or sell at, and a transaction clears only when the market finds a buyer or seller willing to buy or sell at that target price.
Where else can I purchase Bitcoin and other cryptocurrencies?
Along with crypto exchanges and brokerages like Robinhood, some payment services allow users to buy and sell cryptocurrency, although your options for tokens will be more limited, and you usually won't be able to move crypto out of your account and into a private wallet.
Cash App, Venmo and PayPal all let users buy bitcoin via their payment apps. Cash App only buys and sells bitcoin, but it's the only payment service that lets users withdraw crypto to their own private wallets. Crypto fees aren't advertised on Cash App and will vary from trade to trade. Generally, Cash App will charge lower fees than most crypto exchanges for smaller trades, yet higher percentage fees for larger trades.
Venmo and PayPal support bitcoin, bitcoin cash, ethereum and litecoin. Both use a tiered fee structure for crypto that's similar to Coinbase's -- $0.49 to $2.49 on transactions up to $200, a 1.8% fee on transactions between $200 and $1,000 and a 1.5% fee on transactions more than $1,000. Both sites also charge unspecified spread fees that are estimated at 0.5%. You can send crypto to other Venmo or PayPal users with each service, but you can't move your crypto into your own wallet.
Why are so many crypto exchanges unavailable in the US?
Regulations on cryptocurrency in the US are more stringent than other countries, and also vary from state to state.
The SEC and crypto exchanges have clashed several times in recent years, with some exchanges facing investigations by the financial agency. The main sticking point is the SEC's classification of virtual currencies. In 2017, the SEC announced that many crypto tokens represented investment securities, which must be registered with the SEC. The agency also argued that crypto exchanges should register with the SEC as securities trading platforms.
The additional regulatory burdens and threat of lawsuits from the SEC have prompted several crypto exchanges to pull out of US markets.
Methodology
CNET reviews crypto exchanges and brokerages by comparing them using an established set of criteria, including maker, taker, transaction and withdrawal fees, security features, number and type of supported crypto assets, geographical availability, number and type of supported crypto pairs, software interface and functionality, trade limits or restrictions, educational resources and customer support.
More crypto advice
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.
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Is the Crypto Market Bouncing Back? Here's What You Need to Know
Is the Crypto Market Bouncing Back? Here's What You Need to Know
This story is part of Power Money Moves, CNET's coverage of smart money decisions for today's changing world.
In July, the cryptocurrency market bounced back to a $1 trillion market capitalization (the total dollar market value of crypto today) for the first time in recent months. But while the market looks healthier than just a couple of weeks ago, it's still far from last November's peak, which reached $3 trillion. In an economy with high inflation and recession risks looming, is crypto still a worthy investment?
After bullish highs in 2021, cryptocurrency dropped to pessimistic lows this year, tumbling into bear market territory which investors are dubbing another "crypto winter." The $2 trillion crypto market crash wiped out investor gains, cost thousands of people their jobs and obliterated once staple digital currencies, including the crypto token luna, which lost all of its value following stablecointerraUSD's collapse in May.
While crypto is starting to trend upward, volatile highs and lows are nothing new in the crypto markets -- and skeptics have long characterized crypto as an empty bubble destined to burst. Critics have called bitcoin, stablecoins and NFTs simply a new digital version of an old con primed to swindle and scam. But investors see the world of digital coinage as a step forward, a kind of "Money 2.0" that will democratize finance and power the metaverse. Amid the seesawing prices and teetering sentiments, one thing hasn't changed: Cryptocurrency remains controversial, risky and wildly volatile.
Read more: The World's Biggest NFT Festival vs. the Crypto Crash of 2022
In simple terms, cryptocurrency is a digital token, ownership of which is recorded on a blockchain, a distributed software ledger that no one controls. This is designed to make it more secure, in theory. bitcoin and ethereum are the two most widely known cryptocurrencies, but more than 18,000 tokens are traded under different names (dogecoin is one famous example).
