Top 10 Crypto Dos and Don’ts for Every Investor

Every informed investor should take the time to learn the top 10 crypto dos and don’ts. The decentralized market is a dynamic place where movements can happen swiftly and sometimes with very little warning. As such, you need to stay attentive and aware of the current market conditions to avoid losses.

Whether you’re a new crypto trader or someone who has been holding Bitcoin for over a decade, there are some crucial steps you can take to avoid losses and bolster your security against hackers. Here are the top 5 crypto dos and don’ts you need to follow to keep your assets secure and improve your chances of positive returns.

Top 5 Crypto Dos Every Investor Should Know

There are many different things you need to learn to become a savvy crypto investor. From understanding the market to learning what exchanges offer the coins and features you want. Every step you take towards educating yourself can translate into future gains. Here are 5 dos that every crypto owner should follow.

1. Get a Hardware Wallet

Purchasing a reliable hardware wallet is the first step that every crypto investor needs to make. Hardware wallets differ from traditional storage methods in that they provide an air gap between the internet and your device. This approach is called cold storage, and it’s the best way to ensure that your crypto doesn’t get hacked or stolen by online threats.

Hardware wallets are an essential addition to your crypto trading strategy. They come in many forms, with most costing only around $99. These devices can offer a lot of features. Depending on the price, you can get Bluetooth connectivity, a digital screen, biometric scanning options, and more.

Source – Ledger

You will want to stick to a reputable brand when selecting a hardware wallet. Companies like Ledger and Trezor have secured a reputation as reliable options worth your time and money. Another key tip to follow when seeking out a safe hardware wallet is to never buy these devices used. Only buy your hardware wallet from the manufacturer directly to avoid scams.

In the past, scammers would sell used wallets as new, marking the private key so they could access the funds after the sale. This scam works because the seller repackages the wallet, complete with a new unscratched private key, leading the new owner to think they can safely load their coins. However, in all instances, the sale was merely part of a hacking strategy.

2. Always Use Two-Factor Authentication (2FA)

Another crucial step you can take to help prevent hacking and unnecessary losses is to enable 2FA. Two-factor authentication requires the account holder to enter a time-sensitive code to access the account. This strategy is so effective because the code is sent to another device, usually a cell phone.

The 2FA system is time sensitive, meaning that there are only a few moments that which the code provided is relevant. After around a minute, you will need to produce another 2FA code as the original expires. This approach relies on the fact that a hacker most likely won’t have access to multiple devices. As such, they can never get the 2FA code needed to send your funds elsewhere.

The introduction of 2FA on accounts has been one of the main reasons why personal hacking of crypto has become much more difficult. In the past, a person could copy your SIM, watch you carefully, or guess your exchange or wallet login credentials. However, this data isn’t enough to gain access and send your funds nowadays.

The leading 2FA providers are Google and Authy. Both have been proven to deliver heightened security, and neither has had any problems with hackers figuring out their code scheme. Using 2FA is a must for anyone serious about holding digital assets.

3. Don’t Believe the Hype

There is a famous saying in the crypto sector called Do Your Own Research (DYOR). You probably have heard this acronym stated many times as you perused the endless coin selection available today. DYOR simply means that you shouldn’t rely on third parties to give you the details of a project.

Remember, many cryptocurrencies have hired teams to help promote their coin. These groups will do anything in their power to make a coin look like the latest and greatest asset. However, the reality is that they are paid to push the project, highlighting its best features and leaving out anything that would seem unfavorable.

Some key steps you should take before investing in any project include reviewing their whitepaper. The whitepaper is a detailed layout of the project. This write-up should include details such as the project’s technical structure, business model, team, and future roadmap. The better you get at understanding whitepapers and the more likely it is that you will avoid needless losses.

A whitepaper demonstrates several vital aspects of a project to the community. For one, a well-written whitepaper will explain exactly how the project works and what it seeks to accomplish. As such, you should never invest in a project that lacks or has a janky whitepaper.

