There are a lot of things that can be scary about crypto, especially if you are new to the industry. The volatility, uncertainty, security and newness of crypto all give rise to some very real fears. But we believe that with a little education and research that crypto doesn’t have to be scary. So we’re hoping to help you face your crypto fears with some insights on how to tackle them.
Crypto Fear #1: Volatility
Crypto has a reputation to be somewhat of a roller coaster. Like all markets, crypto has its swings. It can be disconcerting to witness the ups and downs.
But did you know that there are signs that crypto is getting calmer? More people are holding bitcoin for a period greater than one year, and short term holders continue to be the main driver of crypto volatility. In fact in the last 3 months the volatility in crypto has actually been lower than the S&P 500.
Crypto is a nascent industry with a lot of transparency, which means it’s going through its growing pains in public. The whole world has the ability to get in early on startup-like assets – these assets have startup-like risks, but potentially startup-like returns.
While we can’t give you investment advice, we’d urge you to understand that like any investment, your crypto investment will fluctuate. Consider starting small and only investing an amount that you can afford to risk. Don’t use loans, credit card debt, or a second mortgage to invest. Look into dollar cost averaging for crypto, where you invest a little at a time on a set schedule, to build your comfort and confidence.
Finally, ensure your crypto investing fits into your broader long-term investing goals, and then execute based on that plan.
Crypto Fear #2: Security
Like any emerging technology or market, crypto has its fair share of people trying to take advantage using fraud or scams. But a few security best practices can go a long way.
Set up multi-factor authentication (MFA or 2FA) on your account as a second layer of protection. This is much more secure than a password alone.
Social engineers use curiosity, fear, or anger to get you to click on malicious links. So pause and look at the link before you click, and make sure it’s the same as the URL you’re expecting.
If you’re considering investing in a new crypto or token, take the time to research it. See if it’s listed on trusted exchanges, consult experts, read the whitepaper, or dig further to find out how the token works and what could make it vulnerable.
Set up cold storage for your crypto, and store your private keys and seed phrases in a secure offline location. Never share private keys or passwords on social media or with other people. An exchange will never ask for your private key.
Limit what you say on social media. Don’t post your wallet address or details about your crypto wealth online, as it makes you an easy target for hackers and scammers.
Crypto Fear #3: Regulation
The question of how (and when) governments respond to crypto with regulations is an open and evolving one. While there is uncertainty regarding regulation, it’s nothing to fear.
Increased regulations are usually a sign that a market has matured and strengthened enough for the powers that be to take notice. Crypto regulation is an effect of crypto mainstream adoption.
If done well, regulation can help protect consumers from scams and fraud while still allowing the best parts of crypto to shine.
You’ll likely feel more secure if you keep on top of regulation news, and make your voice heard if you disagree with the direction regulation is going in your country. Let your elected representatives know what changes you would like to see.
Crypto Fear #4: Learning Curve
There’s so much information related to crypto, and new things are coming out all the time. It can be tough to keep up.
As with other crypto topics, your approach to crypto education should be based on your investment goals. Part of the fun is choosing what to focus on!
Don’t try to drink the ocean. Rather than trying to learn everything about crypto, get a broad base of knowledge and then choose one or two areas for a deeper dive.
Crypto Fear #5: Environmental Impact
While all crypto requires some energy, there are thousands of tokens with different consensus approaches and energy outlays.
For bitcoin, a large percentage of the energy used for mining is from otherwise wasted resources, and there are inherent incentives towards seeking these otherwise overlooked sources of energy. Miners have even found ways to use flare gas and volcanoes to power their operations – these innovations may serve as a useful example for other industries looking to find efficiencies in their energy consumption.
Crypto miners are unique in the fact that they can travel to where energy is cheapest (i.e. where there are sources of wasted energy) in order to conduct business, and are incentivized by the network itself to do so.
Many blockchain technologies, including bitcoin, are designed to utilize energy very effectively, especially given the size of the network. Bitcoin has almost 100 million users, yet its energy consumption is a rounding error on a global scale – currently around 0.5% of global energy consumption.
Many ESG focused investors also hold crypto, and feel that the two things can complement one another. Like any other investment decision, you should make the one that meets your personal goals.
So there you have it. Sure there are some intimidating things about crypto, just like so much in life. But with a little education, research and community crypto doesn’t have to be scary.