Ways To Minimise Risks When Trading And Investing In Crypto
What is common between Snoop Dogg and Elon Musk?
If you are reading your news, you might recognize these two personalities as promoting cryptocurrencies! Yes, you read that right. Both of them are some of the earliest investors in digital currencies like Bitcoin, Dogecoin, and others.
In the last three odd years, cryptocurrencies have been garnering attention from the most diverse circles possible. From Saville Row Wall Street Bankers to Oil Sheikhs from the Middle East, everyone wants to invest in some of the other cryptocurrencies.
However, not everyone is as rich as a Wealth Management Firm or an Oil Tycoon. They can afford to invest, lose it all and it would probably not make a difference. But what about you and me? In other words, what about the countless millions that are not as rich?
In this article, we are going to discuss five ways that can help minimize risks when trading and investing in cryptocurrencies. Before we get to the list of risk minimization strategies, let us first look at what contributes to all the risks.
Why are Cryptocurrencies Risky and Volatile to Invest in?
In this section, we are going to discuss some points that make cryptocurrencies risky and volatile financial entities-
- The unregulated nature of Cryptocurrencies in different parts of the world makes their financial identity problematic. There are no direct legislations that have been announced by governments barring a few countries. The grey area makes it risky.
- Many new investors who are unfamiliar with storing crypto securely, tend to be at the receiving end of the interests of cybercriminals. Blockchain itself is immutable. Other aspects like using your computer to access your wallets are not.
- If you are unfamiliar with crypto transactions, you should know that the same is non-reversible. Meaning that if you have sent it once, you need the other party’s consent to reverse the transaction. This can be problematic and troublesome in many situations.
The above reasons have made many critics brand cryptocurrencies as speculative investments. However, for investors, it is this very speculative nature that leads to astronomical growth margins. In other words, crypto’s biggest criticism is also its biggest USP!
List of 5 Ways to Minimize Risks when Trading and Investing in Cryptocurrencies
Diversifying your Crypto Portfolio-
Experts that study the trends suggest that investors need to exploit the bitcoin loophole. In other words, you need not put all your money in any one crypto basket. Getting different coins means that you will be able to balance out the risks in case of problems. It also means that when the different coins grow, you stand to gain handsomely from your diverse portfolio.
Understand the Risk Versus Reward Scenario-
No matter what investment you are exploring, there is always a risk versus reward trade-off. When it comes to cryptocurrencies, you need to understand whether you will be able to bear the risks going forward. This means that you should be careful about investing only that you can afford to lose. Understanding this can help you become careful about your investments.
Do Research and be Aware of Recent Updates-
As a crypto investor, you need to be wired into the latest news and updates on the crypto ecosystem. If the government is going to bring in progressive legislation, it will automatically increase crypto prices. This means that now would be a good time to buy. On the other hand, if the government brings in something harsh, you can sell your holdings and be safe.
Follow all the Cybersecurity Protocols according to Experts-
As a crypto investor, you need to ensure that you are following all the best practices of cybersecurity. This means choosing the best wallets, avoiding the use of public wi-fi, and not clicking on spammy emails that come by the dozen in your emails. Once you develop a positive cybersecurity habit, you will automatically be minimizing a lot of risks in this industry.
Explore De-Fi, Blockchain and NFTs-
If you really want to be a part of the ecosystem, yet want to steer away from crypto, there are plenty of credible ways of doing the same. In recent years, De-Fi, Blockchain Technology-backed businesses, and the NFT market has taken off in a big way. You can easily invest in these subsidiary entities, yet reap maximum benefits. This is something a lot of big investors are doing.
The Final Takeaway-
There is no running away from the fact that investing in crypto is risky. However, given the record profits, you are likely to enjoy within the shortest time frame, this is something that is well worth the risk. If you have any other questions, you would like us to answer on Bitcoin, Investing, or Blockchain, let us know in the comments below.
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