What are the Top Five Things You Must Not Do When Investing in Cryptocurrency?
Here are top five tips & tricks you mustn’t do when investing in cryptocurrency.
Do Not Lose Your Seed Words For Your Wallet
The seed words in your wallet are there you help you recover your wallet in the case of your phone getting lost, your computer dying, or if your backup files get corrupted. They are one of the coolest inventions ever with regard to finance. With those words, a nuke can hit the country and you will still be able to get your funds bank. The government can raid all the banks like that have done in other countries and you can get your funds back in a different country. It’s pretty cool.
However, if a bad guy gets your seed words, they too can recover your wallet. They can then take your funds for themselves. There are definitely ways to reduce the damage in the event this happens:
- store funds in different coins, which have different wallets.
- store large sums of one coin in separate wallets
- do not leave your seed words on your computer or on a cloud platform
- write your seed words down, and store them safely.
Do Not Keep Funds on an Exchange or Give Your Keys to Someone Else
This is a nascent industry and it is still learning the ropes. It’s expected that some level of hacking happens, heck, Equifax has been around forever and they still cannot keep their data safe. Banks lose funds all the time, but your tax dollars supplement them (never mind about the fact that 90% of that money is birthed out of thin air in a reserve banking system).
Leaving funds on an exchange risks you losing your funds. Some exchanges are rich enough and insured well enough to cover losses, like Binance recently showed. However most exchanges are not, the smaller they are the worse this condition. The Cryptopia hack is ending up with them liquidating and people losing a lot of funds forever. Mt. Gox is of course the most famous for this.
If you want to use an exchange, the best things to do are:
- Use biggest and best exchanges: Coinbase, Gemini, Binance.
- Deposit funds, make exchange, withdraw funds.
- Use 2FA!!!! and don’t deposit any funds until 2FA is set up
Do Not Fail to Follow the Projects You Have Invested in
I can’t stress this enough and I thought about putting it first. The single most stupid thing people do in crypto is to not check on their projects. “HODLing” does NOT mean “ignoring”. Lots of things happen in crypto which moves at the speed of sound compared to stocks, which are hindered by insane regulations designed to keep rich people rich and the rest of the people out of the industry without rich person gatekeepers. Crypto is different.
So when you buy into a project, AT MINIMUM, check in every month on telegram or discord and ask “Is there anything we have to do to get prepared for?”
An anecdote: One project I am in, The Divi Project (like Dash, but far more inclusive, with a far better economy, and one of the best communities in crypto), started as an ERC-20 token. This token was never going to be the actual currency from day 1. It was always intended to be swapped for the real coin when the main net was ready, like a bazzillion other coins. Anyone who read the whitepaper or spent 5 minutes in the Telegram would know this.
When they performed the swap last year, they kept it open for 4 months. Due to SEC uncertainty and the legal framework mostly in the US, it had to be closed. Facebook posts, Telegram announcements, Twitter Announcements, Emails, were all used to get the word out for the last 2 months about when the swap would close. Still, after the close date there were stragglers, who the project members nicely accommodated. But even today, now that the bull market has started again, people are still coming in and claiming they didn’t know about the swap, and then proceed to get mad, when it was they that failed to check or outright ignored the announcements that were directed at them.
Do Not Invest More Than You Can Afford Lose
This is true for stocks, for real estate, or any investment. You don’t want to be in a condition where your investment tanks and you are homeless.
Do Not Fail to Secure Your Computer
The #1 way people lose funds, for crypto, for bank accounts, for PayPal, or whatever, is through their own computer and their own actions or non-actions. The less familiar you are with an industry, the more likely you are to get phished and attacked. It may not even be your fault that you are getting phished.
So secure your computer.
- Use an anti-virus.
- Use a VPN.
- Don’t put all your passwords in a single file called “Passwords to everything”.
- If you can handle it, use a Mac or Linux computer.
- Don’t talk to scammers on telegram. Remember the movie Boiler Room where scammers from stock market investing houses got people to invest in pure scammy penny stocks? Or when banks made junk loans to people who bought houses they couldnt afford. Well, those same scam artist type people are in crypto too. Stay away from them, some of them are pretty tricky.
- Don’t download stuff from unverified websites (look out! phishers are good at making clone websites), and when you do CHECK the file and the link it came from