Some key aspects you should review to help you determine if the project has what it takes to succeed include who the developers are, who backs the project, how far along the technology is, and if the project is active currently. Remember, you have a much better chance of success dealing with projects that are already in operation versus one that promises technology that hasn’t been tested yet.

4. Don’t Be Scared to Diversify Your Crypto Holdings

Yes, every crypto investor should hold some Bitcoin. It’s the world’s first and most successful cryptocurrency. Consequently, it has earned a spot in your portfolio. However, you shouldn’t feel like Bitcoin is the only crypto worth your time. The market has seen massive expansion since its early days, and today, there are thousands of projects and multiple types of tokens to consider.

What was once only digital money has now grown into a diverse economy that includes gaming, DeFi, tokenized RWAs, stable, central bank-issued, programmable, wrapped, and many more options. Each of these sectors has its leaders and pioneering projects. For example, there are AI-powered platforms and next-generation metaverse options that could all help to diversify your holdings.

Remember, cryptocurrencies may be a newer technology, but many of their investment strategies come from other asset classes like stocks. Diversifying your portfolio has always been the smart way to reduce your overall risk of loss. Notably, diversifying only works well if you can follow the previous steps, eliminating emotion from the crypto selection process.

5. Understand how Regulations can Alter the Market

There was a time when every crypto investor held their breath to see which countries were going to ban the digital assets and which ones would end up embracing the technology. These seasoned traders understand that the regulatory climate can alter the market conditions considerably.

A perfect example of this occurred way back when China decided to ban cryptocurrencies. This maneuver shuttered the market for months, causing a massive drop in users and value for all projects. However, it created a boom in other regions like Hong Kong and South Korea, where much of that investment capital migrated.

Thankfully, public understanding and opinion on blockchain assets have changed considerably over the last decade. What was once a mystery is now legal tender in some countries. That’s why understanding what regulators and regions are pro-crypto and which aren’t can help you better forecast what projects possess long-term potential.

Another key example of how regulations affect the market occurred in the US recently, as President Trump did a full turnaround from labeling cryptocurrencies as scams to becoming a strong supporter, even releasing NFTs.

Recently, the President announced the opening of a Bitcoin reserve and has been vocal about not stifling innovation through regulations in the sector. These factors have helped drive Bitcoin’s value to new heights.

You also should consider how regulations affect taxes in your region. Depending on where you live, you may have to pay taxes on your crypto holdings based on value increases. Additionally, when you pay could vary depending on the legislation. In some places, you owe taxes only when you sell your tokens, while in others, crypto is taxed regardless of whether it’s sold or not. Be sure to DYOR to avoid any future tax issues.

Top 5 Crypto Don’ts to Avoid Major Losses

The crypto market offers exciting opportunities, but it’s not without its risks. If you intend to succeed, you will need to implement some crucial don’ts into your strategy immediately. Here are the top 5 Crypto don’ts that every trader should know.

1. Discretion is Your Best Friend

This first rule may seem obvious, but it can’t be overstated. You don’t want to post or boast to anyone about your crypto holdings. Discussing the technology and your support for it is one thing, but never brag about how much crypto you have or have made trading coins. This one seems obvious, but in the social media age, it has to be stated.

A quick search will reveal more than a handful of times that someone was robbed because they wanted to share their newfound wealth and excitement with the world. Whether you want to shine bright for all of your haters or you generally are trying to show that crypto investing can work, the results are the same – you’re making yourself a target.

Source – Reddit

It’s often said that Bitcoin is like digital gold. This saying may ring especially true when discussing discretion. You wouldn’t go online and post that you had gold bricks at our house, would you? So, tell me why you would want to post to strangers that you have digital gold? Remember, even the best digital security can be thwarted by the old-school wrench attack.

2. Never Leave Your Tokens on Custodial Platforms

There are custodial and non-custodial platforms when discussing blockchain projects. The latter enables you to hold your private keys, meaning that you always have access to your coins when needed. However, the majority of your favorite exchanges and projects rely on a custodial approach, meaning that they hold your coins in a large digital wallet alongside other users’ assets.

