What would you do if you lost all your money overnight?
There’s a saying in the cryptocurrency community. Invest what you can afford to lose.
Even so, that doesn’t mean you should be careless with your finances. As more people invest in crypto, you should make sure you don’t fall for avoidable mistakes.
Here are five reasons to take care when investing your wealth in cryptocurrency.
Not Your Keys, Not Your Coins
Repeat this mantra every day, every time you transact, and every time you read the news. There are records of exchanges shutting down and losing customers’ assets.
And it isn’t always about losses. Most recently, Okex halted withdrawals of all funds. Even the biggest exchange in the world, Binance, has suffered outages. Although funds are usually safe, this can be a headache when trying to transact.
Centralized vs. Decentralized Technology
Centralized ownership refers to trusting your assets in a third party and handing them over to someone else, like a traditional bank. Decentralized exchanges (DEX) are the opposite, like cash, where there is no middleman at play.
Swapfol.io, for example, offer services referred to as DeFi, or decentralized finance. DeFi expands on the existing DEX model. It introduces smart contracts that allow peer-to-peer lending without a middleman.
Bitcoin itself was born from a desire to break away from a centralized financial system. So many in the space agree that decentralization is the future.
Lock Down Your Wallets and Accounts
Every single service you use needs securing to reduce risk. Physical security keys, two-factor authentication, and offline transacting should all be high-priority.
The best way to combine these measures but still trade on a DeFi is a hardware wallet. Stick to the big names of Ledger and Trezor for larger value crypto. Yet, for holding smaller amounts, start-ups can be a great way to experience secure storage. Providing you are aware of any unknown territory, of course.
The most well-known risk to the average investor, it’s too easy to forget that what goes up comes down. Also, to making a loss, there are avoidable risks to consider.
For example, when trading, you should always set a stop loss if the market drops. If an exit scam occurs, you will have only made a small loss.
Small Mistakes Can Change Your Life
Like with market volatility, there’s one risk element that nothing can remove; Humans.
Phishing scams, for example, are commonplace. In the excitement of cashing out profits, it’s too easy to mistake “Binance” for “Blnance.” Then you give your details to a hacker, and they overwrite the receiving wallet address with their own.
Plus, you can spend millions on cybersecurity. But nothing stops a five-dollar wrench attack, especially if you are on the public’s radar.
Cryptocurrency Risks Aren’t FUD
Fear, uncertainty, and doubt is a term for scaremongering. It’s vital not to dismiss any cryptocurrency risks you hear about, especially without doing the right research.
Like any other asset, you should spread your wealth and cut risk. That way, if anything goes wrong, you can be sure the majority of your investments are safe, and you have a backup.
Now you have the right mindset, take a look and see what else you can find to save your wealth.