I made my first crypto-currency purchase in August. It's been about 5 months now and boy has it been a roller coaster of a ride with all the price hikes and dips and currently RISE of Bitcoin and other alt coins. Along the way I have picked up some pointers from my fellow crypto enthusiasts on what to do and not to do.
- You can't succeed if you are not in the game. True, but that doesn't mean you can't wait and watch on the sidelines until you are ready. How do you do this? Well, there are a couple of ways, you can open an account on an exchange, such as Gemini, CoinBase, Bittrex, Kraken, Bitstamp and view the coins on their site. Or download an app like HODL or coinmarketcap, choose your list of coins and watch it.
- Believing you have to buy a whole coin. With BTC approaching $20k, your sister says, "I can't get into the game, that's too much money". Wrong. Bitcoin has something called a Satoshi that breaks the decimal to the 8th place - .00000001. Your sister can own part of a Bitcoin with just $10.
- Invest without reading the white paper. What's a white paper? Every coin issues a white paper detailing out what their coin is about, the mission, the reason why they are coming into existence. It also lists who is involved, how they are going to do it, how many coins aka tokens will be issued, how they plan on building what they say they are going to build, and much more. Happy reading!
- Terminology overload. Bitcoin, Altcoin, FOMO, Fiat, FUD, Nodes, Hash, HODL, the list goes on and on. The ones I found most interesting are HODL, FOMO, and FUD. HODL, originally, I thought they misspelled the word "hold". Turns out it was a typo, however, that wasn't a bad typo as it now stands for "Hold on for Dear Life" or "Hold On Despite Loss". So when you HODL something you believe it will "go to the moon" hence you keep it until the price sky rockets. FOMO = Fear of Missing Out, FUD = Fear & Uncertainty & Doubt.
- 2FA aka 2-Factor Authentication. This is cool, you login with your password plus another one time, expiring code. So, it makes it double hard for someone to log into your account. Most exchanges use 2FA. You can either download Google Authenticator or Authy which generates a code specific to your account and your phone. In the past, you can get a code via SMS but most are upgrading to these apps as it generates random codes. Highly recommend you turn on 2FA for all sites that offer it. On facebook, someone shared that his account was compromised and he did not have 2FA turned on.
- Exchanges, exchanges, exchanges. There are so many out there. You got your US based ones, overseas ones, new ones, "old" ones, and this market is 24/7! Lots to choose from so do your research and find ones that you are comfortable with. The old saying goes, "Don't put your all your eggs in one basket." Plus, there is no limit on how many exchanges you can sign up for, so why not diversify. Keep those logins and passwords handy. Also, some exchanges hold your money for 7-days before you can make a purchase, also, there are limits and in order to increase your limits there is a verification process that can take days or weeks. Check out point #11 below.
- Alt Coins = any other coin that is not a Bitcoin. As of today, there are over 1000 active alt coins. This number will continue to grow as blockchain technology arrives into the mainstream. A great website to check them out is www.coinmarketcap.com. This site provides links to the websites, tells you what exchanges the alt coins are available on aka where you can purchase, provides charts and much more. The GUI is not the best but it was one of my first crypto websites that I came across and it had everything I needed to get started.
- Believing everything you read online; everyone has an opinion but no one has a crystal ball. When I finally took the plunge, I joined a number of Facebook groups, read articles and magazines, reviewed comments, followed "experts", my way of looking for consistent and repetitive recommendations of coins. Honestly, I was hoping to get insight on the next big coin. On the internet there are many trolls and paid posts so who can you believe. Don't believe me, believe yourself. Choose something that YOU believe in. If you know someone who does have a crystal ball, please do share.
- Buying crypto to get another crypto; Fees galore! While using Coinbase and Gemini, you currently can only purchase three types of crypto - BTC, ETH and LTC (not on Gemini). So, where did I go to purchase other alt coins? I tried Bittrex. There were a number of tokens available and they are a US based company. However, I was not able to purchase coins with fiat money instead I had to transfer cryptos such as BTC, ETH or LTC into the exchange to make my purchases. Each time you make a purchase there is a fee, then I would have to use Coinbase to transfer BTC to the wallet at Bittrex, I paid another fee, then I purchased the alt coin on Bittrex, you guessed it - another fee. Although minimal in some cases, it was fees galore just to get to the alt coin I originally wanted. Cost of purchasing coins aka cost of business.
