People want to invest in cryptocurrency as it is getting popular with time.
Today, there are thousands of cryptocurrencies in the market with Bitcoin (BTC) leading them as the largest cryptocurrency by market capitalization.
But investors might find cryptocurrency a volatile investment since cryptocurrency is a decentralized digital currency.
You may ask, “Is cryptocurrency safe?”
This is a legitimate question given the recent crypto crunch. But you can avoid risks in cryptocurrency by devising a sound crypto trading strategy based on research and market facts.
Here are some important things you should remember when trading cryptocurrency.
Understanding Cryptocurrency
The basic reason why most people suffer in cryptocurrency is because of their lack of understanding.
Cryptocurrency is a digital currency that exists on blockchain technology, which is secured by cryptography.
Each transaction of cryptocurrency remains anonymous and is recorded on the blockchain.
Bitcoin has emerged as the world’s largest cryptocurrency by market capitalization and there are hundreds of other cryptocurrencies known as “altcoins” in which you can invest too.
Cryptocurrency works in a decentralized manner and does not involve any bank or government intervention in your money.
Carl Runefelt, alias, The Moon, is a global crypto leader who is pushing for the mass adoption of cryptocurrency.
According to Carl, “If you look at the past 13 years of Bitcoin, the volatility has dramatically decreased every single year as more and more people are using it that’s why one of my big missions right now is to get people into Bitcoin because the more people that use it the more useful it becomes just like any social media network.”
Are there Risks Associated with Cryptocurrency?
Cryptocurrency has come a long way since it was introduced into the financial market.
But there are some risks associated with it that you should be aware of.
Volatility
Cryptocurrency is volatile and its value can fluctuate at any time.
This is one of the major risks of cryptocurrency that people need to analyze before investing in it.
For example, Bitcoin was traded at around US$60,000 by the end of 2021, but its current value is US$23,169 (as of August 2022).
So, you need to be careful of crypto volatility.
Irreversible Transactions
Another risk associated with cryptocurrency is its irreversible transactions.
Cryptocurrency uses blockchain technology which is secured by cryptography.
But it also means that cryptocurrency transactions are not reversible.
For example, if you make a wrong fiat transaction, you might be able to reverse it through a bank, but this is not the case with cryptocurrency.
Decentralized Currency
People are accustomed to fiat transactions because fiat is centralized.
Cryptocurrency, on the other hand, is a decentralized currency which means that it works free from bank or government regulations.
This is one of the biggest hurdles in the way of rapid crypto mass adoption.
Things You Can Do to Avoid Risks in Cryptocurrency
Before you put your money in cryptocurrency, remember that cryptocurrency is volatile and once your money is gone, it is gone.
But you can do the following things to avoid risks in cryptocurrency.
Do Research
The most significant thing that you should do before investing in cryptocurrency is you should do market research.
You should carefully study the recent trade charts of cryptocurrencies and trends in the crypto market.
Carl on his YouTube channel, The Moon, says, “The price of bitcoin keeps changing every second, and for new investors, it is necessary to understand the reason behind these changes. Examining its history or the factors that influence the rise and fall of bitcoin, everything must be studied.”
Do Not Trust Everyone
You should analyze each cryptocurrency investment opportunity with extreme caution.
Avoid trusting emails even if they appear from public figures or government officials – asking you to pay for anything with a cryptocurrency.
Check That URL
One of the reasons why crypto investors suffer fraud is avoiding checking the URL of the crypto website.
Scammers copy the URL of legitimate crypto websites and swap out numbers or letters.
You should look for the little lock symbol next to the crypto URL and turn on antivirus software when trading cryptocurrency.
Secure Your Crypto Wallet
A crypto wallet is a place where you would be storing your cryptocurrency.
You probably have heard stories of people losing cryptocurrency because they lost control over their crypto wallets.
If you are a crypto investor, you should never share the key to your crypto wallet with anyone.
Instead, you should store your cryptocurrency in an offline wallet and use multi-factor authentication to keep the bad guys out.
Conclusion
Cryptocurrency has become a hot ticket in the financial market.
Everyone wants to invest in cryptocurrency to make a lot of money in the future.
But you should be careful about the risks associated with cryptocurrency as you can suffer losses. Cryptocurrency trading can be secured when you do your research, secure your crypto wallet, and avoid trusting everyone in the crypto market.
