An URGENT Warning For ALL Crypto Investors

What's up guys, it's Graham here. So, as usual, I had another topic that was planned to post today, but with everything going on, along with some really bad advice spreading around the internet, I decided it was best to postpone that video so that we could talk about the catastrophic state of the cryptocurrency markets.

Because with the collapse of Terra Luna, Celsius, Voyager Digital, Three Arrows Capital, and potentially many more, I worry that most people are completely unprepared for what's about to happen and could wind up losing a lot of money if they're not taking the right precautions ahead of time. In fact, this is something that I think is so serious that I want to go right into the video without any cheesy like button smashing or subscription requests, unless of course you want to. It's just going to be straight up information, since most likely it is going to save you money if you are in any way involved in cryptocurrency.

So thank you guys so much, and also, big thank you to savemind.com for sponsoring this video. But more on that later. Here's the thing: I've closely followed the cryptocurrency market here on the channel since early 2017 when Bitcoin had barely hit a thousand dollars. Back then, we saw the market increase by over two thousand percent. Altcoins and ICOs made multi-millionaires in a week. Dozens of crypto channels popped up, where teenagers were touted as experts, and then everything fell 90 to 99%.

Today, we have an entirely new obstacle caused by poorly managed, over-leveraged companies who take risks with your money for the sake of generating slightly higher returns. And as we're just finding out, this could be the tip of the iceberg. Places like Celsius, Voyager, and Coin DCX have recently disabled withdrawals, while the cryptocurrency hedge fund Three Arrows Capital is unable to repay their debts. With prices continuing to fall, this created almost like a domino effect, where one falls onto the other, which falls onto the other, and with cryptocurrency prices continuing to fall, this could be the very beginning.

With Mike Novogratz calling for two-thirds of those hedge funds to go out of business, unfortunately, this presents a really disturbing problem for the entire industry with a completely flawed business model that should have never existed in the first place. And if you're curious how this works, along with what you could do to protect yourself, here's what you need to know.

See, when it comes to cryptocurrency, you generally have two different types of business models. One is the exchange, where you could buy and sell cryptocurrency, usually for a small fee, and from there you're free to do with it whatever you please. Honestly, from a logistical standpoint, this business model isn't inherently complicated or risky, since they're not taking on the liability of their customers. But there is the danger that at the end of the day, you are at the mercy of that exchange going bankrupt, getting hacked, or otherwise losing your coins because of their own negligence.

And if you think that can't happen, well, it already has. Let's start with bankruptcy. In 2014, one of the largest cryptocurrency exchanges, Mt. Gox, went bankrupt after it was reported that 850,000 Bitcoins went missing. Eight years later, customer reimbursement is still in limbo, and it's highly unlikely they'll receive anything close to their full capital back. Quattro CX also filed for bankruptcy in late 2018 after their founder suddenly passed away, revealing a poorly mismanaged company with no financial bookkeeping, along with Big Grail around the exact same time.

But since cryptocurrency is not held at the same standard as the US dollar held within an FDIC-insured bank account, customer funds are not protected, and as a result, everything is lost. Just recently, this issue was brought back into the spotlight when Coinbase updated their terms of service to say that customer cryptocurrency assets could be considered the property of a bankruptcy estate if such an event were to occur, meaning if they were to go out, basically, you're out of luck.

So even though that's an unlikely worst-case scenario, it's not impossible, and that's something you need to accept. The second you also have the risk of a hack. Unfortunately, this has become far too common within cryptocurrency exchanges, and when you hold your coins on a platform, you open yourself up to the liability that your funds might not be entirely safe.

Finally, you have the risk of halted withdrawals, where the money you thought you had access to is suddenly stuck. In these circumstances, your money cannot be accessed, and you're at the complete mercy of the company to eventually bring it back without any guarantees. And admittedly, this is what you sign up for the moment you open up an account. Just like Celsius, for example, their fine print says that you agree and acknowledge that you're exposed to the possibility that Celsius may become unable to repay its obligations to you in part or in full, in which case any digital assets in your Celsius account that are not using the custody service may be at risk of partial or total loss.

The fact is, by signing up for almost any brokerage, you are agreeing to their terms of service, which give them the unilateral right to almost do whatever they want. Now, even though this is generally standard language for almost every brokerage, and the chance of this happening is rather unlikely if you're using one of the more reputable companies, nothing is impossible.

Although the second business model is something that I personally find way more concerning, and that would be the lending platform. These are the companies that offer staking, lending, and borrowing services, where a person can loan or give the company access to their funds in exchange for a predetermined return of capital, anywhere between 1 and 15 percent. And on the surface, it appears as though it's a legitimate business model: “Just give us your Bitcoin, we'll lend it out at 10 percent, then give you back 8 percent, and we profit 2 percent as the middleman.” Easy money, right?

And yeah, if it just stopped there, that could be a reasonable option. But unfortunately, it doesn't, because most of these companies are completely unregulated. Without any oversight, there's nothing insuring or stopping them from lending out your coins multiple times over. And as it turns out, something like this is only sustainable until eventually, it collapses. And that's what we've begun to see.

For example, it would be no different than me investing a thousand dollars with Crypto Crack for an 8 percent return, but Crypto Crack takes my thousand dollars and then uses that as collateral to get a loan from Crypto Bytes for eight hundred dollars. Then Crypto Crack can take that 800 and use that as collateral to get a loan from Crypto Skunk for six hundred and forty dollars, and this repeats until eventually, Crypto Crack is leveraged up ten to one.

