email@example.com would have been enough. Perhaps firstname.lastname@example.org would have also done the job. But as best practice any normal email address, whatever it was, worked just fine.
Back in the ‘early days’ of altcoins and crypto, that’s pretty much all you needed to register on a crypto exchange.
These days you need to provide government issued ID. You need your name, date of birth, address. Many even require you to take a selfie holding your ID and a piece of paper with the name of the exchange and the date written on it.
What happens to that info? Do they store it? Where? And is it safe?
Now that this has changed, old accounts from before these requirements are effectively considered ‘the plague’.
I’ve held accounts with exchanges for years. For example, I think I first set up trading accounts with Bittrex sometime back in 2014.
That’s longer than most people have even known about crypto. I even had two accounts. Just so I didn’t have to hold all my eggs in one trading basket on the exchange. And for a long time, everything was just fine and dandy.
Caution in the crypto market
The problem is Bittrex didn’t anticipate the flood of FOMO (fear of missing out) that would come to crypto in 2017. And when the mainstream got wind of it all, the flood became more like a tsunami.
That meant scrambling to upgrade infrastructure. It meant a manic state to update systems and try and get user verification. They seem to be struggling to keep up.
Accounts are being frozen — mine included. Just like a bank would freeze your account if there was a sudden run on the bank. A bank stops you from getting your money. An exchange like Bittrex stops you from getting your crypto — which is the same thing.
But because it’s the wild world of crypto, there’s no one you can complain to. No ombudsman. No government hotline. No local member of parliament. No branch, teller or call centre.
You just submit a ‘support ticket’ and hope for the best. Except when the tsunami of users means that your support ticket doesn’t get looked at. For weeks…for months…maybe ever.
Imagine that. Imagine looking at a pile of money in your bank account that you cannot touch. You cannot move. You cannot do anything with.
That’s what’s happening to me right now.
I tell you this for two reasons. First, to show you that no matter who you are, the world of crypto is risky. And second, if I can relay my experience to you, you might navigate the world of crypto just a little bit safer.
Hopefully they do something about these issues.
But these are the kinds of risks you face when using a crypto exchange. Any exchange.
Things might seem to be working smoothly, but you never really know. And you’ve got no recourse.
I know because this isn’t my first rodeo. I’ve lost crypto on other exchanges before. Not once, not twice, by three times. And when navigating the financial Wild West, it’s best to be cautious.
Mt. Gox, Cryptsy, Mintpal…which is next?
The infamous Mt.Gox exchange in the early days seemed to be a perfectly fine, legitimate exchange. But then strange things started to happen.
Accounts would get frozen. Accounts would disappear. Crypto holdings would disappear. Transactions in and out didn’t correlate with the proper amounts. And then one day it vanished into thin air.
All users of Mt.Gox who held crypto on the exchange lost it. Gone, goodbye, never to be seen again.
The same sorts of things happened to the Cryptsy exchange, too. And the Mintpal exchange.
And we expect that over the coming year or two the same thing will happen to other exchanges. Exchanges that on the face of it might seem fine. But under the hood, not all is fine. In fact, things may be be very dire.
It’s why you must act with extreme caution when using exchanges.
In the last 12 months there has been a massive increase in the number of people wanting to trade crypto. And with that increase in volume there are bound to be some issues.
Frozen accounts more than three years old. No response to support tickets. Lack of explanations via communication channels. Mounting similar experiences across the broader community.
These things make it difficult to use an exchange regardless of the cause.
We’ve heard of plenty of exchanges that ignore customer support tickets. We’ve heard of others that freeze accounts and then make no effort to remedy the problems.
As with anything, always use your own discretion. But our position is, and has been for a long time, that by far the safest way to store your crypto is in a wallet. That way you can sleep easy, knowing that regardless of what is happening on any given exchange, you maintain control of your digital assets.
Bittrex isn’t an isolated problem
That’s not specific to Bittrex. It’s a rule you should apply to every crypto exchange.
Use an exchange to transact in crypto, such as when you exchange one for another, or use one to participate in an initial coin offering. But we don’t recommend that you hold cryptocurrencies on exchanges. For that, use wallets.
It’s a bit like crossing a rope footbridge bridge with a bubbling volcano below. And the footbridge’s supports are on fire.
You have to cross it. But make sure you cross that bridge fast. The last thing you want to do is stand there in the middle, admiring the scenery.
Stand too long, the bridge collapses and you fall into the flaming pit below.
All exchanges come with risk. That means the most reliable way to hold your crypto is in a wallet you control.
Approach crypto exchanges with the mindset that they could all go wrong. That’s not to say they all will. Some are very good. But you never really know.
That’s why the crypto world is still very risky. We just don’t have the established, reputable, companies operating that we can put full trust in.
It’s up to exchanges like Bittrex to prove that they are safe and reputable.
They must prove to us that they are worthy of the job. Not the other way around.
That’s the imbalance we currently have.
We don’t think the imbalance will last forever. We think that with time more companies like Coinbase will provide the stability, reputation and integrity that’s needed in the crypto world.
Until then, proceed with caution. By all means proceed. But take heed of our warnings. We don’t want you to fall victim to another Mt. Gox-like scenario. We’ve been there once. We don’t want to be there again.
You’ve been warned.
Editor, Money Morning
PS: The risks from exchanges, and the advantages of secure digital wallets, are hard-won lessons for an experienced crypto trader like me. Sometimes expensive lessons. That’s the risk in such a new and only partially formed market like cryptocurrencies.
The instability and chaos of the market doesn’t mean that you have to miss out on the incredible potential on offer, though. You just have to go in with your eyes open, never use money you can’t afford to lose, and learn everything you can before you start.
That’s the core idea behind our entry-level crypto service, Secret Crypto Network. It walks you through everything they need to know about the world of crypto, before you get started. To learn more, click here.