5-Step Guide to Safely Investing in Cryptocurrencies
Cryptocurrencies have now reached a point where they are considered a serious investment vehicle. The returns earned on Bitcoin, Ethereum, Dogecoin, and other digital currencies are there for all to see. Crypto exchanges, which are platforms that facilitate buying and selling of cryptocurrencies, are also popping up everywhere, which shows just how big the industry is going to get. However, despite all that, there still remains the question of security with new investors.
The lack of regulation and an authoritative figure to oversee crypto transactions is something that worries a lot of new investors. If you’re one of them, here is a step-by-guide to help you transact securely in cryptocurrencies.
1. Understand the market
Before you do anything, understand what are cryptocurrencies, how they work, and why you should be investing in them. Buying and selling Bitcoin and Ethereum without understanding their core should be avoided. As an investor, it is vital that you know the ins and outs of the asset class. As you would with any other investment scheme, spend time to understand the crux of the cryptocurrency matter.
2. Humble beginnings
Cryptocurrencies are volatile. There are no two ways about it. But they’re incredibly rewarding at the same time, so your strategy of investing in digital currencies should be somewhere in the middle. Hence, you should start with a small amount. Only invest the amount you’re willing to lose. Once you’ve done that, monitor, and measure your progress and then increase your contribution based on your risk appetite.
3. Stay loyal to one crypto
Just like the stock market, the crypto market is also flooded with options. You can pick from over 1000 different cryptocurrencies, but that doesn’t mean you pick anything. Make a list of the digital currencies that you like and then pick one from them. Over 70% of the crypto market is controlled by Bitcoin, so it makes sense to go with the biggest player. That said, Ethereum, Dogecoin, and Cardano are equally popular. Also, avoid investing in recently-released cryptocurrencies, as they’re prone to attacks and massive price fluctuations.
4. Carefully choose your cryptocurrency exchange
Think of cryptocurrency exchanges like a bank. The difference is that instead of keeping a track of your money, crypto exchanges store your cryptocurrencies. They are essentially web or mobile platforms that help you buy and sell digital currencies. There are countless crypto exchanges in the market, but it is instrumental for you to pick the safest exchange. Since these organizations are not regulated in India, they could commit fraud and no one could blame them. Hence, pick dependable crypto exchanges like WazirX, Binance, and CoinDCX.
5. Choose a secure crypto wallet
A cryptocurrency wallet stores the private and public keys that you will need to access your cryptos on the blockchain. Without the key, you cannot perform any crypto transactions, which can affect your crypto assets. Online wallets, software wallets, and hardware wallets are the three types of crypto wallets that you can use to store your cryptocurrencies. Which crypto wallet you should choose depends on the digital currency you buy. For instance, if you want to buy Bitcoin, you’ll need a Bitcoin wallet. If you purchase DogeCoin, you will require a wallet that can hold Dogecoin.