The Bitcoin advice I gave to my father-in-law (who is 72 this year)
It dawned on me when my father-in-law, a bright and curious 72 years old gentleman asked me how to buy Bitcoin.
It is really happening.
Cryptocurrencies are exploding, and hundreds of new people come on board every single day. I got used to high school friends messaging me on Facebook for investment advice, but the question from my father-in-law made me nervous. How can we make sure these new users have a great first crypto experience? How can we make sure they won’t get scammed or simply “rekt”?
The next two months are all about family gatherings. Thanksgiving, Mawlid, Hanukkah, Christmas, 春節—it doesn’t matter which one you celebrate, “this Bitcoin thing” will be a topic around the table. It’s your opportunity to shine.
What you are reading here is all the advice I gave to my father-in-law. You won’t find anything new here if you are a pro trader, but remember, there was a time, not even too long ago, when you were just as green as he is now.
Never give your private keys to anyone
Whoever has access to your private keys (and their human-readable representation, your 12-word recovery seed) has access to all your funds. Think of them as your Internet banking password, or the PIN code of your credit card. Would you give any of them to a shady website you don’t know anything about? Hopefully not!
Make sure your recovery seed is noted down. Write it down on paper and keep it in a sealed envelope in your home safe or a bank deposit box. It’s a good idea to give a copy to a trusted family member, as there’s absolutely no way to recover a wallet if the backup seed is lost.
Don’t keep it on a post-it note next to your desk, and don’t store it in a digital form. Many people upload their recovery seed to a cloud server (Dropbox, Google Drive, etc.) or they just email it to themselves — this is dangerous. Would you email your Internet banking password to yourself?
“Convenience” is not an excuse. You can lose everything, so play it safe.
Bitcoin won’t always go up
Just one year ago Bitcoin was traded at $744. Today it’s worth around $8100. It might seem it will always go up.
Yet, it’s important to remember that the price was more or less flat in 2015, and during 2014 Bitcoin lost more than half of its value. Bull markets are followed by bear markets; it’s just how investment works. Bitcoin can easily shoot up to $10k or even higher, but eventually, it needs to cool down like any asset moving on a parabolic curve.
The question is not if we will see a bearish period — the question is when. Never invest more into cryptocurrencies than what you can afford to lose. If it’s a hundred dollars, trade with a hundred dollars.
Practice risk management
Crypto is volatile, so make sure you have a good risk management strategy.
After getting into crypto, most people decide to maintain two portfolios: one for long-term holding, and one for trading. It is a good idea to keep the former in a hardware wallet like Trezor or Ledger Nano, in multiple assets (maybe a mix of Bitcoin, Ethereum and Litecoin). Unless you are a high-frequency day trader, Exodus (with ShapeShift built in) should be a perfect place for your trading portfolio.
Keeping funds on online exchanges makes sense if you want to trade swings. But you give up any control over your private keys, and in the worst case scenario, you can lose everything. Be careful.
And always remember: profits are imaginary until you realize them. Make sure you regularly withdraw gains and add them to your long-term portfolio.
Technology can get messy
Cryptocurrencies and their underlying technology (the blockchain) will change the world. But we are in the early stages. The networks struggle sometimes to keep up with the demand. Forks happen regularly, either because of a particularly nasty bug or a split in the community. This can be utterly confusing for people just starting their crypto-adventure.
Do not panic. Yes, it happens that a transaction gets stuck for a day or two. Exchanges sometimes (rarely) don’t go through, and this can be extremely annoying in a fast-moving market. It’s important to remember that your funds are always safe, as they live on the immutable blockchain.
On the other hand, be very careful when you transact in crypto and always double check the addresses. Since the blockchain is immutable, transactions can’t be recalled or reversed. “Code is law.”
Crypto is not the best investment
Wait, what?
No, I’m serious.
There’s certainly a lot of money to be made in cryptocurrencies, but I think there’s an even better investment: educating yourself about the industry, about trading, and about the technology. It will pay off. You will become better informed and more confident in your decisions.
The University of Nicosia has a fantastic course on digital currencies, which I wholeheartedly recommend. Coindesk, Cointelegraph, news.bitcoin.com and Bitcoinist are all excellent sources to stay up to date, and if you have a bit more time, you might want to follow the brilliant Off Chain YouTube live blog.
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My retired father-in-law is building his crypto portfolio, and I am super happy about it. Help a friend to come on board today, and make the crypto-sphere a better place.
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