No one enters the cryptocurrency exchange to lose money, but many do. Find out how you can protect yourself from scams and high risks with these 6 habits.
The bigger the risk, the larger the earnings; that typically holds true for any investment. For this very reason, many people – individuals, companies, and government financial authorities worldwide – had been wary of cryptocurrency in its early days, and some up until today.
While maintaining a cautious stance is healthy, it doesn’t mean that everyone should avoid cryptocurrency investing like the plague. After all, we’ve heard so many things about cryptocurrency becoming the next big thing (if you don’t consider it to be already ‘big’) and how related technologies like blockchain will revolutionise the way we transact in the world. Countless success stories abound of people who have made windfalls from investing in Bitcoin, especially if they bought into it in the early days.
So, the key here is to take calculated risks. As with investing in anything at all, doing your due diligence is of utmost importance if your money means something to you. For cryptocurrency specifically, let’s see what are some best practices for investing safely.
1. Research the currencies
It goes without saying that you should understand what you are investing in. However, it is scary how many people don’t do their research and jump straight into investments without understanding the company or product they are supporting. The fear of missing out (FOMO) effect is real, but it can be very dangerous.
Doing research on cryptocurrencies means finding out about creators, their manifesto, and their future plans for the project. Does the project look likely to succeed? Are there many individuals talking about this currency? Are the developers doing what they promised to do? Only invest if you have looked into these questions and you feel it is a worthy investment.
2. Choose a credible exchange
Cryptocurrency exchanges are online platforms which let you buy and sell cryptocurrencies using a digital wallet. With the rise in popularity of cryptocurrencies, there are quite a number of cryptocurrency exchanges in Singapore you can choose from, including us here at Coinut.
Most people choose the exchange based on what coins they can trade there – for example, Coinut facilitates Litecoin exchange in Singapore, but you will not be able to do so at some other exchanges. However, in terms of safe investing, the key thing you want to look into is the security of their system.
Centralised exchanges are generally regarded as more secure than decentralised ones. But don’t necessarily take what these websites say as the whole truth. Make sure to explore user reviews to find out about any issues plaguing the crypto exchange, as these are things the exchange won’t tell you themselves.
3. Diversify your portfolio
Cryptocurrency is not a marriage – no one said you have to stay loyal and invest in only one. In fact, it is good practice to diversify your portfolio by trading in more than one currency.
Investing in different cryptocurrencies will spread your risk, providing you with a safety net in case one coin crashes suddenly. For more advanced traders, you can also explore hedging strategies to further offset your risks.
A true diversification strategy will also include cryptocurrencies in different categories, for example, one or two mainstream coins like Bitcoin or Ethereum, some emerging altcoins, as well as stablecoins.
4. Invest small
A common sense way to lower your risk when investing is to invest only a small amount. Due to the volatility of cryptocurrency, most guides for beginners recommend that cryptocurrency take up at most 5% of your investment portfolio. However, everyone has a different appetite for risk; only you can determine how much you are willing to put into cryptocurrency investing.
5. Beware of scams
Scams are rife nowadays, and the cryptocurrency scene is no exception. Scammers are lurking at every corner of the cryptocurrency trading process, waiting to pounce on unwitting newbies.
So-called ‘developers’ can create coins and lure investors into putting their money in it, only to pull out of the project and take all the money for themselves. The same goes for cryptocurrency exchanges, which may promise good rates only to make off with their users’ savings.
A good rule of thumb to abide by is: if it sounds too good to be true, it is probably a scam. Keep your eyes peeled for unsolicited emails that appear to be advertising for cryptocurrency exchanges and mistyped website URLs that masquerade as popular trading platforms.
6. Keep your key safe
Never share your digital wallet key. You may think it is okay to store your private key in a note on your computer or just through a personal message to a trusted family member, but hackers can find ways to get access through the Wi-Fi network or other means.
Ironically, the best way to store your key is in a safe, physical location – not online. Consider putting it in a safe in a hidden location and keep the safe password to yourself.
We shared some beginner-friendly tips on how to invest in cryptocurrency safely. While following these tips is not a guarantee that you won’t lose money to cryptocurrency trading, it does mean that you will mitigate your risk and avoid losing everything overnight.
If you are looking for a secure crypto exchange to check out Litecoin prices in Singapore or trade Bitcoin and Ethereum, be sure to check out Coinut and what we have to offer. A crypto exchange in Singapore and Canada, we take pride in providing fast, user-friendly, and safe cryptocurrency trading, all at low commission fees.
RISK DISCLOSURE: ⚠️
Digital payment token investments, such as cryptocurrencies, are not guaranteed by service providers or cryptocurrency exchanges and the government. It is crucial to exercise caution in investing, including the awareness that a part or all of the capital may be lost and may not be recovered especially in cases of high price volatility or down market, bankruptcy, seizures and other factors. Hence, the user’s risk tolerance, investment appetite or capacity for loss should be set firstly and they should observe safe and knowledgeable investment practices accordingly. For more information, please visit MAS' website.
IMPORTANT NOTE: 📢
Coinut.com is a financial entity regulated as a Money Services Business in Canada and an exempt entity under the Payment Services Act in Singapore. Please be reminded that cryptocurrency trading is highly risky and is not suitable for the general public. For more information please refer to Risk Warnings and Risk Statements.