Despite gyrating prices and a relative lack of regulation, cryptocurrency is seen by many as the next financial frontier. Developments like President Joe Biden's desire to explore a digital US dollar to multimillion-dollar Super Bowl ads underscore a growing desire from powerful government and corporate institutions to quickly legitimize crypto in much the same way as stocks and bonds.
But it's worth considering whether cryptocurrency is a smart investment for you... especially in light of the current downturn and the ever-present potential for a major crash (in crypto and the US economy, generally).
"Cryptocurrency is one of those categories of investing that doesn't have those traditional investor protections," said Gerri Walsh, senior vice president of investor education at the Financial Industry Regulatory Authority. "They're outside the realm of securities trading. It's an area that's in flux, as far as regulations go."
Professionals caution that investors shouldn't put more than they can afford to lose into crypto, which offers few safeguards, plenty of pitfalls and a spotty track record. If you're thinking about adding crypto to your portfolio, here are five key questions to consider before you begin.
What are the risks of investing in crypto?
Before investing in crypto, you should know there's almost no protection for crypto investors. And since this virtual currency is extremely volatile and driven by hype, that's a problem. It's easy to get caught up in tweets, TikToks and YouTube videos touting the latest coin -- but the adrenaline rush of a market spike can easily be washed away with a dramatic crash.
You should be on the lookout for crypto scams. One often-used scheme is a pump and dump, in which scammers encourage people to buy a certain token, causing its value to rise. When it does, the scammers sell out, often pushing the price down for everyone else. These scams are prominent, and they took in more than $2.8 billion in crypto in 2021.
From the US government's current policy perspective, you're on your own. At this time, the government provides no deposit protection for crypto as it does for bank accounts. This may change following Biden's March executive order, which directed government agencies to investigate the risks and potential benefits of digital assets.
So far as we can tell, only one company offers crypto insurance: Breach Insurance, with a Crypto Shield offering that promises to cover your accounts from hacks. Other companies, such as Coincover, provide theft protection, which alerts you if there's suspicious activity on your account. Coincover maintains an insurance-backed guarantee that if its technology fails, it will pay you back up to the amount you're eligible for, which depends on the level of protection the wallet you use offers. (Neither Coincover nor Breach Insurance will cover you against scams.)
Despite all the hype, scams, periodic crashes (and persistent risks) in this market, Cesare Fracassi, who runs the Blockchain Initiative at the University of Texas, Austin, still thinks crypto has a viable future.
"I think crypto holds a possible solution to some of the problems of the traditional financial sector," Fracassi said. "The current, traditional financial system is noninclusive, it's slow and expensive and incumbents, including large banks and financial institutions, basically have a lot of control. I think crypto is a venue through which you can actually break the system."
How do I start investing in cryptocurrency?
If you're considering buying crypto now, as prices have dipped, it's worth noting that there's no guarantee the market will recover. But the simplest way to get your feet wet with crypto investments is to use US dollars to buy a cryptocurrency using a popular exchange like Coinbase, Binance or FTX. A handful of well-known payment apps — including Venmo, PayPal and Cash App — will let you buy and sell cryptocurrency, though they generally have limited functionality and higher fees.
Whether you're using Coinbase, Binance, Venmo or PayPal, you'll be required to provide some sensitive personal and financial information... including an official form of identification. (So much for bitcoin's reputation for anonymous transactions.)
Once your account is set up, it's simple to transfer money into it from your bank. And the barrier to entry is quite low: The minimum trade amount is $2 on Coinbase and $15 on Binance.
Read more: Best Bitcoin and Crypto Wallets for 2022
What percentage of my portfolio should be in crypto?
Crypto is so new, there isn't enough data yet to decide how much of your portfolio "should" be in cryptocurrency, according to Fracassi.
"We need decades of returns in order to understand whether a specific asset is good in a portfolio," Fracassi said. "We know that on average stocks return about 6% more than bonds. That's because we've had 60 to 100 years to see the average returns on stocks and bonds."
