Cryptocurrency can either make you very rich or very poor. Over a decade, it became synonymous with six-digit monthly profits and millions of losses weeks later. It’s extremely volatile.
There’s a golden rule regarding cryptocurrency investments:
Never invest more than what you are prepared to lose.
Without wasting time, let’s ask the real question: should you start investing in cryptocurrency? The short answer is: not at this time. Not just months after the crash of Terra and its stablecoin UST. And, most definitely, not after FTX came out being nothing more than a scam.
However, it doesn’t mean the cryptocurrency is doomed. It will likely have a significant role in future economics. We could even see a revitalization of crypto in the first or second quarter of 2023. It saw a spiking interest in 2021, with NFTs and metaverses catching everybody’s attention. Only to fall flat early this year with Justin Bieber’s bored apes losing 95% value and Mark Zuckerberg struggling to produce a ten billion dollar avatar that would not look like from an early 2000’s video game.
The Dangers of Investing in Crypto
The value of cryptocurrency depends on trust. Unlike national currency or fiat money, it doesn’t have governmental protection. Moreover, the lack of government or bank involvement is one of crypto’s selling points. After all, banks profit from thin air, which is called currency exchange fees. And the failure of worldwide governments regarding the 2008 housing bubble crisis speaks for itself.
The idea of monetary independence is an exciting theory worth further development. At the same time, it’s a risky practice that has already wasted billions of consumer investments. Let’s take FTX as a beau ideal of cryptocurrency failure.
FTX was a cryptocurrency exchange giant valued at 32 billion dollars at the beginning of this year. Superstars like Shaquille O’Neal and Tom Brady helped to push it to public view. Meanwhile, esports teams and Miami arena put the FTX name tag.
To put a long story short, FTX proved to be a scam run by, according to Fortune’s article, “a gang of kids in the Bahamas’ who all dated each other.” Right now, at least 1 billion of FTX’s user money is missing, with people unable to withdraw their investments.
As bizarre as this story sounds, it’s an illustrative example of cryptocurrency dangers. The lack of laws and regulations made FTX possible, with no one overseeing the fragile operation. Moreover, FTX users have little to turn to without a lawful base.
Crypto scams and global financial fluctuations are not something cryptocurrency can handle in this state. However, there are several steps you can take to maximize the security of your investments.
How to Invest in Crypto the Right Way
Firstly, always remember the mentioned golden rule: never invest more than what you are prepared to lose. FTX looked like a legit profit opportunity having so many celebrities contributing to their PR. Its rapid downfall came as a shock to everybody. However, only the people who put their trust blindly suffer the devastating consequences.
To avoid this, get to know what you’re dealing with very well. Getting into cryptocurrency is easy, but profiting from it is harder. A new cryptocurrency pops out each month, and all of them will promise to triple your investment. It’s up to you to keep a close eye on promising ventures and avoid scams.
Keep in mind that cryptocurrency is also a juicy target for cybercriminals. According to CNBC, hackers stole nearly $2 billion in cryptocurrency in the first half of this year. You must take care of cybersecurity if you plan to trade crypto.
Hackers frequently target crypto exchange websites and wallets, expecting unauthorized access. To avoid this, consider using a password manager to secure your accounts with unique and complex passwords. Many crypto traders take the safety of their wallets for granted, forgetting that cryptocurrency’s inherent security benefits on a blockchain do not protect against password dumping.
Lastly, keep a close eye on market volatility. Bitcoin or Ethereum exchange rates will be on your radar most of the time. But do not forget the global factors. Changes in electricity prices, microchip availability, and video card prices affect cryptocurrency just as much as anything else.
To summarize, 2022 was a disastrous year for cryptocurrency investors. However, renowned cryptocurrency businesses step out of the way to bring it back on track. It will have results, and crypto trading will flourish. But it’s up to everybody to learn from the lessons discussed in this article and start investing in cryptocurrency more responsibly.
