my journey from negative net worth to financial freedom

Money Hack: Bitcoin Trading in Korea

Money Hack: Bitcoin Trading in Korea

For the past 8 months I’ve been paying over $50 in international wire fees (every month) to transfer savings from my Korean bank account to my US bank account. I’ve paid over $450 total. I finally woke up recently and said to myself: no more! I decided I needed to find a better way, a money hack, to keep those funds in my wallet. Perusing reddit one day I found out that bitcoin (BTC) trading was a viable option for skirting international transfer fees. Huh…really? How’s that work? The posters’ generally described the process as: buy BTC in KRW and sell it for USD. Sounded simple enough but I knew absolutely nothing about BTC. So, off I went on a hunt to learn all I could about BTC – something I’d previously avoided because I thought bitcoin/cryptocurrency was way over my head. Now, I’m by no means an expert, but through research, reading, and questioning (thanks fb friends!) I think I now have at least a basic understanding of bitcoin/cryptocurrency.

Bitcoin/Cryptocurrency

Note: Bitcoin (BTC) is a type of cryptocurrency. Here are the videos and websites I used to gain a clearer understanding of bitcoin:

BTC Investing & BTC Trading Explained In 5 Mins:

A simple explanation of what bitcoin is and description of the technology supporting bitcoin

BTC Made Simple

A simple history of bitcoin and its role in disrupting institutional systems of banking and commerce

The Real Value of BTC

A bit more complex explanation of cryptocurrencies and their potential for revolutionizing the way we live

What is a Blockchain?

Simple explanation of the backbone of all cryptocurrencies: the blockchain. NOTE: Dash is a type of cryptocurrency.

Blockchain 101

This video explains the technical aspects of a blockchain, in a detailed but still fairly easy to understand way.

So, bitcoin is a type of cryptocurrency whose value is largely determined by the people who trade it. Transactions involving bitcoin are recorded on a shared ledger that everyone has access to but can’t edit. In addition, there are special people who confirm the accuracy of the ledger and are rewarded for their efforts in bitcoin. Buy/sell trades aren’t completed until approved by these “miners.” Other than that, bitcoin and other cryptocurrencies can be traded like any other currency or commodity. Bitcoin, like other commodities, is also in limited supply

Basic understanding of bitcoin…check.

Next, I looked for information on how to trade BTC and other cryptocurrencies (crypto) safely and securely. I learned a”wallet” is the way in which crypto is stored. Exchanges which trade crypto usually provide wallets (Coinbase, GDAX, BitStamp, etc.). However, there are different types wallets which offer varying degrees of security.

Hot wallets vs cold wallets

This article and video gives a quick and simple explanation of internet (“hot”) and hardware (“cold”) wallets and some specific brands to choose from.

Paper wallets

This article gives a good description of hot, cold and paper wallets.

So, hot wallets are internet based, cold wallets are external pieces of hardware, and paper wallets are literally pieces of paper containing the private keys to unlocking your stash of crypto. Paper wallets are supposed to be the most secure (if generated safely) because they’re not in any way exposed to hacking. Cold wallets are more secure than hot wallets because they aren’t linked to the internet. Hot wallets are the least secure because they’re linked to the internet. There is a higher probability of loss if your funds are kept in a hot wallet (i.e. if someone hacks the server/company which is storing your money or private keys). Experts say one should never store large amounts of $$  in hot wallets.

Understanding of digital wallets…check.

Trading Cryptocurrency in Korea

After my initial learning phase, my next question was: How do I trade BTC in Korea? My fb friends gave me tips on where to trade bitcoin.  They mentioned several exchanges, including Coinbase, Bithumb, and Korbit. On my own, I found two more exchanges, Bitstamp and Bitfinex. After doing some digging and more research I found out the following:

 

  1. As of 11/6/2017 if you live in Korea you cannot buy and sell crypto (BTC or otherwise) on Coinbase or GDAX (also owned by Coinbase) unless you use a VPN to mask your location.
  2. As of 11/6/2017 you cannot use debit cards from banks outside Europe to purchase crypto on BitStamp (even though their public site says you can)
    1. As of 11/20/2017 you can now use debit cards. However, in my opinion, their fee for use is too high (5%).
  3. As of 11/6/2017, BitFinex does not support trading crypto with USD.
  4. In order to buy and sell crypto on Korbit you have to be a Korean citizen or legal foreign resident.
  5. You cannot sell bitcoin (BTC) for USD on Korbit nor Bithumb.

 

Bitstamp and Bitfinex are international exchanges, meaning you can buy and sell bitcoin using a variety of fiat (paper) and digital currencies (i.e. buy ethereum using bitcoin). Bithumb and Korbit are Korean exchanges so you can buy and sell bitcoin using only won (KRW) and other digital currencies. Coinbase/GDAX are American based exchanges. You can buy and sell bitcoin using USD, EUR, GBP and other digital currencies.

Korbit or Bithumb

The experiment:

 

  1. Buy BTC or other cryptocurrency for KRW on Korbit or Bithumb.
  2. Transfer the BTC/crypto to an exchange which supports USD withdrawals.
  3. Sell the BTC/crypto on this exchange for USD.
  4. Withdraw USD into US bank.

 

If I could match the KRW to USD exchange rate (as close as possible) while paying fees <$56 = success!

