Ways to Invest in Crypto Safely
Ah, cryptocurrencies. The virtual currency revolution is upon us, and investors are crossing their fingers that the next big thing will make them rich. But anyone who has ever been through a bubble knows that there’s always a risk of losing money…
What if I told you there was a way to invest in cryptocurrencies without the dangerous volatility? In this post, we’ll outline how you can take advantage of this strategy to reap the benefits while staying clear of crypto investment mistakes.
Is Cryptocurrency a Safe Investment?
The term “safe investment” implies that there’s no risk of losing money; but is this true in the case of cryptocurrencies?
There are two ways to invest in cryptocurrencies: the first involves buying them like stocks. This means you are trading your hard currency or a fiat currency for cryptocurrency, either because you expect its value to go up or because you want to hold it as an asset.
In this case, if you buy a cryptocurrency that has been rising rapidly and then it suddenly falls, your portfolio goes down along with it. And if you’re holding a cryptocurrency that you think is going to be worth more in the future, but then it suddenly plummets, you could lose tons of money.
The second way to invest in cryptocurrencies involves mining your own coins. This means using special computers (called “mining rigs”) that run algorithms for the sole purpose of solving complex math problems and receiving cryptocurrency as a reward.
It’s important to keep in mind that mining can be very difficult and expensive, even with access to top-of-the-line hardware.
Ways to Safely Invest in Cryptocurrency
If you’re diligent, you’ll find hundreds of tips from different “cryptocurrency experts” telling you how you can invest in crypto safely. While they may present valid points, it’s important to make sure you know the basics of investing in crypto. Here are some ways you can invest in Crypto safely.
1. Research the Exchanges
Before you hop on an exchange to buy any cryptocurrency, make sure you do your due diligence. Cryptocurrency exchanges are busy places, especially during peak times and when winners are declared (when a coin’s price rises rapidly). If you’re on a new exchange, it may look empty until you get through the registration phase (where they verify your identity), and that can be a frightening experience for those unfamiliar with technically advanced concepts such as hashing algorithms. When you’re ready to buy, do your research first. What is the exchange’s security record? Is it licensed by the appropriate financial regulators? Is it transparent and easy to navigate?
Furthermore, most cryptocurrency exchanges allow you to buy NFTs, which is a great way to diversify your portfolio.
The biggest risk associated with exchanges is security attacks. Some exchanges have been attacked by hackers where investors have lost all their crypto. While this is certainly unavoidable, it’s important to invest in an exchange that has strong security measures. Not to mention, you should also have a strong guarantee of what they plan to do in case this happens. Some exchanges offer a guarantee that you’ll get your money and investments back if they are attacked by hackers.
2. Research Your Crypto Choices
Don’t go around diversifying your portfolio with every cryptocurrency you can find. As we mentioned above, some currencies can be very volatile and lose a lot of their value in a short amount of time.
A good rule of thumb is to always read a currency’s white paper and understand how it works. This will give you a sense of what to expect. If you’re unsure of what to buy, seek out some expert advice (crypto markets are very young and most people rely on their opinions). Also, make sure that whoever you’re getting advice from is not a paid shill, so to speak (there have been many cases where inexperienced traders have lost all their investment because they trusted someone they shouldn’t trust).
3. Invest in a Secure Crypto Wallet
Cryptocurrency wallets can be divided into two groups: software wallets and hardware wallets.
Software wallets are installed on your desktop, phone or laptop. They’re convenient to use because you can access them at any time as long as you have a device with an Internet connection. However, it’s important to make sure you’re using an application that has a good reputation and gets regular updates. Some malware apps masquerade as cryptocurrency apps and will steal your data when you enter it into the app.
In the case of hardware wallets, they’re essentially USB devices that store your private keys (passwords used to access digital currencies). These devices are extremely safe and secure because they are only connected to a computer when you’ve entered your password. Hardware wallets can be a bit expensive, so it’s important to consider the cost-benefit before buying one.
Cryptocurrency investments are risky and volatile, but there are ways to invest that won’t put you at risk of losing too much money. A good place to start is to research the exchange you want to invest in and make sure that it’s fully regulated and has strong security measures in place. Once you invest, make sure to spread your investments across various crypto assets. Don’t just go all-in on a single currency because it’s going up. It’s not uncommon to see a rapid decline in value immediately after the announcement of a new cryptocurrency (especially one that issues billions of coins).
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