Like all investment decisions, how much you pour into crypto will depend on your risk tolerance. But investment professionals suggest that investors keep their exposure low, even for those who are all in on the technology. Anjali Jariwala, a certified financial planner and founder of Fit Advisors, recommends that clients allocate no more than 3% of their portfolio to crypto.
If I make money on crypto trades, do I have to pay taxes?
Yes. Whether you're buying, selling or exchanging crypto, the IRS wants to know about it. Your tax liability depends on your particular situation, but crypto investments are broadly treated like other investments, including stocks and bonds.
You don't need to report crypto on your tax return if you didn't sell or exchange it for another type of crypto. Buying and holding also doesn't need to be reported. If you did sell or exchange crypto, though, you'll need to report any gains or losses realized, just like you would for stocks and bonds.
Adding crypto trades won't make your tax return any easier. But popular tax software like TurboTax, CoinTracker and Koinly now connect with wallets and exchanges to automatically track your cryptocurrency holdings, sales and transfers.
Is there a way to learn about crypto without investing in the currencies themselves?
Buying tokens is the most straightforward approach to experimenting with cryptocurrencies. But other opportunities exist for exploring the crypto world while potentially protecting your money from seesawing swings.
Here are a handful of alternatives:
Buy shares of crypto companies. Many companies in the crypto space are publicly traded. Buying shares of Coinbase Global or PayPal Holdings rather than of the coin itself allows you to benefit from the business proceeds of these companies, which are in part generated by crypto. You can also buy shares of companies that make crypto-related hardware, such as Nvidia and AMD.
Invest in crypto ETFs or derivatives.Specialized exchange-traded funds, or ETFs, are available for crypto. ETFs are baskets of securities, such as stocks, commodities and bonds, that follow an index or sector, in this case, crypto. Futures and options are also available for some crypto products, though these advanced types of investment vehicles come with their risks.
Get a job in crypto.LinkedIn, Indeed and Monster list thousands of jobs in crypto. Whether you've got a traditional finance background or you're a software engineer, there's a boom in the blockchain labor market. There's also Cryptocurrency Jobs, a job board dedicated to blockchain careers.
Whether you'll plunge into crypto waters is ultimately up to you, but bear in mind it isn't the only place to start your investing journey. And beyond crypto, there are other digital assets to consider, too, including NFTs. But if you do take the plunge, be sure to invest in a good wallet to keep your digital currency safe.
Read more: Air Travel Is More Expensive in 2022: Here Are Smart Ways to Save Money When You Fly
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.
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Beyond Axie Infinity: 'Web3 Games' Hope to Convert Crypto Skeptics
Beyond Axie Infinity: 'Web3 Games' Hope to Convert Crypto Skeptics
The moment Chris saw Axie Infinity, he was hooked. He was once an avid gamer, playing hours of League of Legends every day, but stopped after deciding he was sinking too much time into an unproductive hobby. Axie Infinity promised something different. Inspired by Pokemon, it's a video game about training and battling monsters. That sounds like hundreds of other games, but one element distinguishes Axie Infinity. It's built on the blockchain.
Axies are the Pokemon of Axie Infinity, but they're owned as nonfungible tokens, or NFTs. A cryptocurrency called Smooth Love Potion is earned by battling these Axies. Players can also breed Axies, then either sell or battle with them. Chris, who declined to give his real name and goes only by the pseudonym Cryptobarbarian, felt he could justify playing video games again -- as long as it paid.
"It was fun for the first few weeks, but it gets boring really fast," the 28-year-old said. From there, he said, Axie Infinity became purely about making money.
Axie Infinity is a browser game. Accessing it is free, but you need to buy a team of three Axies to play. At its peak of popularity, bottom-tier Axies cost around $350 each, meaning playing the game once required a four-figure investment. The game allows Axie owners to lease out their monsters to other players, however. A longtime crypto investor, Cryptobarbarian told me he bought $30,000 worth of Axies and loaned them out in return for 40% to 70% of the profits. (CNET wasn't able to verify his purchases.)
