Sep 11, 2021
Buy Crypto Safely Part 1: What You Need to Know Before Buying Crypto
Bad actors are waiting for a chance to take the keys to your crypto kingdom. However, you need not enter the arena unarmed.
This is part 1 of 3 of the Buy Crypto Safely series.
According to recent data, only 13% of Americans have bought or sold crypto in some form since its inception in 2009. That’s a low number, to be sure. Crypto investing hasn’t taken hold in the states as it has in other countries around the world. Still, it is growing, and more and more people are considering jumping into the cryptocurrency pool. In a report by Valuates Reports,
“The global cryptocurrency market size was valued at USD 1.49 billion in 2020 and is projected to reach USD 4.94 billion by 2030, growing at a CAGR of 12.8% from 2021 to 2030.”
That’s nearly quadruple the growth projected over the next nine years than the entire growth history of crypto. Yet, with the adoption of crypto as it stands, a significant number of bad actors come along with the scene. And as their numbers grow, so does the risk of you losing all your hard-earned money invested in the crypto market. The primary reasons most are cautious about adopting crypto investing are hacking and fraud. Yet, there are precautions you can take to nearly eliminate all of those fears and begin your crypto investing journey like a professional.
In this guide, you and I will go deep in the weeds on important factors to consider before you start your journey. Even if you’ve bought crypto before, there might be steps in this guide that can help you, so be sure and take a glance. You might learn something new.
If you’re ready, let’s get started.
Some hard truths about crypto
Media coverage
The media loves to run crypto stories. Stories ranging from crypto-breaking records to crypto are doomed. Some reports have merit, such as matter-of-fact ones, like Bitcoin Breaks $50k mark, etc. However, there are some wild ones out there as well — for example, this story by JP Morgan tauting Bitcoin to break $146K in 2021. To be fair, they have corrected their wording to reflect that it “could” happen, but still, how many of us are going to process anything past a $146K prediction? JP Morgan could have us all running out the door to buy up all the BTC quick and in a hurry. Yet, even a financial powerhouse can be wrong. Therefore, you must take any predictive news about any market with a grain of salt. And for a good reason. The crypto market is a bit like the wild west.
The wild west
The crypto space is like the wild west with hackers, fraudsters, and dubious transaction activity. The news mentioned above loves to cover hackers who’ve robbed exchanges, shitcoin fraudsters, etc. And while reporting on those events is a benefit to you and me, it can be discouraging if you’re thinking of entering the field of crypto trading. So, you must be armed and ready to fight the good fight for your wealth-building plan with crypto. Yet, challenges come from adversaries and some harsh financial facts about support for crypto as well.
No reversals
There are no transaction reversals in crypto. Once a transaction is completed, that is it. If you want to get your money back from a transaction partner, you must negotiate with them. The exchange cannot perform reversals for you. Thus, you must do business with people and entities you trust and make calculated and careful decisions.
No FDIC insurance
Another reason for caution when trading crypto is if it’s lost or stolen, there’s no FDIC insurance. Cryptocurrency isn’t legal tender, nor is it considered a security and therefore not under any protection from the FDIC or the SIPC.
Bragging about your wins
We all love a win, and when we experience one, we like to share that victory with others. So maybe you call up a friend or go out with the squad and have a few drinks regaling everyone at the table with the big crypto win you pulled off today.
Don’t.
I’m not proposing your most trusted friends would attempt to hack your exchange account and rob you blind, but your friends aren’t the only ones listening. You can’t know if a bad actor might be standing by, ready to take advantage of your good fortune. So, the best advice is to keep those wins to yourself. Or, if you must tell someone, don’t be specific. However, I urge you to command restraint. If you’re out with your friends and you offer to pay for the evening, they’ll know something good happened to you, and that should be enough to send the message that you’re winning.
Don’t invest more than you are willing to lose
Also, I must impress not to invest more than you can afford to lose. Too often have I seen people apply for a credit card with a few thousand dollars limit to then turn around and max out that card buying crypto. No one, and I mean no one, can know which way the market winds will blow, so don’t stretch beyond your means. This advice goes for any financial undertaking but especially with crypto. It’s more volatile than the stock market.
