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Cryptocurrency 101: A Guide to Avoiding the 7 Most Common Pitfalls

Updated: Jan 8


cryptocurrency 101 Most common pitfalls

Welcome to MoneySkills.com, your guide for financial empowerment. Today, we're delving into the exciting world of cryptocurrency, which is full of both prospects and unsurprisingly, drawbacks. We'll concentrate on the key tactics for protecting your digital assets. This guide is intended to provide you with with the insight you need to safely and securely navigate the cryptocurrency world, from avoiding scams to using smart wallets and understanding the nuances of buying Bitcoin.


#1 Avoiding Cryptocurrency Scams

  • Identifying Deceptive Practices: Be cautions of schemes that use celebrity endorsements. In July 2020 Twitter accounts of top celebrities such as Kanye West, Barrack Obama, Warren Buffet, Elon Musk and a few others were hacked and promised doubled returns on Bitcoin sent to their address. The '2020 Twitter Hack' serves as an example of how to spot such schemes. See more in detail here.

  • Avoiding Scams: Keep in mind that reputable cryptocurrency initiatives cannot promise profits. Approach everything with suspicion.




#2 Smart Use of Mobile Wallets

  • Managing Convenience and Risk: Put greater amounts of cryptocurrency in more secure wallets and use mobile wallets for smaller, daily transactions.

  • Choosing Wallet Types: For large amounts, use hardware wallets to improve security.


#3 Implementing Two-Factor Authentication

  • An Additional Layer of Security: To avoid unwanted access, use two-factor authentication for all online accounts, especially those associated with cryptocurrencies.

  • Backup Codes: Keep backup codes for your 2FA safely stored to ensure account recovery if needed in case of an emergency.


#4 The Importance of Wallet Backup

  • Preventing Loss of Assets: To avoid losing access to your digital assets, regularly backup your cryptocurrency wallet.

  • Physical vs. Digital Backup: For increased security, go with offline physical backups.


#5 Purchasing Bitcoin – Methods and Considerations


  • Credit Card Risks: Watch out for increased fees and privacy concerns while using credit cards.

  • Bitcoin ATMs: These are becoming more popular and provide more privacy, while fees can vary.

  • Bank Transfers: A safer option, typically have fewer fees, and connect straight to your bank account.

  • Decentralized Exchanges (DEXs): Offer more privacy and full control over funds but can be complex and have liquidity issues.

  • Peer-to-Peer (P2P) Platforms: Offers a range of payment options and the ability to purchase directly from sellers, however security and costs may vary.


#6 Leaving Your Cryptocurrency Assets on Exchanges

The advantage of buying your digital assets on cryptocurrency exchanges is a relatively low purchase fee (around 0.1 - 0.4%, depending on the exchange and monthly volumes). Centralized cryprocurrency exchanges like Coinbase, Bybit, Binance, Kraken are generally not recommended to hold your assets on.


  • The Illusion of Control: Realize that since you do not possess the private keys, you do not have total control over your digital assets on cryptocurrency exchanges.

  • Protecting Your Assets: Move digital assets to private wallets, where you are in complete control of your keys, never leave them longterm on exchanges.


#7 The Dangers of Trading Cryptocurrencies

  • Acknowledging the Risks: Trading requires an in-depth understanding of market dynamics as well as emotional discipline.

  • HODLing vs. Trading: For a less stressful method to cryptocurrency investing, think about the long-term strategy of holding cryptocurrency as opposed to trading.


To safeguard your investments in the constantly changing world of cryptocurrencies, you must be aware and watchful. You're not only safeguarding your digital assets but also laying the groundwork for a more confident and stress-free interaction with the world of digital currencies by being aware of the risks and putting the suggested techniques into practice.


Remember that your approach to security and strategic decision-making will determine how successful your cryptocurrency investment venture is in the long run. With MoneySkills.com, your guide through the intricacies of the financial world, you can stay informed and continue your education.

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