If you are reading this page, it is our hope that you are looking for information on how to buy Bitcoin and have not yet purchased anything without performing your own research. This page is here for you to digest and verify. We are sharing lessons learned that cost some of us a lot of money; so you can avoid some common pitfalls.
We encourage you to sit down and write out your goals and how you plan to achieve them. All we ask is you do your own research before jumping into something that you may not fully understand just yet.
Below are some General Guidelines that we have developed and follow:
- Not your Keys, Not Your Cheese – This means, if someone is holding your money, it is likely gone. The only limited exceptions to this are licensed financial institutions with verified Insurance such as Coinbase, Gemini, SwanBitcoin and several others. If you are invited to sit down for a sales pitch about making a lot of money in some invitational meeting, run.
- Never send Money to someone else to “Grow your Bitcoin” or “Invest it into Mining Contracts” – If someone contacts you to tell you of a new platform for cryptocurrency investing where you will make a lot of money, red flags should go up immediately.
- When picking an exchange to buy Bitcoin, make sure they are (1) a real company, and (2) will allow you to hold your own Bitcoin. Robinhood is a great example of not meeting the second criteria; they do not allow you to transfer Bitcoin to your own wallet and they could choose to sell it at any time (taxable event for you)
- Never leave a large amount of crypto on an exchange. One of our team members lost over $1 Million (present value) when an exchange was hacked and his bitcoin was stolen. The safest place for your Bitcoin is in your Hardware Wallet (we’ll discuss in Step Two).
- Trust, But Verify – Question everything you hear, especially YouTubers telling you what to buy next. Do Your Own Research (DYOR)
- If something is receiving a lot of hype to “Hurry now, Buy Before It’s Too Late,” you are almost guaranteed to lose money. (See Rule 5)
- Limit how much you will put on a wallet on your phone, the majority of your stash needs to be on a cold wallet locked up where nobody can get to it. Phone wallets and Wallet programs on your computer are much easier to hack and are targeted by thieves.
- If it sounds too good to be True, it Likely is. (See Rule 5)
- Leave instructions for your family, on how to access the funds in your hardware wallet, in a safety deposit box in case something happens to you.
- Always verify the wallet address you are sending to before authorizing a transaction; If you get the address wrong, the transaction is not reversible.
- Don’t spend money that you cannot afford to lose – Never take out a loan to speculate on cryptocurrency, you may win big, but you could lose very big as well. Cryptocurrency should not be your only form of planning for the future.
- Every time you sell a Cryptocurrency, it is a taxable event if you are in the United States. Holding longterm is generally the best advice. One day you may be able to just borrow against it without selling and paying taxes on the capital gains.
- Always set up Two Factor Authentication with the exchange you choose to use so that someone cannot exploit your email or phone number to get access to your account. Our preference is Google Authenticator. Keep the recovery codes for your 2FA method written with pen and paper only and stored in a locked waterproof container is always recommended.
What is Dollar Cost Averaging?
Simply put, Dollar Cost Averaging is buying on a schedule, regardless of price, over time in order to accumulate a stash.
We believe the best strategy is to accumulate Bitcoin over time by making regularly scheduled buys. In the long run, it adds up. Setting a weekly or monthly amount to buy that is then sent to your hardware wallet for offline storage, is generally good advice. Again, leaving Bitcoin on an exchange leaves it susceptible to someone trying to hack your account or the exchange itself.
Some of us have taken a look at our personal finances and changed cell phone providers, reduced cable service, pack a lunch to work, and other small changes to free up just a little more bit here and there. It can add up quickly over time.
Before buying any Bitcoin, we believe it is best for the individual to determine how much they plan to buy and in what intervals in order to reach their goals. Keep in mind, you can buy in very small amounts. Not many of us are able to just wire the money for a couple Bitcoin, most of us are buying very small fractions that add up.