Why Should You Never Buy Bitcoin Before Reading This?

You might be watching Bitcoin price charts with interest or even with excitement. Perhaps you already bought it. Or you are seriously considering it.

However, there is something you should know. Never buy Bitcoin before you learn about all the potential ways of losing it first.

Given the hype and the number of people in your network who have already bought in, you should have heard many times, “I invested in Bitcoin, and just look at me. I bought myself a new house!” or “I just cashed out a bit and bought myself this cool car!”

Have you ever heard anything like that, though? Probably not. Me neither.

But you have probably heard of those who lost their Bitcoin in crazy ways. Me too.

Why is that? Why is the price constantly increasing, yet no one is getting wealthier? Well, one reason is that there is one easy way of getting Bitcoin — namely by buying it — but there are hundreds of easy ways to lose it.

How Can You Lose Your Crypto Assets?

There are hundreds of more or less interesting ways of losing Bitcoin. To name just a top few:

1. Losing Access to Your Bitcoin. 

It can happen, for example, by losing/breaking a hard drive that contains your Bitcoin wallet. Or losing the password to your wallet.

2. Getting Robbed. 

It can happen, for example, by involuntarily sharing private keys or the password to your Bitcoin wallet with the wrong person. It can also happen when placing your BTC on a malicious Bitcoin exchange that suddenly shuts down without any explanation. Then, your money evaporates.

Actually, your crypto can also evaporate even if you don’t actively interact with crypto scammers. New pieces of malware with the sole purpose of stealing your crypto assets are revealed every day (check out this recent finding).

Reportedly, some Bitcoin owners also lost money as a result of a home robbery. Telling anyone that you are a Bitcoin owner puts you in jeopardy and can result in losing money or even losing your life.

3. Gambling addiction. 

When you see the charts soaring, you might be tempted to think, “Hey, if I buy into it on margin, I could get so much more!” In other words, greed takes.

And even though you have already invested in speculative assets, you make your moves even riskier. Intelligent people often fall into this trap.

They believe that their competencies, which are valued in the job market and perceived as intelligent in daily life, will help them make decisions in their crypto-adventure. It’s a cognitive error.

The crypto market has different dynamics from those of other markets. Thus, even if you made some money on the traditional stock exchange in the past, it doesn’t guarantee that you will be successful in crypto. According to Barber and Odean (2000), even in stocks, the most active individual traders reliably underperform the market.

So, as soon as the lizard brain gets involved, we become stupid. I have a Master’s in Psychology and a PhD in Brain Science.

Yet I couldn’t prevent myself from all kinds of cognitive errors. Usually, you only learn that you are a gaming addict at the point when you feel relief when you lose instead of winning — as this means that you can finally close your computer and rest for a bit.

4. Close Meetings of Third Degree with Conmen.

Losing your Bitcoin by getting involved in one of the financial services/actions launched by crypto-conmen. To name just a few of them:

Conmen, Type #1

1. Conmen, type #1.

Those who persuade you to buy into their crypto-bots and other shady services by taking part in the pump-and-dump heists on shitcoins. You will lose your money here with a probability close to 100%.

Bot owners will buy into the coin with their money, pump the price, and sell at the top. And that leaves you at a loss. 

Furthermore, these scammers will attempt to deceive you even after you’ve suffered a loss. They may claim that the bot malfunctioned, offering reassurances such as ‘It was the last time,’ ‘The bot will be upgraded next time,’ and ‘You can try again without any additional fee.’ This manipulation is designed to regain your trust, only to have them use your money to pump their coins again. 

Plus, of course, they keep deleting all the negative comments from unhappy group members. Thus, you have an impression that everyone else is making money, just not you. This means that you are just stupid and should keep quiet. 

But there is more to it; there are even pumps on pumps! Namely, when a group of people is planning to pump a coin in an organized way, someone else mocks the group. They maliciously buy into another coin a minute or two before the action starts to give an impression that the news leaked and the pump-and-dump is already going on. 

These tactics are not isolated incidents. In fact, they are rampant in cryptocurrency communities on platforms like Discord and Telegram . Scammers are everywhere, and it’s crucial to be on guard against their manipulative schemes.