This setup can lead to some serious issues, such as losing access to your crypto due to hacks, network outages, rug pulls, and any other occurrence that disrupts the company’s business practices. Sadly, it’s very difficult to avoid custodial platforms altogether.

Exchanges like Coinbase (COIN +1.3%) and Binance still provide some of the easiest ways for new users to convert fiat into digital assets and trade. Consequently, it’s recommended that you limit the amount and time that you keep your assets on these platforms.

Remember, the crypto market has a long history of exchanges failing without notice. In nearly all of these instances, users took losses because their coins were sitting in their custodial exchange wallets, rather than safely nestled in their hardware wallets. Avoid these risks by committing to never leaving too much crypto in custodial hands.

3. All that Glitters Isn’t (Digital) Gold

The Fear of Missing Out (FOMO) is real. You know that amazing project that you just heard about on your social media feed? It’s supposed to provide 10000% returns and will revolutionize everything. Well, the chances are it’s a flop, and sadly, it may not even be a legitimate platform. While this response is harsh, it’s meant to help snap you out of the hypnotizing effects of FOMO.

Unlike any other asset in history, cryptocurrencies and social media platforms remain intertwined. Social media is a powerful tool that has helped many blockchain projects share their advantages and technology with the world. However, not everyone on these platforms has the best intentions.

These platforms contain paid promoters, those with shared financial ties, and even bots, all focused on skewing your perspective in a particular direction. Sadly, when used together, it’s very easy to make a project seem like it’s the next big thing. Avoid this trap by keeping emotions out of your asset selection process.

4. Your Seed Phrase is Everything

The majority of cryptocurrencies rely on seed phrases to grant you access to your assets. This phrase is the only way anyone can ever access your crypto. As such, it’s incredibly valuable and has led to some epic crypto sayings like “Not your keys, not your crypto.”

Protecting your private keys should be the most important task you undertake. Losing these keys can result in major losses. Some of these losses have made international headlines and led to many sleepless nights for those who lived the horror of not being able to access their crypto.

In one very famous instance, a man’s girlfriend accidentally threw out a hard drive with private keys to 8,000 Bitcoins, resulting in billions in crypto lost. The man was so distraught that he attempted to purchase the landfill he believed the HD to be in, offering to repay any investors with the findings.

Protecting your private key can be as easy or complicated as you require. For the average person, you simply need to write the phrase down and keep it safely stored away from prying eyes. Whale investors will have to take more precautions.

For example, the Winklevoss Twins keep their passphrase separated and in different bank vaults, making it virtually impossible to steal, minus a Hollywood-style simultaneous multi-bank heist targeting them. However, they would still need to figure out the order and remove the coins before being noticed.

5. Red Flags Mean Stop

As you become more experienced and hopefully before taking any major losses, you will learn to recognize red flags when investing in crypto projects. Red flags can encompass a lot of things, including a lack of a whitepaper or underdeveloped technology. Usually, if a project promises too much, it’s not going to deliver.

Another sign that a project is simply trying to whip you into a FOMO frenzy includes promised returns. Scammers will often make wild return claims like a 450% return guaranteed. Yes, it’s possible for a crypto project that takes off to deliver exceptional returns. However, they would never guarantee this to you.

Source – YouTube

The best scammers will even pay out some people to help build the hype around their project. Of course, the new investor is the one who is paying out, via a traditional Ponzi scheme approach. In this scenario, early investors start to report massive gains, which leads others to want to get in on the action. The next thing you know, everyone is making tons of money on the platform.

Then, one day, the withdrawal feature is disabled, or some other technical mishap occurs. Next comes the rug pull. Sadly, this cycle repeats itself with the only change being the victims. Avoid your turn on the crypto carousel of pain by seeing the red flags and acting accordingly.

Final Thoughts: Stay Safe and Smart with Crypto

Now that you understand the top 10 crypto dos and don’ts, you’re ready to start your research. Stick to the tips on this list, and you will avoid the most common pitfalls made by traders. Don’t get caught up in the hype and always adhere to your security protocols to ensure a long and fruitful crypto experience. If you can accomplish these tasks, there’s a bright future in the decentralized economy for you.

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