The strategy paid off at first. Axie Infinity was a hot ticket in CryptoTown, generating over $15 million a day last August. But thanks to a combination of poor in-game economics, inflation threatening the real world's economy and a $600 million hack reportedly caused by a fake job posting, the price of Axies and the game's Smooth Love Potion cryptocurrency collapsed. The same monsters that cost hundreds of dollars last year now fetch under $10.
"I got around 100 players playing for me with high-end Axies," Cryptobarbarian said to me over Twitter, "which overall cost around $100,000 at the height and are now worth nothing."
To gamers, stories like this provide ample reason to reject "Web3 gaming," a term referring to the integration of NFTs and cryptocurrency into games. The significant carbon footprint of ethereum and bitcoin adds to the resentment. Be it Ubisoft bringing NFTs into Ghost Recon or Square Enix launching Final Fantasy 7 NFTs, gamers have fiercely resisted the blockchain coming anywhere near their industry.
Three Axies in Axie Infinity.
Sky Mavis
The fear is that crypto and NFTs will deform gaming into a side hustle, transforming its purpose from entertainment to moneymaking. Play-to-earn titles such as Axie Infinity prove the point; they're not games as much as they are financial speculation with the veneer of a game.
"I've never met anyone that played it just for fun," Cryptobarbarian said of Axie Infinity, "only to make money."
But Axie Infinity doesn't represent the future that many Web3 developers envision for gaming. Video game firms, both small and large, are developing titles they hope will clean the slate of Web3 gaming. All are on carbon-neutral blockchains such as polygon or solana, which are far more efficient than ethereum. (Whether they're as secure is an open question.) The goal isn't to make titles that entertain crypto speculators, but rather to make games fun enough that people can justify playing them regardless of whether they earn crypto.
"I've long been a believer that gaming is one of the consumer internet categories that is most likely to bring on mainstream adoption of crypto," said Amy Wu, head of gaming at FTX Ventures, the investment arm of the FTX crypto exchange. "But I also believe when you have a hit game with Web3 elements, it's very likely that the majority of players will never actually trade those tokens. They're just playing the game."
Free to play, play to own
The upcoming wave of Web3 games will range from free-to-play mobile titles to big-budget AAA games for PC and console. On the simpler end of the scale is Shatterpoint. With an art style inspired by Legend of Zelda: Breath of the Wild, it's an action RPG for Android and iOS that, on paper, looks like many top App Store games. There's a single-player campaign plus a PvP multiplayer mode. You earn new weapons and gear as you progress and, much like Fortnite and Call of Duty, the multiplayer is broken up into different "seasons."
But these seasons, segmented by "the shattering" in the game, is where the blockchain comes in. Players will be given a certain list of goals each season. If they complete one -- say, being one of the first 100 players to reach level 50, or staying atop of the PvP leaderboard for a certain amount of time -- their character will be converted into an NFT. Only a limited amount of NFTs will be minted per season.
There are two reasons why players might want to bother scoring an NFT. The shattering acts as an in-game reset, so any gear you've collected will vanish. NFT characters, of which there will be a limited amount each season, are permanent. However your character looks when it's minted into an NFT, with whatever combination of gear equipped, that's how it'll look in perpetuity. The second benefit is that these NFTs can be sold on a marketplace -- if there's a market for them.
A screenshot from Shatterpoint.
Estoty Games
There are three crucial elements that make this model sustainable, says Shatterpoint developer Benas Baltramiejunas. First, the game is free to play -- unlike P2E games like Axie Infinity, which requires the upfront cost of three Axie NFTs. Second, none of the items retained as an NFT can resemble "pay to win" mechanics. There can only be cosmetic benefits to owning it, not a competitive edge. Last, and most important, the game is designed with the assumption that most people playing won't be interested in minting their character as an NFT. It has to be fun for them too.
"We're using the NFT approach to create a bit of competitiveness, to incentivize players to play," he said. Shatterpoint is monetized by traditional microtransactions and from taking a small cut of NFT sales -- 2.5% is the traditional cut creators take. Baltramiejunas hopes that focusing on NFTs will result in both better game design and fairer prices. If developers can create a compelling game, revenue can theoretically be sorted out organically through whatever the player base sets as the value of the NFTs.