Conmen, Type #2

2. Conmen, type #2.

Those who sell you “financial advisory services” by giving you “information” on the “hottest coins to buy into at the moment.” The advice is either based on technical analysis, fundamental analysis, or a combination of the two. 

Of course, you don’t get any guarantee of the results. The mechanism is similar to the first option, except it is officially legal.

Regardless of how competent the offered advice is, this business model must be revised. It’s true, even if it’s the most qualified advice in the industry!

This is because the scenario is always the same. Namely, people with the fastest bots (and their clients) will be the first to implement and profit from the advice.

You, who diligently pay for the product and then try to make money by manually buying whatever is suggested, will buy at a higher price and be left at a loss. Not to mention that the authors of such reports usually buy first, before the information is out in the press.

Who Profits First

And then they profit the most from their advice. You first give them cash by paying for the service and then pump their coins with your money. Mind that these “experts” always activate during the tide, in essence, in a bull market and somehow close their service in the bear market.

So, from the very start, they are not planning to promote valuable projects. Instead, they ride the tide and make even more money than they would otherwise.

These people are typically aware of how their advice will eventually affect their clients. Clients buy into these services because they are attracted by the opportunity to make profits. So, if the author of the service is conscious that they will come out of this at a loss, it makes them a con artist.

It’s worth learning more about how “successful” such financial services in crypto have been in the past. For example, you might be familiar with the story of Palm Beach Confidential by Teeka Tiwari.

Teams Releasing New Coins

3. Teams releasing new coins. They can promise you the world and picture themselves as authors of groundbreaking technology.

They try to persuade you to buy into their new shitcoin on online forums and conferences. If you are not an expert, it is easy to make a mistake and invest in something that only looks promising. 

While it’s a repetitive and unnecessary project, usually, you only learn that the shitcoin has no added value after its value drops to zero. Or, when the whole team disappears with the funds they collected right after the public launch of their “asset”.

Or even a few years later, as it happened with Onecoin, to give an example. By the way, I recommend you watch an episode on the ColdFusion channel dedicated to OneCoin.

Outright Scammers Who Commit Crypto-Heists

4. Outright scammers who commit crypto-heists. Groups of crypto-scammers regularly arrange websites and YouTube channels announcing that when you send some BTC to the given address, Elon Musk will send you 10 times back. 

It is incredible that after a decade or more, people still go for these scams and send their Bitcoin, hoping they will ever hear back! Of course, other protocols are attacked, too. For instance, so many scams use Vitalik Buterin’s name that he had to put the “I don’t give away ETH” disclaimer outright in his public Twitter profile.

Influencers

5. Influencers.

Folks on social media, for instance, on YouTube, who profit from their following in their ways. To be clear, many of the owners of the crypto YouTube channels are genuine content creators.

Those guys share their thoughts and enjoy a lifestyle from joining the market early enough to profit from its growth. They built a name for themselves and earned a following. 

They also made small contributions to this space (e.g., the Ikigai philosophy, “purpose,” etc.) and are additionally paid through the YouTube monetization scheme. 

Of course, there is nothing wrong with such people. We all need role models.

The problem starts when their scope of operations exceeds what you see on the screen. Many crypto-YouTubers have become millionaires at twenty (or even earlier), which can lead to a weird morality.

Namely, to the view that “money is just a game” and that you can play this game without thinking about the consequences. So, they start secretly buying coins before praising them publicly so that their viewers pump their coins.

How Influencers Quietly Profit

Since crypto is highly volatile, one influential YouTuber with 100k+ followers can effectively boost the price of a middle-size project by 50% or more. So they do — and then, they quietly sell.

Or, they take money from crypto projects under the table and shill for coins without disclosing that it is sponsored content. Which is a plague in crypto nowadays. I will never forget how surprised I was in April 2018 when I visited Amsterdam for a conference hosted by one of the leading crypto projects.

I accidentally bumped into one of the most popular YouTubers at the event. He used to shill for that project a lot on his channel. I trusted his words and had bought the coin a few months before.

That’s why I wanted to attend the conference first. But when I noticed him on stage as the announcer at the event, I realized that he had been paid for everything he ever said about the project. It was like a cold shower for me.

