Bitcoin Pitfalls to Avoid
Bitcoin Pitfalls to Avoid
While there are many benefits of Bitcoins, there can be some common pitfalls people fall into from time to time. Being well aware of the issues can make you feel better about getting involved with Bitcoins.
#1 – Not Understanding the Currency
There is plenty of discussion out there about this digital form of currency. Those that do understand the ins and outs of Bitcoin are excited about it. Those that don’t though can be hesitant to work with it or even critical about it. Don’t let a lack of information or information that misleads you prevent you from taking part in it.
#2 – Avoid Losses
Sometimes, losses can occur with Bitcoin, and there is no foundation of consumer protection with it. If there happens to be a fraud transaction, then there is no safety net in place. However, there is very little chance of such fraud occurring with Bitcoins. To avoid losses, mine them yourself or make sure you use a trusted 3rd party wallet service.
#3 – No Backup System
Mining for Bitcoins can take a toll on your computer. It can result in hard drive failures. Sometimes, it can allow malware or spyware to access your system. Always have a reliable external back up system in place just in case.
An offline backup system for Bitcoins is called a cold wallet. It needs to be a processor that will never have an internet connection to it. The use of a USB is the best way to transfer the data quickly and securely.
#4 – Federal Regulations
Even though there aren’t Federal regulations in place for Bitcoin use, be wise about what you use it for. Bitcoins can’t be used for illegal purchases online. Even though the government offers plenty of flexibitly right now, that may change so stay on top of the laws. Bitcoins should never be used for drugs or for gambling online.
#5 – Waiting
There is a limit to the number of Bitcoins that will be created. The longer you wait, the less there is the chance to get them and to financially gain from them. Experts believe that with the growing desire to take part in Bitcoin and the state of the economy, it will only take a few years to hit that maximum.
#6 – Risk Free
While Bitcoins are less of a risk than many other forms of investments, there is still a risk involved. A common pitfall is assuming no risk exists. It is expected and highly anticipated that Bitcoins will continue to grow in value. Therefore, it makes sense to hold onto them. Still, it is wise to only invest money in them that you can reasonably afford to lose.
#7 – Only one Wallet
It is a good idea to have your Bitcoins in more than one wallet. This makes the process of selling easier for you. It also offers you a great deal more protection on your investments. Many people assume that they can’t have more than one wallet, but that isn’t true. In fact, you can have as many wallets as you would like to for your Bitcoins.
#8 Not Protecting Privacy Keys
Be diligent when it comes to where you keep your privacy keys for Bitcoins. If they are compromised, then they can be used to access your Bitcoins and use them fraudulently. It is a good idea to keep your privacy keys in an external location rather than on your computer.
#9 – Not Using Escrow Services
Since you may not know the other party involved with a Bitcoin transaction, it is best to always protect yourself. It doesn’t matter if you are the buyer or the seller. The use of an escrow allows there to be a neutral 3rd party in the mix. They will “hold” the value of those Bitcoins until the transaction is completed.
#10 – Failure to Understand Currency Conversions
There are plenty of programs out there that make it simple for you to understand and follow currency conversions. These conversions can play a huge role in the outcome of your decisions for investing. A lack of understanding in this area can result in making bad decisions. It can also result in passing up good opportunities for investments of Bitcoins.
#11 – Understanding Global Limitations
While Bitcoin is accepted on a global level, not all entities accept it. This is important to keep in mind. You will need to have some forms of alternative payments that you can use for online purchases. There are some countries where Bitcoin is prohibited. They include Russia and Thailand.
#12 – Mining isn’t Recommended
Mining of Bitcoins is an option if you have the time to spend on it. If you don’t, then it is best to go to an exchange to buy them or to accept them for goods or services you offer. As an individual, you have to decide if you have the time available to commit to the process or not. If you do, then it is a good idea to consider. If you don’t, it doesn’t have to hold you back.
#13 – Technical Flaws are Possible
While we have amazing technology to benefit from for the World Wide Web, we can’t get too comfortable with it. There may be some technical flaws along the path for Bitcoins that have to be worked out. They weren’t forecasted as there are simply too many variables to troubleshoot and prevent every possible scenario.
#14 – Values Change Daily
Today, your Bitcoins could be worth a great deal of money. Tomorrow, they may be worth less than half of that! Being aware of this is important concept is a big part of successfully investing. Developing a strategy for when you will sell and when you will by is important. It should be based on logic, and not on emotion.
#15 – Payments can’t be Reversed
You do have to be 100% sure you are sending the right Bitcoin amount and to the right recipient. Since there isn’t a central authority for processing, you could create a huge loss on your end if you enter information inaccurately.
Disclaimer: Please refer to our disclaimer and seek your own financial advisors on any investments. All information here is intended for educational purposes only.