- Transferring coins/tokens to wallet destination (try a small amount first). I noticed this statement in many of the exchanges and I appreciated it. First transfer a small amount to ensure it reaches your intended destination. This helps ensures it gets to the right address, no typos, errors, etc. Then, transfer your millions. :+)
- Verification Process. In the US, certain companies are required by law to KYC (know your customers) hence they ask for identification this helps prevent money laundering, fraud, criminal activities, etc. Companies will ask for a form of ID such as Driver's License or government ID along with address, DOB and a couple of other items. Don't hit submit until you checked all your boxes. I was locked out of my Coinbase account for 3+ weeks because I didn't change my year of birth. This is when BTC hit it's all time high along with ETH and LTC. Such a bummer!
- Inform IRS. Pay your taxes. I know that the technology pronounces that it's anonymous but how anonymous can it really be if it's on a public ledger. Also, FinCEN (Financial Crimes Enforcement Network) part of the US Department of Treasury is well aware of crypto currencies. Here is an interview with FinCEN director. IRS has also forced Coinbase to report users who trade $20k or more.
- Cold storage. Offline storage. This is when you store your coins on a drive such as a Ledger Nano S. When you make purchases on the exchange, the exchange is holding your coins for you. There is a risk of being hacked since the exchange is supposed to be online all the time. Whereas, with cold storage, you move your coins to the drive and is stored offline in a safe place such as a safe, therefore, it will be difficult to be hacked because there is no internet connection. More to come on this as I'll be writing a detailed article on how to move coins to a Ledger Nano S.
- Rise. Fall. Rise. Fall. Rise....This market is very unpredictable as it's new, no history, regulations constantly changing, no true consensus nor committee such as W3C (World Wide Web Consortium) as we had for the internet...yet. The prices will continue on this roller coaster ride, prices will rise and fall within a matter seconds, minutes, hours or days. Its up to you as when you want to get in and out of the game.
- Spend what you can afford. Everywhere I went I was cautioned, "Spend only what you can afford you can lose". I took this to heart while others were much more of a risk taker. Such as the man and family who was willing to lose their house with the bet that Bitcoin will rise. Man sells house and goes all in. At the time, he made the Bitcoin purchase at $3,700 per BTC, today the price is around $16,000. Again, spend what YOU can afford.
- Secondary markets. Once I got my first Bitcoin, I had a friend from Japan tell me about USI-Tech, this company trades your Bitcoin for a BTC package and aims to give you roughly a 1% return per day on your BTC. There are other secondary markets such as Bitconnect, a friend from Germany shared this one with me. There are articles out there that review both secondary markets, some say it's a scam other say it's not. Do your research.
- Bitcoin ATMs. Yes, these exist. And there are close to 2000 all around the world. I know of one in Silicon Valley at Valley Fair Mall near the kids playground...go figure. It's just like a regular ATM however you use your BTC wallet to send money to the ATM to get your money out of the ATM. Essentially, you exchange your BTC for fiat money. More to come as I plan to try it out myself one day. Bitcoin ATM Map.
- Redistribution of wealth. The belief is that with all these new digital currencies anyone can get into the game. Therefore, there may be a redistribution of wealth. Additionally, for the innovators and early adopters, they will have the power to redistribute the wealth that they have acquired. This may lead to big changes for global society.
Lessons learned. 18 and counting. Feel free to share your lessons in the comments.
If I had $18 in crypto, I would buy this.
Disclaimer: This is an informational and opinion site, no financial or tax advice is implied or expressed. It's your money, your responsibility and your choice. Do your research. Any listings or references of companies or persons on this site does not constitute an endorsement or recommendation on behalf of Babe-on-the-Block[chain]. Read more at www.blockontheblockchain.com.
