Cryptocurrencies are digital or virtual tokens that are secured by cryptography, making it nearly impossible to counterfeit or double-spend. Cryptocurrencies have become increasingly popular due to their decentralized nature, which means they are not regulated by governments or financial institutions. While some investors have made substantial profits from investing in cryptocurrencies, there are also risks involved, and investors need to be cautious before investing. Let’s dig in further in our Crypto Safety 2023 guide.
What are Cryptocurrencies?
Cryptocurrencies were first introduced in 2009, with the launch of Bitcoin, which remains the most popular cryptocurrency. Since then, thousands of other cryptocurrencies have been introduced, each with its unique characteristics and purposes. Unlike traditional currencies, which are backed by governments, cryptocurrencies are decentralized and not controlled by any central authority.
Cryptocurrencies are created through a process called mining, which involves using powerful computers to solve complex mathematical problems. Once a problem is solved, a new block is added to the blockchain, and the miner is rewarded with a certain amount of cryptocurrency.
Why are Cryptos risky?
While cryptocurrencies offer many advantages, such as anonymity, decentralization, and fast transactions, they also carry significant risks. One of the primary risks of cryptocurrencies is volatility. Cryptocurrencies are known for their wild price swings, with some cryptocurrencies experiencing daily price swings of over 10%. This volatility can make cryptocurrencies a risky investment, particularly for those with limited investment experience.
Another significant risk associated with cryptocurrencies is their lack of regulation. Unlike traditional investments, cryptocurrencies are not regulated by financial authorities, which means there are no safety nets or legal recourse for investors. This lack of regulation makes cryptocurrencies vulnerable to fraud, hacking, and other cyber threats.
Crypto Safety: Crypto risks you should avoid
1. Over-Investing
One of the primary risks that investors should avoid is investing more money than they can afford to lose. Due to the volatility of cryptocurrencies, it’s crucial to only invest money that you can afford to lose.
2. Investing in Garbage and Hype
Another risk that investors should avoid is investing in cryptocurrencies that have no clear use case or real-world application. While there are many cryptocurrencies available, not all of them have a clear use case or real-world application. Investing in these cryptocurrencies is akin to gambling and carries a high degree of risk.
3. Pump-and-Dump Schemes
Investors should also avoid investing in cryptocurrencies that promise huge returns or those that have no track record. These types of cryptocurrencies are often associated with scams and should be avoided at all costs.
How to store your Cryptos safely
If you decide to invest in cryptocurrencies, it’s essential to store them safely. Cryptocurrencies are stored in digital wallets, which can be either hardware or software-based. Hardware wallets, which are physical devices that store your private keys, are considered the safest way to store cryptocurrencies. Hardware wallets such as Trezor are not connected to the internet, which means they are not vulnerable to cyber threats.
Software-based wallets, on the other hand, are vulnerable to cyber threats, and investors should take steps to protect their wallets. One way to protect your software-based wallet is to use two-factor authentication, which adds an extra layer of security to your wallet.
Another way to protect your cryptocurrency investments is to use reputable exchanges. Cryptocurrency exchanges are online platforms where you can buy and sell cryptocurrencies. However, not all exchanges are created equal, and investors should only use reputable exchanges with a proven track record of security.
