Buying cryptocurrency, like any day trading, is never a risk-free endeavor. Cryptocurrency has a volatile price that can make it more of a risk than traditional stocks and other kinds of investments. However, that volatility can also make it more profitable too, which makes it very tempting if you’re hoping to make big money. Cryptocurrency is an emerging technology and the knowledge that you will need to safely purchase and store your cryptocurrency can add to the risks.
In the early days of cryptocurrency, it was often hit by attempted hacks and fraud, but as the technology has become more regulated over time and more widely accepted, it has begun to be more legitimate. As the technology around cryptocurrency begins to gain more acceptance, there are more ways being developed to buy, sell, and store cryptocurrency that has made it a simpler, more convenient, and more secure method of investment.
If you want to buy cryptocurrency and make major crypto exchanges but have some worries about the security or investment risk, then read on to learn more about it.
The best way to keep your cryptocurrency as secure as possible is to keep your private key stored on a device or app that is not connected to the internet, or in a non-digital form, such as written down. This is known as a cold wallet.
If you use a physical cold wallet, like a thumb drive, this should be kept in a fireproof safe or other secure location. A safe deposit box at a bank could be another option for storage. You could also add an extra layer of security to your cold wallet by encrypting the device.
If you have your private key written down, change a few digits so nobody else can use it. For example, you could swap the first number from a 7 to a 4, and remember this change, or leave yourself a hint to help you remember.
Some people who trade cryptocurrency like to keep it in an online digital wallet, especially if they often buy and sell or need to have access to their digital wallet from different devices. A lot of online cryptocurrency platforms or exchanges will set up a wallet for you when you open your account.
Some platforms keep a lot of the cryptocurrency in their system in cold storage, which is offline, and will only keep a small amount in online, or hot, storage for their users. In the same way that the local branch of your bank doesn’t have enough cash on hand to cover all its customer’s deposits in its vault, neither would a cryptocurrency platform. This means that if a hack happens, it won’t always put cryptocurrency belonging to all the users at risk.
Beyond where you decide to store your wallet, the biggest risk is the humans who trade in cryptocurrency. Cryptocurrency scams are becoming more common in recent years, and fraudsters could try to persuade you to share your private key or account details with them. They could also attempt to talk you into installing software that infects your devices and can steal your account information.
