‘Crypto’ – the six-lettered term has revolutionized the world of economy. The most popular cryptocurrencies, like Bitcoin and Ethereum, shifted into the mainstream, and many people are trying to look into Crypto. And the most common question that pops into people’s minds- is Crypto safe?
This detailed guide will try to simplify the confusing world of Cryptocurrency and concentrate on what the average person craves to know to invest in and utilize Crypto safely. So let’s get down to business without further ado.
What is Cryptocurrency?
If you are thinking about how does Cryptocurrency works, Cryptocurrency is nothing but a digital virtual currency. There are a plethora of digital currencies available on the internet. The term cryptocurrency can refer to any digital currency that is secured by cryptography and operates on blockchain. Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) are some of the most popular and valuable cryptocurrencies. Crypto is generally a peer-to-peer payment system that does not depend on banks to process online transactions or central governments to generate and bring in the currencies in circulation.
One can use Cryptocurrency just like any other currency as well as a platform of exchange. Just like conventional currencies like the U.S. dollar, you will only find cryptocurrencies in digital form. Some particular cryptocurrencies are often called “coins” or “tokens.” Cryptocurrency is decentralized, which makes a big difference. It signifies that no central authority for control exists that creates, distributes, or regulates Cryptocurrency. It is entirely different from the U.S. dollar, which the Federal Reserve operates.
Cryptocurrencies like Bitcoin are without borders and can be accessed by everyone with an internet connection. Now the vital question is if there is no central authority, how can you say, is Crypto safe? How are people prevented from making fake Ethereum tokens or fraudulent cryptocurrency payments?
The name cryptocurrency originated from the term cryptography, which signifies a technology to encrypt, secure and conserve data in computer systems. An advanced peer-to-peer computer network helps save records (aka ledgers) of all cryptocurrency transactions. Thousands of individual registers are protected and verified against each other, which enables them to avoid fraud — and reduces the chance of fake tokens. Hence, if you are wondering, is bitcoin safe; then the answer is yes.
Is Crypto Safe to invest in?
You must have heard queries like- is bitcoin safe? Is Wazirx safe? You should know that Cryptocurrency is indeed decentralized. But there is no doubt that all the transactions on most cryptocurrency networks are completely secure. To be on the safe side though, crypto users have to take proper precautions.
Blockchain Technology is entirely secure. You can purchase, store, and use Crypto securely if you follow the best tips to invest in Crypto. If you follow proper safety measures, you can invest in Crypto safely.
However, if you are considering investing, most professionals suggest keeping Crypto at a comparatively small percentage of your invested assets. In other words, investing in Cryptocurrency is entirely safe, but you should keep only some of your finances in Crypto.
Professionals suggest crypto users develop a diversified portfolio of bonds, stocks, real estate, ETFs, and Cryptocurrency. But it would help if you remembered that no crypto investment comes with a guarantee. We saw the market crash in 2008, showing us that even secured investments such as real estate and stock index funds can be affected by market crashes. Hence, Crypto is not something beyond it.
What are the risk factors in Cryptocurrency?
If you wonder how safe is Cryptocurrency, there are some risk factors in Cryptocurrency, and you should be careful about them. Some of the most important ones are as follows.
Volatility: You will find the crypto markets to be fluctuating. You may avoid this risk by developing a diversified portfolio and purchasing long-term Crypto without opting for short-term Crypto.
Lost keys: Cryptocurrency is protected using public and private keys like passcodes. In case you lose access to your private key, you will not be able to get access to your Crypto. To avoid this risk, you must restore Crypto with a reliable custodian/exchange or use a Bitcoin wallet.
Investment hype: Cryptocurrencies can be prone to severe promotion and buzz, raising prices. It is accurate for lesser-known coins and “troll” coins like Dogecoin. To avoid this risk, you must stick to well-set coins like Ethereum and Bitcoin.
Phishing: Crypto owners might be targeted by phishing attacks. It is done to get access to passwords or private keys. You should not open suspicious emails and direct messages or click on unknown links to avoid this risk.
Limited history: Cryptocurrency is a considerably new idea that depicts a bit of a risk because we cannot look at historical data to detect how Crypto may behave in an important event like a war or a 2008-type market crash. To avoid this risk, you must keep your crypto investments as a relatively small amount of your total earnings.
Theft and scams: Crypto owners are often a target of online thefts and scammers. The best way to avoid this risk is not to let anyone know about your cryptocurrency holdings except for your loved ones.
Regulation: Cryptocurrency is primarily unregulated by majority world governments to date. It could vary, and we might see the government’s crackdown on Cryptocurrency in the near future.