My final question: should I choose Korbit or Bithumb? I decided to register with both to see which I preferred. The winner: Korbit. I chose Korbit because their English website is far superior to Bithumb’s. Bithumb’s “English website” is simply a translation through Google Translate. If you know anything about Google Translate you know it’s not the most accurate. Because of this, navigating Bithumb’s website was ultra confusing. Korbit’s website is an actual English version and is much easier to navigate.

The downside to Korbit is their verification process. But the initial process to register is pretty simple (though their public website doesn’t do a good job of explaining how). Here are the steps I followed:

 

  1. You have to be a Korean citizen or legal resident with a Korean phone number and bank account.
  2. I went to the website and followed instructions for registering.
  3. After registering, I verified my email.
  4. To complete step 1 of the verification process I entered my personal information, including DOB and mobile number.
  5. I tried to verify my phone number but couldn’t. Probably because the spelling of my name is incorrect in my Korean mobile carrier’s, KT, system.
  6. Korbit’s FAQs state to email proof of ID documents if the system can’t verify your ID.
  7. However, I later found that the proper procedure is to upload them through the Documents section on the verification page.
  8. After submission, I got an email about 2 days later saying I was denied – huh?
  9. I emailed them back demanding a reason for the denial and received an email the next day saying I was approved.
  10. After being approved, I requested a virtual account (through the Korbit Deposit page).
  11. I then went to my bank and deposited money through the bank ATM to the virtual account number I was provided (which essentially is a hot wallet held by Korbit).
  12. From there I found it pretty simple to navigate the website to buy crypto.

 

One thing I was sure to check was Korbit’s trading fee structure. Apparently, all exchanges charge fees and a portion of these trading fees are based on the type of cryptocurrency you are trading. Korbit’s trading fees are not excessive though and they do a good job explaining how much they are whenever you trade. There are no deposit fees. However, there are fees for withdrawing or transferring funds (crypto or fiat (paper) money) from your Korbit wallet to another exchange, wallet, or bank account. Again, Korbit does a good job explaining how much these fees will be before the withdrawal.

Before preceding with my main plan, I decided to trade a bit of KRW just to get the hang of it. I deposited a few KRW into my Korbit wallet. I bought BTC right before the price took a major dive. A little later, I bought bitcoin cash (BCC). I left those funds sitting in my Korbit wallet. After 2 weeks, I was pleasantly surprised to find I’d made a small return (6000 KRW) when the price of both currencies rose significantly. I then sold those currencies for KRW and withdrew the KRW back into my Korean bank account (cost: 1000 KRW). That transfer took a few hours to complete.

Later this month, I moved forward with my experiment. I decided to buy ethereum or ETH (instead of BTC) because I read the fees for trading this crypto are less than BTC. I also decided to use GDAX (owed by Coinbase) to sell my ETH for USD. I found out about GDAX in a fb crypto group. Unlike Coinbase, GDAX allows you to set your own price for buying and selling. Ultimately,  I bought $1,200,000 KRW worth of ETH on Korbit and sold it for $1071 USD on GDAX. I paid a total of 6860 KRW ($6.30) in fees, all to Korbit. My trade on GDAX was free. The ACH transfer (withdrawal) to my US bank was also free however it will take 4 business days for my funds to be credited. This is a drawback, since my international wire usually takes 1 business day. However, I’ll gladly endure the small delay for $50 in savings. All in all, my experiment was a success and I’ll be using crypto trading from now on to transfer KRW to USD. But there are definitely some lessons I learned during this process.

Lessons Learned

Choose your crypto wisely

The fiat (paper) currency exchange rate at the time I made my transfer was: 1,200,000 KRW = $1,106 USD

What I failed to consider was the difference in price between USD ETH and KRW ETH. Even though they are the same currency (ETH) they were being traded at different prices on each exchange (Korbit and GDAX). ETH was trading for about 457,000 KRW on Korbit ($422 USD) and about $410 on GDAX. I essentially bought high and sold low. I should have picked a different crypto (one where the difference in prices was zero or close to it). Alternatively, I could have held my ETH in my Korbit wallet until it increased (possibly) in value but that would be a risky move since the price could’ve actually dropped instead. Update: it actually rose to $424 the day after I sold my ETH for $410 (damn!)

Educate yourself and stay informed

I joined a crypto-investing  group on Facebook: Financial Juneteeth- Black Crypto Investing to learn more about crypto. I’ve found the group to be really helpful in getting questions answered and learning about other’s experiences and strategies for trading crypto.

Buy and Hold investing

My initial interest was simply to trade BTC to transfer my KRW to USD and bypass my banks’ fees. But all my reading and researching has led me to believe that crypto is a good (but risky) investment. To minimize my risk, I plan on investing only money I can afford to lose and choosing a few cryptocurrencies whose value I think will grow in the future. My strategy will be to buy and hold. Right now, I’m looking at Ripple, Steem, Litecoin, Ethereum, and Dash. If my strategy works out – in the future I could have a nice little stash to use in helping me reach my FIRE goals.

Are you interested in or currently investing in crypto? Leave a comment or feedback below!

 

Motivating Mantra: “Push beyond your limits”

I’d initially avoided reading up on crypto because it sounded like something that was way beyond my comprehension. Ultimately, the $450 I’ve thrown away these past 8 months was enough of a boot kick to push me towards learning. Self limiting beliefs can really do damage in holding us back from things which in the end can bring reward. Something for me to keep in mind as I move forward.

 

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