Saturday, February 4, 2023

Nine New Year’s Resolutions for Crypto Newbs

Nine New Year’s Resolutions for Crypto Newbs

2017 may go down as the year that saw massive increases in the number of people joining the cryptocurrency revolution. Popular exchange Coinbase has been hardly able to keep up with the onslaught of new members. The number of unconfirmed transactions on the Bitcoin network has been repeatedly breaking records. With all these new people joining the fold, there is a lot of misinformation, bad advice, and just a lack of good advice to follow on the internet. So if you are new to cryptocurrency this year, this list is for you. If you’re a seasoned crypto vet with nightly flashbacks to the Mt Gox massacre, you still should run through these items and make sure you’re keeping yourself secure. We’re going to discuss nine New Year’s resolutions for you to take on this year to ensure crypto success in 2018.

Also read: Bitcoin and Crypto’s Crazy Year: 2017 Brought Tokens, Forks – and Piles of Money

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Look Before You Leap – Understand What You’re Investing In

What is bitcoin? What is a private key? What is a seed phrase? If you can’t answer these questions, you probably shouldn’t be getting involved in Bitcoin – or any other cryptocurrency just yet.

Many people who’ve joined the crypto world this year probably still don’t really understand what cryptocurrency is. They probably think it’s something like stock. You buy it at price X, and sell it at price Y for a profit. Cryptocurrency is so much more than that, and a fundamental understanding of not only what it is, but how it works, is essential for success in this field.

This mindset also applies equally, if not more so, to ICOs. New ICOs are launching essentially every day. The truth about ICOs is that in the long term, nearly all of them will fail. That doesn’t mean every single one will fail, though — and there’ll be plenty of short-term gains even if they do.

Some of them represent fantastic ideas that can fundamentally change entire industries, if successful. The responsibility is on you, the investor, to read their entire whitepaper, look into who is running the project, and understand the technical details before investing. Lack of regulation just means you need to do your own due diligence.

Learn to HODL and Train Your Weak Hands

panic sellingYou’ve probably come across the term “HODL” before, but if you haven’t, it basically means to hold onto your cryptocurrency investment and not sell it out of fear when the price dips. If you’ve successfully completed step 1, then you should have complete faith in the project you have invested in, and understand what is causing a price to dip, or surge.

Members of the community refer to those who “panic sell”, or sell out of fear, as having “weak hands”. That being, they aren’t strong enough (in willpower) to hold on when prices go south. This year, only invest in projects you believe it and hold on to them during normal market fluctuations.

(For the record, the deliberately misspelled “hodl” comes from this now-legendary drunken post on BitcoinTalk, written as the bitcoin price was falling in December 2013. What seemed like a stupid decision at the time became pretty lucrative in the longer-term — so let that be a lesson.)

Don’t Use Exchanges as a Wallet, or Keep Funds Stored on Exchanges

2017 saw a huge number of exchanges hacked. Each time an exchange is hacked, there is a big chance that you could lose some, or all, of the digital assets you kept there.

When you put cryptos on an exchange, you are basically giving that exchange your money, and getting a promise of repayment in return. Even some of the most popular exchanges are run by largely anonymous individuals, who may be anywhere in the world.

Don’t treat an exchange like a wallet. If you need to use them, make your exchanges then withdraw everything when you are done.

Use a Hardware Wallet

Now that you aren’t using an exchange like a wallet, you need to keep your cryptocurrency secure. Not only can exchanges be hacked, but individual devices like computers and phones can be hacked as well. Back in September, one poor soul was robbed on 973 ETH straight from their mobile Jaxx wallet.

If you have a lot of money (by your own definition) in crypto, you owe it to yourself to keep it secure. The easiest way to do that is by using a hardware wallet like the Ledger, KeepKey or Trezor.

Trezor wallet

Secure Your Seed Phrase

You might remember seeing it when you first set up your wallet. The program you used gave you a 12- or 24-word phrase. It was probably something like ship three imbalance replace… you may have just blown passed it as you were too excited to get into your new wallet program or hardware wallet.

The truth though, is that this “seed phrase” is what gives you (or anyone else with it) total access to everything in the wallet. Not only that, but if you were to lose your device, or if your computer running the wallet software has a hard drive crash, that seed phrase is the only way you can get your funds back.

