Beginners Guide to Blockchain X: What are the real risks in crypto?
When it comes to money people are very emotional.
Wether it is FIAT money (government backed coins), gold, silver or crypto-currencies — Money has a huge emotional component because it goes hand in hand with our survival.
And the two biggest emotions when it comes to investing are fear and greed (that’s why we have this “fear and greed index” to measure the market’s current emotional state).
However in this 10th article of our “Beginners Guide to Blockchain” we have to talk about what people should really be afraid of when it comes to crypto investing; what is real, what is fake and what you should look out for to keep safe always.
If you haven’t read our previous 9 articles, here they are just in case:
Now, let’s get to it — Here are the top 5 biggest “real risks” in crypto that you should look our for always:
The risk of volatility.
In crypto, 80% drops in value are common and they don’t necessarily mean you are being ripped off. The king of crypto, Bitcoin has had multiple +50% drops through out its history and it has always recovered.
Just do your own research, buy solid projects and remember this: You only loose money if you sell. Buy low, sell high — always.
2. Cyber-theft and Hacks.
As in any financial market, theft is very common. However in this crypto world thieves have gotten very smart. Some of the most common ways thieves steal your coins are by creating fake websites, sending you direct messages on instagram or twitter, copying social media identities of “famous people” in the niche and directly by hacking exchanges like in this case and this case.
What can you do to stay safe? Keep your coins in a physical cold wallet like a Trezor or a Ledger, always double check the websites you are using, never share your seed phrase and always double-triple check everything.
It’s what makes crypto sexy but can also be considered a risk.
In “traditional” banking institutions there is always a third party to charge big commissions bring in bureaucracy but also to “help” if something goes wrong — In crypto this doesn’t exists. If you send your BTC to an ETH wallet by mistake, they disappear, they’re gone and you can’t call your “bank” for help.
Going crypto means owning total responsibility on your money and you must be very careful with everything you do.
4. Loss of Private Keys.
“Man searches through landfill for his lost $350,000,000 crypto wallet” — Yes, this stories are real and they must suck.
Like I mentioned in point 4, crypto means total responsibility on your money and if you loose your seed phrase or your physical wallet it will be impossible to recover any type of assets you have stored in them, so keep them safe.
5. Rug Pulls.
This could probably be a part of point #2 (cyber thefts) but it deserves a point of it’s own I think. What is a rug pull? It’s a crypto term that refers to crypto projects that build hype, get investor’s money and then poof! they dissapear, stealing your coins and never to be seen again, “pulling the rug from below your feet”.
This happened a lot in the ICO craze of 2017, this is happening a lot with NFT projects and one of the best ways to protect yourself from this scenario is making sure that your projects developers are not anonymous. If some one is willing to put their face on their project there is less probability that they will rug you but it’s still not a guarantee, so watch out!
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So that’s it for now — Any new risks that we should mention inside this article? Have you been a victim of any of this? Let us know in the comments and if you want to dive deeper into the crypto world follow me on twitter at Chris Pace.