Cryptocurrency is a digital currency that serves as an alternative to government-issued currencies. The cryptocurrency market has grown exponentially over the past few years, and it’s not showing any signs of slowing down anytime soon.
However, cryptocurrencies are still new to the world of investing, and there are a lot of risks involved. There is no safety net when it comes to cryptocurrency investments, which means that you could lose every cent that you invest if things don’t go your way or if you aren’t careful.
This blog post will walk you through how to invest in cryptocurrency safely and how to avoid getting scammed.
Table of Contents
4 Tips To Trading Cryptocurrency Safely
#1 Research Exchanges
Before you invest any money into cryptocurrency, it’s important that you familiarize yourself with the different cryptocurrency exchanges. There are a ton of exchanges out there, and you should always look into how secure a particular exchange is before deciding on using it for trade or investing.
Make sure that the site has been well-reviewed by other users so that you have an idea of how reputable they are in general. Also check how safe their servers are, how they keep user information private and how quickly they process transactions.
Cryptocurrency exchanges typically charge users small fees depending on how large an amount is being traded or transferred, so you should also compare exchange fees for different cryptocurrencies before you make a decision on which one to use as well.
#2 Research How To Store Your Digital Currency
When you invest in cryptocurrency, one of the first things that you need to do is figure out how exactly you plan on storing it.
There are a few different storage options for digital currency investors.
#1 Paper Wallets
A paper wallet is the most basic form of crypto wallet: it’s simply a piece of paper with your private keys written on it. However, there is a significant disadvantage to paper wallets: if you lose your paper wallet, you also lose your cryptocurrencies.
On the flip side, these will never be able to be accessed by hackers, so they technically can be considered one of the most secure ways of storing your digital currency as far as online theft is concerned.
#2 Software Wallets
Software wallets may be downloaded onto any computer or smartphone with Internet connectivity. They’re extremely handy, but their downside is that they can also be hacked (even if you have 2-factor authentication enabled).
Because they’re the only type of wallets that can be hacked, software wallets are also known as “hot wallets”.
#3 Hardware Wallets
The most secure way to store a significant amount of cryptocurrency is in a hardware wallet since it cannot be hacked or utilized without direct access to the physical device.
In recent years, security-minded crypto exchanges have taken to using hardware wallets to safeguard their Bitcoin.
You might also choose an offline software wallet, which means putting software on your computer where you can safely keep all of your data offline.
#3 Diversify Your Investments
Diversifying your investments is a great way of increasing your chances of success when it comes to investing, and it holds true for cryptocurrency as much as it does for other types of assets.
For example, if your main digital currency is Bitcoin and it’s performing well on the market, then investing in Ethereum or Litecoin might be wise so that you’re not entirely dependent on just one coin for success.
On the flip side, if Bitcoin is performing poorly on the market then you should try investing in one of these other coins instead.
#4 Understand How Volatile Cryptocurrencies Are
Since cryptocurrencies are still a very new type of asset, they’re extremely volatile and therefore susceptible to dramatic fluctuations in prices.
This means that you must be prepared for the possibility of losing your entire investment if the market suddenly crashes; even though cryptocurrency is used as digital cash (meaning it can’t really crash like stock markets), there’s always a possibility that the market could fail.
There’s no such thing as a risk-free investment, and you should be prepared for this possibility before going in on any digital currency.
In Summary
The cryptocurrency industry has exploded in growth in these last few years, but it’s also extremely volatile and complicated to get involved with.
If you’re not careful, it’s entirely possible that you could lose your entire investment overnight due to fluctuations in the market.
Before you decide to invest in any cryptocurrencies, it’s important that you do your research and figure out how exactly they work so that you can be sure of how much money is safe for you to invest at a given time.
As long as you keep these tips in mind, this new industry shouldn’t be too hard to navigate.
