Real-Life Use Cases: Top 5 Mistakes That Can Cost You a Fortune in Bitcoin and Crypto Trading

| Updated on March 26, 2024

On May 22, the world’s crypto community celebrates Bitcoin Pizza Day. As you may have heard already, on this date, a guy from Florida paid nearly $400 million for two pizzas and made the first commercial blockchain transaction. Every year we calculate the value of that 10,000 BTC Hanyecz spent on pizzas and it grows dramatically. This brought us to thinking, was it a mistake, actually? At that time, BTC worthed about 0.0025 cents. So, in fact, he paid just $25. 

Nowadays, you can find a lot of stories on forums like Reddit about how people lose a fortune in crypto because of a little mistake. Mostly, because they didn’t know how to trade with minimum risks. Yet, even if you’re experienced in trading there are some useful tips you need to know about crypto to save your money.

1. Attention! Crypto withdrawal

Traders usually have several accounts on different crypto trading platforms or have additional wallets to keep their long-term investments. So they perform at least one crypto transaction in a month on average. And here’s the deal. If you make a little typo in the recipient wallet address, funds will go to another user or just be stuck in the blockchain. Forever. 

Tip: When sending crypto to another address, double-check:

  • The Currency. Because every crypto runs on a separate blockchain and has a unique address format. If you accidentally transfer Bitcoins to Cardano wallet, you’ll definitely lose your funds. 
  • The Destination Wallet Address. Even if you copy and paste it. Some malware can replace the copied address with the one that belongs to hackers. 

Also, always pay attention to what blockchain does your crypto running. For instance, Tether (USDT) exists on Bitcoin (Omni and Liquid Protocol), Ethereum (ERC-20), Tron (TRC-20), Algorand, SLP, and OMG blockchains. However, you can transfer funds within one network. Sending ERC-20 tokens to the TRC-20 blockchain can result in stuck funds.

2. You Can Trust Your Credential to No One

The support team doesn’t need to know your password, 2FA-code, or seed phrase to assist you. If it sounds like a great discovery for you then you’re lucky to read this article before someone tries to steal your money. 

Everyone knows that you should protect your password as if it was your piquant pictures. But many of us forget this rule when the situation is critical and we need a solution right now. Like when you have been waiting for a good price to sell some of your Bitcoins and when the day has come you can not access your account. Or when you sent crypto to your relatives abroad and the transaction is stuck for a few days. Trying to find the solution on online forums, many people became a sweet loot for scammers. Crooks will try to contact you in direct messages and ask for your login credentials, including password or seed phrase to investigate the case.

Stay on the lookout, use only official support channels to ask for assistance. And no, you can not tell your password to your mama. Even in secret. 

3. Save Your Wallet Backups As if They Were Crystal

Millionaires losing a fortune in Bitcoin because of forgotten passwords. This is not the headline of breaking news, this is the reality of the crypto world. Blockchain works without intermediaries who can help you restore access to your wallet or be a custodian for your investment. 

When you keep your crypto on the cold wallets, you’re the only person who can manage it. There is no technical support administrator who can just reset your password. 

Talking about devices containing your crypto, there’s always a risk that you’ll lose or break it. Or just threw it away accidentally, as it happened to J. Howells. Well, if you have your 24-word recovery seed phrase written down somewhere, your funds are safe and sound. And if you don’t have the seed phrase, your money is gone. 

It can be a good idea to create a backup of your wallet. Still, it requires certain digital knowledge and skills. That’s why many traders prefer having an account on a crypto platform with an option of custodial storage. If you choose a reliable crypto exchange operator with enhanced security measures you can keep calm about your funds’ safety and focus on trading goals. Because in case you forgot your password, a support team will help you restore access to your wallet. 

4. Say NO to Paid Crypto Giveaways

During the ICO boom in 2017 many investors lost their funds because of fake blockchain projects. The lesson was learned and now crypto users study projects well before making deal with it. Well, at least this is a top recommendation and the golden rule of every investment strategy. 

But fake ICO is not the only way how scammers can make you send them your money. In recent times, frauds lure victims with crypto giveaways. The situation is quite similar to a fraudulent ICO. There’re legitimate free crypto giveaways launched by trusted companies. But there’re also fake giveaways launched by scammers. The difference between them is that you don’t need to pay for the legally issued giveaway. 

Remember, if anyone asks you to make a small, refundable crypto payment this is a scam. Another red flag is a promise to double your income in return. No one is going to send your money back. Crypto transactions are irreversible and anonymous, so it’s hardly possible to track the scammer and return your money. So better keep away from these sweet promises. For the same reason, avoid sending funds to the wallet address that doesn’t belong to you. 

5. Trading on Unregulated Crypto Platforms

The regulatory issue has plagued the cryptocurrency world for years. Some people think that with regulation we’ll lose the anonymity of crypto transactions. However, it doesn’t affect the security of your operations and, conversely, can improve it. Here is why:

  • To receive the license, the crypto exchange should follow anti-money-laundering laws. That means users of the regulated platforms are not involved in illegal activity like terrorism financing or drug distribution. 
  • Every asset listed by a certified exchange passes the legal due diligence procedure. This is necessary to make sure that the token issuing company is not a scam. When you trade on the regulated exchange you can save your time on the research and choose one of the coins presented on their marketplace.
  • A crypto exchange that follows international and local regulations in different countries can build strong relationships with banks and payment providers. For you, as a customer, that means multiple payments options and quick fiat deposits and withdrawals. 

And the key point. Most regulated crypto exchanges are responsible for the security of the customer’s funds. They implement all possible measures to protect your account from unauthorized actions and online scams. Also, some laws require exchanges to have enough balance on the reserve account to cover customer’s losses in case of an online hack or other unexpected issues. That’s why working with the unregulated exchange can definitely cost you a lot of money.

John M. Flood

John is a crypto enthusiast, Fintech writer, and stock trader. His writings provide guides to perform your best in the crypto world and stock planet. He is a B-Tech graduate from Stanford University and also holds a certification in creative writing. John also has 5 years of experience in exploring and understanding better about the FinTech industry. Over time, he gained experience and expertise by implementing his customized strategies to play in the crypto market.

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