Choosing the right wallet depends on how much you value security, convenience, and control of your private kety.
While it might be over a decade since Bitcoin was first launched, cryptocurrency is still a nascent space with opportunities in the industry consistently increasing with new tokens and platforms emerging. As an alternative asset, cryptocurrencies bear a great deal of potential. With this potential comes a fair deal of risk, especially if you’re not sure of how to enter the market. Being aware of the risks – and how you can get around them – can make your first steps into cryptocurrency investment a safer, more profitable experience.
In this, we go through three common risks with cryptocurrency investment and how you can avoid the negative consequences.
The severe volatility is one of the main aspects that the reputation that Bitcoin and cryptocurrencies have. It’s part of the defining components for crypto tokens and is a bit of a two-sided coin: On one hand, you can stand to make a lot of money from it. On the other, you might lose out if you go in at the wrong time.
How to avoid the negative side
With Bitcoin’s market movements, if you “buy the dip” and hold on for dear life (HODL), you’re setting yourself and your portfolio to mitigate the possible losses from the volatility as best as possible. Keeping your investment ticking with your head rather than your heart and not reacting to market movements (like quick sales if things look like they’re heading for a downward trend) is a good strategy to take wins from the volatile nature. It’s also important to not invest more than you might be able to afford to lose. Bitcoin and cryptocurrencies shouldn’t be treated as a get-quick-rich strategy.
Scams and schemes
At the end of November 2021, more than £1 million GBP of cryptocurrencies scammed was being reported to Santander UK by customers each month. This is just one bank in the UK. The scale of cryptocurrency scams and loss by fraud is much higher and much more across the globe. Cryptocurrency hackers know how to target vulnerable investors through things like malware or phishing schemes. Once they’re in your cryptocurrency account or can access your crypto wallet, it’s impossible to trace and get your funds back because of the decentralised untraceable nature of the industry.
How to avoid getting scammed in crypto
Make sure you protect your funds with a combination of hot (online) and cold (offline) storage and keep your data extremely secure. Be cautious of speaking about your cryptocurrency holdings online, especially in public forums, and do not tell people how you store your funds. Keep your online system secure too with the right tools and anti-virus management software to avoid malware using your system. Avoid clicking on any links you might find suspicious and be careful of emails or messages that might request you send them cryptocurrency.
Hype and promises of big profit
Some projects are focused on fundraising, not necessarily offering a fully functioning platform or network that can be built up. Buying simply because the price is low and it might increase isn’t the best strategy for a cryptocurrency that doesn’t have any sort of established community or reputation. This is especially the case if the team behind a cryptocurrency is not well known or if they’re only promising high yields for your investment.
How to avoid
If a cryptocurrency has a lot of hype around how much it’s making and not what it can do, there’s an immediate red flag. Be careful of investing in a cryptocurrency that doesn’t have much background to it. With every cryptocurrency investment, proceed with caution and do your own research. Some projects might overstate how much you can make without letting you know the risks involved. The more information you have, the more knowledge you can invest with.