How to Invest in Cryptocurrency | 5 Tips to Safely Do It

Cryptocurrency is a digital currency, which means it exists only in the form of computer data. The purchase and sale of cryptocurrency are decentralized, meaning that no central authority issues new coins or tracks transactions. Cryptocurrencies can be acquired by purchasing them with fiat money (i.e., national currencies like US dollars), trading goods for them on specialized websites, mining them with computing power, or using coin-swapping services.

1. The Cryptocurrency Risk

Investing in cryptocurrency includes many overlapping risks and should be considered a high-risk investment. Some of those risks include:

Loss of capital

The price of cryptocurrencies can go up or down by 20%-100% in just one day. By purchasing cryptocurrencies, investors could lose the money they’ve invested because there is no implication of a central authority.

Regulatory threat

Currently, cryptocurrencies’ regulatory framework does not favor their use for daily transactions due to price volatility and threats like money laundering. The potential for new regulations on the horizon could make investing in cryptocurrency less attractive as banks would more likely look at them as investment vehicles instead of actual currencies.

Technological threats 

The growth of the cryptocurrency industry as a whole is still in question. In particular, many people are worried about blockchain technology’s lack of scalability and its volatility. A growing number of individuals have voiced concern over the security of cryptocurrencies.

2. Look at Blockchain Technology

Investing in cryptocurrency can be a good choice for those who want to diversify their portfolio, but investors need to take the time to understand blockchain technology and do proper financial planning.

Decentralized system

Blockchain cryptocurrencies are decentralized, which means any single entity does not control them. This lack of regulation gives cryptocurrency users increased control over the way they spend money.

Standardization 

Currently, cryptocurrencies are not regulated by any central authority, but that may change as governments start to consider the potential benefits of blockchain.

3. Keep Your Private Key Secure

Keeping your private key secure is one of the most important parts of investing in cryptocurrency. It ensures that only you will have access to your account, and all transactions can be safely carried out through it.

How to secure your private key

• Use a hardware wallet

Keeping your cryptocurrency in an online or software-based wallet means that others could potentially gain access to it, so stick with a physical device such as the Trezor. 

• Password protects your wallet

Make sure you use a strong password and activate two-factor authentication whenever possible. 

• Keep malware detection software updated

The number one way hackers take control of cryptocurrency accounts is through malware, which you can prevent by keeping your anti-virus, anti-keylogger, and web browser updated.

4. Choose an Exchange

There are many different exchanges where investors can purchase cryptocurrency. If you plan on buying cryptocurrencies regularly or doing business in the cryptocurrency industry, you should consider getting an account with a platform that supports multiple coins.

Bitcoin: Many people choose to invest in Bitcoin because it allows users to make international transactions without high fees or conversion rates, but other popular currencies include Ethereum, Litecoin, and Ripple.

5. Be Aware of Scams

Though many people are excited about cryptocurrencies, there are others that want to take advantage of the excitement and hype.  Luckily, there are ways to check if crypto project is a scam, so that you can invest wisely with the peace of mind that you’re not about to make a costly mistake. The last thing you want to do is invest a large amount of money only to find the scheme is worth nothing. If you need to know more, Dan Hollings the plan review can help you invest wisely.

Conclusion

When investing in cryptocurrency, it is essential to be aware of the different risks associated with it. Investors need to understand blockchain technology, keep their private keys secure, and make sure they choose an exchange that supports multiple coins.

About the Author

Patrick Watt is a content writer, writing in several areas, primarily in business growth, value creation, M&A, and finance. His other interests include content marketing and self-development. Say hi to Patrick on Twitter @patrickwattpat.