Bitcoin and the world of cryptocurrencies have attracted different segments of users and investors. From the experienced to the newcomer, people who are trading different cryptocurrencies can be found everywhere.
However, not everyone’s experience is as positive or safe as it can be. We discuss the top five things every newcomer, and/or crypto head, should keep in mind when dealing with cryptocurrencies.
1. Invest with a plan
Whenever you buy a coin keep in mind the date or price you want to exit with. Whatever fluctuations happen in between are just that - turbulence along the way. If you believe in one currency that it will reach €100 or €100,000 then that’s the plan. If you dig deep on BitcoinTalk you will find people saying that it’s too late to buy crypto when it was already at $1 since it had already peaked. Your timing or price plan would have helped you out in this position.
Equally important, if you invested with the goal in mind to only sell say after 24 months, then stick with that deadline. Having a plan will save you heart and headache that comes with the highs and lows of the crypto world.
2. Always hold your private keys
Their importance is in the name. Private keys are unique to your wallet. Without them, no one can access your wallet (unless your password is weak). By generating and holding them, you are able to recover your wallet and/or claim any coins that resulted from a fork e.g. bitcoin cash.
You might find yourself in a position when you’re not holding your private keys by storing your coins on an exchange wallet. While this is great for having your account funded and ready to trade, it is not a sustainable long-term solution.
Majority of projects have developed desktop, mobile or hosted wallets for their coins. Bitcoin wallets like Bitwala’s allow you to hold your private keys while being user-friendly. Cold storage wallets like Trezor and Ledger are also great for security, convenience and the range of coins that you can hold there at once.
3. Enable 2 Factor Authentication everywhere possible
Using the standard security procedures (username and password) has become easy for criminals to break into peoples’ accounts.
2FA is an extra layer of security that requires an additional piece of information which is generated only on a secondary device of your choice. The most common example is when you do online banking. In most cases, the bank sends you an SMS or calls you sometimes to confirm that it is you indeed who’s doing a transaction.
Most cryptocurrency exchanges support this option as well these days. Connecting your phone, via a 2FA app, is a widely available option. Once connected, the app generates a new code every 30 seconds, therefore, increasing your level of security.
4. Don’t be impatient
There is an old saying in the investment world, time beats timing. It means that while some people might have made a killer profit through being the first (timing) i.e. anyone who got into bitcoin before 2013 or Ethereum before 2016 or any other ICO coin, time and patience usually balance things out*.
This doesn’t necessarily mean that no gains can be made from short-term trading but the opposite. If you decide to trade short term, know and map out your risks and stick to your investment plan.
5. Don’t buy anything without reading
Another good saying in the investment world goes like this: only invest the amount that you can afford to lose. A better approach is to read and research the origins and merits of the coin or project you’re about to buy into.
ICOs, like any investment opportunity, should be approached when you have all the information in front of you. Study the team’s experience, consult experts, and cautiously sources online ;), and the project’s potential.
Above all, evaluate returns and the offer with care and objectivity. If increasing your investment by 4000% in two weeks sounds ok to you from a project with a weak team and no running prototype, please familiarise yourself with Eisegesis.
Bonus: Don’t underestimate the cost and effort of mining
If you decide to start mining or forging cryptocurrency, great for you but, be aware of what demands it comes with. While mining first movers might have made millions in profit, not everyone can pull it off.
Among the first things that you should consider is the cost of electricity. So unless, you can get very cheap, borderline free, source of electricity, mining is not worth it. Another thing mining requires is skills. Setting up a mining operation does require a bit of technical knowledge that’s a bit more complex than the one you need to conquer an IKEA assembly guide.
If you’re interested in getting into that sort of thing, consider proof of staking. It is a mechanism whereby you stake your coins with a dedicated, and most often voted on based on experience and contribution to the network, individual or party. They then send you part of their profit, based on the number of coins that you staked, as a reward.