Note: This story was written by Jon Creasy, and has been posted to BlockChannel with permission.
Obligatory Disclaimer: To modify a quote from Tim Ferris, “I am NOT a financial advisor, and none of this advice should be taken without speaking to a qualified professional first. Also, my results [are most likely] due to pure luck and zero skill.” But…this is working for me.
As I was going through the awesome new “Quora-for-Crypto” platform Cent the other day, I decided to ask my fellow cryptonians about their worst beginner mistakes. For a reward of $10 worth of ETH (‘cause you get paid to answer questions over there), I got some awesome answers.
Here, for your pleasure, is a list of the ten mistakes every newcomer to crypto should avoid like the plague.
1. Not #DYOR (Doing Your Own Research)
At the end of the day, you are the one using your hard-earned cash to purchase cryptocurrency. If you don’t understand the product, or the value, and you’re only listening to “experts” on Medium, Twitter, or Slack who tell you when to buy and sell, you’re going to get in big trouble and lose a lot of money.
As my friend from Cent brilliantly pointed out, “If you rely on someone other than yourself to buy crypto, you also have to rely on them to know when to sell.” Don’t be a noob. Do your own research.
2. Don’t start mining expecting big profit
It’s true, the original miners of Bitcoin and Ethereum are most likely now multi-mega millionaires. It may be tempting to go out and buy your very own rig to start getting “free crypto” ASAP, BUT DON’T DO IT (without DYOR first).
The reality is that mining takes up loads of electricity — so unless you can get ultra cheap/free electricity, mining is simply not worth it — unless you live in Siberia and own a massive warehouse that can store hundreds of rigs. Even then, it’s probably best for newcomers to avoid mining.
If you really want to get into that sort of thing, consider proof-of-staking with Decred, or maybe vesting with NEM (BlockChannel reminds you to always do your own research, and never directly take advice from 3rd parties without due diligence).
3. Lack of patience
I have to admit that this one can be a toughie, especially if you keep up with crypto Twitter at all. We are inundated with “OMG HUGE PUMP BUY BUY BUY” or “Welp, looks like BTC is trashed, better sell.”
While this info may have some merit, it is physically impossible to keep up with it all, and, generally speaking, the patient are the most rewarded. For instance, I gained 46,000% growth by just holding my Decred for two years. Had I sold when it was worth $0.20, I would have lost around $18,000.
This doesn’t necessarily mean no gains can be made from short term trading. Quite the opposite is true. But if you do decide to trade short term, have a plan, and stick patiently to that plan.
To quote my idol Warren Buffett, “the stock market is a device for transferring money from the impatient to the patient.” Crypto is similar to the stock market in this respect.
4. Selling when it’s “high enough”
“It’s never to high HODL.”
What my friend on Cent meant by this is that you never know how valuable a certain token will get. I bought Ether when it was worth about $8.00, and I must say that it was tempting to sell when it was worth $100. I would have regretted that badly.
It’s important to make a plan for selling your crypto. You must have an end-game, and you must stick to it, no matter what. Was it stressful watching my portfolio lose ~$10k in 36 hours? Of course. Did I sell? Absolutely not.
5. Not holding your private keys
This may be the largest mistake in the crypto community to date. If you’re unfamiliar with what your “private keys” are, or what types of wallets you should be using, check out this previous article.
Hundreds of millions of dollars have been lost because people entrusted all of their crypto to an exchange that was compromised, or a wallet service that crashed. Always hold your keys. K? K.
6. Failing to find a good community/s to learn from
I really liked this example mistake from Cent. Personally, I’m who I am today because of the support, encouragement, and knowledge that I’ve picked up from amazing crypto-communities. Going it alone is not an option here. You need good crypto friends.
A few of my favorite communities:
7. Sending to the wrong crypto-wallet in an exchange
This is a technical mistake that a ton of people do pretty often, and it’s easy to fix.
Double-check that the exchange wallet you’re sending funds to matches the token you’re sending. Don’t send BTC to an ETH wallet. Don’t send OMG to a CVC wallet.
It may be ok to send multiple tokens to MyEtherWallet as long as they’re ERC20, but it is NOT ok to do that on exchange wallets. Don’t lose your crypto. Send to the right wallet.
8. Not keeping hard copies of everything
Let me be very clear here. I’m certainly not advocating you keep a Word doc with all your passwords stored on it. That isn’t a hard copy.
What I mean here is that you write down all your passwords, private keys, etc., print them off, and store them somewhere secure. This way, if your computer should crash, or get stolen, or compromised, you can restore all of your crypto onto another device.
9. Not using 2fa or saving records of the code
I totally understand that exchanges can be a necessary evil. However, that does not excuse you from enabling two-factor authentication whenever possible, and saving the restoration code somewhere offline.
I learned my lesson with Mailchimp, thank goodness. I forgot to save the restoration code, and when I got a new phone I had to contact customer support to get my account unlocked.
There isn’t customer support in most cases of the crypto world whenever you neglect to back up your two-factor authentication. So please, do that.
10. FOMO (Fear of Missing Out)
FOMO haunts us all. Thoughts like “If only I had gotten into the SchmeckleToken ICO” spur us into making rash decisions down the road, because we’re afraid we’re going to “miss out.”
Reign it in. Realize that there are new opportunities in the crypto world every single day, and you’re better off just DYOR and telling FOMO to leave you alone.
So there you have it. Ten mistakes every crypto newcomer should avoid. I hope one helped you! If so, comment below, tell me which one, and hit the 👏 to help others find this article.
If you haven’t invested in Bitcoin yet and you want to join the movement, the easiest way to begin is with Coinbase. Get $10 of free Bitcoin when you use this link — it’s my referral link — and get started now!
If you’d like to start using an exchange instead of Coinbase, Binance is a great place to start. Sign up here!