How to avoid becoming a millionaire with Bitcoin (but what to do if you’d rather win)

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This article was translated from English on 01/21/2021

This article has been written exclusively for Investing.com

Madness and excitement for the cryptocurrency queen in December and January
● meaningless price forecasts from analysts
● Lost passwords and lost millions
● Nursery and attractiveness are both influencing forces

I am a fan of cryptocurrencies, but I am also a beginner when it comes to this new asset class.

The universal nature of these coins appeals to my libertarian tendencies. If governments do a reasonable job managing the money and the money supply, there is no reason for cryptocurrencies. Unfortunately, governments have not, and the situation is getting worse. With the US deficit ballooning to the level of $ 30 trillion, and indifferent stimulus spending continues, the case for the digital currency revolution becomes compelling.

But I’m now in my sixth decade, so, I can officially say I’m an old-school guy. Technology continues to overwhelm me at times. And although I consider my heart still young, my mind is not the same as it was decades ago. Let me tell you a nod to that: I tend to forget passwords shortly after I set them up and enter them on websites.

So I had to smile sympathetically when I read a few days ago about Bitcoin millionaires who had become rich recently, who had lost access to their recent earnings as well (which, by the way, are still rising steadily) due to exactly the same problem: a weakness in memory that made them They forget their cryptocurrency wallet passwords.

Here are some simple things to know about Bitcoin, and precautions to help avoid these and other risks.

Madness and excitement for the cryptocurrency queen in December and January

When prices of other assets fell in March 2020, prices fell to as low as $ 4,210. That price was roughly one-fifth of the price Bitcoin had reached in late 2017, when the market value of this asset class reached over $ 800 billion. In 2019, Bitcoin rose to a lower high than the previous one, at $ 13,915.

Source: CQG

As the monthly chart traded on the Chicago Mercantile Exchange shows, the price moved above its 2019 high in November.

The technical breakout to the upside sparked an explosion under the cryptocurrency. And at the beginning of 2021, the price reached the level of 42,730 dollars, and by the end of last weekend, the cryptocurrency was trading above the barrier of 36 thousand dollars. At this level, the market value of this asset class is close to the $ 1 trillion level!

Meaningless price expectations from analysts

Everyone loves a bull market. Now, many critics are writing that Bitcoin is the new, and that investors are fleeing the shiny metal in search of mysterious digital tokens.

Bitcoin has had a lot of detractors over the years. In 2018, Warren Buffett described Bitcoin as a “square of rat poison”. His partner Charlie Munger said it was “artificial gold of no value” that same year. Jimmy Dimon, chief executive of JPMorgan Chase, described Bitcoin as a “fraud” in 2017. So far, they are all wrong.

Meanwhile, the crypto-assets craze has hit the Global Investment Bank run by Mr. Damon. At the start of 2021, bank analysts said Bitcoin had the potential to reach $ 146,000.

In my opinion, the words of this bank analyst are dubious, as are the words of the bank’s president himself in 2017. The level of $ 146,000 appears to have been picked out from the void. Analysts have models that compare the market value of the digital currency to other competing assets, which confirm their predictions. But I do not pay heed to those statements and consider them, as Mr. Munger said, of no value.

Markets tend to rise much more than anyone might think during bulls, and during downturns, they drop much more than most bearish bearers think. And if you have any doubts about what to say, just look at the behavior of futures prices, which fell to the lowest in its history of minus $ 40.32 on April 20, 2020.

Lost passwords and lost millions

There are many news reports that have spoken of the loss of millions of dollars, if not billions, by people who simply forgot their digital keys or passwords for Bitcoin wallets, or other encrypted wallets. There is an article on the (PC Gamer) magazine website about a computer programmer’s loss of 7,002 Bitcoins, currently worth about a quarter of a billion dollars, because he forgot his password. If a programmer encounters this problem, what are the chances of it occurring for a coding newbie like me?

A New York Times article last week estimated that of the 18.5 million Bitcoins in existence, 20% are missing in stranded wallets. There are recovery methods when we lose passwords for a bank, investment, or other type of account. But for Bitcoin wallets, those who lost the keys ended up being the biggest losers.

I used Google (NASDAQ 🙂 to find an answer to the question: “What happens if I lose my Bitcoin key?” The answer was: “If you forget your private key, there is no way to regain access.”

Incubation and attraction are both forces

Therefore, if you choose to invest in Bitcoin, or another digital currency because the same, and you choose to store it in a private wallet, write your key and keep it in a safe place. Make copies of the password or key and put it in a safe.

An alternative option to private wallets is that you can store cryptocurrencies on some online exchanges, but there are risks. Coinbase is one of the largest of these exchanges. This exchange keeps nearly 99% of its assets in offline, inaccessible, and impenetrable storage facilities. Other internet exchanges offer similar storage services. For the cryptocurrency market to mature, security is a critical issue. The CryptoNews website offers valuable suggestions for storing cryptocurrencies safely.

Keep records of your digital currency savings and store them securely. Custody remains the main issue for me and many others, whether or not I am one of those forgetting passwords. Keeping encrypted assets on your computer increases the risk of hacking. It is the old school mentality in this world of digital currency that causes these drawbacks.

And for investing in Bitcoin and other digital currencies, it is difficult to call in which direction any of these currencies will go in the future. But one thing is for sure, expect volatility.
The bottom line is that digital currencies are ultimately markets. And like all markets, risks rise during very sharp moves.

Whether Bitcoin once again reaches its historical peak of $ 42,370, or the current explosive rally will find another peak at two or four times this level or more, “gravity” will ultimately lead to a massive correction. Watch out for losing access to those tokens, but you must also have a plan in place to deal with price risks.





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