Crypto is still a wild West. And if you listen to the advice from the crypto media, you might need to say “Goodbye!” to your money very soon.

It is hard to tell the difference between genuine advice and sponsored shilling. Thus, I advise you not to repeat my mistakes and disconnect from crypto-authorities online as soon as possible.

Crypto-Traders

6. Crypto-traders. Yet another group of YouTube crypto-conmen is traders.

Again, there are some genuine people out there. They became well-known for their fundamental trading skills. 

Now, they show the audience their trading moves in real time and profit from the YouTube monetization scheme. But many traders are not genuine at all. They built their reputation in crypto trading solely because they acquired a large following. 

Their “predictions” then become a self-fulfilling prophecy. After publicly sharing their prediction that a given coin will pump, it will pump because of the following. And, of course, traders always return to successful predictions and discuss them, justifying why a given prediction was a good bet from the start.

They skip unsuccessful predictions and wipe them under the carpet as if they never happened. That’s why you can easily understand that they are always right.

“Friends”

7. “Friends.” You may also have people around you who entered crypto earlier than you did—those tempted to sell you some financial advice in exchange for a part of your crypto assets. 

The problem is that greed not only prompts anonymous scammers online to take your money but can also break your relations with the people around you. All those who seem the closest to you, but when facing large sums of money, might suddenly become monsters. Remember that money often touches people’s lowest instincts. 

It happened to me a few years ago when I was still naive. I don’t wish anyone to experience this. It makes you feel like you are losing everything: your money and your friends.

And it feels awful when you are ripped off by your ” friends ” instead of anonymous people online. If you are enthusiastic about crypto, it is hard to prevent yourself from pulling other people in — including your friends.

I made this mistake myself. In 2017, I was so enthusiastic that I started telling all my friends about the opportunity. Some people bought in at 1,500 euros, while others bought in when Bitcoin was already 8,000-10,000 euros.

They then experienced a lot of stress when the charts went downhill for another two years. According to Forbes, Bitcoin’s price corrected from nearly $20,000 in December 2017 to just above $3,000 by the end of 2018, making that year its worst on record. 

I felt guilty, even though I knew the prices would eventually get back on track. In summary, Bitcoin can screw your relations with people in many ways — even if you have pure intentions.

Other Scammers

8. Other scammers.

All the other types of scammers whom I might not even have heard of. One undeniable fact is that crypto scammers are even more creative than others.

This space is still heavily underregulated, which gives a lot of freedom to creative conmen. According to the U.S. Securities and Exchange Commission, fraudsters routinely exploit hype around crypto assets to lure investors.

This creativity is ironic; if all these scammers engaged their creative brains in something constructive, they might create something great. Instead, they use their talent to produce bad karma by stealing money from others.

What I notice is that now, in 2020 — in times of the pandemic, we have even more of this cancer than back then in 2017. People are tired of the lockdown, feel uncertain about their jobs.

And look for investments to secure their future and help them through the hard times. This makes them even more prone to manipulation than they used to be. And crypto-scammers can’t miss the opportunity!

Also, remember that people who try to persuade you to buy as much Bitcoin as possible usually don’t want good for you. In principle, if someone tries to convince you to go all in, that’s a red flag. These people usually use some of the following arguments, which are all invalid:

Counterargument: “There Are Market Cycles”

1. “There are market cycles. Bitcoin goes roughly 10 times every cycle, so you are guaranteed to gain money anyway.”

This argument is flawed for at least two reasons. Firstly, the fact that something happened before doesn’t mean it will happen again. 

This model (10x-ing every 2-3 years) is unsustainable and must eventually crash. The whole question is “when” and not “if.” Also, the fact that Bitcoin has a market cap of Y billion dollars doesn’t mean that people bought Bitcoin in exchange for Y billion dollars!

The price is always roughly equal to the price at which the last transaction was made. That price inflates the value of all the other coins in circulation.

Moreover, Bitcoin cannot be compared to any physical asset. It is entirely speculative, and its real value is tricky to estimate. When the sentiment in the market changes and people start taking money off the Bitcoin market, the price can also rapidly go down.

