Or, How To Have The Best Money Ever And Not Get FTXed
So, is your Bitcoin safe?
Can someone steal it from you?
Well, if you take self custody with a hardware wallet, along with a few other steps - yes, it is safe.
However, if you don’t, all sorts of interesting things could happen. Someone like those at FTX could pretend to sell you BTC but never really purchase or hold it for you. Gross. Some have become afraid that their Bitcoin journey is going to be fraught with tragedy and scams. Others may never purchase Bitcoin out of the fear of loss - which is truly sad.
The good news for you? It doesn’t need to be like the FTX debacle - and there are some fairly simple steps you can take to keep your Bitcoin safe.
Here are the four tips we recommend to our clients, no matter their investment size:
Make It Yours With Self Custody
Okay, it can seem scary and overwhelming to own an asset. We’ve become conditioned to banks being “safe” and caring for our assets for us. So, the notion of keeping your own Bitcoin can be scary - at first.
However, what’s more scary is what happens when you don’t self custody, and some bad actor reveals that they didn’t buy ANY Bitcoin with your investment. Or, a bank that puts new rules on when and where and how you get access to your assets. Yeah, that’s a lot scarier.
So, you absolutely want to self-custody with the hardware wallet of your choice. Trezor and Ledger devices are very popular and easy to order, along with many online how-to tutorials. We are also very impressed with the Blockstream Jade hardware wallet.
One of the most important parts of a hardware wallet is our next point…
Don’t Share - Secure Your Passphrase Offline
Part of setting up a hardware wallet is the creation of a 12 or 24 word passphrase.
This is something you keep on paper (or other means like a metal-based solution such as Billfodl). Please do not make a photo of this, save it on any computer, or anything of the sort.
In the short term, an inexpensive fireproof safe can be a great place to put this passphrase. While it’s new to many of us to maintain our own security and asset access, it comes with the convenience of instant access and the security of hard money that no government or company can harm.
We recommend testing a few small transactions so you get comfortable understanding how to receive and send BTC.
OMG, I just got the custody thing done and over that fear. Really, you are going to make this harder?
Sorry, not sorry - we are going to tell you about this so you can choose it when it’s right for you.
Put simply, this allows for 3 (or 5) entities to have access to your Bitcoin - and it takes 2 (or 3) of them to unlock it. As you might imagine, if something happens over the decades you have your Bitcoin, you want some security that you could recover it. This allows this to happen.
The current companies that are solid in this space are Swan Bitcoin, Unchained and River Financial. There are also some do-it-yourself open source solutions out there as well.
This can be very powerful for generational wealth, where you plan to leave BTC for your kids (and maybe even their kids!).
Move Off of Exchanges (and use 2FA when you use exchanges)
Exchanges are easy. Just some clicks and photo uploads and you are done.
We do billions of transactions on Amazon and other sites, so we have become comfortable that exchanges are safe. Some even have passed regulatory scrutiny and seem safer.
Bottom line here - even if they are nice - exchanges hold your keys to your Bitcoin - not you. You really don’t own Bitcoin on an exchange - they do. For example, if a government entity ordered an exchange to seize it, they would have to comply. Or, if you somehow went against some exchange policy, they could hold your funds just like a bank. No bueno.
Exchanges should be thought of as just that - exchanges - on ramps and offramps. And, there are other places to purchase/sell your Bitcoin, which leads us to our next point (imagine that?).
And, when you do need to exchange Bitcoin, be sure to enable 2FA on your exchange. What’s that? This means two-factor authentication. The exchange will send you a text or have you use an authenticator app on your phone. So, if a bad actor gets your password, they will have a really hard time getting into your account.
Consider Either Bitcoin Mining or a Custodian that Prioritizes Self-Custody
Somehow, one needs to buy (or mine) Bitcoin for it to be able to later land in our custody.
Human nature being what it is - we can forget or say “I’ll do it tomorrow” (and tomorrow doesn’t happen).
Instead of this, we recommend custodians that champion self custody, and may even automate it.
For example, Swan Bitcoin can set up an auto-deposit of BTC to your wallet. For example, you could have a weekly $100 buy, and also a weekly auto-deposit to your wallet of choice.
Or, while it’s a bit more work to setup, you could purchase and run a BTC miner, and have that miner pool deposit directly into your hardware wallet’s BTC address. Now, that’s a bit more to set up and not where many start, but it does have some interesting advantages. Done as a business, the costs of the miner and energy are a valid business expense for taxes. And, it is pretty cool running a miner that is creating BTC.
Alright fellow humble plebs and normies, we hope that gives you a few solid and simple ideas to be secure in your BTC holdings.
It’s absolutely worth the effort and really not that scary. There are ways to protect yourself in case weird things happen. And, you can rest better knowing that you have the hardest (and best) money in the safest location.