Safe Measures To Take Before Investing In Cryptocurrency
Investing in cryptocurrency doesn’t have to be cryptic. But successful investing does have a learning curve and requires knowing what you’re getting into right from the start.
Sure, well-known investors like Elon Musk make it look easy, but most people aren’t playing fast and loose with billions of dollars. If you’re going to invest your hard-earned cash, you’ll want to know why it’s a good choice, and how to maximize the possibility of making a profit.
By following just a few, well-thought-out steps, you can get in on the crypto craze – without driving yourself crazy with worry.
Start Out Small
Truth is, crypto is an emerging asset class and remains highly volatile especially these days. Those two factors alone are why it’s important to invest only a small portion of your total wealth. A good rule of thumb: Cap your exposure to an amount of money you feel you can comfortably lose without spiraling into debt.
Crypto investment is one of those times when you don’t necessarily want to think big: Start with a small amount of money and relatively few digital assets so that your crypto portfolio is manageable. Once you’ve gained more confidence and knowledge, you can scale up.
Look For Mainstream Assets
It goes without saying that any newer cryptocurrencies and digital assets are not only more volatile but also at higher risk of fraud. As with many other investments, cryptocurrencies with longer track records are considered a safer bet.
Because Bitcoin has been active for over 12 years, the possibility that it could be a fraud scheme is relatively slim (but not entirely nonexistent); in addition, it’s also less volatile than some of the smaller cryptocurrencies on the market today. Several other crypto offerings, including USD Coin and Solana, are considered less risky when compared to lesser-known, niche cryptos made available by anonymous developers.
Rely On Reputable Sources
Investing smartly requires knowledge: knowledge of the product, knowledge of the market, knowledge of when to invest, and when to walk away.
Seek out reputable sources of information that can keep you apprised of changes that may impact your investment choices. Some helpful information sources include Binance Academy, Cointelegraph, and Bitcoin.org. All provide technical information as well as general crypto news and updates.
Implement Best Practices
New crypto investors should adopt safety tools and best practices that can help protect their investments and guide them along their crypto journey.
To begin with, consider taking your crypto off exchanges and then storing it offline on a device such as Ledger. In addition, to avoid phishing scams steer clear of links embedded in suspicious or unfamiliar text messages or emails you receive. Another important step when it comes to investing safely in crypto is: Securely store your private key.
With just a few simple steps, you’ll find that peace of mind is priceless, regardless of how little or how much you’ve invested in crypto.
Know The Risks
Like most investments, crypto comes with risk. But you can put yourself in a position to anticipate risks – and mitigate them – by understanding exactly what it is you’re getting into.
In general, cryptocurrencies are subject to three distinct risks: volatility, fraud, and cybersecurity.
Cryptocurrencies are more volatile than mainstream asset classes, which means bitcoin prices can swing more wildly than those of stocks and bonds, gold, or real estate. In other words, bitcoin’s price can vary greatly from its long-term average.
The numbers tell the story: According to MacroAxis, the Dow Jones Industrial Average has a standard deviation of roughly 1.0; by comparison, Bitcoin has a standard deviation rate of 4.0, and Ethereum has a standard deviation rate of 4.5.
The risk of fraud is real, unfortunately. Scams concocted by developers or creators are always lurking for crypto investors. For proof, you need to look no further than Bitconnect for a glimpse of all that can go wrong with investments of this type.
It’s a fact: Digital assets have a history of being prime targets for hackers and cybercriminals. But today’s more advanced blockchain technology has proven to be effectively hack-resistant.
Bitcoin’s blockchain network uses a double SHA-256 hash function, commonly used for digital authentication and signatures, which is impressively secure. And since all transactions are stored on a block connected (chained) to a previous block, a hacker would need to crack all of the blocks all at the same time to succeed at network disruption. If Bitcoin is lost or stolen by cybercriminals, it’s usually owing to third-party services such as wallets and exchanges.