While planning to invest in cryptocurrency, there are certain risks that you should check out before venturing into cryptocurrency investment. In this article, we have highlighted the top risks that every crypto investor should avoid to ensure that their expected outcome (capital + profit) is not tampered with.
Risks to watch out before investing in cryptocurrency
If you are able to take heed to the risks explained below as well as avoid them, you will surely excel in your cryptocurrency investment.
#1. Choose a good crypto exchange platform
In our previous articles, we have looked at many crypto exchange platforms that investors can use to trade cryptocurrencies effectively. When selecting the best crypto exchange platform, there are certain things that one should consider such as security measures, transaction fees and reliability, etc. CoinMarketCap listed the top crypto exchange platforms for crypto beginners as well as advanced traders. Traders should also check out fiat coins that they can swap if they intend to convert their crypto to another currency and also be aware that not all exchange platforms support swapping cryptocurrencies with another. Binance which is one of the most secured and trusted exchange platforms, allows its users to swap altcoins, Bitcoin and Ethereum, etc., and vice versa.
#2. Do your best to avoid scammers
Many crypto fraudsters will come to you by posing as someone who predicts how cryptocurrency prices will rise or fall (dropping trading signals). Initially, they may seem like they want to help you, but just know that they’re looking for a way to con you. Online fraudsters have come up with lots of ways of hacking traders’ accounts. One of their tricks is by using bots to monitor trader’s transactions. While trying to protect your account, you should not log in to your crypto account with public computers such as in a cyber café where several users have access to a single computer. Also, don’t regularly save your login details in browsers when they suggest auto-login for you. This will prevent people from gaining access to your account even when your device is stolen.
#3. Understand volatility
Normally cryptocurrency prices fluctuate because of several factors that determine the rise and fall of cryptocurrency prices. There was a time when the price of 1 Bitcoin wasn’t even $1,000, but people who took the risk of purchasing it back in 2015 when Bitcoin didn’t look as if it had any potential like it does today, are now rolling in profit. As an investor, you should study the coin’s price data to learn about whether the coin is likely to boom or dip in future. This will help you to make a profit even just from that little investment you made in the crypto platform.
#4. Create an Investment Strategy
Successful crypto investors don’t just invest their money in any crypto or any period of the year. They will first study the market and check out the coins price predictions they intend to invest their money on; by so doing they can be able to eliminate some impromptu losses. Investors can set a limit order or stop order; this is the level that traders set as their target price. This means that once that cryptocurrency they invested on reached that price, they will be either notified by the exchange platform or their order will be fulfilled (buying or selling of a coin). Following daily crypto news will enable traders to be able to track the favourable months, days, and times that will yield maximum profit as they invest in the platform. Knowing how to swing trade cryptocurrencies will as well be of great help on your way of strategizing your investment period.
#5. You Should Embrace FUD
FUD stands for “Fear, Uncertainty, and Doubt” in cryptocurrency, as someone who is planning to invest in the crypto world, you should try to separate your fear from your budget, estimate, and plans. Someone said, “those who have succeeded most in this life are those who are not afraid of failure”. No matter how rough some predictions may look, you have to encourage yourself to take the risk to invest even in coins that don’t seem to have a dazzling future as of now, like Bitcoin back in 2015. Coming to uncertainty, cryptocurrency majorly lies on uncertainty – a coin that people don’t value today could become the most valuable coin by tomorrow. As an investor, don’t follow the crowd; develop your own techniques. The people that own Bitcoins that are worth millions of dollars today took the risk of investing in Bitcoin when nobody knew about it. Doubting has caused a lot of traders to regret while others are making profits from the same coin that they refused to invest their money in – they probably doubted in their hearts that the coin will not be profitable in future.
#6. Protect Your Private Keys
While you check historical data as well as future price predictions for the coins you want to invest in, it’s advisable to think about the security of your wallet or the coins you have purchased over the years. After investing in a cryptocurrency, one of the ways to protect your coins is to keep your private keys secret and safe. You could get a hardware crypto wallet that will ensure that your cryptos are safe from hackers and fraudsters, etc.
#7. Embrace Hodling
Hodling is holding cryptocurrency with the goal of selling in future. Sometimes, crypto prices fluctuate which creates uncertainty in the market. During one of these periods, the best option is to hodl your portfolio. Remember that you lose out when you sell during the crypto dip.
#8. Protect your wallet
While protecting your private keys, also protect your crypto wallet. There have been instances where traders’ entire cryptocurrencies have been wiped out. The usual cause is a breach of users’ information. You can integrate a 2-factor authentication in your account and other security measures put in place in the crypto exchange.
#9. Watch out for Phishing
In phishing, scammers pose as investors or popular exchanges and ask users to enter private keys. Sometimes, they impersonate popular exchanges to dupe unsuspecting traders. To avoid phishing, always ensure that you verify every email or message sent to you before replying.