What would a trendy purchase of Dogecoin mean for your capital right now? A cryptocurrency whose price rose over 800%, boosted by the group SatoshiStreetBets organized on Reddit platform.
Just 3 days ago, Dogecoin rose very high due to a hyped trend starting from the world’s richest man Elon Musk’s tweet, followed by the reddit hype. It’s not been even 7 days and yet the Token lost 53% of its value and is now trading at $0.0489. The coin was just a victim of a classic case of a pump and dump scheme forged by the collective of enthused superusers of Reddits financial forums.
While all investment classes possess inherent risks, the prices of crypto assets are a highly speculative asset: You can easily gain or lose a large sum of money based on very minor changes in the markets.
However, the risks associated with the crypto sector can be avoided with the right information, and a bit of common foresight and patience.
Staying Safe While Investing in the Crypto Market
The crypto boom
Since the bitcoin bubble started its upward rise in 2009, the number of cryptocurrencies has continued to multiply. New ones appear every week and it is estimated that there are now over 1,500 different cryptocurrencies, or “Alt” coins, (referring to the fact that they are alternatives to Bitcoin).
Consider that crypto currencies have been one of the fastest growing investment classes of the past years. It is now easier to buy and sell cryptocurrencies through regulated brokers then in times past. As such, many users are registering for the Initial Coin Offering (ICO) of various coins. With all of the options available to the average investor, it can becoming quite overwhelming. Here are some features to search for when deciding on a specific cryptocurrency to invest in:
Know where you want to invest
When you purchase regular shares, you would research about the company, what it does, and review the financials and overall fiscal health of the company. This is not much different then when investing in cryptocurrencies. When selecting a specific cryptocurrency, it is essential to identify the features that set it apart from the rest. Is your coin of choice a “fork” of a parent blockchain? Is it a “Defi” coin? Is it a pet project or “hype meme” such as “Dogecoin” that holds no true value other than for popularity or being the token coin of the moment? These are all important things to consider. Generally speaking, the thing that differentiates cryptocurrencies from traditional investment securities is the type of technology they use and the philosophy behind them.
Look for long-term value
In the case of gold—in present times—its value is not directly affected by it’s usefulness beyond being sourced for some types of cables, circuits, and jewelry (of which the cost is derived from the extraction and maintenance costs associated with each individual piece). Due to its exclusive properties as a safe haven value, individuals, businesses and banks have gathered this asset throughout history in efforts of maintaining the value well. Similar to cryptocurrencies, any coin that can present as a store of value will have longevity overtime.
We have seen in the past and recent times how speculation has collapsed the value of many cryptocurrencies. Aside from this, many analysts predict that Bitcoin will hit $100,000 in the not so far off future. For this reason, it is recommended to resist speculations and day trading on short-term crypto investments. Instead, you should seek to invest in currencies that, under normal conditions, will maintain and increase their value in the long-term. Once buyers’ awareness of appreciation capacity increases, fewer holders of crypto will be willing to sell their assets, thus further reduce to supplies will equate to additional value appreciation for “hodlers” of crypto.
Evaluate the “hype” or “meme” currencies
At one point not to long ago, even Bitcoin (BTC) was considered a “hype” asset that would quickly fade out. However today it is the most well known crypto asset known. However, all trendy crypto currencies are not necessarily bad investments. It is important to know that you will always need to do your own research. Just because an asset is popular does not mean that the people investing in it are doing so callously. On the other side, popularity does not automatically equal that a coin will be an instant pay-day either.
It should be expected that there will be monetary gains and loses within the crypto market. However, if you pay attention to what your currency of interest is doing, and it’s long-term prospects, your investment may pay out.
Now If you don’t want to bother with researching your selected assets, you can certainly try your luck, but you must also be prepared to lose your funds—and possibly in large sums. It is always best to trade in cryptocurrencies (or any other asset for that matter) in a responsible manner, with all risks taken into account. You should also only invest amounts that you can afford to lose during a market dip or downturn, as they are much more frequent in the crypto space.
