RED FLAG FILES
What is the Red Flag File?
It is an incredibly important, top secret (not so secret), list of 10 things you must be warned of before you make your first Bitcoin or crypto purchase.
Put another way, the Red Flag File may “scare you so much you won’t want to go on. But on you will go” with knowledge and preparation to avoid some of the most common and avoidable mistakes. Once you are aware of the mine fields and have a good foundation, it is our hope that you can make your Bitcoin purchase with a firm understanding and unshakable confidence. This way you can HODL your bitcoin with diamond hands and not lettuce hands.
Bitcoin is very volatile, but when in doubt zoom out.
Bitcoin can be very volatile, meaning its price can increase or decrease significantly on a daily, weekly, or monthly basis. But when you zoom out or take a big picture look at bitcoin over the years, it’s clearly an increasing asset. So, if you buy Bitcoin and have a long-term time goal, the volatility will not bother you. In fact, the increase in price will work in your favor.
Not your keys not your coins.
This is a commonly used concept among people who have been in the crypto space. Essentially, it is a reminder about the importance of maintaining possession (control) of your coins. In cryptos this is done by knowing and maintaining your private keys. If you do not have possession (control), it is likely that someone else does. This can be intentional or unintentional. For example, if you buy your bitcoin on Coinbase, you will not have your private keys. In this example, you would not have possession (control), until you send the coins from the Coinbase wallet to a chosen private wallet that you have the private keys to.
Divide and conquer – use a separate bank and a separate email.
Your bank may disapprove of you buying crypto with your bank account (although some banks are buying it for their wealthy clients only). The disapproval may be expressed by shutting down your bank account. To be clear, there is no law against the purchase of Bitcoin in the United States, in fact Coinbase is a public company. However, it is suspected that some banks flag accounts that make crypto purchases. To avoid any hassle resulting from your primary bank account getting flagged or closed, you may want to set up a separate bank account to use solely for crypto purchases. This also makes it easy to keep track of your purchases. It is also a good rule of thumb to have a separate email address that you use solely for crypto.
Do not keep a lot on hot wallets or phones.
Remember, there is a trade off between ease of access and security. The more secure your wallet is, the more effort you will have to give to access your coins. Coins held in wallets on your phone, for example can be quite easy for you to access, but they may also be easier for unintended third parties to access. Whether it be by you losing your phone or falling victim to a scam/hack, you do not want to risk losing your entire life savings because you kept it on your phone. After all, you would not keep your entire life savings on your living room table. Because, although it would be convenient to access your money on your way out the door, the risk of someone taking it outweighs the benefit. This same concept applies to your cryptocurrency.
DYOR – Do Your Own Research.
We make all efforts to ensure we give you the most accurate up to date information. However, the cryptocurrency space is widespread and ever changing. Moreover, even the most well-intentioned people make mistakes. Take the time, as appropriate given the value of your investment and do your own research. Once you have what you feel is an appropriate amount of information and knowledge, then make your best decision on how to proceed. But always remember, you alone are responsible for the consequences of your decisions, so make your decisions wisely.
Do not invest money you cannot stand to lose, like your rent money.
You should only buy bitcoin with your excess money, not money you need for essentials or day-to-day living. Put another way, do not use your rent money to buy bitcoin. Some believe bitcoin is a get rich quick scheme and they can take their rent money when they get paid, buy bitcoin, increase their money, and then pay rent. The problem with this “strategy”, among many, is #1 (Bitcoin is very volatile). So, it is equally likely, if not more so, that by the time rent is due, the value of bitcoin has decreased. Therefore, it’s critical not to use money you need for other things. A better idea is to use the money you would have spent on overly priced coffee, especially if you resolved to stop drinking coffee anyway (just kidding, but you get the idea).
Never, never, never, never, never give anyone your private keys.
If you give anyone your private keys you might as well just give them your coins, because they could just as easily take the coins. Your private keys are how you secure your coins. It is like the Pin number for your debit card. No exchange, wallet or any other service will ever legitimately ask you for your private keys. However, scammers will. They may ask for the keys directly or even send you a link to a site that requests you to enter your private keys. Stay vigilant, so that you do not unintentionally give away your wealth by giving away your private keys.
Often imitated, never duplicated, there is only one true Bitcoin.
There are thousands of other digital assets, some even have Bitcoin in the name (e.g., Bitcoin Cash). So, it is easy to get confused. It is often suggested that noobies start with bitcoin (BTC). Once you are comfortable with bitcoin, you may choose to explore a variety of other cryptocurrencies. But do so with knowledge. Do not think, “I can get Bitcoin Cash cheaper.” It is not the same as bitcoin. That is like saying, “I want a custom Ferrari, but I can get a Ford cheaper.” If you want a Ford, get a Ford, but do not get a Ford with the hopes that it is the same as the Ferrari.
Beware of Scams.
Scams are becoming a more common part of modern life. There are many different categories of scams. Make sure you are vigilant. Do not use the same emails or passwords for your cryptos. Pick very random, long passwords that have no relation to your personal life. One form of scam is phishing, this is where the scammer pretends to be a trusted third party to get information about you. Often their information is used to try to guess your passwords or other access information to later steal your wealth. Another common scam is using a spoofed URL. This is where a website is designed to look like another so that you will enter your personal information. For example, a website at Cionbase.com may be designed to look like Coinbase.com. You could accidentally end up at Cionbase.com (the wrong site) by inadvertently switching two letters when you type the address into the address bar. One way to avoid these types of scams is to bookmark your sites. There are many other types of scams, like scam emails that you should stay vigilant against. Scammers are becoming more sophisticated, but with proper security and attention to detail, you should be able to protect your wealth.
DCA – Dollar Cost Average your bitcoin purchases.
Especially if you are new to bitcoin and have never been a trader, dollar cost averaging is a great way to start. This means selecting a regular amount and a regular time-period for which you will buy bitcoin. Sometimes you will buy at a high price and sometimes you will buy at a low price. But overall, your purchases will average out. This way you do not have to worry about trying to time the market at an exact right time and you are able to stack your sats without worrying about perceived volatility.
For more info on how to safely invest in crypto, schedule your consultation today.