Common Errors Made When Dealing with Cryptocurrencies

Money is a wonderful invention. This comes with a baggage that it can be misused in numerous ways. To prevent this, making paper money today has special dyes on watermarked sheets, contains serial numbers, “security threads,” and even hologram. Here comes the advantage of cryptocurrencies over paper money as the former boasts of algorithmic security and consensus procedure which usually don’t encounter counterfeiting hindrances.

This advantage is assumed as a security against fraud and immunity to all loss by the crypto holders. Cryptocurrencies offer unique methods to enhance your economic strengths, but one should also take special precautionary measures to avoid unwarranted problems.

Cryptocurrency portfolios present on exchanges namely CoinCheck, Bitfinex or Poloniex, are convenient to use but do not possess satisfactory internal security. Hence, one needs to answer the query as to what the investor can do. The answer is surely not to panic and liquidate the positions but, a majority of them believe, it is always good to invest in more than one wallet. Various forms of wallets are available providing you with a similar purpose of storing cryptos which beginners are unaware of. They may be online, offline, hardware, software or even just paper pieces. Notwithstanding the value or the place invested, one should definitely take care that ensures at least the common investment blunders don’t occur.

The first mistake being treating wallets as banks. Remember “Mt.Gox.” Previously the largest Japanese exchange went bankrupt and can send shivers to crypto holders who have seen a lot of seasons in this field. It was hacked for a whopping amount of 1.35 million BTC and in 2014 for $450 million of currency. Of late, in 2016 a hack cost Bitfinex community $72 million. Needless to say, though the security has developed over time investors themselves should ensure that their holdings are safe.

InfoSec Institute wrote last year that insecurities are there to stay. It is sad that investors treat exchanges as banks. On a larger degree, the United States Federal Deposit Insurance Company sees that investors don’t lose their wealth even if the bank fails. On an individual degree, the bank restores an amount dealt fraudulently, which will not be compensated if a request of a similar fashion is made to an exchange and who better can answer this than the victims of Mt. Gox.

The next mistake being avoiding taxes on crypto earnings. Even though most cryptocurrencies are not regulated by the government, it is wrong to assume that one does not need to comply with tax returns on their earnings. Advice on taxes is been given by exchanges to cryptocurrency investors. In the United States the tax situation does not provide a clear picture, but tax experts want that investors should be aware of their coin movements, their possessing dates, the amount paid as well as the amount received when sold.

The next common mistake being losing the crypto wallet. Cryptocurrencies offer paper wallets. Though they can be dealt with offline which could prevent from being hacked but can give you no protection if the number of your private key fades away due to numerous folds, you could lose everything stored, if by any chance you misplace the wallet. It is to be noted that by 2017, near about 4 million Bitcoin disappeared from circulation.

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