"In free-to-play games you have whales which account for 10% of the player base but 90% of the revenue," Baltramiejunas said. "If you only have those microtransactions for monetization, you are only focusing on those whales during the content creation, and you're leaving everybody behind. However, with NFT integration, you don't need to monetize that aggressively. The market decides."
NFT brands expand into gaming
While Shatterpoint is a mobile game that produces NFTs, the coming years will see many examples of the reverse: NFT collections turning into games. NFT drops, such as the famed Bored Ape Yacht Club, are doubling as crowdfunding platforms that produce games. Creators earn millions in royalties from sales, and use that money to expand the brand, theoretically boosting NFT prices in the process. Some brands are expanding into TV and film. Many are dabbling in gaming.
One such example is My Pet Hooligan. It's a product of AMGI Studios, an animation studio where former Pixar animator Colin Brady serves as chief creative and technology officer. The studio sees Unreal Engine 5 and blockchain technology as the next technologies that will drive entertainment, Brady told me at the recent NFT.NYC conference.
AMGI Studios' goal of 2021 was to use Unreal Engine 5 to create an animated film for Netflix at half of the traditional cost. While the film was being greenlit, Brady explained, AMGI technical lead Kevin Mack approached him about starting an NFT collection.
The result was My Pet Hooligan, a set of 8,888 3D rabbits. "We sold out in less than a minute, and all of a sudden people started saying, 'hey, when movie? When TV show? When video game?'" Brady said. The studio, filled with Unreal Engine programmers, already had a game in the works.
The result is Rabbit Hole, a sandbox game that looks like a mix of Grand Theft Auto and Ratchet and Clank. Rabbit Hole is currently in closed alpha, available only for My Pet Hooligan NFT holders with only one map functional. The build of the game I saw at NFT.NYC was intriguing. It was certainly incomplete, with noticeable frame-rate issues, but had the clear foundation of a fun sandbox game.
My Pet Hooligan NFTs on the OpenSea marketplace.
AMGI Studios/OpenSea
Rabbit Hole will eventually be available for PC and console. Brady says the goal is to reach 1 million players by the end of the year. To encourage the type of in-game socialization seen among players of Fortnite and Roblox, the studio developed a companion facial-recognition app for phones. If you perch your phone where a webcam typically is on a computer, it'll track your face and replicate all facial movements on your on-screen Hooligan.
Unlike Shatterpoint, which will integrate just NFTs, Rabbit Hole will use both NFTs and crypto. It will have a play-to-earn mechanic -- or play and earn, as technical lead Kevin Mack prefers to say -- in the form of in-game currency Karrots. These will be used to buy clothing, dances and more for the Hooligan avatars, but it doubles as a cryptocurrency that can be exchanged for ether or bitcoin. You can earn money playing Rabbit Hole, but Brady said it's not going to be life-changing cash.
Then there's the NFT element. This is primed towards holders of the 8,888 My Pet Hooligan NFTs. While players who download the game will start with a generic Hooligan, My Pet Hooligan owners will be able to use their NFT as an avatar in the game.
If the game gets popular enough, Mack said, there will be a certain prestige to owning one of these avatars. But he recognizes that to make that happen, the team has to make a game that people actually want to play.
"Superman No. 1 is valuable because Superman was a great comic," he said. "I think the NFT space for a while started to get that a little backward, where they thought the things were valuable just because they were collectable."
To infinity...
Of all the NFT brands expanding into games, Bored Ape Yacht Club is the biggest. BAYC creators Yuga Labs are developing Otherside, a "metaverse" MMORPG. The term "metaverse" is nebulous, but in this case it refers to an open world where items are owned as NFTs and in-game currency is crypto that can be exchanged for dollars. Details on Otherside are scant, but Yuga has a huge warchest for it. The game's map will be made up of 200,000 plots of land, which players can buy and own. Over $350 million was raised from selling land back in May.