So this year, be sure and secure your seed phrase. In the words of Andreas Antonopoulos, don’t get too smart. Just use a pencil and some paper, and write it down somewhere that is safe. And although it seems like an easy option, don’t screenshot it — that just means anyone with access to your phone’s photo library has full access to your crypto balance.

Keep at Least Some Assets in Cold Storage

When we say “cold storage”, it means to keep your private keys in an offline storage medium. For example, this could mean a paper wallet, a hardware wallet, or even just stored on a computer that is never connected to the Internet.

So what’s the point of cold storage? It serves two purposes: the first one is to keep your private keys completely secure from hackers. If your keys are offline completely, then hackers cannot steal them.

The second benefit is a bit more psychological. When prices dip you may be tempted to sell. If, however, your private keys are in cold storage, selling becomes much more difficult, so you are less likely to do it out of fear.

If you do decide to use a paper wallet, make sure you read and understand how they work, and also ensure that it is stored in a way that is protected from fire, moisture, mold, or theft.

Don’t be tempted to use a “brain wallet” generated from a passphrase you can easily remember — hackers figured out how to clean those out years ago. Of course, if you can remember an entire 12-24 word random seed phrase — and trust yourself to never get it wrong — then go for it.

Don’t Fall for Crypto Ponzi Schemes

If you look at a lot of cryptocurrency related websites, you’re guaranteed to come across advertisements, messages, or affiliate links for what are essentially Ponzi schemes. Also known as HYIP scams, these sites will promise you outrageous profits in incredibly short times, and all with a 100 percent guarantee (until you read the fine print).

mmm Ponzi scam
The notorious MMM “investment” scheme

These kinds of programs typically offer one percent per day or more. Some have even offered to double or triple your money in a short as a week. The scams will usually try to offer an explanation for how they earn such an incredible return.

Sometimes your friends will invest in these schemes, and tell you about the incredible returns they’re getting. Press them further and you’ll often find the “returns” exist only in their proprietary account, with little or no chance to turn them into hard cash.

Some examples have been coin mixing, lasers, artificial sapphires, lending, and a myriad of others that are all lies. These scams may appear to make money for some people for a short time but these programs typically collapse very quickly and then the owners shut down the site and disappear along with all deposited funds.

Because there is no single central government to shut down the schemes, they have been popping up one after another with no sign of slowing. They’re especially popular in Southeast Asia. This year, take some time to learn what a Ponzi scheme is so that you don’t become a victim to one.

Make a Long-Term Plan and Stick to It

Many investors new to cryptocurrency are not only new to crypto, but they’re also new to investing at all. One of the most important things you do as an investor is to make a plan, and stick to it. This one ties into HODLing and not selling out of fear.

Here’s an example: make an investment plan to buy and hold bitcoin, litecoin, and ethereum for a period of at least five years. As part of your plan, choose a reasonable amount of money to put into them each month. Then stick with this plan and, no matter what the market does, don’t deviate. If you have a deep understanding of cryptocurrency, this can also help guide your own investment plan.

Keep Your Goals Realistic, and Your Head out of the Clouds

Ever since bitcoin went from less than one cent to $20,000 USD each, many people have entered the crypto space with dreams of turning pocket change into a fortune.

unicornAt this point, no-one knows if, or when, or how many crypto assets will see a return like bitcoin did. As such, it is important that as a cryptocurrency investor, you keep your goals and expectations realistic and grounded in reality. For example, don’t take out a second mortgage on your home or max out your credit cards buying bitcoin and expect to see massive 1000 percent or more returns within a year or two.

Yes, it is possible that you may see these kinds of returns. However, you should never “bet the farm” on something that is still so new — even if it ends up working for a lucky few.

If you make regular, reasonable sized investments in cryptocurrency, and they all end up dropping in value, you will be much better off than if you sold your house to buy bitcoin — and in the next minute, bitcoin drops to zero.

In conclusion, 2017 was an exciting year for a bitcoin and other cryptocurrencies. 2018 is gearing up to be even more exciting. So make sure you keep yourself protected, smart, and on a reliable and realistic plan for the future.

Do you have any special New Year’s resolutions for crypto newbs? Let them know in the comments.

Images via Pexels, Pixabay, 

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