Introduction
Cryptocurrency is known to have emerged as a phenomenon that offered a more flexible and better way of investing and making money. But with the introduction of such an ingenious innovation there will always be some pretenders who are going to con people. Learning the type of consistencies involving the scammers and applying various precautionary measures when investing on the cryptocurrencies is extremely important for anyone willing to invest in a cryptocurrency.
Cryptocurrency is on the rise and with its popularity comes conmen and fraudsters who want to make quick buck through unlawful activities and cons.
Sadly, crypto scams can be incredibly easy to fall for. It ranging from phishing schemes from Ponzi schemes, and if these schemes involve the sale of securities to members of the public, the law provides the scammers with many ways to rip off the investors. It not only means people lose their money but also the credibility of virtual currency world is disappearing.
Why Cryptocurrency Scams Persist
Taking this into account, there are several factors that help explain why crypto scams are still happening today. There are relatively fewer restrictions to the operations of such companies, which implies that there is inadequate regulation. Another factor that acts as a handicap when investigating cryptocurrency related crimes is the aspect of anonymity attached to all cryptocurrency transactions. In addition, due to the complicated nature of technological aspects of crypto, investing in the asset class can be a challenge for new entrants to the market and hence, they can easily fall prey to fraudulent investments.
In this case, detecting red flags is a critical aspect that investors have to consider when undertaking any venture in cryptos.
The best way to avoid getting scammed is to gain knowledge on how scams work, and this knowledge is very vital. When you come across an opportunity which boasts unrealistic returns, or when persons employ high pressure means to get you to invest than when an organization or a project’s team is not well introduced, these are some of the warnings you should beware of. Some key lessons that have been known to be effective are; it is always wise to undertake research before investing.
3 risk-free method of investing in cryptocurrencies
1. Using Reputable Exchanges
It is therefore important to select the right exchange that will maximize your profits. Security; this involves having reliable security features and strict policies guiding the exchange; reputation; this involves having resources from reliable sources and being reliable by users. Of course, it’s possible to find the desired item on any exchange that has positive feedback, clear activity, and compliance with the requirements of the legislation.
2. Diversifying Your Crypto Portfolio
It is basic finance knowledge that diversification is a must do due to its ability to manage risk in investments. Thus, the exposure of funds to numerous types of cryptocurrencies helps save you from losses due to the fluctuations of related assets. Leaning towards diversification, try to invest in some of well-known cryptocurrencies while still considering some new promising projects.
3. Employing Cold Storage Solutions
Cold storage means that you store your cryptocurrencies somewhere where it cannot be accessed directly from internet. This can be done with hardware wallets or by creating paper wallets. These methods are highly secure and their connection to the internet is not established in any way meaning they cannot be prone to such attacks.
Recommendation Exchanges Reviewed
There are some of the best exchanges, which are, Coinbase, Binance, and Kraken. Such services boast numerous security mechanisms including multi-factor authentication, and their usage is compliant with a range of regulations. To ascertain the authenticity of any exchange, one must examine its license, customer reviews, and instances citing the exchange’s susceptibility to hacks.
Diversification is a form of investment management strategy that involves spreading an investor’s portfolio across a variety of assets, especially in the context of cryptocurrencies. This post will provide guidance to investors on how to diversify their crypto portfolio.
To diversify, one needs to know about other types of money. Invest in Bitcoins, Ethereums and other alt-coins that may have gotten a push in terms of growth and development. Choosing between more high risk and low risk investments is another key consideration for the general risk on the portfolio.
Understanding Cold Storage Solutions
It is vital for anyone interested in making big investments in the field of cryptocurrencies to make use of cold storage. Some of the common ways are using the security hardware wallets as Ledger and Trezor. They leave your private keys offline, meaning that you will be well protected against the various cyber threats. Paper wallets – Another form of secure wallets but they are slightly less convenient since your keys are printed on the paper wallet.
This is the third article in our series on investing in cryptocurrency in 2021, and we will focus on the most essential aspects of it in the following paragraphs; the common pitfalls people make when investing in crypto.
But if that you fail to avoiding such pitfalls, you’re going to be a great loser. As much as it is fun to jump around new coins without doing our research we need to stop this. Habits safeguard ranging from employing the right passwords and employing two-factor authentication ought to be put into practice most of the time. Last but not least, risk management should be kept simple: never invest money that you cannot afford to lose.
Staying Informed and Educated
Even today, I observed that many new players entered the crypto space. To present, it implies monitoring a few precious resources, which include the reputed sites like CoinDesk, CoinTelegraph, and subreddit about cryptocurrencies- r/cryptocurrency. This way, you shall be able to armour your self with the right knowledge and outlook to detect any threats looming around the corner.
In the Fourth Industrial Revolution the role of regulatory bodies can not be over emphasized as they are responsible for the monitoring and controlling of organization in order to ensure that they conform to stipulated regulation or standards.
Relatively, there are now slowly emerging regulations aimed at safeguarding the investors. Institution such as SEC, FINRA among others are striving to enact laws regarding investing in cryptos and blockchain. It illuminates the fact that you should carefully monitor the regulations to avoid getting on the wrong side of the law while investing in cryptocurrencies.
As we have seen in the previous chapters business success and human achievements generally are vastly built on community and networking.
It also important because to understand and leverage crypto investors can be beneficial to acquire information and support from the crypto community. Engage in social media, go to meetings (conventions) focused on cryptocurrencies, and interact with fellow investors. A good network will also help you avoid some mistakes that others might have made while discovering best practices that could be useful to spearhead change.
Leveraging Technology and Tools
Let us look at some of the following tools that can be used in improving your approach to investing in the Cryptocoin market. Cryptocurrencies should be managed and traded using tools like CoinTracker for effective tracking of portfolios. Anti-virus applications like Virtual Private Networks and encryption software can help ramp up security in your proceedings online.
Conclusion
Cryptocurrency trading is one of the most lucrative businesses these days, but just like any other venture it also has its risks. Thus, paying attention to the reputability of the used exchanges, using multiple wallets for storing coins, and applying cold storage for the long-term storage of assets, you can minimize these risks. So always be alert, informed, and never forget the importance of security even while investing in the shares.
FAQs
How do I know when it is safe to just ignore or avoid a crypto scam?
If you think you have been involved in a scam, the first thing you should do is refrain from any interaction with the alleged scammer, contact the proper authorities and share it with the members of the crypto community to mark its name as a fraudster.
I’d like to know how one can differentiate between the imposter projects and the genuine cryptos.
Study the project’s whitepaper, evaluate the team, identify any auditor involved in evaluating the project and detection of fraud, and read reviews from other investors.
While it may be possible to purchase insurance for some other types of assets in the blockchain ecosystem, no cryptocurrency investments as such are insured.
A few exchanges provide an insurance for the funds residing on the company, but again it is not a frequent occurrence. Generally it is advisable to use appropriate storage facilities to enable safeguarding of your investments.
Which cryptocurrencies have the lowest risk of giving the holder a marginal return on the invested money?
The main cryptocurrencies that could be considered safe to a large extent are Bitcoin and Ethereum because they have already occupied their respective niches and have significant capitalization. Nonetheless, it is vital to understand that every opportunity entails a specific degree of risk.
Another important question which has been popping up frequently is, how do I protect my investments in crypto?
Make sure to create and implement robust and distinctive easily memorable passwords, put on two-factor authentication, store your private keys away from the online world, using cold storage and update your security software.