Cryptocurrency transactions were declared illegal by China in 2021. It bans Chinese citizens from buying Crypto. These actions are unlikely in self-governing countries like the United States, but it is hard to foresee the future of crypto regulation. You must take primary safety measures by having good knowledge of crypto regulations and knowing whether it is Cryptocurrency legal in your country to avoid this issue.
What are Some famous cryptocurrency scams?
It is understandable if you are stuck on whether cryptocurrency good or bad investment; many scams are happening in the crypto world. But if you take some precautions, you can prevent these scams. Some of the well-known cryptocurrency scams are as follows:
“Pump and dump” scamsThis scam usually impacts little-known altcoins, not popular coins like ETH or BTC. Essentially, a collaborative group will start buying vast amounts of the specific currency that causes its price to go up.
“Giveaway” scamsSome scammers will imitate famous people or celebrities on social media, acknowledging to be conducting a crypto “giveaway.” They often ask individuals to send Crypto to a specific address asserting that they will double the amount or give them bonus prizes. When individuals transfer their Crypto to these online scammers, they get nothing in return.
Mining and staking scamsProgressive crypto users may indulge in mining cryptocurrency or staking their digital assets to improve earnings. However, this industry has numerous scams that draw people in with vows of huge returns.
Romance scamsScammers have even intruded on the world of online dating. They are famous for starting digital relationships with online dating users, only to demand Cryptocurrency as temporary financial support or offer a tempting crypto investment opportunity that turns out to be a scam in the end.
Phishing scamsIf you keep your cryptocurrency safe with personal keys, which are password phrases, many scams will try to gain access to your private keys through online phishing. You should never open emails and direct messages or click on unknown links to keep these keys always secure.
Blackmail attemptsSome scammers send emails or messages insisting on having sensitive information about you and demanding or blackmailing you into sending Crypto coins to their address — or else they will publish the sensitive information to the public.
How should we avoid crypto scams?
It would help if you avoided cryptocurrency scams by following the steps that are given below:
- You have to stick to popular coins like Bitcoin and Ethereum. The newer, lesser-known coins are often the target of many scams which promise to provide huge returns.
- You have to stick to popular exchanges. It’s essential to buy Crypto using a reliable exchange like Gemini, Coinbase, and Binance to avoid scams and online thefts. Three of them are excellent options.
- Remember, if you find it highly tempting or it tells you to provide huge returns, guaranteed profits, or make your Crypto double–it is a scam.
How can we invest in Crypto safely?
If you plan to invest in cryptocurrencies and avoid cryptocurrency scams, you must follow some steps to make your investment secure and safe. You have to keep the following things in your mind:
- One must buy from a reputable exchange like Gemini, Coinbase, Binance, etc.
- One must keep their coins safe with a reliable custodian or in your crypto wallet.
- One must stick to famous safe cryptocurrency coins like Bitcoin and Ethereum unless one becomes an experienced and professional crypto user.
- One must set strong passwords for their crypto exchange and wallet accounts.
- One must use two-factor authentication for more security.
- One must always have to keep their password and private crypto keys secure.
- One needs to keep financial and crypto-related information confidential.
- One needs to modify their investments by creating a portfolio of Crypto, stocks, bonds, and real estate.
How to store Crypto safely?
Now that we have learned the names of a few safe cryptocurrencies and wonder- is bitcoin a good investment 2022, there are two strategies to store Cryptocurrency that we must know before. Those include:
- Storing Crypto with exchanges/custodians This method is the simplest way to leave Crypto stored with a reliable exchange or custodian for crypto beginners. If you buy Crypto through an exchange like Gemini or Coinbase, you will find your Crypto automatically stored with that exchange. It signifies that the exchange stores your private keys. If you prefer this option, you must use a strong password for your exchange account.
- Storing Crypto in your wallet Another Way to store Crypto on an exchange is to transfer it to your crypto wallet. In maximum cases, you will still purchase the Crypto through an exchange, but you’ll then be able to transfer it to a separate devoted wallet. It almost shifts the security responsibility from the exchange onto you. That is why this is mainly suggested for experienced crypto holders and those with large amounts of capital invested in Crypto. Some Well-known cryptocurrency wallets are Hardware wallets, Software wallets, and Paper wallets.
It’s a good idea to invest in Cryptocurrencies. But at the same time, it’s also essential to remember that not every investment guarantees successful returns. Cryptocurrency should commonly be believed as part of your “higher risk, higher reward” investments — a group that may also include stocks.
Cryptocurrency does come with its own set of unique risks. But as part of a various portfolio of assets, investing in Crypto can be a great choice and is Cryptocurrency the future. Finally, it’s up to you to decide if Cryptocurrency is friendly to your risk profile and overall investment portfolio. You must consult a professional to have a clear idea about it.