Life is not a bed of roses, and neither is investing in crypto. Though I am sitting on decent gains having entered the market near the bottom, my journey has inevitably hit some rough patches.
The two biggest ones happened within the past month when BTC was trading horizontally for an extended period. Though I was expecting a major correction, I didn’t want to time the market. I decided to take the opportunity to dollar cost average and accumulate some altcoins.
The lure of exchange coins
Having seen BNB’s remarkable returns this year, I was keen to get into other exchange coins. The particular coin that caught my eye was down >90% from its all-time high in 2017. Since the exchange did not accept fiat, I needed to buy a major crypto first in order to exchange for the coin.
Although BTC and ETH were the norm, I was put off by slow transaction speeds and high withdrawal fees. I wanted something cheaper and faster with trading pairs against both SGD and the exchange coin. In my search, XRP emerged as the coin of choice.
Warning signs ignored
After buying XRP, I was eager to move it to the new exchange. When I pulled out the XRP deposit address on the new exchange, I noticed an additional destination tag number. Together with the tag was a warning that funds transferred without a tag will not go into my account. Although I never used tags before, I assumed the UI on the fiat exchange withdrawal page would make it intuitive.
Instead, all I found was the standard “withdrawal address” and “amount” text boxes. There was no text box nor instruction for how to input destination tags. Although I was puzzled, I let my impatience get the better of me and confirmed the transaction without a tag. I reasoned that the exchange’s support could recover my funds since it still ends up in their wallet.
A week of delay…
Bad move. After the transfer was completed, I couldn’t find XRP in the new exchange wallet. I contacted the new exchange’s support, expecting the matter to be resolved within the day.
After requesting proof that I had authorised the transfer, I was told they could only reverse the transaction back to the sending account. I was mad. The coin was already in their wallet! It seemed a simple matter to me to assign the funds to the correct destination tag. Now I had to incur another withdrawal fee just to transfer the XRP back correctly.
Thankfully, after some deliberation, their tech team decided to transfer the balance to my account. I just needed to repeat a transfer of 30 XRP to my exchange wallet. Unfortunately, I had emptied my XRP wallet for the first transfer, so I had to buy more.
This time, I made sure I got the destination tag right. I sent proof of the transfer and waited anxiously for the funds to be moved back to make my purchase…
And just before my funds were transferred, the price of the exchange coin shot up 30%, putting my initial purchase beyond reach.
Insult to injury
In the midst of resolving this mistake, more bad news came through an ominous notification from Poloniex. 16% of the BTC set up for margin lending was lost to a sudden, severe crash in the CLAM market. I just happened to be among the 0.4% of users affected by the loss.
Unlike Binance, Poloniex didn’t have deep enough pockets to cover the losses. Instead they chose to spread (“socialise”) the losses across all lenders. Although they have paid back ~10% of the losses, with promises of more to come, the warning is clear.
What did I learn?
- Take ownership. With the immutability of crypto records, a small mistake in your address could mean permanent loss of funds. I made a foolish mistake of relying on the exchange’s support to cover my lack of research and preparation. Ultimately, you are responsible for your funds, what you do with them, and what happens to them.
- More haste makes waste. I could have saved myself a lot of trouble by being less hasty and finding out how to attach the destination tag properly. Instead, the service recovery took 10x more time than the time I “gained” by making a premature transfer.
- Diversify and spread. With the limited liquidity in the crypto market, even something as straightforward as margin lending can be subject to big losses. If you want big rewards, you must accept the proportionally bigger risk and (hopefully occasional) losses that come with it. Spread out your assets so that not all your eggs are in one shaky basket.
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