And the price can be verified to see how much Bitcoin is worth. So, you can’t guarantee that the ultimate market crash won’t happen. The only sure thing is that when you buy Bitcoin, you inflate the price for all those who already have it, including the person who persuaded you.

Counterargument: “Bitcoin Makes People Equal”

2. “Bitcoin makes people equal. Bitcoin is an alternative to a dollar, a flawed currency since it doesn’t have a comparative in gold.”

Yes, you can print digital dollars, which lowers the value of the dollars in circulation. This inflationary system has been working for over 100 years now. 

Somehow, the world economy is improving instead of going to the dust. Inequality is on the rise—that’s true—but what about the Bitcoin market? It is deflationary, which produces inequality, too. 

Let’s look at the situation from another angle. Those who had cash to invest, the best access to the internet. And information about new technologies bought in first and became millionaires.

Meanwhile, those living in third-world countries still need to be aware of Bitcoin’s existence. They will discover the whole blockchain revolution only after Bitcoin becomes ultra-expensive.

So, geeky kids from developed countries buy for 1 dollar. And those from developing countries will buy for 1 million dollars. That doesn’t sound like equality to me at all.

Counterargument: “Don’t Trust Banks!”

3. “Don’t trust banks!

They can steal your money!” Oh really?

I was never robbed by a bank, and neither of my family and friends. Yet, most of the crypto investors I ever encountered were robbed in one way or another. Many of them multiple times and in hundreds of different ways. 

Of course, there is some risk of getting robbed by a bank (mostly in developing countries). Yet, it is incomparably lower than getting robbed of your crypto assets.

Many crypto conmen feed on the lack of public trust in banks and their overall bad press. It is so easy to make money on other people’s hate!

To sum up, don’t trust people who try to persuade you to go all in. If these people were Bitcoin evangelists who sincerely believe in the project, they would try to convince you to use Bitcoin — namely, pay with it and accept payments — rather than buy it for all your money.

Why Doesn’t Investing in Crypto Work the Way You Expect?

Now, to the point. Judging from the title of this essay and the text above, you might be thinking now, “The author is clearly against crypto assets.” I’m not.

As soon as you invest your savings in Bitcoin, you most likely won’t profit from it. Instead, you will likely become wrecked in one way or another. Let’s analyze three possible scenarios.

Scenario 1: Losing Your Crypto Assets

Scenario 1: You lose your crypto assets in the process.

As mentioned above, you can quickly lose Bitcoin in hundreds of ways. And it happens to many, if not most, crypto investors. Funny enough, those who shill for crypto will first tell you, “Banks steal from you; don’t keep your money there!

Buy crypto! “.

But once you follow, remove your money from the bank. And move it towards crypto. And then you lose your crypto savings, the same people will tell you, “Yeah, this is normal.

Everyone loses in crypto at the start. Just buy more crypto, and I promise you that you won’t lose it the second time! “

Say what? You told me I should buy crypto because otherwise I would get robbed by the bad, bad banking system. And so I bought it.

I did get robbed, and now you are telling me that it is all fine? And why didn’t you share this insight BEFORE I moved my money out of my bank account? This is insanity.

Furthermore, once you lose, many people in crypto will tell you, “Oh, you are not the only one. “Imagine that you tell someone that you have cancer or that your house was just burnt.

And they react by saying, “Oh, you are not the only one. That’s the level of empathy that crypto people will have for you.

I don’t mention people outside of crypto who will just laugh at you or even clap at your loss. They will think that your greed has just beaten you and that you’ve got what you deserved. So, you will be suffering in silence without having anyone to share your pain with and be understood or helped.

Scenario 2

Scenario 2: You don’t lose your crypto.

And what happens if you don’t lose your assets?

Well, let’s assume that you invested your savings in crypto. You took the risk, have put your now private assets on the table, and want to achieve a maximum profit.

So, you will hold, hold, and be afraid to sell. According to Kahneman and Tversky (1979), losses loom psychologically larger than gains, which is exactly what keeps people frozen.

All these people who sold during the bull market in 2017 or any of the bull run before regret it now. There can always be another bull run 10 years from now, right?

So, you don’t want to be this loser who had a golden goose in their hands yet walked away way too soon. All those people who bought at 1$ and sold at 100$ must feel like fools now!

