Bitcoin has become very popular in Nigeria, with the West African country being in the top five countries with the highest search volume for the term “bitcoin” on Google.
A lot of people are getting into bitcoin. However, many of them skip essential tips and information. In this article, we share important tips every new bitcoin user should know.
Do your own research
There are several experts and influencers in the space, blogs, and websites that provide information for new users. Regardless, when your money is involved, you are directly responsible for what you do.
To avoid a situation where you are led to make a decision that will cause a loss of funds or put you in an uncomfortable position, you have to do your own research.
Before investing in bitcoin, it is best practice to understand how the technology works and how to navigate the ecosystem. New users can combine information from different credible sources to reach a balanced conclusion.
New users should also be cautious of advice from “experts” like trading tips and platform suggestions.
Keep your coins of exchanges
A lot of new users keep their bitcoin on exchanges after purchasing them. This might not seem like an issue until funds on the exchange get compromised.
In 2014, Mt.Gox was handling up to 70 percent of all bitcoin trading. However, users suffered a huge loss when hackers stole 740,000 bitcoin from customers and 100,000 from the company. Over $460 million of funds were lost at that time.
There is a popular phrase in the bitcoin ecosystem that says: “Not your keys, not your coins.” This adage means that if you keep your coins in a wallet you do not control, you do not own your funds.
New users should use wallets to keep their funds when they are not actively trading. This avoids a loss of funds when exchanges get hacked, or other unforeseen circumstances occur.
Other wallet features like back up, passcodes or passwords should also be used to safeguard your funds.
Bitcoin is volatile
Bitcoin is a highly volatile asset. Some new users invest in bitcoin with the hopes of getting rich quickly. This might not always be the case due to the volatile nature of bitcoin. The price may depreciate quickly or appreciate at a faster rate too.
For instance, earlier this year, Bitcoin experienced a 40 percent drop in a single day. Another example of bitcoin volatility is the 2017 bull run, where bitcoin moved from 10,000 to 20,000 in under 20 days.
New users need to understand the volatile nature of bitcoin before investing in it to avoid loss or unfavorable conditions.
Watch out for scams and ponzi schemes
There are several scams and Ponzi schemes built around bitcoin and blockchain technology. A lot of these projects follow similar models and formulas.
Things to look out for:
- Do your research before investing in projects
- If you cannot find precise information about the founders of an investment company, be careful about the project.
- Be suspicious of projects that ask for registration fees.
- Projects that promise and guarantee returns cannot be trusted.
- Do not invest in something you do not understand
A major red flag is when projects promise high returns and quote prices that cannot be verified with a third party.
For instance, sites like CoinGecko, provide a list of publicly traded cryptocurrencies, their market capitalisation, and volumes. Sites like these help you verify claims of projects.
What’s more, blockchains are verifiable and available to the public. Projects that claim to have a blockchain should have a portal where users could track transactions on the network.
Further, new users should look into the teams behind these projects and check reviews from other credible sources.
Take your cyber security seriously
Another important tip that is often forgotten is cybersecurity. When you enter the digital finance space, you must take your online security seriously.
New users should avoid sharing their personal details with sites that cannot be trusted like websites with “http://” URLs.
There are several phishing scams in the bitcoin ecosystem that collect emails, personal addresses, and passwords and put them up for sale on the dark web.
This puts your funds on other exchanges at risk since they can use your details to move funds from other platforms. Further, bad actors on the dark web could use your information for other malicious activities.
New users should take precautions like using, VPNs, different passwords for platforms, and use two-factor authentication.
The bitcoin ecosystem is very exciting to be a part of. However, new users have to be careful and take measures to safeguard their funds.