Cryptocurrency is a form of unregulated digital currency designed as a medium of exchange that offers anonymity. With the government not involved in cryptocurrency, the process of payment becomes faster. In addition, these currencies are non-taxable, hence, the popularity and attraction to people.
Digital currency is considered the future of monetary exchange. Lately, this form of cash has been doing well in the market. This is because so many people are investing in it without looking at the pros and cons.
Before the pros and cons, you should first understand the risks and rewards of cryptocurrency. This is so because the world has become so cruel with malicious people who will do just anything for money.
Here are several risks one should be concerned about before investing in cryptocurrency
One should research thoroughly about cryptocurrency. Learn about blockchains, the cryptocurrency you want to invest in, the security measures to take, the do and don’ts of cryptocurrency, to mention but a few. Make sure you keep on researching even after investing. Read about crypto every day because things keep on changing, and what might have been confirmed today can turn out not to be tomorrow.
Make sure you are on the know-how of cryptocurrency and keep yourself updated every single day.
Cryptocurrency Wallet and private keys
The crypto wallet is a device, program, or service that stores cryptocurrency transactions’ public and private keys. Private keys are the secret codes you use to access the wallet. There are so many different types of wallets that are classified into two; Cold wallets and hot wallets. Hot wallets use the internet, an example being Desktop wallets.
Cold wallets are the best. Paper wallets are examples of cold wallets. They don’t use the internet; hence are not prone to hacking. At the same time, if one is not careful with the wallet, one might lose it. Losing a wallet means you forget about all the funds you have invested in.
Crypto Wallets should be kept safe, and secure private keys with complicated and difficult characters for anyone to guess. Finally, make sure you alone have control over your funds.
Purchase wallets that well-established companies manufacture to avoid purchasing one that has been tampered with.
Cryptocurrency relies so much on technology; therefore, there are very high chances of being hacked. Cyber theft is, therefore, a very major risk. Furthermore, unlike the traditional currency with analog backup, cryptocurrency has no backup security of any kind.
Lots of investors have lost millions of dollars in stolen digital currencies. But, unfortunately, once you lose the funds, you can never retrieve them.
Besides cyber theft, there is also fraud in the crypto market. With the popularity of crypto in the modern world, interest builds up. Plus, anyone can start up a fake cryptocurrency exchange because there is so much freedom. A buyer looks up Bitcoin, for example, online. A seller also markets online. Fraudsters take advantage, primarily because with crypto, there is no security.
Investors have been warned against fraudulent exchanges that deceive you into selling all your crypto.
A wise investor should put in money, in such an investment without security, that he can afford to lose. We have heard of a lot of people who have lost all their savings. Some borrow money to invest, thinking they would have good returns but instead lose everything.
When you have thoroughly researched the crypto you want to invest in. you will be more comfortable putting in just the amount you are willing and able to risk. This makes you confident with crypto.
Invest small as you learn how to play with real exchanges and real money. Do not put in all your investments in only one crypto; diversify. If you are a newbie in investing, do not invest only in crypto.
Human is to error. If you are a newbie in cryptocurrency and have no experience in trading and investments, there are chances of getting mixed up and confused.
It is effortless for any human being to send money to the wrong wallet, lock yourself out of your account entirely, or even place a wrong order. You can even forget your password, and most of these blockchains do not have a password recovery function.
As a human being, it’s easy to lose your private keys and even your wallet.
Cryptocurrency is unpredictable
Cryptocurrency exchange comes with a lot of uncertainties. They are exchanged peer to peer without any financial institution like a bank involved. Therefore, no one can know when the value will either go up or down.
How much crypto is worth is very hard to tell based on the currency’s past and current value. However, this doesn’t necessarily mean that it has no potential; you only need to be extra careful.
Join an online Cryptocurrency group
Since these exchanges are done online, most of the updates are online as well. Things develop so fast, and for you not to miss out on anything, make sure you join an online community. Remember that it has to be a group that will give actual updates about the crypto you invest in.
Scammers rarely post on social media and send direct messages to try and defraud newbies. At the same time, make sure you do not join a misleading group.
Keep track of your funds
When you start investing in cryptocurrency, you tend to create lots of accounts on different websites. There are very many other cryptocurrencies, and it can be tough to trace all your funds. It would help if you learned how to keep track of all your funds.
It would be best if you had a proper tool to track all your investments.
Long term or short term investment Cryptocurrency Investment Decisions
Before you invest, think of how long you want to invest. The time frame is determined mainly by how long you can tolerate the risk you are about to get yourself into. Your financial situation and your financial goal. For example, if you have a time-consuming and demanding job, you should make short-term investments.
Example of investments are
- Bitcoin – it has been there for the longest time. It represents 40% of the cryptocurrency market cap, even with many other cryptos on the market. The value of Bitcoin fluctuates a lot, and it might not be a good investment for a person who gets nervous so fast. However, fluctuating should not be alarming if you bear in mind that it is a long-term investment.
- Binance coin – there was a rise in prices of all cryptocurrencies on the bull market in 2017. Binance reached its peak then. BTC has continued a slow but consistent trend upward. Binance coin is different from other cryptos because it was created by a company and not a tech developer group.
- Etherum – it is not only a cryptocurrency like the other coins. Ethereum is also a network that allows developers to create their cryptocurrency. It has not been there for so long as other cryptos.
Before you think of investing in crypto:
- Consider all these and watch out for more risks.
- Ensure you understand the coin, the exchange, and even the company you are handing out your assets to.
- Be keen.
Lastly, as someone once said, never invest in something you do not understand.
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