So you will hold, hold, and hold, and always be afraid to sell. What if Bitcoin were traded at a million in one day? I can’t sell now.

But what if the central banks pull the plug and delegalize crypto the other day. And its value will go to zero?

Perhaps keeping it is a gamble, too? It’s a never-ending spiral of fears and anxiety.

What If You Believe in the Project?

And what happens if you buy in because you believe in this project? — in the new financial system called Bitcoin? So, you support it by buying Bitcoin, then hold it for dear life (HODL) through thick and thin and keep your Bitcoin safe.

After all, the original Bitcoin whitepaper (Nakamoto, 2008) describes a payment system, not a get-rich-quick scheme.

So, what happens when you and Bitcoin successfully get through the bear markets together? And if you grow a deep belief that this is IT? Well, most likely, you will become a miserable slave to your Bitcoin, like Gollum has become a slave to the ring in “The Lord of the Rings.”

Many Bitcoin millionaires will die in empty one-room apartments with tons of Bitcoin hidden somewhere. They will never go on a decent vacation, buy a car, or enjoy life for their Bitcoin. Every time they spend Bitcoin, they feel like they are cutting their fingers.

For the same reason, I predict that Bitcoin is much more likely to become a store of value. A digital gold of sorts—than a viable payment system.

Scenario 3

Scenario 3: You are one of the few lucky ones who profit greatly and make much money from crypto.

Well, in that case, you are happy, right? Waaaait!

Isn’t this pretty much the same situation as winning a lottery? Buying a ticket for a few bucks that happens to win millions?

Lottery winners are known to medicine as one of the most unhappy groups of individuals. According to Brickman, Coates, and Janoff-Bulman (1978), published in the Journal of Personality and Social Psychology, lottery winners studied at Northwestern University in 1978

The study reported that despite having cash in their accounts, the lottery winners were not happier than the controls. Actually, they enjoyed their daily lives less than before. After all, money won’t replace bonds with people and a sense of purpose in life.

The same can be seen in crypto. Instead of traveling the world and enjoying their fortunes, many of the people who became crypto-millionaires became miserable.

That’s why they try to become influential figures in the crypto community—in all the wrong ways. They keep arguing publicly about which Bitcoin fork is the “real Bitcoin” and provoking all kinds of drama and scandals.

Apparently, money doesn’t make them much happier; what they really dream of is being respected, and it is something that winning a lottery just can’t buy.

Conclusion.

So, can you gain anything from Bitcoin? Absolutely. You have the power to earn Bitcoin by producing value with your work, giving you a sense of control over your financial future.

For instance, by contributing to the crypto world. For instance, by building new protocols and infrastructure, becoming a Bitcoin miner, producing new educational materials, becoming a legit tax advisor, and saving companies and individuals from legal trouble with their financials. I even know people who earn their Bitcoin by helping others redeem their lost Bitcoin — for instance, by fixing crushed hard discs or getting involved in crypto-forensics.

And even if you have nothing to do with the blockchain industry in your professional life, you can still profit from it if you peg crypto payments to your payment system. This could involve setting up a Bitcoin wallet and integrating it into your existing payment system. The point is that you didn’t formally invest your own private assets in crypto because you believed in the concept.

Earning Bitcoin Without Investing In It

Instead, you generated sales and received payments in crypto. So you don’t feel any emotions about your crypto assets.

In this context, crypto is simply another method of payment, nothing more, nothing less. It’s like having another bank account with a different currency.

If you earn crypto this way, you won’t be exposed to any speculative actions that could lead to loss of assets. You can confidently exchange your crypto assets for cash whenever you need to spend, ideally at a higher price than when you originally earned it.

You might be thinking now, “Investing in crypto or earning it — what’s the difference? I don’t see any.” Indeed, this difference is hard to notice with a bare eye, as it is nonmaterial.

When you invest in Bitcoin, you buy it with the hope that its value will increase over time. However, when you earn Bitcoin, you receive it as payment for goods or services, and its value is a bonus.

This is a psychological difference that allows you to benefit from crypto in real life. Believe me or not, the people I know in real life who benefitted from crypto assets were those who got paid in crypto.

That’s why it’s always better to earn Bitcoin than to buy it.