Setbacks at this stage, in fact at all stages, is almost inevitable. It is no secret that the cryptocurrency market is highly volatile. But to become a successful cryptocurrency trader, you must understand that volatility is an important measure of risk, which can help traders make their fortunes.
An understanding of the industry and the major cryptocurrencies that are projected to explode can pave the way for cryptocurrency trading success.
In-depth knowledge and analysis are also key to helping cryptocurrency traders develop a consistent trading strategy. After all, consistency is the key to success! Analyze your moves, learn from your mistakes and focus on your long-term goals instead of quick profits.
Crypto wallets are the tool that crypto-asset owners store and manage their cryptocurrencies. Similar to fiat currencies and physical wallets, the coin is what you pay with and the wallet is where you keep it.
These wallets keep the unique “private keys” which hold the accessibility of your coins, via public and private addresses. These addresses are fundamental pieces of the cryptocurrency exchange.
The wallet utilized advanced blockchain encryption techniques to provide security to users. Because of these security features, a wallet can save, send, and receive cryptocurrencies without serious risks.
The level of security provided by a wallet relies on the kind that is being utilized, be it a Hot wallet, Cold wallet, or a Paper wallet.
Select a safe wallet
Finding the right electronic wallet can seem like a challenge at first go round. The choice –whether in the cloud or physical environment (hardware) or both—implies having to consider key parameters such as:
It is important to choose a wallet that offers the best security measures. Regarding this, you should take into account if your wallet is Hypertext Transfer Protocol Secure (https) protected. This will ensure that the data being transferred is encrypted. And that’s just what to look for.
It is always recommended that the wallet be open-source since this will ensure two advantages: you will know how the crypto assets are being secured and be able to verify if your wallet has been compromised.
These are handy as they can be accessed from a smartphone, which is an advantage for quick transactions facilitated by the scanning of your a QR code. This eliminates the need to copy and paste long wallet addresses.
Type of investment
The type of investment to be made must be taken into account as this will define which wallet to choose. For example, if what you want is to be a holder (investors who do not sell their cryptocurrencies but instead store them indefinitely), you can use a physical wallet or a virtual wallet that has immediate access.
While the list of crypto currency wallets is quite long, some of the best known and most reliable include the following:
Gemini has a built-in cryptocurrency wallet for trading and storing. The blockchain-based wallet uses checksums to verify and authenticate all your transactions and make sure they get to the correct destinations. Gemini crypto wallet can also be used to compare the price of the cryptocurrencies against USDT. Why use Gemini?
It is as safe as a cryptocurrency wallet can be, accessible 24/7 worldwide on your device, and has some of the lowest transaction fees of any mobile wallet.
Trezor is the first Hardware Wallet created in 2013, whose development was driven by the SatoshiLabs team. In this wallet more than 1,000 different cryptocurrencies can be stored. It offers 2-Factor Authentication, has encryption via GPG and allows you to secure coins via connection to your computer or cell phone.
This is a wallet issued by a decentralized exchange. This is a secure and anonymous digital wallet, as the Trust Wallet team ensures that it will not access users’ personal information. It is compatible with ERC20 and ERC223 tokens from the Ethereum network and allows you to store BTC, BCH, ETH, ETC, GoChain, POA Network, Tron, VeChain, among other cryptocurrencies.
Backup on a hardware wallet for extra security
Your assets are never really stored in the hardware wallets themselves; they will always live on the blockchain. The wallet essentially stores your private key or keys which opens the lock to your blockchain address where your assets are.
All you need is your Hardware token to access/interact with your cryptocurrencies on the blockchain.
With all of the surge in prices and dramatic falls from grace within the crypto sector in the last few weeks, it can be a bit of a challenge to get your footing when conditions have presented us with so much uncertainty. Luckily for you, you don’t have to get caught up in the tornado of speculation and overhyped trendy assets. Take a breath and think about what you want from your crypto investments, then take some steps to secure your funds and buffer the storms along the way. You will likely be surprised and proud of your efforts overtime as the storms calm.
What do you think of the recent crypto volatility? Let us know down in the comments section below!