Blockchain Finance

Is Cryptocurrency a Safe Investment?

More than ever, otherwise traditional investors are considering the short, medium and long-term investment benefits of cryptocurrency. While once relegated to niche status, cryptocurrency has increasingly become regulated and sanctioned by a variety of organisations. In Canada specifically, its designation – while not a legal form of tender – has been upgraded to the category of money service businesses.

Cryptocurrencies generally involve additional volatility when compared to more traditional financial investments, but the return on investment can likewise be more substantial. Due to this, many are asking whether cryptocurrency is a safe investment overall.

Below are some considerations to evaluate when deciding whether cryptocurrency is a safe investment for you.

Trustworthiness of Exchanges

Before making any decision that could impact your financial investments, it is important to know the reputation and trustworthiness of the tools, resources, advisers and services you use. For most crypto investors, the most vital aspect of safety in this regard is the choice of exchange.

Counties such as Canada, the US and others have taken strict action to ensure the reliability and validity of crypto exchanges, but it nevertheless should be a priority to personally inspect any options you may consider. One notable example of a trustworthy exchange is the Coinbase crypto exchange Canada and western traders use. 

Personal Security Concerns

Cryptocurrencies being decentralised and digital makes them an ideal commodity for the 21st century. Unfortunately, it can also make them a prime target by thieves who want to earn cash quickly without being easily caught. Unfortunately, all too many crypto owners fall prey to these people due to simple personal security lapses.

Ensuring your personal computer and devices are virus-free, using different and complex passwords that are changed at intervals, and enabling two-factor authentication for crypto services where available can dramatically reduce the chances of your investments being stolen. 

Diversification and Research

With so many different cryptocurrencies available, knowing the details about each one can’t be expected. However, savvy investors who want to make the safest investments possible understand that it is not wise to bet entirely on a single cryptocurrency. This is why many investors purchase variable amounts of multiple currencies in order to diversify.

However, purchasing any random series of crypto options isn’t exactly wise or safe. Careful research about each currency’s history, volatility, performance and usage can prevent investors from making a bad series of choices that would otherwise lead to a loss of investment.

Understanding Volatility

Last but not least, safe investing in cryptocurrency means understanding the nature of the markets themselves. While increased regulation and larger trade volumes have gradually reduced the infamous levels of volatility once seen, there is still potential for considerable variance in crypto prices when compared to various stocks, bonds and other traditional financial instruments.

Many investors in crypto who do so with safety in mind understand that reputable currencies are to be held for the long-term, avoiding the panic that first-time traders and investors might experience. In understanding volatility, investors can prevent themselves from making serious mistakes when it comes to buying and/or selling.

No investment is truly a safe investment, but some are safer than others. With regard to cryptocurrencies, the potential for reward is great. Risks are always involved, but you can minimise these risks and invest more safely by understanding a few basic crypto-related principles.