It wasn’t just fireworks during Chinese New Year last week; Bitcoin rose above $50,000 due to the growth of large capital and small users. With the current growth, the number of users worldwide could reach a billion in the coming year. Digital coins are also as popular as ever in the Netherlands. More than two million Dutch people have already invested in it. But what mistakes are made and how can you prevent this? In this article you will find 6 tips.

Due to the AI ​​hype, many other cool technologies seem to be losing out in media attention. The great thing about the underlying blockchain technology is that almost all data is transparent. This allows you to make many great analyzes about its use and adoption worldwide. Governments and law enforcement agencies do this with a platform like Chainalysis, consumers go to Glassnode, which also continuously posts incredibly interesting analyzes on YouTube.

The expectations in 2024

As I wrote before in my 2024 trend article about crypto: we are going from the most boring to a significantly important year. My first prediction has already come true: the bridge to the big boys has been built. The American stock market watchdog SEC has approved a so-called ‘Bitcoin ETF’. This makes it suddenly very easy for large investors to invest in cryptocurrencies such as Bitcoin. They no longer have to buy and store the cryptos themselves, but can easily invest in large quantities through a third party. In the first few days, more than $4 billion flowed to these parties, exceeding the trade in a precious metal such as silver. More than 50,000 Bitcoins have already been purchased for these ETFs.

I can’t explain you how ridiculous this is – Nate Geraci, ETF Institute

But there are still a number of events planned in the coming months that could have a very positive effect on the market. It is therefore not only the interest of major investors that is increasing, but also consumers. I notice it in the many phone calls and texts I receive from people for advice, but also in the discussions with students during lectures I give and keynotes at events.

The market forces that I learned during my finance studies clearly apply here. Interest increases exponentially with price increases. You can also see this clearly in the ‘Fear & Greed index’.

But with all my enthusiasm, I also see many things going wrong.

Rugs & Romance, Pig Butchering & Ponzis

When I started crypto in 2015, I bought my first Bitcoins for around $100. The same year I sold them for $800, because I was going to organize a TEDx event offline in a jungle for a while and therefore could no longer keep an eye on the prices. Indeed, it wasn’t my best entry into crypto, with the current price hovering around $40,000.

The crazy prices mean that many people are always looking for a cryptocurrency that also has the potential to rise exponentially (preferably in a short period of time) (‘mooning’ in crypto language). They don’t go for the ‘safer’ choices like Bitcoin and Ethereum, but coins like memecoins (which I recently wrote about) BONK that rise 15000% in a short time.

Create your own crypto

Nowadays you can create your own crypto in a few seconds. If you use a good marketing device for this, and completely spam channels such as X and Telegram, you can also increase the price in a short time. When the price has risen a lot, sell your own coins and count your profit.Pump & dump they call this. And that is extremely illegal, but something that occurs every day in various forms in the cryptocurrency ecosystem.According to research, 350 new ‘scam cryptos’ were created every day.

SCAMS

There are all types of SCAMS in cryptocurrency, from Pig Putchering and traditional Ponzi Scams, to Rug Pulls and Romance Scams. With the many positive applications that really have an impact on people, it is of course a shame that there is also such a dark side. But it is difficult to eliminate in today’s fast-paced digital world. Unfortunately, there are still countless gullible consumers who fall for this every day and have lost many billions of euros in recent years. How can you prevent this? By reading up on the crypto in which you want to invest in advance. In 2019 I already wrote an article about this with practical tips.

Better warm than cold

The underlying technology of cryptocurrencies is developed around a decentralized idea. You are your own bank here. You can carry out transactions directly yourself, without the need for an intermediary such as a bank, credit card or service provider such as Paypal. And you have your own digital wallet, where you store access to these digital coins. In addition, more and more people are storing this on a so-called ‘ledger’; a kind of USB stick.

The decentralized idea is great, but unfortunately still too complex for most consumers. For example, people lose the password and backup codes. And because everything is decentralized, there is no central helpdesk that you can call. The name ‘crypto’ says enough about the cryptographic way of working. It is so secure that you will never be able to access your coins again if you lose the password and backup codes.

Lost Bitcoins

I have already spoken to a number of people who have lost their coins in this way. You can still see on the internet that they are in a digital wallet, but you can no longer access them to sell them, for example. There are countless stories, such as a man who bought 7,000 Bitcoins for a few euros in the early days and put them on a ledger. But he can no longer access it because he no longer remembers the password. $280 million gone.According to blockchain analysis company Chainalysis, of the 21 million Bitcoins alone, 3.7 million have been lost and are now impossible to recover.

Although I am a big fan of the decentralized idea of ​​the technology, I do not see most people storing their cryptos in a digital wallet themselves. They leave them at the exchange where they bought the coins. There is always a helpdesk there that can give you access to your coins again if, for example, you have lost the password. The only risk you can run here is that a stock exchange goes bankrupt.