Crypto is more volatile than the stock market
If the stock market falls by more than 10%, there are safeguards to stop trading for a certain amount of time. It slows position changes down to aid in creating equilibrium and provide a stabilizing effect. This safeguard hasn’t always worked, but more often than not, it does. Unfortunately, crypto has no protection, and a 10% drop is just another Tuesday. I have a friend whose portfolio dropped by more than 30% in a day! Drops like that are not for weakhands (people who change positions at the drop of a hat). My friend had a tough day then and a few drinks, but I don’t recommend alcohol. You need better alternatives, which leads me to my following and most important advice: stress management.
Consider ways to manage the stress you will feel
When you make your first crypto investment, you will want to check its progress, probably more frequently than you should in the beginning. It’s normal. It can be exciting to see your first purchase jump by 200% and feel that extraordinary flood of dopamine. However, if your brand new investment drops by 30%, you will experience a different type of flood: cortisol. Cortisol is a stress chemical. When you perceive a threat, it’s what pumps through your body, so you’ll either run or fight. It’s also unhealthy to maintain high levels for extended periods. That’s why you need countermeasures to relieve the stress you will inevitably feel when your portfolio dips.
For me, it’s taking a walk, especially when it’s sunny. Walking and other exercises shake away stress, and 10–30 minutes a day of direct sunlight produces serotonin and vitamin D. Both help regulate the nervous system and provide stress-relieving effects. First, however, do what you find best for you.
Fraudulent websites
It shouldn’t be a surprise there are many bogus websites on the internet trying to steal your information. According to this article from HelpNetSecurity,
“[Scammers created] over 18,000 fraudulent websites daily in 2020 [alone].”
These bandits are ready to deceive you into revealing your login and password information so they can make off with your crypto. So please, be careful with which websites you visit. Plenty of those bogus sites will claim to be authentic crypto exchanges or wallets. Therefore, you must research which exchanges and wallets you can trust.
Also, only ever visit a site you have the full URL (website address) to. If you’ve done your research and found a reputable site, for example, “reputablesite.com” (not real), don’t click the link. Instead, type it into the address bar yourself.
SSL secured and bookmarking
Once you’ve landed at the trusted site, check to see if it is secure. You can do this by looking to the very left in your browser’s address bar to see a little padlock. The padlock means the site is encrypted, and entering your information should be safe. However, getting an SSL certificate (padlock) for your website is relatively easy these days. Therefore, you must take an extra step. For instance, if you use Google Chrome, click the padlock, then click on “certificate (valid).” The information box that pops up will give you more detail about who issued the certificate and to who. It’s another step to make sure you aren’t visiting a site with a misleading SSL. Finally, after you reach the website, bookmark it and only use it to visit the site. Most web browsers will bookmark a site when you press the control key plus the D key.
Finally, once you’ve verified the site and bookmarked it, your first urge is to start shopping for your first crypto purchase. But there is something important you need to know before you begin.
Crypto pricing doesn’t mean it’s a good buy, so look for the market cap
Your first instinct when purchasing crypto will be to look at the price. After all, that’s the fundamentals of buying a product. However, crypto is different in that the price doesn’t necessarily reflect its value. For example, you might look at Bitcoin and say, “that’s too expensive. I’ll buy this cheaper altcoin for a dollar instead.” So, you buy the cheap coin, it quadruples in price, and you go and retire. Except that isn’t how it works. You want to look at the market cap to help you gauge the value of the coin you want to buy. Market cap is how many coins are in circulation multiplied by the price. The more market cap a coin has, the more interest in the currency, and it can be an indicator of promise. Just because a token is cheap doesn’t make it a good buy, and just because a coin is expensive doesn’t mean it’s a solid investment. So, remember to look at the market cap.
So, there are all the potential pitfalls awaiting you when you decide to take the dive into the crypto waters — still interested?
Conclusion
That’s a lot to take in, but I want to come at you with all the downsides you might face on your crypto journey. Crypto is volatile. More volatile than the stock market, and there are no safeties in place to prevent massive drops. So, you must prepare yourself for days when your stomach might be doing flip flops. Not to mention, hackers and scammers wait for a suitable climate in which to flourish and steal your hard-earned rewards. But it doesn’t have to be that way, and if all I’ve said hasn’t detoured you from starting your journey, then bravo and stay tuned!
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