Even though it's highly irresponsible of the company, according to the fine print, that's what you agreed to. Like with Celsius, they say that they may lend, sell, pledge, hypothecate, assign, best use, commingle, or otherwise dispose of assets and eligible digital assets that are not held in the custody wallet. The same thing also applies to Voyager Digital, with the customer being treated as an unsecured creditor and/or the total loss of all customer cryptocurrency.

If anything, it's a lot scarier that this is the new reality we live in because it's not just another risky cryptocurrency going down after Jake Paul tweeted about it, in which case you probably should have known better. Instead, it's an entire business model collapsing before our own eyes, hidden in the fine print that no one ever really reads.

So in terms of my own thoughts on this and what you could do to protect yourself, just consider this. Although before we go into that, just like it's important to protect your investments, you can also protect the data that you share online, all thanks to the sponsor of today's video, savemind.com. The fact is, we frequently give out our personal details, email address, financial information, and other sensitive data on nearly every online interaction.

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That's why if you're interested in signing up or learning more, you can feel free to use the link down below in the description or go to savemind.com to get started today. So thank you guys so much, and with that said, let's get back to the video.

Alright, so in terms of how you could protect your cryptocurrency investments: first, the most obvious from all of them: not your keys, not your coins. I know we've all heard this phrase non-stop, but most people still don't follow it. If you're a buy-and-hold investor like myself, this needs to be something you take very seriously.

The fact is, even though cryptocurrencies could be highly volatile and could very well be worth nothing a year from now, once you buy them from an exchange, no matter what happens, they still belong to you. And to ensure that nothing changes that, you have to transfer them to something that you control, like your own cold storage. This would completely solve the problem of "my crypto is locked away, it's gone forever, the company is going bankrupt, and I have no idea if I'm ever going to get any of that money back."

Generally, people tend to use either the Trezor or Ledger cold storage, and if you have anything that you want to store to keep long term, this is probably the way you should go. Second, only invest what you're willing to lose. I know this sounds like the most cliché investing advice ever, but it's true. Given the uncertainty, volatility, regulation, and manipulation of a large portion of the market, you should not be investing an amount where if you lost it, you would be financially ruined.

The truth is, in order to think logically and make rational, level-headed decisions, you cannot let your emotions get the best of you and cause you to trade as though you're looking to buy the home next door to Drake. The only way to remain completely neutral is to invest in an amount where if it went to zero, it would suck, but you'll be okay. From my experience, after speaking with hundreds of people, if you're losing sleep, can't concentrate, or you panic at the sight of a 20% drop, you've invested too much, and it's probably a good idea to lower the amount that you have in order to think objectively.

Three: never keep all of your eggs in one basket. I've said it before, and I'll say it again: you should never become too reliant on one exchange, and you should never keep all of your crypto in one place just in case something happens. I personally use five different exchanges with varying amounts in each, and then I eventually move it over to cold storage once the money settles.

That way, if one exchange is unavailable, something happens, one of them is hacked, or aliens invade the world while TikTok overtakes YouTube, I have plenty to fall back on. And so far, that's worked well. In fact, I would highly recommend that you take the exact same approach—try a little bit of everything, see which exchanges you enjoy the most, and never hold cryptocurrency on a platform that you're not comfortable risking.

Finally, when it comes to cryptocurrency, only invest a small portion of your portfolio. Like I know it's tempting to want to place your life savings into an investment that could potentially 10x in a year, but realistically, it's a bad idea. In fact, it's pretty stupid. I would personally say that you shouldn't have more than 10 percent of your net worth in cryptocurrency unless you have an extremely high-risk tolerance, you make a lot of money, you don't mind the downsides, or you're perfectly fine placing your financial future in the hands of Gary Gensler.

The way I see it, cryptocurrency should be used as a way to further diversify into an untraditional asset class, and that's it. It should not be seen as a way to get rich fast or stick it to the system, but as a small part of your overall account. It could make sense under the right conditions when you plan to hold on to it long term. That's why for myself, I hold less than five to eight percent of my entire net worth in cryptocurrency, spread evenly throughout Bitcoin and Ethereum, using multiple brokerages as a part of a well-balanced portfolio.

I almost said well-balanced breakfast, but, uh, that wouldn't make any sense. Anyway, the way I see it, the larger cryptocurrencies have a lot of potential, and I think it could be worth a small amount of risk to be a part of the journey. But I've always invested an amount where, if it goes to zero, it would have no impact on my life whatsoever. And sure, it would suck; I would be sad. No one likes losing money, although I would be fine and life goes on.

In my opinion, this is the approach that more people should be taking. Unfortunately, though, it makes me really worried when I see articles with headlines that talk about how more than a quarter of U.S. Millennials plan to use crypto to fund retirement, which is absolutely insane. The way I see it, it's no different than replacing crypto with lottery tickets, because by blindly investing in an unproven asset, that's essentially what you're doing.

I might be an old man dinosaur at this point, but I just don't think it's worth the risk, especially when there are other proven options out there that'll give you a similar return without the chance of losing everything. And if you decide to invest, just keep it a small amount relative to an already balanced portfolio. If you could do that responsibly, well, dollar-cost averaging, and over time, then go for it.

Otherwise, you're probably better off just continuing to save, investing as usual, and no matter what, subscribing and hitting the like button if you haven't done that already. So with that said, you guys, thank you so much for watching. Also, feel free to add me on Instagram. Thank you so much for watching, and until next time.