The cryptocurrency market is booming with more new coins and startups than ever, but they’re not all created equal. And when it comes to investing in crypto, the first people many people ask is, ‘Is it safe to put all my money into this asset?’
Cryptocurrency is a trailblazing technology that could overhaul the financial systems of the future. However, it’s wise to do your homework before actively trading or investing in cryptocurrencies with price volatility and privacy concerns.
These are some of the common questions people ask before they invest in crypto.
What Is A Cryptocurrency?
Digital money that makes use of cryptography to safeguard transactions and regulate the generation of new units is called Cryptocurrency. It’s called a cryptocurrency because it relies on cryptography’s encrypted form of data. Cryptography also provides anonymity for users by obscuring their identity and, indeed, all aspects of their transactions.
Cryptocurrencies can be mined, traded or used to purchase goods and services. A person would have to rely on already established relationships with merchants or banks to make purchases in the past.
How Safe Is Cryptocurrency?
Cryptocurrency is more than an idea to create a digital form of currency at its core. Cybercriminals have learned that they can target these digital currencies because they are not regulated and not backed by any government. In theory, it’s tough to track down the source or the location of cryptocurrency transactions.
Cryptocurrencies are a prime target opening for cybercriminals since it’s difficult to trace transactions and identify the individuals involved.
How to Safeguard Your Cryptocurrencies
Cybersecurity in Cryptocurrency is a common issue and one that you should be aware of if considering an investment. Though the concerns are real, these problems can be mitigated mainly through a few simple security steps before trading or investing in Cryptocurrency.
Here are some basics steps to help secure your account from Cryptocurrency transactions:
Password Protection
Enable two-step authentication and password protect your computer when searching for cryptocurrency exchanges. This will prevent anyone from accessing your machines if they are stolen or hacked.
Use a Virtual Private Network
A virtual private network (VPN) is a computer network where you can hide your proper IP address. If a hacker were to try and break into your account, they would see an IP address from the VPN, so it would be impossible to gain access.
Backup Your Wallet
Backup information that includes public address and private keys. This will help you retrieve any lost currency or prevent others from transferring Cryptocurrency from your wallet.
Use Multiple Wallets
Using more than one Cryptocurrency wallet helps protect your investment from theft even if your account is compromised. If you have a cryptocurrency wallet on multiple devices and platforms, it’s easy to keep a backup of your information in case of an account breach.
What Are the Risks Associated with Cryptocurrency?
With all the blockchain talk about decentralization and anonymity, getting swept up in the hype is easy. Cryptocurrency has become a rapidly growing portion of the investing market, and many retail investors are looking to trade or invest in cryptocurrencies.
While the technology behind cryptocurrencies is impressive, risks are rushing, making trading and investing in Cryptocurrency risky for inexperienced traders.
Phishing Scams
Phishing scams come in many forms, including emails and text messages. These scams can occur on an individual or a more general level, as most commonly happens. The Federal Trade Commission (FTC) publishes information on detecting phishing scams. Still, it’s hard to tell the difference between a legitimate cryptocurrency exchange and an imposter because most large cryptocurrency exchanges do not have contact information listed for regulatory reasons.
Volatility
Cryptocurrency is a very volatile market that can swing wildly in either direction in almost no time at all. All cryptocurrencies are responsive to news, which can cause price changes within minutes or hours. There are also several different types of currencies, so you may have a hard time getting used to the volatility of each type. If you see only one digital currency (e.g., Bitcoin), it’s easy to assume stability when it’s still highly volatile.
Online Payments
While using crypto for online payments is a convenient method to pay for products and services, there are significant hazards involved with such transactions. When you pay for anything using bitcoin, you have no way of knowing the seller’s identity or having your payment details validated by a third party. You’re on your own if there’s an issue with the transaction.
With online purchases, you don’t have access to a complaint process, and there is no recourse if something goes wrong. This all results in anonymous transactions that pose risks online. As long as Cryptocurrency continues its rapid growth, this will be an iCryptocurrencyilers and sellers will need to solve.
Conclusion
Cryptocurrency is a highly sought-after currency for investors due to its untraceable nature and ability to exchange value without interference from a third party, such as a bank. However, this feature also makes it an appealing target for cybercriminals.
If you’re considering investing or trading in Cryptocurrency, educate yourself on the processes used to make transactions and invest your money safely and securely with reliable services that vet every transaction before letting it go through. Before diving in headfirst, make sure you research the different types of Cryptocurrency available and what risks are associated with each one. For more information on Cryptocurrency and its different types, visit our blog now!
