Practicing these bitcoin investing tips listed below will not just give you an edge in this industry, but will help you stay safe both from hackers and regulatory bodies.
The price of Bitcoin has increased drastically in the past few months and those new to this cryptocurrency are wondering how to benefit from the price surge. If you fall into this category of people then continue reading.
First, there is no guarantee the price of Bitcoin will continue to be on the increase and although Bitcoin offers great opportunities there are certain risks involved.
Hence, it’s advisable to know some basic rules as you get started with Bitcoin.
1. Educate yourself as Bitcoin is still an experiment
Acquaint yourself with all the opportunities and risks as Bitcoin is still in its infancy. Research and choose a good bitcoin wallet to store your bitcoins.
2. Remember Bitcoin is NOT Naturally Anonymous
Contrary to what you may have heard, Bitcoin is not naturally anonymous. Bitcoin transactions are completely transparent and traceable.
Therefore, if you want to make your transactions private, you should consider something else or learn how to make your bitcoin transactions private.
3. Know the Price of Bitcoin Can Fluctuate Easily
Take a look at the graph below showing the price of bitcoin over a period of 3 months and you can see how the price fluctuates in such a great manner.
So you should not be panic-struck when you start seeing this and sell at a loss.
4. Invest Only Money You Can Afford to Lose
The same rule that applies to trading the stock market applies here. Do not assume bitcoin can make you rich and invest all of your money in it.
Remember the fact we establish in (1) above that bitcoin is still in its experimental stage.
5. Encrypt Your Bitcoin Wallet
Most Bitcoin wallets have the option to secure your wallet password. Take advantage of it to add an extra layer of security to your wallet.
6. Be Careful When Using Online Wallets
Online wallets are easy to use, but they also come with certain risk. If an Online wallet provider gets hacked or go bankrupt, you can lose all of your bitcoins.
The hacking of the famous Bitcoin exchange MT Gox is a typical example. Store only small quantity of your bitcoin online and move the remaining to an offline wallet. Of course, this should be combined with a good password and backup.
7. Use a Different and Complex Password
Many of us for convenience sake choose to use the same (often simple) password for multiple sites we use. Unfortunately, hackers can easily guess or crack such easy passwords.
You can use free password management software such as LastPass to safely store and manage all your passwords.
8. Always Check Your Bitcoin Address
Always check the bitcoin address properly when you want to send or receive bitcoin. Bitcoin payments are irreversible and any bitcoin sent to a wrong address should be regarded as lost.
9. Back up Your Bitcoin wallet
10. Consider Paying Tax
AS Bitcoin becomes more accepted by the public, government agencies will start interfering. You must now specify, for example, your entire digital asset in the annual tax return to be safe when the Tax authorities start coming sooner or later.
So that is my 10 bitcoin investing tips for you. Go and start implementing them and if you have any question let me know in the comments below. Did I miss anything? Let me know also.
Reddit – How MtGox got hacked
Bitcoin Wiki – How to stay tax compliant with your Bitcoin earnings
Coin Tracking – Bitcoin and Digital Currency portfolio/Tax reporting
The Merkle – Bitcoin Taxation Calculation Tools