Hardly a day goes by without some news about the world of cryptocurrencies, crypto trading, new regulations or blockchain innovation hitting the headlines. However, there is just as much news about concerns over crypto trading, scams, the market faltering and exchanges or wallets falling apart.
It can be difficult to know where to start and if you are not already familiar with the world of crypto trading and exchange, it might seem safer to just avoid the world of digital currencies altogether. While avoidance is certainly a valid option, there are ways for users to engage with cryptocurrencies in a safe and secure way that minimizes risk and maximizes security.
Below are just a few of the ways you can stay financially safe in the cryptocurrency world.
Do your research
It can be tempting to jump headfirst into the world of crypto, especially as there are more crypto “bros” and influencers than ever before, all celebrating and flashing the wealth they apparently made from crypto. However, before you invest a single cent of your hard-earned money into any crypto venture, you need to do your research.
There are cryptocurrency scams out there and there are platforms or exchanges that are less secure and well developed than others – there are also influencers who are absolutely faking their way through social media. Take as much time as you need (days, weeks, months, etc.) to learn about cryptocurrencies and blockchain technology so that you have a foundational level of knowledge.
Then, research the individual cryptos and the exchanges – read third-party articles and learn about the security technology used by exchanges. Every crypto has a white paper you can read to learn more about the cryptos themselves, and third-party sources are also helpful.
The world of digital currencies remains largely unregulated around the world. While this has led to a huge amount of innovation and growth, it has also led to the crypto world becoming something of a Wild West.
You can practice caution in investing by maintaining a diverse portfolio of investments – this means that you are not putting all of your eggs into one basket. It is also important to start small and only gradually increase your investment; crypto is a very risky investment, so keep this in mind whenever you are investing or making trades.
There are many extremely sad cases in which people have chosen to remortgage their home or invest their child’s college fund in a single crypto, only for it to disappear overnight. It is better to be cautious and make small, measured gains than to potentially lose everything and have to start over again.
Some traders have become obsessive about every single movement in the market – this could have a negative impact on your mental health and wellbeing. You are likely to be more stressed and anxious if you have invested a significant amount of money, so start small and only invest money you can afford to lose.
Follow the developments
It is important to try to remain on top of developments in the crypto space. This does not mean that you need to follow everything constantly, but it is a good idea to have a general idea of what is happening in the market.
Traders should also use tools to help them make the best investments possible. One helpful tool is the OKX cryptocurrency list, which includes a list of hundreds of cryptos that can be traded, along with real-time updates and information.
Be smart about the tech
Blockchain technologies such as cryptos and NFTs are still relatively new – in the history of currencies, they are extremely new. They are also much more experimental than, say, credit cards, and it is unclear whether all blockchain technology will really stand the test of time.
What this means is that you should be very cautious when investing, and treat crypto just like any other extremely volatile asset you would trade on a normal exchange. Traders should be vigilantly watching for potential scams or exchanges with weak credentials, and should also store crypto in a secure crypto wallet, otherwise known as a “cold” wallet. This minimizes the risk of users losing their crypto in an online hacking attack.
Users should also be aware of crypto’s limitations – there are limited legal protections when paying with crypto and it is impossible to “take back” a crypto transaction, because of the immutability of the blockchain. Above all, be cautious, take it slow and do your research.