On home soil

That brings me to the third tip: look carefully at the exchange where you buy your cryptos. Plenty of exchanges have gone bankrupt in the past, along with all their customer funds. Names like Mt. Gox, FTX and Quadriga are still fresh in the minds of many people. Netflix already made a very interesting documentary about this:

The European crypto legislation ‘MICAR’ will come into effect in the coming year. In the run-up to this, many Dutch stock exchanges have already passed an extremely strict inspection by the Dutch Bank (DNB). A big step forward, because a number of obscure parties have opted for money and left the Netherlands. In addition, the remaining parties have been put through the wringer by the DNB in ​​their registration for months, that in my view a registration is really a ‘quality seal of approval’.

So check in advance in the DNB register whether the party is also established in the Netherlands.

Stable, not volatile

All well and good; virtually everyone who is in crypto is in it to make a profit on the investment. Yes, I also work with technology every day, but I am really in the minority there. Almost everyone who owns cryptos hopes to make a profit on that investment. But then you have to invest in crypto coins that can also increase in value. Some of the most popular cryptos are so-called stablecoins. These are coins that always retain their value.

Looking at market size, the third coin is currently ‘Tether’: a stablecoin that is always worth $1. Very useful if you do not want to expose yourself to strong price fluctuations. But investors who invest in this and think they will make a profit will soon be deprived of illusions. I see a lot of new investors investing in these types of coins because they don’t cost much. Better 1000 Tethers than ‘only’ 0.01 Bitcoin. They also call it ‘poor man’s gold’ in the crypto ecosystem.

So do you want to invest with the aim of making a profit? Then check in advance whether you are not accidentally investing in a stablecoin.Here you can find a nice overview.

Aaaaaaaand… it’s gone!

Smart in crypto, with every click: a great campaign from the Dutch government to inform young people in particular about the risks of cryptos.

“A lot of information is shared about cryptos on social media, but financial influencers are not always neutral and transparent. If you are thinking of buying cryptos, make sure you know what the risks are and do not get blinded by promised high returns. Only spend money you can afford to lose and remember that if something sounds too good to be true, it often is.” – Minister Kaag

I don’t encourage anyone to invest in crypto. Everyone really has to decide for themselves how savings can be put to work. Shares, crowdfunding or crypto; Everyone really has to make their own decision about this. But I say very clearly ‘savings’ here. Because unfortunately, in the many interactions I have when giving lectures and keynotes on this subject, I notice that there are many people who also invest with, for example, borrowed money.

Just borrow a few hundred euros (or even more) to invest in crypto. And due to the rapid rise of certain currencies, you will have recouped that investment tomorrow and you will be ‘financially free’. You can buy a Lamborghini or fly in a private jet, like many of those influencers do. At least, that is what many influencers tell you in an expensive course they offer and from which only they ultimately make money. These cars and private jets are often even rented to present an even more beautiful image.

The most important tip I always give people when they consider investing in crypto: only do so with money you can afford to lose. The value of a coin can drop significantly in a short period of time. For example, during the last crash in 2022, 70% of cryptos lost more than 90% of their value. If you have just borrowed money to invest in it and you have to pay it back, then you are in trouble. Something that unfortunately more and more people are discovering, according to Nibud.

Myths and fake news

I always try to look very objectively and positively at all developments in the ecosystem. For years I have seen many cool applications of cryptos and the underlying blockchain technology worldwide, which really have an impact on people and society. But I also see the previously described scams and mistakes that people make, with all the consequences that entails. I am really trying to make a clear distinction between facts and fables here. The transparent nature of the underlying blockchain technology provides independent researchers with a wealth of data and information.

“Crypto is mainly used by criminals”

According to Interpol and the EU, the share of regular money (cash and digital transactions via banks) is much larger than that of cryptos. The number of crypto transactions that are classified as ‘illegal’ is also increasingly decreasing.

“Crypto is boiling the oceans”

One of the most lively discussions surrounding crypto remains the energy consumption of so-called ‘mining’. Bitcoin’s energy consumption is equal to that of the energy consumption of the entire Netherlands. It would boil oceans from all the heat.

For me, the biggest challenges in the world are the biggest business opportunities. This is also reflected in the rapid development of the underlying blockchain technology of, for example, the second largest crypto Ethereum. There, an incredible upgrade in the code has reduced energy consumption by 99.98%.

And what about Bitcoin mining? One of the largest accounting and consulting organizations in the world, KPMG, came here at the end of last year with an extensive and very interesting report.

Bitcoin miners have started reusing heat for various purposes, such as heating greenhouses, homes, offices or swimming pools.

Some miners use flared gas for mining, which reduces methane emissions. Money was made on what would otherwise be wasted energy.

Idle and wasted energy is a major problem for renewable energy installations, due to a mismatch between supply and demand. While this can lead to low or even negative prices for the utilities, miners can consume that energy, providing an incentive for new, renewable energy sources.

With all the cool developments currently in the field of technological improvements and global adoption, I am and remain very enthusiastic about cryptocurrencies. I will continue to follow this with enthusiasm for Frankwatching in the coming year.

This article is absolutely not financial advice and should not be viewed as such. It should only be seen from an informational perspective. Do your own research before investing in crypto. Crypto can be lucrative, but also risky.