The phenomenon of cryptocurrency can be defined as a virtual currency which utilizes a technological system of ledger known as blockchain to store information about crypto transactions. This technology ensures both transparency and ease the process of tracking. Digital currencies are also decentralized, which makes them free from any third party regulatory intervention. There are several pros associated with the digital currencies, common ones among them being that a relatively lower transaction fee is charged for these crypto transactions, there is no regulatory authority involved and the transactions ensure privacy as there is no need to reveal personal details. Download and use the Bitcoin System App to learn more about bitcoin.
However, even cryptocurrency comes with its inherent risks. The most prominent one being the constant volatility in the prices of the digital currencies. Another common problem is the possibility of the account or system being hacked containing cryptocurrency, which can lead to a partial or complete loss of the digital asset. Mt. Gox serves as the most prominent example of a crypto hack, where almost 0.85 million bitcoins were lost as a result of a hack.
Considering this, are there any ways this risk associated with digital currency investment could be minimized?
Of course there are. In this article we have identified some of the ways these risks can be reduced while making an investment in the crypto market. These ways are as follows:
1. It is essential to Learn the Basics of Crypto
For those who think cryptocurrency is a simple phenomenon, they are mistaken. Other than the basic concepts, it can get pretty intricate and complex, given the constantly evolving nature of the market and unpredictable fluctuation.Therefore, it is absolutely vital to learn about the fundamentals of cryptocurrency before you make a decision of investing your resources into it. Fortunately, there are quite a few platforms, both digital and mainstream, to learn about cryptocurrency, such as Investopedia and Wikipedia etcetera. Video tutorials on Youtube can also prove to be very handy.
2. Do A Thorough Research
It is important to understand that there are over two thousand virtual currency versions circulating in the world. And therefore, there are 2000 different terms, concepts, systems and their intricacies to be learnt and grasped. Research, therefore, is a key requirement in this area of investment, in order to equip yourself with most of the knowledge and information one requires to make a well-informed decision from a range of available crypto options.One tip we have for you here is to not waste your time going after the currencies which are not strong enough to perform well in the near or long term future. Therefore, screening the unnecessary or weaker ones should be the first step when beginning your research.
Diversification of Assets is Really Essential
Similar to other financial assets, one of the best ways to curb or reduce risk in the crypto investment is through the diversification of your investment portfolio. This can be done by incorporating several different classes of assets such as stocks, bonds, and other modes of financial investment, in order to reduce the individual risk of investments.
3. Take Firm Security Measures
A handful of several cyber-security methods should do it when you are looking to maintain the security of your digital assets and trying to keep them safe from any sorts of cyber-attacks. We have identified some of the best ways to keep your digital assets safe, in terms of cyber-security:Two factor authentication via your phone or a secure reliable portal is a must. This two-step layer of security can prevent unwanted access into your digital accounts.
- Write your private keys on a piece of paper (hard copy) and keep it in a well secured place such as a safe or a locked drawer. Writing it on a phone or your computer system might result in its leaking if your system is hacked.
- Do not generally share your private keys with anyone you don’t trust. Also, do not also share it with no one. This is because in case a person dies, and only he knows the private key, those crypto coins are then also gone with him.
