How I lost $8,000 Bitcoin in Seconds
Bitcoin is a currency created and distributed completely online. This unique attribute of Bitcoin makes it very appealing to customers. Similar to other currencies its value is based on supply and demand. What makes Bitcoin different is that you can make Bitcoin or “mine” for coins with your computer. Mining for Bitcoin is where your computer joins with millions of other computers to solve a complex set of algorithms called the blockchain. Once the system of algorithms is solved the block is unlocked. Within the block are transactions that people make so once the block is unlocked the transactions go through. You are rewarded with a small amount of Bitcoin if you enable your computer to help out with the algorithms, but it is not required to transact Bitcoin. People tend to invest in Bitcoin when other centralized currencies are not doing well driving the price of Bitcoin up making it a hedge against inflation and other disasters. Centralized currencies are those that rely on a central government to make and distribute, decentralized currencies like Bitcoin are not controlled by any government and instead valued based on supply and demand. So who invented Bitcoin? No one knows, the digital currency was created by an anonymous person that goes by Satoshi Nakamoto.
So, no one knows who created the currency and it is not controlled by any government, why would anyone invest? Similar to stocks, most people invest or buy Bitcoin with the hope that the value increases. Since Bitcoin was created the price has risen from $.0008 to over $30,000 when this article was written. This is a price jump that has not been seen with regular stocks and people continue to invest with the hope that the price will continue to grow exponentially as more and more people see value in the currency. Some people suggest you could lose all your money, while this is true It is highly unlikely. Roughly 63,000,000 people own some Bitcoin, meaning for the price to reach $0 all those people would have to agree there is no value. It is true though that the price can go down meaning you could lose money, but consider this. If you haven’t sold your Bitcoin have you actually lost money? This is why people suggest Bitcoin is a long-term investment and you should invest money you won’t need for the next 10 years or so.
How I Invested
I got started investing in Bitcoin after I came home from college due to the Coronavirus. I had a bit of time on my hands and did some research into Bitcoin. I had a little bit of extra money and decided to invest. I used an app on my phone where I simply put in my bank information, a password, and an email and was able to purchase the currency. Over the next few months my Bitcoin started to slowly gain in value.
As the value of my Bitcoin went up I became more and more interested in crypto currencies. I researched more and more about Crypto and watched every video I could. The bullish investors suggested Bitcoin could rise to over $1,000,000 in value. This would be a 200x return for my investment. A 200x return is extraordinary and rarely seen in finance. For me, a 19 year old boy, that return was not enough. I wanted a return like when Bitcoin first launched to today. I looked into other Crypto currencies and found one called Zilliqa.
Zilliqa is a fully digital currency like Bitcoin but invented a new technology called sharding which allows smaller transactions to take place through the same blockchain technology. The team behind Zilliqa is extradinary and at the time the price was only $.02. With my $5,000 in Bitcoin I could buy over 200,000 Zilliqa coins. If Zilliqa was to reach even $10 I would be a millionaire with a return on my investment of 500x. After I researched Zilliqa more I decided to invest. I traded my Bitcoin for Zilliqa.
The Bull Market
I traded all my Bitcoin for Zilliqa. As months went by the value of my portfolio grew and grew. I started to see 2x returns and even more some days. I encouraged all those around me to invest in Zilliqa too. My dad was on board, my brother-in-laws, and I even bought some Zilliqa for my newborn niece. The markets began to look even more bullish as Bitcoin rose to over $20,000 for the second time ever and Zilliqa followed suit as it soon grew to a value of $.06. The value of Zilliqa only grew a few pennies but because of the great volume I had invested my account value grew exponentially.
As the value of my Zilliqa portfolio grew, I became even more interested in different crypto currencies and how they could be used. I came across something called Zilliqa staking. Zilliqa staking from my understanding is the process where you stake or agree to hold on to your Zilliqa for a certain amount of time. If you wish to unstake your Zilliqa there will be a 2-week or longer delay in accessing your funds. This is great hedge against price volatility because it means people can’t sell off all their coins at once. Staking is also good for coin holders who choose to stake because they get rewarded as well. Just like when banks loan money out and earn interest, when you stake your Zilliqa you earn an annually return. Right now, if you stake your Zilliqa you earn around 16% annually.
Staking my Zilliqa sounded like a great idea. I could potentially earn hundreds of dollars in passive income. There was a problem though, the app I currently held Zilliqa on did not have the capability of staking Zilliqa. I did some research and found another app that allowed staking.
I Lost It All
To transfer my Zilliqa to this new app I had to convert my Zilliqa coins to Bitcoin then transact the Bitcoin to the new account. I opened the new app, created an account, and retrieved my receiving address. A receiving address is what you put into your current wallet to transfer Bitcoin to another wallet. A wallet is where your coins are retrievable through what is known as a private key. There is a private key address you need to access your Bitcoin or a 12-word phrase. I took the receiving address I had for my new wallet and put it into the current app. I clicked transact and just like that $8,000 worth of Bitcoin was sent to my new address. I was so excited because I knew once I received the Bitcoin, I could convert it into Zilliqa and stake it to earn passive income.
After I transacted the Bitcoin, I went to the app to see if it had arrived. There was nothing in the new wallet, so I refreshed the app. I logged in with my password and still there was no Bitcoin. Not knowing better, I deleted the app thinking that is where the problem was. Once I re-downloaded the app it asked for my 12-word phrase. What is this I asked myself? I didn’t remember a 12-word phrase or even what it was used for. Due to high security protections the app does not store your password on their servers and instead places that in the app’s local data on your phone. When you delete an app the app’s local data is also deleted. To gain access to my wallet I needed the 12-word phrase so the app could access the network and display the funds. After staring at my phone for minutes I realized what happened. I could not believe myself; I forgot to copy, screenshot, or even write down this 12-word phrase. Everyone that knows Bitcoin well knows without this 12-word phrase no one on earth can access the funds. Not me, not the app, no one on planet earth can access them. Just like that, within a second I lost over $8,000 of Bitcoin. This was an expensive lesson to be learned so I decided to share so no one or at least the people who get through this whole article never make the same mistake. Right now, if you own Bitcoin, find that 12-word phrase and write it down and save it in three secure locations. With this 12-word phrase you will be able to access your funds no matter what, even if all the apps go away.
It wasn’t a bad investment; I was a bad investor.
Bitcoin is now worth over $30,000 and the price of Zilliqa is almost $.10. If I had not lost access to my investment, I would now have over $20,000. This was an incredible investment that ended with an even more incredible mistake. It still hurts to this day, but I can rest with the mindset that the lessons I learned out value the money I lost.