Top 12 Do's and Don'ts of Bitcoin
Bitcoin is back! Year-to-date, the price of the digital currency is up by more than 200%, and people are taking notice. Bitcoin Google search volumes are up, brokers are advertising their crypto offerings again, scammers are coming back, and first-time buyers are knocking on the doors of exchanges.
To help crypto newcomers avoid classic beginner’s mistakes, we have compiled a list of the top twelve do’s and don’ts of investing in bitcoin.
Educate yourself about crypto before you invest
Before you purchase any digital asset, conduct thorough research on what you intend to buy. As the old investing adage goes, “don’t invest in what you don’t understand.”
It is essential to educate yourself about how the blockchain and cryptocurrencies work as well as the differences between the most popular digital assets. That way, you will understand the current and potential future value of each coin and token you are considering buying.
Read more: Introductions into top digital assets
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Only use reputable exchanges
There are multiple ways to acquire digital assets. Once you know which assets you want to buy and you want to use an online exchange it is important to only transact on reputable, secure platforms.
There are hundreds of bitcoin and altcoin exchanges but only a handful of them regulated. The majority of exchanges do not provide much transparency as to how they operate, how well they are funded or how they handle their cybersecurity. Dealing on small, overseas exchanges that operate under little regulatory oversight can lead to an unexpected loss of funds due to an operational error, an exchange hack or an exit scam. Unfortunately, all these things have happened in the past, which makes a strong argument for only dealing on reputable trading platforms. However, even those might be hacked.
Read more: Exchange reviews
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Securely store your digital asset holdings
As soon as you have purchased bitcoin and/or other digital assets, it is imperative to store your holdings in a secure personal wallet. There are a wide array of wallets to choose from, but hardware wallets, such as Ledger, Trezor, KeepKey and BitLox, are generally considered the most secure for long-term investors.
Read more: Attacks on Bitcoin Holders Are on the Rise: How to Protect Yourself
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Invest only as much as you can afford to lose
It is also important to note that when it comes to investing in digital assets like bitcoin, you should never invest more than you can afford to lose.
While bitcoin is on the rise and many experts believe we will see it surpass its previous highs sooner than later, the reality is that bitcoin is a volatile asset that can easily lose 50% of its value in a short period of time. Hence, experts agree that it is best to only commit a small percentage of one’s overall investment portfolio to digital assets if you want to invest in the asset class.
Read more: 10 Bitcoin Trading Mistakes Beginners Need to Avoid
Don’t let the volatility spook you
Bitcoin and digital assets are volatile investments. The price of bitcoin can easily go up or down ten percent in a matter of days (if not hours), so it is important to keep your cool as a crypto investor. Remember, this is not the stock market. Crypto experiences much bigger intra-day price swings and that’s ok.
If the volatility is making you nervous, maybe you are better off not checking the value of your digital asset portfolio daily.
Read more: 10 Dangerous Traps For Crypto Traders
Don’t leave your funds on exchanges
Exchange hacks are, unfortunately, still a widespread occurrence in the cryptoasset markets. Even one of the market-leaders, Binance has not been immune from cyber attacks. Hence, it is imperative to transfer your digital asset holdings off exchanges and into your personal wallet(s) as soon as you have executed your trades.
If an exchange is hacked and your funds are affected, it can take weeks to get your funds back (provided the exchange will pay for the security breach) or you will lose all your funds with little to no legal recourse to recuperate them.
Read more: The Paper Wallet Debate: Are They Safer or Riskier than Other Wallets?
Don’t listen to what mainstream media says about Bitcoin
Mainstream media has claimed that Bitcoin has died over 300 times. At the same time, mainstream media loves to report about bitcoin when the price is skyrocketing as it drives views and clicks from interested investors.
Generally speaking, you should be very cautious towards mainstream media when it comes to any sort of financial advice. The same also holds true for investment in bitcoin and other cryptocurrencies. However, choose your crypto media sources very carefully, also, as the space is known for unprofessional reporting, biases and hidden paid articles.
Don’t fall for a scam
Unfortunately, with the rise in the price of bitcoin, the scammers are coming back into the market as well. There are a number of different crypto scams to look out for but when it comes to investment scams, the simple rule “if it looks too good to be true, it probably is” generally holds true. Avoid investing in any type of investment plans or schemes as they will likely turn out to be nothing more than Ponzi schemes. Instead, buy and hold the assets you want to buy directly if you want exposure to bitcoin and co.
Read more: How Cryptocurrency Scams Work
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Don’t take part in pump and dump schemes/groups
Pump and dump groups are very common in the crypto markets as it is easy to manipulate the price of small-cap coins and tokens that see very little trading volumes. It may seem enticing to join these groups/schemes but aside from the fact that these operations are illegal, you will also likely lose out as someone who tries to ride the pump before the dump happens.
Read more: Are Paid Crypto Groups Worth Your Money?
Don’t get fooled by @bitcoin
The prominent Twitter account @bitcoin, which has over 950,000 followers, is not actually about bitcoin. It is a promotional account for bitcoin cash (BCH), seemingly run by bitcoin cash-focused news outlet Bitcoin.com.
Newcomers following this account may end up believe that bitcoin cash is the same as bitcoin and buy the altcoin instead. Hence, it is best not to follow and take advice from this account. Unless, of course, you want to diversify into bitcoin cash (BCH).
Read more: Bitcoin.com Accused of Misleading People into Buying BCH
Don’t try to buy “the next Bitcoin”
Finally, a very common mistake of new crypto investors is to try to find “the next Bitcoin.” There are a number of cryptocurrency projects that claim to be the next Bitcoin in an (effectively fraudulent) attempt to entice newcomers to buy. There is only one Bitcoin and their altcoins are not it.
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