Cryptocurrencies such as Bitcoin, Ethereum, and altcoins have gained traction in the financial world in the last few decades. The growing popularity of bitcoins and their altcoins is primarily due to the promise of decentralization and the security features of these financial investments. Thanks to decentralization, crypto transactions attract lower fees and take less time due to the lack of a central authority in the transaction process.
However, trading of any kind carries financial risk, and crypto investors need to beware of the possible safety pitfalls and secure their digital assets. This piece guides beginner crypto investors on how to secure their investments.
1. Beware of crypto cyber crimes
Despite calls from many governments to regulate cryptocurrencies, the digital currency world is still largely unregulated. In addition, the cryptocurrency realm is a hot cake for scammers and fraudsters. Each year, cybercriminals create fake applications and crypto wallets to lure unsuspecting investors. Sometimes, the criminals may send phishing emails to lure crypto investors into revealing their private keys to their wallets.
The best way to avoid crypto scams is to secure your assets with a reputable wallet. Choose a crypto wallet with a good track record and reputation in protecting against cyber theft. Consider storing most of your crypto assets in a cold wallet.
2. Do your research before investing in crypto
Blockchain technology, the building block of many cryptocurrencies, is still relatively new. At a minimum, crypto investors should read and understand a crypto’s white paper before investing. The whitepaper is a document that highlights a cryptocurrency’s purpose, scalability, and the creator’s plan for the asset. Join an online cryptocurrency forum to understand better digital currencies that interest you.
3. Diversify your digital currency holdings
Today, thousands of cryptocurrencies are listed on exchange platforms, with thousands of others still in early development. With so many crypto assets to trade in, it becomes challenging for investors to differentiate winners from losers. Like stocks, you should never put all your eggs in one basket.
Crypto investors should diversify their investments by adding more coins to their portfolios. Like stocks, some cryptos are highly correlated, meaning they are likely to move in the same direction.