Otherside may be the Web3 game with the highest budget, but perhaps the most ambitious is Star Atlas.
In development since 2020, the Eve Online-inspired Star Atlas is crafted like a traditional AAA game. Michael Wagner, CEO of Star Atlas development studio ATMTA, told me there are around 200 developers working on the game. It's scheduled for release in 2026.
Like Eve Online, Star Atlas is half game, half space simulator. Players ride spacecraft through the galaxy, socializing and battling with each other, exploring exoplanets, mining lands and meteors for resources and so on.
Games like Eve Online are giant, big enough for players to lose themselves in for years. Star Atlas hopes to mimic that feat. On the way to doing so, it uses almost every new tool Web3 offers.
It starts with funding. Wagner said $185 million in revenue was raised in 2021, through the sale of an Atlas token and NFT ships, with a "substantial margin" of that funding development. In the game, ships, items and land will be owned as NFTs. There will be a comprehensive crypto economy built atop the game, which Wagner says will allow for not just a market, but a labor economy too. The economy isn't just in the game; part of Star Atlas will be built on the blockchain, meaning elements will be open source. People will be able to develop apps on top of this data, for things like spacecraft maintenance or resource management.
Part of Star Atlas' economy will involve taxation. Just like in real life, a certain percentage of all sales will go to a treasury. There will be a DAO, or decentralized autonomous organization, in which token holders can vote on how these funds are used, be it to fund a new marketing campaign or a user engagement campaign. Then there will be another DAO specifically for the game itself, where token holders can vote on changes to the game, like additional features or ways to balance combat.
"We've structured the economics of the DAO such that we don't lose control in the near term," Wagner said. "But in the future, it would even be possible for them to vote us out as the principal developer of the game and bring in somebody new if they think they could deliver the product in a superior fashion to us."
Risks and rewards
The potential of Web3 gaming is tremendous, but its challenges are enormous. An examination of Star Atlas alone highlights many issues Web3 developers are likely to face.
First and foremost, making video games is hard. Making high-quality AAA games is harder still, even for veteran game studios, and the Star Atlas game alone is audacious in its ambition. The Web3 components offer additional opportunity for failure: An imbalanced economy, for instance, has the potential to completely break the game. Then there's security and regulation. Crypto has been a digital Wild West for years, with scams endemic. Regulators are slowly changing that. It's an open question whether Web3 gaming can survive in a regulated environment.
"In many countries, consumer protection is the No. 1 driver of regulations. Given gaming is so mainstream, it will be a topic," said FTX Ventures' Wu. "100%, these assets are going to be regulated."
The final issue is the very commodity that fuels crypto tokens and NFT projects: hype. Games are often promised on NFT project road maps before a single second of development has been undertaken. As Brady noted, it took less than a day for My Pet Hooligan holders to demand the announcement of a game, movie or TV show to sustain hype and lift the NFT value. Vaporware is sure to be common.
Games will need to be developed in a way that insulates players from the crypto-rich speculators. Speculators outbidding each other can artificially raise the value of in-game items, which blocks players who actually want to play the game from accessing them. Recall the speculative bubble that caused the cost of entry to Axie Infinity to inflate to over $1,000.
"I'm personally not interested in someone who's paying $100,000 for an NFT," said Brady. "That's a certain echelon. That's not normal society. I'm only interested if this helps every person."
Of all the developers I spoke to, a recurring theme was mistrust of any games company that promises a regular income, or dangles the possibility of earning enough money to quit the rat race. "Play-to-earn is not sustainable and is going to die off," said Baltramiejunas. Instead, the goal is for Web3 games to be more engaging than the games you play today, with the benefit of some pocket money on the side.
"If the game was good I would be satisfied with a little money as long as it's not totally a time waste," said Cryptobarbarian, reflecting on how much money he'd need to earn to justify playing games again.
"If I could earn some lunch money with it, that would be nice. But I think that will take at least a few more years before it happens."
