In the past decade, cryptocurrency has grown in popularity as a form of investment. And some of the biggest digital currencies are Bitcoin, Ethereum, Cardano, and XRP.
New investors have become billionaires thanks to cryptocurrencies. The market is still flooded with new coins and cryptocurrency exchanges competing to draw regular investors. Naturally, it’s tempting but also very difficult to understand.
Investing in cryptocurrency is excellent if you want direct exposure to high-risk and high-reward investments. But is it really safe to invest in cryptocurrency?
This article explains what factors to consider before investing in cryptocurrency and whether it’s a secure method of transaction or not.
What Exactly Do People in Crypto Trading Do?
Cryptocurrency trading involves making predictions about price movements using Contracts for Differences, or CFD, accounts to buy and sell digital coins through an exchange.
One way of trading cryptocurrencies is using a CFD account, which are derivative products that let you speculate whether the value of the cryptocurrency you choose will increase or decrease. Prices are listed in conventional money like the US dollar, and you never actually become the cryptocurrency owner.
Because CFDs are leveraged products, you can start a position for a small portion of the total trading value. Leveraged products can increase your profits, but if the price turns against you, they can also increase your losses.
Why Do People Choose To Engage In Crypto?
There are several reasons why people choose to invest in crypto, including the following:
Blockchain Technology
The infrastructure that sustains cryptocurrencies is responsible for some of their main advantages, not the currency itself.
Blockchain is a decentralized ledger for data storage that keeps track of every transaction made in the crypto world. A blockchain entry is imprinted in the system and cannot be removed.
Additionally, because the blockchain is distributed across computer sets, no hacker can access the entire chain at once, guaranteeing the safety of every piece of information stored in it.
Cryptocurrency Market Is Open 24/7
Due to the lack of centralized market administration; the cryptocurrency market is typically open for trading 24 hours, every day of the week.
On cryptocurrency exchanges worldwide, transactions are carried out directly between individuals without a third party. However, activity can experience downtimes as the market adjusts to infrastructure changes called ‘forks.’
Cryptocurrencies Are Not Subject To Inflation
Since cryptocurrencies aren’t tied to any particular country or currency, their price is determined by worldwide demand rather than domestic inflation.
But what about cryptocurrency inflation itself? If you’re an investor, you have nothing to worry about. Mostly, there is no inflation since the number of crypto coins is limited, which prevents the supply from spiraling out of control.
Whether a coin has an overall cap, such as Bitcoin, or an annual cap, such as Ethereum, this strategy can prevent inflation.
Is It Actually Safe To Invest In Crypto Trading?
No matter what type of investment, some risks always accompany them. There are a variety of distinct risks associated with crypto trading that you should be aware of.
The volatility of cryptocurrencies, their lack of regulatory oversight, and the prevalence of fraud are just a few of the rampant risks in crypto trading.
If you’re a novice investor, investing in crypto trading is not the best way to accumulate wealth. The world of crypto trading is unpredictable and can overwhelm beginners. But if you really want to invest in cryptocurrency, there are several ways to ensure your investment’s worth it.
A Quick Guide On How To Invest In Cryptocurrencies
Before investing in cryptocurrency, there are specific requirements you need to meet: documents of personal identification, bank account information, and a secure internet connection.
Once accomplished, you can now invest in cryptocurrencies by following three steps:
Step 1: Select a Cryptocurrency Exchange
You must first choose an exchange where you can buy cryptocurrencies. You can create an account with the selected exchange and begin trading cryptocurrencies. You have a lot of choices, but the most well-known cryptocurrency exchanges are:
Step 2: Buy Cryptocurrencies
You can buy cryptocurrency using your debit card on the exchanges mentioned above. Usually, you have a selection of several cryptocurrencies, including Bitcoin and Ethereum. One coin can be worth hundreds of dollars.
However, most exchanges let you purchase a fraction of a coin, which is much more cost-effective for novice investors. Afterward, an exchange will collect fees for each of your transactions.
Step 3: Keep Your Cryptocurrency Safe in a Wallet
Once you’ve paid for a cryptocurrency unit, it will be added to your digital wallet. The codes for all of your cryptocurrencies will be stored in the wallet.
You can store them in a hardware or software wallet. Simply put, a software wallet is a computer program that stores the cryptocurrency you need for active trading.
A hardware wallet resembles a USB drive and is more secure than a software wallet, but it is only necessary if you buy a huge amount of crypto.
5 Risks To Watch Out For In Crypto Trading
There are numerous available methods for crypto trading; you must conduct thorough research to know what method suits you best. Find out if the exchange has even been hacked or if any regulatory authorities govern it. Other risks you should look out for in crypto trading include:
- Crypto trading is volatile and can cause a huge loss if the value of cryptocurrencies drops.
- It’s run by blockchain technology and is unregulated by the government, which is not legal in some countries such as Turkey.
- They are prone to hacking and cyber theft.
- You can lose your private digital wallet key.
- Cryptocurrencies can be subject to taxation laws like stocks.
What Factors Should You Consider Before Trading In Crypto?
There are several factors you need to consider before trading cryptocurrencies; these include:
- Research before deciding on the currency you want to exchange, like Bitcoins, Dogecoins, and others.
- Check the history of the digital currency you chose.
- Consider how much money you want to invest in crypto trading.
3 Helpful Tips For Traders Of Cryptocurrencies
Here are some helpful tips you can practice to help you avoid loss in the crypto market:
Tip 1: Set a Limit For Your Profits and Losses
Knowing when to exit a trade, whether we are making a profit or losing money on crypto trading, is an essential skill to master. You can limit your losses by capping them at a particular amount. Avoid being greedy; set a limit on profits, too, so that everything remains balanced.
Tip 2: Monitor Your Risks
Stay put, accumulate small profits, and regularly engage in bitcoin trading. Fewer portfolio investment in a market with less liquidity is a good idea when trading in crypto.
Tip 3: Manage Your Risks
When studying the cryptocurrency market, we can see that the current price of Bitcoins influences most altcoins’ prices. It’s connected to fiat currency. Altcoin prices decline when the price of Bitcoin rises, and vice versa. Therefore, it is preferable to either set close targets or simply refrain from trading during risky times.
What Cryptocurrencies Should People Invest In?
In the crypto world, some of the highly recommended cryptocurrencies to invest in are the following.
Binance Coin
Binance is the biggest and most well-known cryptocurrency exchange. It has $76 billion daily trading activity, 600+ coins to pick from, 90 million registered members, and a low transaction cost.
Fantom (FTM)
Fantom is an open-source blockchain-based platform for digital assets and decentralized apps that is quick and secure. According to their experiments, it may be capable of handling up to 10,000 transactions per second (TPS), but now it can only handle about 4,500 TPS.
Frequently Asked Questions
Here are some common questions regarding safety in cryptocurrency investment.
How do I ensure that cryptocurrency trading is safe?
Study the market before signing up for an exchange to guarantee your cryptocurrency trading is secure and avoid hazardous trades. To protect yourself from unexpected price drops, diversify your risks by buying various cryptocurrencies.
Keep your password in a safe location and most of your cryptocurrencies in an offline wallet. Lastly, install an antivirus program on all your crypto trading devices to protect your transactions.
Is Bitcoin a good investment?
The most widely used and traded cryptocurrency worldwide is Bitcoin. It’s a good investment option if you’re searching for quick and short-term profits because of its high liquidity.
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