Cryptocurrency is a legal digital currency based on blockchain technology. Cryptocurrency is the future of finance, with increasing interest from investors. However, cryptocurrency is not a fail-safe investment — investors need to know the risks and possible scams to keep their money safe.

Things to Consider Before Buying Cryptocurrency

Consider these factors before investing in cryptocurrency:

  • Crypto scams are increasing: Cryptocurrency is not safe from hackers. Scammers try to get investors to give up their private keys to access their money.
  • Crypto is volatile: Crypto is an unstable investment, with its value fluctuating significantly in hours.
  • Blockchain technology is new: Since blockchain is new, few rules for usage and regulations exist.
  • Crypto is unregulated: Cryptocurrency is less regulated than other asset classes. If you would lose your capital through a bankrupt or hacked platform, your legal options are minimal.

Risks Associated with Cryptocurrency

Cryptocurrency comes with unique risks like:

  • Lost keys: Crypto is secured through public and private keys. Losing your private key means losing access to your crypto.
  • Investment hype: The hype around crypto investments makes their price surge and crash unpredictably.
  • Limited history: Since many cryptocurrencies are new to the market, investors have limited historical data about crypto performance.

Cryptocurrency Scams

Cryptocurrency sees many types of scams, including:

  • Pump and dump: A small investor group “pumps” a lot of money into a cryptocurrency to inflate its price. Then, the investor group “dumps” the investment by selling it for a profit before the price falls.
  • Giveaway: A scammer claims to be doing a crypto giveaway and asks people to send their crypto to a certain address. They promise to send more crypto in return but don’t follow through.
  • Romance: Scammers use online dating platforms to ask people for crypto financial support or offer investment opportunities that don’t exist.
  • Phishing: Hackers try to gain access to personal keys by sending investors emails that look like legit messages from the trading platform.

Tips for Keeping Your Cryptocurrency Safe

Cryptocurrency can be a good investment when you exercise caution against the risks. Follow our tips to keep your crypto safe:

  • Research your cryptocurrency options: Learn more about a cryptocurrency before investing. Read the whitepaper to understand use cases and scalability. Online forums are great resources for investment tips.
  • Diversify your investment: Since crypto is fairly risky, spread your investment across several cryptos. Thousands of cryptocurrencies exist, but it’s too early to differentiate between the best and the average.
  • Use a secure crypto wallet: Use a hardware or cold wallet to keep your crypto safe from online attacks.
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