This week, many investors were at the forefront of the conflict between two of the biggest cryptocurrency exchanges, FTX and Binance. The aftermath shows a grim picture of scared investors looking for a way to minimize risk and cut their losses after steep declines in popular coins like Bitcoin and Ether.
Others take this opportunity to capitalize on falling prices and “buy the dip”.
Whether you are interested in buying or selling crypto, the most popular avenues usually involve buying or selling coins through an exchange through an app or website. But what is the safest way to buy and sell your cryptocurrency? Well, it’s complicated.
Cryptocurrency is inherently risky
Crypto is still the new kid on the block compared to other assets. There is always some level of risk when it comes to investing, but as a new alternative investment, risk is almost certainly part of the deal. What makes crypto appealing to so many investors is the loose regulations surrounding this investment. Compared to other types of assets like stocks, cryptocurrency is currently not well regulated.
The downside is that putting your funds behind crypto exposes you to greater risk of fraud, loss of your funds in the event of bankruptcy, and significant losses due to increased volatility.
Many crypto enthusiasts argue that regulation could stunt innovation and defeat the purpose of decentralized currency, which is to cut out middlemen like big banks and the federal government. But industry pros say the cryptocurrency market is very flawed and investors are paying the price.
“Many crypto-assets operate on open, permissionless networks that allow anyone, anywhere to trade on the network, which by design makes it difficult to track individual players,” said Acting FDIC Chairman Martin J. Gruenberg of the Brookings Institution on The Prudential Regulation of Cryptoassets. “This design feature also makes it nearly impossible to ensure compliance with anti-money laundering and anti-terrorist financing requirements.”
The Benefits of Investing in Crypto
Yet even with the potential risks associated with crypto investing, cryptocurrency can be a valuable way to diversify your investment portfolio and spread your risk across a few different asset classes.
Some investors view cryptocurrencies like Bitcoin as a valuable inflation hedge because there is a fixed number of coins that can be mined, unlike regular central bank-controlled currency which sees regular increases and decreases in value. supply, although some experts say that has changed. time.
How to invest safely
If you’ve decided to invest in crypto, there’s no surefire way to eliminate risk, but there are a few steps you can take to make investing safer.
- Use a secure device: Public computers and WiFi networks expose you to potential fraud. When buying crypto, you will likely be asked for personal financial information that you wouldn’t want hackers to get their hands on. Choose to use your personal computer and a Virtual Private Network (VPN), which helps establish a secure connection between you and the Internet and protects your sensitive information.
- Choose a reputable exchange: You will want to explore different crypto exchanges and compare the cryptocurrencies offered, the fees associated with buying and selling crypto, and the history of the exchange. Do your research to determine if this exchange is well established and if there have been any security breaches in the past. Read each exchange’s terms of service and agreements carefully to learn more about where your funds are kept and what happens to your money if the exchange goes bankrupt. You might also want to spend some time browsing through user reviews to find out if there are any major red flags you should be aware of.
- Think carefully about how you plan to store your crypto: When you invest in crypto, you have the option of holding your currency in a web wallet hosted by your exchange. Although this may be a low lift option, it could cost you dearly if you need to turn your coins into real money or if your exchange fails. Alternatives like “hardware wallets” keep your cryptocurrency’s private key safe in an offline storage device. Alternatives like “hardware wallets” keep your cryptocurrency’s private key safe in an offline storage device.
- Check your budget: Whether you invest in crypto, stocks, bonds, commodities, or any other type of asset, you will need to carefully assess your current financial situation to determine how much you can comfortably afford to invest. There are no guarantees in the world of investing and it’s never a good idea to bet more than you can afford to lose.
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