3 common risks in crypto investment and how to avoid them

Although it may have been over a decade since Bitcoin’s inception, cryptocurrency is still an emerging space, with opportunities in the industry steadily increasing as new tokens and platforms emerge. As an alternative asset, cryptocurrencies hold a lot of potential. With this potential comes some risk, especially if you are unsure of how to enter the market. If you are aware of the risks – and how to avoid them – your first steps in cryptocurrency investing can become a safer and more profitable experience.

In it, we go over three common risks in cryptocurrency investing and how you can avoid the negative consequences.


The strong volatility is one of the main aspects of the good reputation of Bitcoin and cryptocurrencies. It is one of the defining components of crypto tokens and is a bit of a two-sided coin: on the one hand, you can make a lot of money with it. On the other hand, you could lose if you get in at the wrong time.

How to avoid the negative side

When you “buy the dip” and HODL (HODL) Bitcoin’s market moves, you are setting yourself and your portfolio up to mitigate the potential losses from volatility as much as possible. Making profits from volatility is a good strategy if you make your investment tick with your head rather than your heart and not react to market moves (like quick sells when things look like they’re going up head for a downtrend). It’s also important not to invest more than you can afford to lose. Bitcoin and cryptocurrencies should not be treated as a get-rich-quick strategy.

Fraud and Schemes

At the end of November 2021, Santander UK had more than £1 million worth of cryptocurrencies being scammed by customers every month. This is a UK only bank. The scale of cryptocurrency fraud and loss from fraud is much higher and much larger globally. Cryptocurrency hackers know how to target vulnerable investors through things like malware or phishing schemes. Once they are in your cryptocurrency account or have access to your crypto wallet, the decentralized, untraceable nature of the industry makes it impossible to trace and get your funds back.

How to Avoid Getting Scammed in Crypto

Make sure you protect your funds with a combination of hot (online) and cold (offline) storage and keep your data extremely safe. Be careful when talking about your cryptocurrency holdings online, especially on public forums, and don’t tell people how you store your funds. Also protect your online system with the right tools and antivirus management software to prevent malware from using your system. Avoid clicking on links that you may find suspicious and watch out for emails or messages that may ask you to send them cryptocurrency.

Hype and big profit promises

Some projects focus on fundraising and don’t necessarily provide a fully functional platform or network to build. Buying just because the price is low and could go up isn’t the best strategy for a cryptocurrency that doesn’t have an established community or reputation. This is especially the case when the team behind a cryptocurrency is unknown or only promises high returns on your investment.

How to avoid

When a cryptocurrency has a lot of hype about how much it makes and not what it can do, it immediately throws a red flag. Be careful when investing in a cryptocurrency that doesn’t have much background knowledge. With any cryptocurrency investment, tread carefully and do your own research. Some projects may exaggerate how much you can earn without informing you of the risks involved. The more information you have, the more knowledge you can invest.

The post 3 common risks in crypto investing and how to avoid them appeared first on Coin Insider.


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